Deupree v. Hall

• Decision Date: 26 October 1953
• Docket Number: No. 364.,364.
• Citation: 115 F. Supp. 956
• Parties: DEUPREE v. HALL et al.
• Court: U.S. District Court — Eastern District of Kentucky

115 F. Supp. 956

DEUPREE v. HALL et al.

No. 364.

United States District Court E. D. Kentucky, Covington Division.

October 26, 1953.

Nichols, Wood, Marx & Ginter, Cincinnati, Ohio, for libelant.

Thomas F. Schnorr, Newport, Ky., for respondent Mitchell A. Hall.

Harry K. Aurandt, Covington, Ky., for respondent Louisa M. Hall.

SWINFORD, District Judge.

The question before the court is: Was the stock transfer from Mitchell A. Hall to his mother, Louisa M. Hall, without valuable consideration and with intent to hinder, delay and defraud collection of the libelant's debt?

The libelant's intestate, Katherine Wing, met her death on June 19, 1948, in Campbell County, Kentucky. As it later developed the incident gave rise to unliquidated damages for wrongful death. The libel was filed on December 7, 1948. The libelant, the alleged administrator, qualified in the County Court of Kenton County, Kentucky, rather than in the County Court of Campbell County, Kentucky. The libelant later qualified as administrator in the proper court and amended the libel on July 29, 1949, setting forth that the qualification in the proper court had been had and that letters of administration had been issued in the County Court of Campbell County, Kentucky, on the 28th day of July, 1949.

This court held that the case was barred by limitation. The ruling was appealed and the lower court was reversed by the Court of Appeals for the Sixth Circuit, Deupree v. Levinson, 186 F.2d 297. The case came on for trial on November 29, 1951. On January 16, 1952, the court entered a judgment in favor of the libelant in the sum of thirty thousand dollars jointly and severally against each of the respondents. The transfer of stock from the respondent, Mitchell A. Hall, to his mother, Louisa M. Hall, was on November 7, 1951.

I state these facts in order to show that from the time the cause of action arose until the time the stock was transferred was a period of three years, four months, and eighteen days. The libelant does not seek to set this transfer aside as a preference of creditors, since such an action would have to be brought within the statutory period of limitation. He relies upon KRS 378.010 which provides for nullification of fraudulent conveyances and encumbrances. In order for the libelant to sustain his position it must appear from the evidence that the transfer was without consideration and made solely for the purpose of defrauding this creditor.

The whole question is one of evidence. There can be no dispute as to the law or as to the interpretation by the Kentucky courts of the statute on which the proceeding is based. Since these parties are mother and son it is the law that the burden rests upon Louisa M. Hall to show that the transfer was for a valuable consideration and that the respondent, Mitchell A. Hall, was actually indebted to his mother on a claim which she had a legal right to enforce. The law in the case is set forth in the following quotation:

"It has been held in many cases that creditors, attacking a conveyance on the ground that it was fraudulent, must show a fraudulent intent on the part of the debtor at the time he conveyed his property. Perry v. H. Krish & Co., 157 Ky. 109, 162 S.W. 555; Cogar v. National Bank of Lancaster, 151 Ky. 470, 152 S. W. 278; Guthrie v. Hill, 138 Ky. 181, 127 S.W. 767. This court has held that, where there is confidential relationship existing between the parties to the conveyance, and evidence is introduced by the creditors which tends to show that the conveyance was voluntary, and made after the creation of the debt to which it is sought to subject the property, an inference of fraud is raised, and the burden is cast upon the grantee to show that there was no fraud in the conveyance. Stewart v. Wheeler, 220 Ky. 687, 295 S.W. 991; Roberts, Johnson & Rand et al. v. Baker, 224 Ky. 414, 6 S.W.2d 474; Com. v. Filiatreau, 161 Ky. 434, 170 S.W. 1182; Farmers' Bank & Trust Co. v. Peters, 226 Ky. 403, 11 S.W.2d 103." Francis v. Vastine, 229 Ky. 431, 17 S.W. 2d 419, 420.

Notwithstanding the fact that the burden is upon Louisa M. Hall, in order for the court to find fraud it must appear from clear and convincing proof in the record and the court's mind must be left free from doubt that there was such fraud.

The record, in my opinion, does not disclose evidence of such a positive nature that the court can say that this was a fraudulent transfer. In the first place, the stock which Mitchell A. Hall transferred to his mother was stock which she had purchased and had transferred to him with an idea, in my judgment, of attracting her son to a greater interest in an established family corporation. The son was to pay for the stock, which he never did. It is shown from the record that the mother on numerous occasions put up substantial sums of money for Mitchell A. Hall, much of which was for his living expenses and for some of his spendthrift tastes.

The record does not disclose a case in which an independently wealthy and indulgent parent lavishes gifts upon her child. While it is true that Mrs. Hall was evidently too indulgent in making these payments and loans to her son and for his benefit, it is shown that she had contributed to the well-being of the company through her own labor and had protected the interests of her husband and family by her devotion to the business. Her husband is an invalid and she has by reason of that fact had additional financial burdens and the income which she derives from her stock ownership and personal work in the company is relatively small. I mention these facts to emphasize the lack of likelihood that a mother, even though devoted and inclined to spoil her child, would give away a fair sized estate or transfer over eight thousand dollars worth of stock in the company on any basis other than to expect payment.

From the whole evidence in the case and reasonable inferences which may be drawn from it, I feel that it would be essentially unfair and unjust to take this property from Louisa...