First Nat. Bank of Indianola v. Brubaker

• Decision Date: 19 October 1905
• Citation: 128 Iowa 587,105 N.W. 116
• Parties: FIRST NAT. BANK OF INDIANOLA v. BRUBAKER ET AL.
• Court: Iowa Supreme Court

128 Iowa 587

105 N.W. 116

FIRST NAT. BANK OF INDIANOLA

v.BRUBAKER ET AL.

Supreme Court of Iowa.

Oct. 19, 1905.

Appeal from District Court, Warren County; Edmund Nichols, Judge.

The opinion states the case. Affirmed.

Henderson & Henderson, for appellant.

O. C. Brown, for appellees.

WEAVER, J.

On or about March 1, 1902, the defendant C. D. Brubaker and one Alexander entered into partnership as retail merchants. Brubaker had very little capital, and his father and mother, who are codefendants herein, advanced or loaned to him about $1,800 with which to begin business. In August following the firm property was sold to Nuzom Bros. For some reason not clearly indicated, the partners did not unite in the deal with the purchasers, but conducted separate negotiations; Alexander selling his half or partnership to one of the Nuzoms, and Brubaker selling his interest to the other, each making such terms and receiving his pay in such money or property as was satisfactory to himself. In making this deal, C. D. Brubaker was assisted by his father, and the transaction took the form of an exchange of properties; the Brubakers transferring to Nuzom the half interest in the partnership property, together with a house and lot owned by the elder Brubaker and occupied by him as a homestead, in consideration of which Nuzom undertook to give title to the other party to a 40-acre tract of land owned by him in that vicinity, transfer a small stock of goods then held in a neighboring town, and to pay in addition to the property here mentioned the sum of $665 in money. In closing this exchange, the cash payment and the conveyance of the land were, with the consent or at the direction of C. D. Brubaker, made to his parents in alleged payment of the loan made to him when he entered business. The tracts of real estate entering into the exchange were both incumbered by mortgage, and the parents are not shown to have received from the transactions money or property materially in excess of the debt due them from their son. The small stock of goods referred to was subsequently levied upon and sold for the benefit of the plaintiff herein as a creditor of the firm of Alexander & Brubaker. When the firm went out of business, it was indebted to the plaintiff in a considerable sum and had outstanding obligations, most or all of which were taken up by said bank or paid by checks drawn upon it by said Alexander for the firm, thus accumulating an overdraft. Suit was afterward brought upon the indebtedness thus incurred and judgment obtained, on which, after allowing all proper credits, there is still an unpaid balance of several hundred dollars. C. D. Brubaker proving to be insolvent, this action was brought in equity to subject the 40-acre tract, above mentioned as having been conveyed to the parents, to the payment of the plaintiff's judgment. The theory of the plaintiff is that C. D. Brubaker's interest in the partnership property and business was first liable to the payment of partnership debts, and that the transfer or payment to D. Brubaker and S. I. Brubaker of a part of the proceeds of the sale of said property was fraudulent. The trial court after hearing all the evidence found for the defendants and dismissed the plaintiff's bill, and from this judgment the plaintiff appeals. In our view the right of the plaintiff to the relief demanded rests wholly upon the question whether the allegation of fraud is fairly established by the record. A careful reading of the testimony leads us to agree with the conclusion reached by the trial court.

1. There is nothing shown which would justify us in saying that the parents of C. D. Brubaker, in receiving the money and property in payment of their debt, were actuated by any purpose to hinder or delay, or to assist their son in hindering or delaying, the partnership creditors in the collection of their claims. It may well be that they were dissatisfied with the outlook for the success of their son in the partnership business, and were anxious to avoid loss by having him pay or secure the debt due to them. That a creditor may lawfully receive pay or take security from his debtor, even though he knows or ought to know that the result of such transaction will be to delay or defeat other creditors, is well settled. Carson v. Byers, 67 Iowa, 606, 25 N. W. 826; Stroff v. Swafford, 81 Iowa, 699, 47 N. W. 1023;Aulman v. Aulman, 71 Iowa, 124, 32 N. W. 240, 60 Am. Rep. 783. If, however, the creditor colludes with the debtor and takes the property of the latter for the purpose of hindering or delaying, or assisting him in delaying or defrauding, his creditors, then, of course, it is an elementary proposition of equity that the fraudulent sale will be set aside. In the instant case there is no attempt to show that the judgment defendant was not in fact indebted to his father and mother in the full amount claimed or that the property transferred in payment of the debt was in excess of the sum justly due to them. It is true that transactions of this nature between members of the same family one of whom is insolvent or in failing circumstances will be closely scrutinized, and, if the taint of fraud be found or is fairly to be inferred, they will not be upheld. The right of a person to receive pay or security from a debtor is in no manner lessened or restricted because the debtor is a relative or member of his family. The fact of relationship is a material matter, to be considered upon the question of good faith of the person receiving the property; but, if no fraud in fact be found, neither law nor equity discriminates against him. We are satisfied that the parents of the judgment defendant took the conveyance of the land for the honest purpose of securing their own claim, and not for the purpose of defrauding or delaying the other creditors of...