Farmers' & Merchants' Bank v. Blue

• Decision Date: 25 March 1930
• Citation: 233 Ky. 583,26 S.W.2d 493
• Parties: FARMERS' & MERCHANTS' BANK v. BLUE et al.
• Court: Kentucky Court of Appeals

26 S.W.2d 493

233 Ky. 583

FARMERS' & MERCHANTS' BANK v. BLUE et al.

Court of Appeals of Kentucky

March 25, 1930

Appeal from Circuit Court, Hopkins County.

Action by the Farmers' & Merchants' Bank against W. N. Blue and others, with an attachment against property of defendants, and wherein L. E. Blue and another filed motions to discharge attachments and quash levy on respective tracts of land conveyed to them. From the judgment, plaintiff appeals.

Affirmed.

C. J Waddill and J. W. Powell, both of Madisonville, for appellant.

William J. Cox and John J. Grayot, both of Madisonville, for appellees.

WILLIS J.

The Farmers' & Merchants' Bank of Slaughters, Ky. on September 1, 1928, instituted an ordinary action against W N. Blue and three of his brothers to recover a judgment upon three promissory notes aggregating $5.039.38, with interest from various dates. W. N. Blue and Owen Blue signed the three notes. M. A. Blue signed two of them, and H. L. Blue executed one of the series. On September 4, 1928, an affidavit for an attachment against the property of the four defendants was filed and orders of attachment were issued. A levy was made upon three tracts of land described in the return of the officer as the property of W. N. Blue, and the orders of attachment were served upon several garnishees. The answers of the garnishees disclosed nothing due any of the defendants. W. N. Blue denied the grounds of attachment, and filed an affidavit claiming his statutory exemptions. A personal judgment was rendered against W. N. Blue and Owen Blue for the entire amount of the notes with accrued interest. H. L. Blue and M. A. Blue were not served with process. L. E. Blue, another brother of W. N. Blue, and William J. Cox filed motions to discharge the attachments and to quash the levy thereof upon the respective tracts of land which had been conveyed to them by W. N. Blue and wife. Thereupon the bank filed an amendment to its pleading attacking the conveyances to L. E. Blue and William J. Cox as fraudulent under section 1906, Kentucky Statutes. William J Cox and L. E. Blue filed separate answers traversing the allegations of the amended pleading, and, upon hearing the proof, the court sustained the attachment, but held that L E. Blue purchased the 84 1/4 acre tract of land, and that William J. Cox purchased the 92 and 82 acre tracts, without notice of any fraudulent intent, and discharged the levy of the attachment on all the land. The bank appeals.

It is insisted for appellant that W. N. Blue sold and conveyed the lands with the fraudulent intent to cheat, hinder, and delay his creditors, and that the purchasers had notice, or were chargeable with notice, of the fraudulent purpose. It is conceded by appellant that the statute against fraudulent conveyances protects a bona fide purchaser for value; that a valuable consideration, as contemplated by the statute, means a fair equivalent of the thing bought, and that it is necessary, to defeat the purchase, to prove knowledge on the part of the purchaser, which knowledge, however, may be implied from circumstances. Allen v. Ligon, 175 Ky.

767, 194 S.W. 1050. The evidence in this case discloses that W. N. Blue was indebted to the bank on some direct obligations not involved in this action, and that he was surety for his brothers on the three notes which were the basis of the present suit. He also owed other debts. He owned a tract of land consisting of 84 1/4 acres which he sold and conveyed to his brother, L. E. Blue. He also owned a one-half interest in two other tracts of land comprising 174 acres which had been conveyed to him and his wife many years before. William J. Cox owned a large boundary of land adjacent to the 174 acres owned by W. N. Blue and wife.

The Blue land was between the Cox land and the public road, and Mr. Cox had desired to purchase it to put his land on the road. This purpose had been made known to Mr. Blue. Cox was approached as a prospective purchaser of the land, and a price was named which was satisfactory to him and which was the present fair value of the land. Cox investigated the title, and found that it was clear and that no suit had ever been filed against Blue. He had no knowledge of any debts owed by Blue, but was informed, after he had concluded the purchase, that Blue desired to sell in order to pay his debts. The consideration paid by Mr. Cox for the two tracts of land was $4,900. The price originally suggested was $5,000, but Blue desired to remain on the property until December, and was allowed to do so in consideration of a reduction of $100 in the purchase price. One-half of the $4,900 legally belonged to Mrs. Blue, which left $2,450 belonging to W. N. Blue. Of this amount $1,000 was exempt as the proceeds of his homestead. That left $1,450 applicable to debts. About $1,000 was paid to the appellant bank in discharge of debts due it from Blue. From the remaining $450 Blue paid a tax lien of $168. This left only $282 which Blue applied to other debts. Mr. Cox testified that he had no notice of any intent to defraud the bank or any other creditor. He had known Mr. Blue for many years, and there was nothing in his character or career to suggest that he would perpetrate a fraud. We find nothing in the record to justify an inference that there was any fraud in the transaction with Mr. Cox, or that he had any reason to suspect the good faith of Mr. Blue. Carter v. Braswell, 186 Ky. 760, 217 S.W. 1019; Ballard v. Security State Bank, 219 Ky. 468, 293 S.W. 950.

On the same day, August 28, 1928, W. N. Blue sold to his brother, L E. Blue, his other land, for the recited consideration of $2,000. That property belonged entirely to W. N. Blue. Blue testified that he owed several debts to his brother who was directed to calculate the amount due, deduct it from the purchase price of the land, and pay the difference. L. E. Blue produced uncontradicted proof of the genuineness of the indebtedness. It exceeded $1,300, leaving a balance of $616,...