Farmers Bank v. Handly
| Decision Date | 10 July 1928 |
| Docket Number | No. 26684.,26684. |
| Citation | 9 S.W.2d 880 |
| Parties | FARMERS BANK OF HIGGINSVILLE, Appellant, v. ROSS M. HANDLY ET AL. |
| Court | Missouri Supreme Court |
Appeal from Ray Circuit Court. — Hon. Ralph Hughes, Judge.
REVERSED AND REMANDED (with directions).
Lyons & Ristine for appellant.
(1) The court erred in dismissing the plaintiff's petition and rendering a verdict for the defendants, because under the law and the evidence, the verdict should have been for the plaintiff and against the defendants. Sec. 2276, R.S. 1919; Barber v. Nunn, 275 Mo. 565; Gust v. Hoppe, 201 Mo. 293; Bishop v. Bishop, 228 S.W. 1065; St. Francis Mill Co. v. Sugg, 206 Mo. 148. (2) The evidence clearly shows that defendant Handly conveyed all of his property to the defendant Greer, for the purpose of hindering, delaying and defrauding his creditor, the plaintiff, Framers Bank of Higginsville, and the grantee in such conveyance had knowledge of such fact and the verdict and judgment of the court should have been for the plaintiff setting such conveyance aside as a fraud upon the grantor's creditor. (a) Any attempt to put property beyond the reach of creditors or beyond the reach of an execution which might follow an apprehended judgment of a creditor is a fraudulent transaction, and even though the grantee pays an adequate consideration for the property, if such grantee knew of such intentions of the grantor, then the transaction is fraudulent as to both the grantor and the grantee and will be set aside by the courts. Sec. 2276, R.S. 1919; Barber v. Nunn, 275 Mo. 565. (b) The unusual recital in this deed, to-wit, "Also all crops now growing, being or standing on the above-described land," when said crops had already been mortgaged and when the deed would carry such crops unless excepted in the deed, is a badge of fraud. Any false recital of the consideration in a deed such as the one contained in this deed, to-wit, "As part of the consideration grantee assumes and agrees to pay all notes now secured by deeds of trust recorded against said land," when the assumption of the deeds of trust was the only consideration, is of itself a badge of fraud. Barber v. Nunn, 275 Mo. 573; Bishop v. Bishop, 228 S.W. 1067. (c) If part of consideration is fictitious the whole transaction is fraudulent as to creditors. Defendants Handly and Greer in their answer plead a consideration and payment of only $45,000 and the undisputed evidence shows a payment of $43,207.52. Klauber v. Schloss, 198 Mo. 502. Defendants having pleaded payment of $45,000 cannot now change their position, State to use v. O'Neil, 151 Mo. 81. (d) Where fraud is an issue, other similar fraudulent acts are admissible to show intent. Handly gave Greer a chattel mortgage on property which he had previously mortgaged to the plaintiff bank. May 5, 1923, the plaintiff sued Myra E. Handly and husband on a note executed jointly by them and on May 14, 1924, Myra E. Handly and husband conveyed the undivided one-sixth interest of Myra E. Handly in and to her father's estate to her brother-in-law for $6000, even though at the time there was an unreleased mortgage on said land executed by the same parties for $7000. Dougherty v. Strong. 313 Mo. 27. Unless the mortgage to Peoples' National Bank for $7000 was a duplication or fictitious, the $6000 consideration recited in the deed to the brother-in-law was fraudulent. (e) James A. Greer was not a creditor of Handly and had no interest to preserve or protect and therefore is not protected in his purchase if he knew that Handly in selling was trying to put his property out of the reach of his creditors. Gust v. Hoppe, 201 Mo. 293; Sexton v. Anderson, 95 Mo. 373; Wall v. Beedy, 161 Mo. 625. (f) Handly's continued possession of the premises after an absolute conveyance is a badge of fraud. McMurray v. McMurray, 258 Mo. 405; Barber v. Nunn, 275 Mo. 565. (g) Handly's mortgagees were not threatening foreclosure at the time of the conveyance to Greer and Greer wasn't a creditor of Handly's, so the conveyance from Handly to Greer was voluntary and therefore fraudulent as to all of Handly's creditors. Needles v. Ford, 167 Mo. 510; Johnson v. Murphy, 180 Mo. 597. (h) Failure of defendants Myra E. Handly and Mary Lillian Littlejohn to testify at the trial raises a presumption of fraud against them. Baldwin v. Whitcomb, 71 Mo. 658; Bank v. Nichols, 202 Mo. 309. (i) Handly told his brother, Lee Handly, that James A. Greer had a mortgage on his corn so he could save it, and also requested his brother, Lee Handly, to permit him to give him a mortgage without consideration on three unmortgaged cows which he had just purchased and paid for. These items were not satisfactorily explained away by Handly and constitutes very positive proof of fraud on the part of Handly and Greer. Dougherty v. Strong, 313 Mo. 27. (3) The evidence clearly showed that the defendants John T. Littlejohn and wife, with knowledge of the fraud being perpetrated by Handly upon his creditor, aided and assisted in the fraudulent transaction by purchasing approximately half of said real estate, so that the finding and judgment of the court should have been in favor of the plaintiff and against defendants Littlejohn and wife, setting aside said conveyance as a fraud upon the creditors of Handly. State ex rel. v. Purcell, 131 Mo. 312. (a) Littlejohn bought part of the land for $797.50 less than he had offered to pay a few months previous and this fact is a badge of fraud and evidence of knowledge on his part of the fraud. Bank v. Nichols, 202 Mo. 309. (b) Littlejohn was a preferred creditor of Handly's for $8000 but a conveyance to him by said Handly through James A. Greer of the large excess over and above the amount of his debt and mortgage renders the deed fraudulent and void as to creditors. Bank v. Fry, 216 Mo. 24. (4) Fraud may be proven by circumstantial evidence as well as direct testimony. St. Francis Mill Co. v. Sugg. 206 Mo. 148.
