Federal Land Bank of Spokane v. Egan

• Decision Date: 29 June 1938
• Docket Number: 27108.
• Citation: 195 Wash. 330,80 P.2d 813
• Court: Washington Supreme Court
• Parties: FEDERAL LAND BANK OF SPOKANE v. EGAN et al.

80 P.2d 813

195 Wash. 330

FEDERAL LAND BANK OF SPOKANE v. EGAN et al.

No. 27108.

Supreme Court of Washington

June 29, 1938

Department 1.

Appeal from Superior Court, King County; Clay Allen, Judge.

Action by the Federal Land Bank of Spokane, a corporation, against Richard Stanley Egan and others to set aside alleged fraudulent conveyances, wherein named defendant cross-complained. From the judgment, defendants appeal.

Affirmed.

Padden & Moriarty and Melvin T. Swanson, all of Seattle, and Danforth & Davenport, of Sioux Falls, S. D., for appellants.

Henry R. Newton, of Spokane, and R.L. Bartling, of Seattle, for respondent.

HOLCOMB, Justice.

This action was brought by respondent to set aside two conveyances by appellant, Richard Stanley Egan, to appellant, Lloyd T Egan, his brother, alleging they were made with the intention of defrauding respondent.

Appellants answered, admitting that the conveyances were made, but denied that there was any fraud in their actions, and alleging that the conveyances were suported by a good valuable, and sufficient consideration. Appellant, Richard Stanley Egan, cross-complained, setting up an agreement alleging respondent thereby agreed either to bid the full sum due at foreclosure sale or to satisfy any deficiency judgment that resulted, and prayed that the obligation alleged by respondent to be outstanding be declared satisfied. Respondent replied, denying the affirmative defense.

The trial court did not disturb one quitclaim deed which was executed December 10, 1935, to effect a more equitable division of the estate of appellants' father, Sylvester Egan; but decided that the property held by appellant Lloyd T. Egan, by virtue of a quitclaim deed dated December 18 1935, was subject to the lien of respondent's judgment entered in cause No. 256399 in the superior court of King county. The cross-complaint of appellant, Richard Stanley Egan, was dismissed, and from these adjudications appellants have appealed.

The facts necessary to present the issues raised are these Appellants' father Sylvester Egan and his son Richard came to this state in the spring of 1915 and settled near Kent, while the other son, Lloyd, continued to maintain his residence at Chester, South Dakota, but made numerous trips to visit his father and brother here.

January 10, 1924, Richard and his wife borrowed a sum of money from respondent and executed and delivered to it a note and mortgage therefor upon lot 11, section 30, township 22 North, range 5 E.W.M., situated in King county. At the time of the execution of the mortgage the major physical improvements on the mortgaged property consisted of a house, a milk house, and a barn.

It appears that Richard proved to be a somewhat unsatisfactory debtor. The taxes were in arrears upon the property described in the mortgage, and after a somewhat extended delay, respondent instituted an action to foreclose its mortgage on September 1, 1932. By reason of periodical promises for better performance respondent extended Richard further consideration and carried the mortgage along between 1932 and 1935 to enable him to put the mortgage in good standing.

In 1935 the father of Richard and Lloyd died. His estate was probated and a decree of distribution was entered December 16, 1935. By that decree there was distributed to Richard $550 for services as administrator, $3,650 cash, an automobile appraised at $350, a one-third interest in certain intangible property, an undivided one-third interest in lot 4, block 11, Yesler's First Addition to the Town of Kent; and all right, title and interest in the southeast quarter of the southeast quarter and of Government lot 10 in section 30, township 22 North, range 5 E.W.M. This real property is that which is involved in the conveyance of Richard to Lloyd dated December 18, 1935.

December 7, 1935, Richard moved a house, which he had built upon the mortgaged land subsequent to the execution of the mortgage at a cost not in excess of $500, on to the real property distributed to him from his father's estate. December 16, 1935, the same day as the final decree of distribution was entered in his father's estate distributing the property among three heirs, namely, Lloyd, Richard and Julia Shafer, a sister, Richard went to Spokane to attempt to obtain an agreement with respondent whereby no deficiency judgment would be taken against him, and conferred there with a Mr. Crowley, an attorney for respondent. Crowley advised Richard that respondent would bid the full amount of the mortgage when the foreclosure came up provided he delivered up to the bank immediate possession, and provided further that he and his wife would execute a so-called 'possession agreement.' Richard said he would so agree if respondent would lease the property to the present renter for one year. An agreement was prepared by respondent the following day and mailed to Richard, but it was never executed. It appears that respondent was not informed during the course of the negotiations hereinBefore referred to of the removal of the house from the mortgaged premises, and upon being apprised of the same, Richard having refused to remove the house back to the mortgaged property, respondent advised him that under such circumstances no arrangement would be made for not taking a deficiency judgment.

December 18, 1935, Richard executed a quitclaim deed which recited a consideration in the sum of ten dollars whereby he conveyed to his brother Lloyd the bulk of the aforementioned real property which he had inherited from his father.

Both Richard and Lloyd testified that Richard was in December, 1935, and had been for many years prior thereto, indebted to his brother Lloyd in various sums of money, evidenced by four promissory notes bearing the following dates, amounts, and interest provisions, and that the above mentioned deed was executed to satisfy them:

April 15, 1925 $400.00, due one year after date, 6% interest;

March 1, 1932 150.00, due one year after date, 6% interest;

May 15, 1933 965.00, due one year after date, 6% interest;

January 1, 1934 150.00, due one year after date, 6% interest;

The several assignments of error in substance raise three questions, namely, whether the evidence discloses that the deed was executed on December 18, 1935, to discharge a real obligation owed by the grantor to the grantee, whether respondent entered into a binding agreement not to take a deficiency judgment, and whether the trial court erred in refusing to reopen the case or grant a new trial.

It is well settled that the party who seeks to set aside a transfer of real property on the ground of fraud has the burden of proving...