Farmers & Merchants Bank of Festus v. Funk

• Citation: 92 S.W.2d 587,338 Mo. 508
• Decision Date: 10 March 1936
• Docket Number: 33672
• Parties: Farmers & Merchants Bank of Festus, a Corporation, Appellant, v. William A. Funk, Anna L. Brands, J. R. Funk, Katherine Funk, Nellie Funk, Daisy Funk, H. E. Vaughn and E. T. Manley
• Court: United States State Supreme Court of Missouri

92 S.W.2d 587

338 Mo. 508

Farmers & Merchants Bank of Festus, a Corporation, Appellant, v. William A. Funk, Anna L. Brands, J. R. Funk, Katherine Funk, Nellie Funk, Daisy Funk, H. E. Vaughn and E. T. Manley

No. 33672

Supreme Court of Missouri

March 10, 1936

Appeal from Franklin Circuit Court; Hon. R. A. Breuer Judge.

Affirmed.

James Booth and R. E. Kleinschmidt for appellant.

(1) Although in an equity suit rulings on evidence are of little or no controlling force on appeal, as a general rule, as the appellate court will review the evidence, yet a mass of irrelevant matter tends to becloud the chancellor's mind and mar serenity of judgment, and its admission may demand a reversal. Russell v. Sharp, 192 Mo. 291; Walther v. Null, 233 Mo. 112; Hornsey v. De Voto, 16 S.W.2d 633. (2) A conveyance made for the purpose of hindering, delaying or defrauding creditors is void and should be set aside. Sec. 3117, R. S. 1929. (3) A voluntary conveyance is fraudulent as to existing creditors regardless of intent, if conveyance leaves debtor without means to pay debts. Citizens Bank v. McElvain, 219 S.W. 75; Lionberger v. Baker, 88 Mo. 453. (4) Where a part of the consideration of a conveyance is fictitious or fraudulent as to creditors, the entire transaction is vitiated. National Tube Works v. Ring, 118 Mo. 365; Seger's Sons v. Thomas Bros., 107 Mo. 644; Munford v. Sheldon, 9 S.W.2d 907. (5) The transfer of property to one creditor in preference to others is void if done with intent of the debtor to place the excess beyond the reach of other creditors, and if creditor knows of that purpose. 27 C. J., p. 635, sec. 397; Imhoff & Co. v McArthur, 146 Mo. 371; Riley v. Vaughan, 116 Mo. 169; McVeagh v. Baxter, 82 Mo. 518; Alberger v. White, 117 Mo. 366; McKinney v. Wade, 43 Mo.App. 152. (6) If the transfer is not in reality a preference of an actual debt but is a mere colorable device to place the debtor's property beyond the reach of his creditors, or if the transaction extends beyond the necessary purposes of a mere preference so as to secure to the debtor some benefit or advantage, or unnecessarily hinder and delay other creditors, such being the purpose of the parties the transfer will be held fraudulent, even though there was an actual indebtedness to be discharged or secured. 27 C. J., p. 628, sec. 385; Gutta Percha Rubber Co. v. Supply Co., 149 Mo. 538; Martin v. Estes, 132 Mo. 402; Farwell & Co. v. Meyer, 67 Mo.App. 566; McKinney v. Wade, 43 Mo.App. 152.

Terry, Terry & Terry for respondents.

(1) Fraud will not be presumed nor deduced from mere suspicion, but must be proved. And the burden of proving that a sale was fraudulent rests upon him who asserts the fraud. Gockel v. Gockel, 66 S.W.2d 870; Gittings v. Jeffords, 292 Mo. 691; Brueckle v. Pechan, 21 S.W.2d 907; Albert v. Besel, 88 Mo. 153; First Natl. Bank of Jefferson City v. Link, 275 S.W. 939. (2) An insolvent debtor has a right to prefer, in payment of his debts, one creditor over another, even though such creditor be a member of the debtor's family or of some relation to him, provided the payment is made and received in good faith and not with the intent to hinder, delay or defraud any other creditors, except so far as might necessarily happen by the mere act of paying in full the just debt of the preferred creditor. Pew v. Price, 158 S.W. 340; First Natl. Bank of Jefferson City v. Link, 275 S.W. 939; Friedel v. Bailey, 44 S.W.2d 11; Mansur-Tebbetts Imp. Co. v. Ritchie, 143 Mo. 605; McElvain v. McElvain, 20 S.W.2d 914. (3) If a transfer is for valuable consideration creditors cannot attack it because of the fraudulent intent of the grantor where the grantee had neither (1) actual notice of such intent, nor (2) notice of any fact or facts calculated to put him on inquiry and which would lead to a discovery of such intent, nor (3) participated in fraud. 27 C. J. 506, sec. 175; First Natl. Bank of Jefferson City v. Link, 275 S.W. 939. (4) It is the duty of the court to reject irrelevant and immaterial evidence because such evidence tends to clutter the record and lead to confusion of the issues. For that reason the court did not err in refusing to allow appellant to prove the fair and reasonable market value of the property included in the deed of trust foreclosure at the time of said foreclosure.

