Farmers State Bank of Potter v. Mitchell

• Decision Date: 07 March 1936
• Docket Number: 32240.
• Citation: 55 P.2d 423,143 Kan. 286
• Parties: FARMERS STATE BANK OF POTTER et al. v. MITCHELL et al. [*]
• Court: Kansas Supreme Court

55 P.2d 423

143 Kan. 286

FARMERS STATE BANK OF POTTER et al. v. MITCHELL et al. ^[*]

No. 32240.

Supreme Court of Kansas

March 7, 1936

Syllabus by the Court.

Judgment of probate court allowing claim against estate held not subject to collateral attack on judgment creditor's bill to set aside conveyance as fraudulent.

Probate court held not without jurisdiction to allow claim before final order of distribution on ground that claim was not filed within statute of nonclaim.

Double liability on bank stock listed as assets of estate was proper claim against estate, where bank closed after testator's death.

Defendants in action to set aside fraudulent conveyances and to subject property to judgment allowing claim, against estate for double liability on bank stock, could not complain that stock liability was not a proper claim against estate, where no appeal was taken from judgment allowing claim and judgment was final.

Receiver of closed bank could bring action to set aside conveyances as fraudulent and subject property to judgment allowing claim against estate for double liability on bank stock, where estate was insufficient to pay judgment and executrix was allegedly both fraudulent grantee in deed from deceased and fraudulent grantor in deed conveying same property to her daughters (Rev.St. 1923, 22--803, 22--1301).

Creditor's bill to set aside conveyances as fraudulent was maintainable though execution had not been returned unsatisfied, where judgment was against decedent's estate in process of administration, since property in executrix' hands could not be reached by execution.

Voluntary conveyance can be sustained as against existing creditors only when property retained by grantor furnished reasonable and adequate provision for discharge of his debts.

In action to set aside conveyances as fraudulent and to subject property to judgment allowing claim against estate for double liability on bank stock, evidence showed insolvency of decedent when his conveyance was made, and fraudulent intent.

1. Statutes of nonclaim may be available as a defense to the allowance of a claim against decedent's estate, but they do not deprive the probate court of jurisdiction, when the judgment allowing the claim is rendered prior to final order of distribution; and a judgment of the probate court allowing a claim, when unappealed from, is as final and binding as that of a court of general jurisdiction.

2. Real estate conveyed with intent to defraud creditors, when title not held by one who purchased for a valuable consideration in good faith and without knowledge of the fraud, may be reached and sold when required to pay debts of decedent's estate, and when the executrix as an individual is the alleged fraudulent grantee and also the alleged fraudulent grantor to her daughters, which facts would make a request that she as executrix institute proceedings to reach the property, futile, held, a creditor beneficially interested may bring an action to set aside the fraudulent conveyances making the executrix and others interested, defendants.

3. While it is a prerequisite to the maintenance of a creditor's bill, in which it is asked that transfer of real estate be set aside as fraudulent, and the property transferred be subjected to payment of plaintiff's debt that he shall have reduced his debt to judgment, and while it is ordinarily necessary that execution be returned unsatisfied, held, it is not a prerequisite that execution be returned unsatisfied when the judgment is against the estate of a decedent which estate remains in process of administration, as property in hands of the executrix could not be reached by execution.

4. A voluntary conveyance can be sustained as against existing creditors, only when, under all the circumstances of the case, the property retained by the grantor furnished reasonable and adequate provision for the discharge of his debts.

Appeal from District Court, Jefferson County; Lloyde Morris, Judge.

Action by the Farmers State Bank of Potter, by Charles W. Johnson receiver, and another, against Sarah F. Mitchell, as an individual, and as executrix of the estate of R. F. Mitchell, deceased, and others. From a judgment for plaintiffs, defendants appeal.

Affirmed, with directions.

B. J. Lempenau, of Topeka, and James B. Kelsey and Homer Davis, both of Leavenworth, for appellants.

Gerald W. Foley, of Atchison, for appellees.

WEDELL Justice.

This was an action in the nature of a creditor's bill to set aside certain alleged fraudulent conveyances and to subject the property to the satisfaction of plaintiffs' claims, allowed in the probate court.

The trial court set aside the conveyances and directed the real estate be subjected to the payment of claims of creditors against the estate. From that judgment defendants appeal. The parties made defendant were Sarah F. Mitchell, an individual (widow of deceased), Sarah F. Mitchell, executrix of the estate of R. F. Mitchell, deceased, and the five Mitchell children, all of whom were adults.