Aull & Aull and Nick M. Bradley for respondents.
(1) The trial judge after hearing the evidence and observing the witnesses found there was no fraud. (a) "Courts should be reluctant to place a stamp of fraud on a transaction if there is a plausible air of fairness about it." Gust v. Hoppe. 201 Mo. 302. (b) Even where the findings of the chancellor are slightly against the weight of the evidence, they will not be disturbed on appeal except for plain error. Hunnell v. Zinn, 184 S.W. 1154. (c) The finding of the chancellor on conflicting evidence will not be disturbed. Walker v. Wallis, 186 S.W. 1041; Shannon v. Dillon, 205 S.W. 236. (d) There being substantial evidence to support the chancellor's finding, held, that it would not be disturbed on appeal. Miller v. Lloyd, 275 Mo. 35. (e) If a trial judge has reached a just and equitable conclusion in an equity suit, it is the duty of the Supreme Court to sustain it if possible. Lawson v. Cunningham, 275 Mo. 144; Tinker v. Kier, 195 Mo. 202. (2) A distinction is to be observed between one who purchases for a fresh consideration and one who purchases merely to secure a preexisting debt. An insolvent debtor may make a preference of creditors, and if a creditor takes property from him for the sole purpose of liquidating or securing the debt, mere knowledge on his part that the effect of the conveyance will be to defeat other creditors and knowledge that the debtor is making the conveyance for that purpose, will not render the deed void. But one who is not a creditor, who has no existing interest to preserve or protect, who purchases merely for a fresh consideration, is not protected in his purchase if he knows the seller is selling for the purpose of putting his property out of the reach of creditors. Gust v. Hoppe, 201 Mo. 293; Hume v. Wright, 274 S.W. 744. (a) It is no objection to the validity of a conveyance by a debtor to his creditor that it operates to hinder and delay other creditors, that it was made with the intent on the part of the debtor that it should so operate, and that the creditor receiving it was aware of that intent, provided he received it with the honest purpose of securing his debt. Shelley v. Boothe, 73 Mo. 74; Larrabee v. Bank, 114 Mo. 592; Wood v. Porter, 179 Mo. 56. (h) There is a class of cases to which the doctrine asserted in the instruction applies: as, if one knowing of a judgment and execution against another, goes and purchases his goods in order to defeat the execution, or if knowing that a debtor is selling his property to hinder, delay or avoid the payment of his debts, buys it, and pays the full value of it, thereby enabling the debtor to carry out his fraudulent design, such sales will be adjudged fraudulent because the purchaser becomes a participant in the iniquitous purpose of the debtor. But cases of this kind should not be confounded with those which only amount to giving a preference of one creditor over another. A debtor may give a preference to a particular creditor or set of creditors by a direct payment or assignment, if he does so in payment of his or their just demands, and not a mere screen to secure the property to himself. (c) The pendency of another creditor's suit is immaterial, and the transaction is valid though done to defeat the creditor's claim. Shelley v. Boothe, 73 Mo. 74; Kuykendall v. McDonald, 15 Mo. 416; Murray v. Cayson, 15 Mo. 415; State v. Benoist, 37 Mo. 500; Potter v. McDowell, 31 Mo. 74. (d) An embarrassed debtor may make sale of his property which he deems advantageous to enable him to raise the necessary means for paying off his creditors and to prevent its sacrifice at forced sale under execution, and for this purpose the law recognizes his right to sell for cash or on time. Dougherty v. Cooper, 77 Mo. 531; State ex rel. v. Purcell, 131 Mo. 312. (3) He who alleges fraud must prove it, either by direct and positive evidence or by facts and circumstances from which fraud may be inferred. Glasgow Co. v. Burnes, 144 Mo. 192; Mapes v. Burns, 72 Mo....
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