Ferguson, C. Hyde and Bradley, CC., concur.

OPINION

FERGUSON

This is an equity suit in two counts. The first count is a suit to try and determine title to an undivided one-sixth interest in a tract of approximately 134 acres of land in Jefferson County. The second count seeks a partition of the land. The issue of title on the first count is between plaintiff and defendant Katherine Funk, the title and ownership of the other five-sixth interest in the land not being in dispute. Defendant Katherine Funk alone answered. The cause went on a change of venue to the Circuit Court of Franklin County and the trial chancellor found the issues for defendant Katherine Funk and entered a decree declaring that plaintiff "has no right, title, interest or claim in the real estate described in" the petition, and that defendant Katherine Funk "is . . . the owner" of the undivided one-sixth interest therein in dispute. Plaintiff has appealed.

We first state the situation as shown by the uncontroverted facts. The tract of 134.84 acres of land is a farm known as the "Funk farm." It was owned by defendants, William A. Funk, Anna L. Brands, J. R. Funk, Katherine Funk, Nellie Funk, and Daisy Funk, brothers and sisters and the children and heirs of Christian Funk, deceased, who owned the land at the time of his death intestate. They owned the land as tenants in common, each having title to an undivided one-sixth interest therein. William A. Funk was indebted to plaintiff bank on notes aggregating $ 3500 secured by deeds of trust on certain real estate, which he owned, in the city of Festus. The undivided one-sixth interest in the "Funk farm" was the only real estate other than this property in Festus that William A. Funk owned. It seems the major part of his indebtedness to plaintiff bank secured by deeds of trust on the "city property" (so referred to in the evidence) was incurred in 1922. In addition to the indebtedness to the bank secured by the deeds of trust on the "city property" he was indebted to it on two unsecured notes in the principal amount respectively of $ 300 and $ 275. William A. Funk was called before a meeting of the board of directors of plaintiff bank on "the second Tuesday in May, 1932," and advised that it was the opinion of the directors that the "loan on the city property was not properly secured" and he was "asked to give additional security" and to give the bank a mortgage or deed of trust on his undivided one-sixth interest in the "Funk farm," which he refused to do stating that he "thought" the bank "had ample security." At this time William A. Funk was indebted to other creditors and one unsatisfied transcript judgment was outstanding against him. Shortly thereafter the plaintiff bank caused notice of foreclosure sale on the first deed of trust against the city property to be published. The notice fixed June 4, 1932, as the date of the foreclosure sale. On June 2, 1932, William A. Funk and wife, by quitclaim deed, executed and delivered of that date, conveyed his undivided one-sixth interest in the "Funk farm" to his sister, the defendant herein, Katherine Funk. The consideration was stated therein as: "One hundred dollars and other valuable considerations." This deed was filed for record on the next day, June 3, 1932. The foreclosure sale of the city property did not satisfy the debt, interests and costs, and on August 18, 1932, the bank commenced an action, in the Circuit Court of Jefferson County, against William A. Funk seeking a deficiency judgment. A default judgment for $ 1043.83 was entered therein on September 15, 1932, and execution issued thereon April 18, 1933. The sheriff levied the execution upon an undivided one-sixth interest in the "Funk farm" as the property of William A. Funk. Such interest was offered for sale at the execution sale on May 13, 1933, and conveyed by sheriff's deed under execution to plaintiff bank upon its bid of $ 200. Thus the issue in the present suit arose. The plaintiff bank claims title to and ownership of the undivided one-sixth interest of William A. Funk in the land under the sheriff's deed to it and defendant Katherine Funk claims to be the owner of the same undivided one-sixth interest under the quitclaim deed of June 2, 1932, to her.

The object and purpose of this suit is to set aside and cancel the quitclaim deed of June 2, from William A. Funk and wife to his sister, defendant Katherine Funk. It is alleged in the first count of the petition that the deed "was executed . . . without consideration and in order to defraud the creditors of the said William A. Funk, particularly this plaintiff, . . . and was accepted by said defendant Katherine Funk to enable said defendant William A. Funk to defraud his said creditors and . . . said deed is therefore null, void and of no effect." This excerpt from the petition presents the issue -- that of fraud or a fraudulent conveyance. The answer of defendant Katherine Funk is conventional. She claims to be the owner of an undivided one-sixth interest in the land "by reason of the quitclaim deed," etc., "and also another one-sixth interest by reason of having inherited the same from Christian Funk" and denies that plaintiff "has any right, title, interest or claim in and to said property."

Plaintiff having charged fraud in the transaction rendering the quitclaim deed void the burden rested upon it to prove it. [Stahlhuth v. Nagle, 229 Mo. 570, 129 S.W. 687; Mansur-Tebbetts Imp. Co....