The trial court made findings of fact as follows:

"1. That on December 11, 1931, R. F. Mitchell and Sarah Mitchell, his wife made, executed and delivered their certain warranty deed to Sarah Mitchell, the wife, one of the defendants herein, to the real estate involved herein and set out in plaintiff's petition, situated in Jefferson county, Kansas, which deed was recorded in the office of the register of deeds of Jefferson county, Kansas, on December 12, 1931.

"2. That R. F. Mitchell died about three weeks after the execution and delivery of said deed.

"3. That at the time of the execution of said deeds to Sarah Mitchell, the said R. F. Mitchell owed the Potter State Bank, the plaintiff herein, the sum of $2,900.00 and interest on a promissory note which was not due at that time. The evidence fails to disclose the date of maturity of said note.

"4. That said sum of $2,900.00 was all that the said R. F. Mitchell owed said bank at the time of the transfer of title to said real estate.

"5. That on the 1st day of July, 1930, R. F. Mitchell signed a financial statement for the Farmers State Bank in which he listed his assets as follows:

Personal Property

Cash on hand in bank .............. $ 400.00

Bills receivable ................... 3,500.00

Bank stock and Bldg. and loan ...... 3,000.00

Real Estate

393 a. in Jeff. and Leaven. Co..... 39,300.00

House in Potter ................... 3,000.00

Equity in 361 a ................... 5,000.00

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$54,200.00

Liabilities

Farmers State Bank ................ 3,000.00

Notes payable (unsecured) ......... 2,000.00

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$5,000.00

Net worth ........................ $49,200.00

"6. After the death of the said R. F. Mitchell, administration was taken out of his estate in Atchison county, Kansas, and the following assets listed:

"Personal property consisting of corn, wheat, oats, hay, wood, Ford car and desk, $624.25.

"Other property consisting of 20 shares of bank stock, estimated value, $2000.00.

"Amount due the estate, notes and open accounts, $602.50.

"Cash Farmers State Bank, $142.00.

"7. That on the 6th day of February, 1933, Sarah Mitchell flied her final account as executrix of the estate of Robert F. Mitchell, deceased, showing payment of preferred claims in the sum of $997.00 and claiming due her as executrix, a balance of $170.00 advanced by her to pay said preferred claims.

"8. The evidence fails to disclose whether or not any consideration was paid by the said Sarah F. Mitchell to R. F. Mitchell for the land in controversy, other than the fact that the deed states as a consideration, love and affection.

"9. That on the 25th day of August, 1932, the said Sarah F. Mitchell conveyed to the other defendants, herein the above described real property for the consideration of $1.00 and other valuable consideration. The grantees in said deed being the children of Sarah F. and R. F. Mitchell, and being devisees and legatees under the last will and testament of the said R. F. Mitchell.

"10. That the Farmers State Bank, plaintiff herein failed January 18, 1933, more than twelve months after the death of R. F. Mitchell.

"11. That so far as the evidence discloses there is no property either real or personal belonging to the estate of R. F. Mitchell out of which the claims of plaintiff could be paid, except the homestead occupied by the widow and some equities of very doubtful value.

"12. That on the 19th day of November, 1932, the Farmers State Bank of Potter had its claim allowed on the note mentioned heretofore in the sum, of $3,306.82 with interest at 10 percent. from that date which claim has never been paid.

"13. That on the 25th day of March, 1933, the plaintiff has its claim for double liability on its 20 shares of bank stock allowed in the probate court in the sum of $2,000.00, which claim has never been paid."

The trial court made one conclusion of law, which was: "That the demurrer of the defendants to the plaintiff's evidence should be and the same is hereby overruled."

Appellants' first complaint is the trial court erred in overruling their objection to the introduction of evidence. The basis of this contention is the petition did not allege sufficient facts to entitle plaintiff to a judgment for stockholders double liability. This was not an action to establish a claim for double liability. The petition alleged, in substance, that at the death of R. F. Mitchell, he was the owner of 20 shares of capital stock in plaintiff bank, that thereafter the bank became insolvent and Mitchell's estate became liable for the double assessment in the sum of $2,000, the bank duly and regularly recovered a judgment thereon in the probate court...