First National Bank v. Hartsock

• Decision Date: 16 November 1926
• Docket Number: 37483
• Citation: 210 N.W. 919,202 Iowa 603
• Parties: FIRST NATIONAL BANK OF IOWA CITY, Appellee, v. M. B. HARTSOCK et al., Appellants. CITIZENS SAVINGS & TRUST COMPANY OF IOWA CITY, Appellee, v. M. B. HARTSOCK et al., Appellants
• Court: Iowa Supreme Court

210 N.W. 919

202 Iowa 603

FIRST NATIONAL BANK OF IOWA CITY, Appellee, v. M. B. HARTSOCK et al., Appellants.

CITIZENS SAVINGS & TRUST COMPANY OF IOWA CITY, Appellee, v. M. B. HARTSOCK et al., Appellants

No. 37483

Supreme Court of Iowa, Des Moines

November 16, 1926

Appeal from Johnson District Court.--R. G. POPHAM, Judge.

Consolidated creditors' bills to set aside a conveyance of land by defendants M. B. Hartsock and Clara J. Hartsock to their son defendant Ernest L. Hartsock. Decree for plaintiffs. Defendants appeal.

Affirmed.

A. E Maine, for appellants.

Dutcher & McClain and Byington & Rate, for appellees.

MORLING J. DE GRAFF, C. J., and EVANS and ALBERT, JJ., concur.

OPINION

MORLING, J.

The case presents only a fact question. The burden of proof is upon the plaintiffs. Fraud is not presumed. The relationship of parents and child between the grantors and the grantee does not create a presumption of fraud. It does require a critical examination of the attending circumstances. Fraud is not committed openly. It is an offense of secrecy. Direct evidence is rarely obtainable. Frequently it can be shown only by the circumstances admitted by the parties to it. Fraud may, and usually must, be proved by circumstantial evidence. The individual circumstances are usually inconclusive, and, attacked separately, may be blown away. The circumstances must ordinarily be considered together, and the force and weight to be given them are that of them in combination.

The circumstances of a bona-fide transaction are ordinarily consistent with each other, and with generally recognized business methods and fair dealing, and not incredible. A fraudulent transaction naturally begets stilted, contradictory, and incredible evidence. The bona-fide transaction and the fraudulent one each has its well recognized indicia. As said in Jones v. McGruder, 87 Va. 360 (12 S.E. 792, 798):

"A transaction may, of itself and by itself, furnish the most satisfactory proof of fraud, so conclusive as to outweigh the answer of the defendants, and even the evidence of witnesses. The circumstances attending and following a transaction are often of such a character as not to leave even a shadow of doubt as to the real object and motive of the parties engaged in it. * * * The motives and intentions of parties can only be judged of by their actions and the nature and character of the transaction in which they are engaged. These often furnish more conclusive evidence than the most direct testimony."

Though the parties concerned testify directly to the payment of valuable consideration and good faith, but the proved circumstances make such direct testimony improbable, and either alone, or with other evidence, leads the mind to the conclusion that the consideration claimed was not paid, or that the transaction, instead of being in good faith, was in reality fraudulent, the court should disregard the direct, and accept the circumstantial.

The conveyance attacked is of 110 acres, made September 14, 1923, and is claimed to have been made pursuant to agreement of sale, noted later. The farm had been owned and operated by M. B. Hartsock for a number of years, and was clear of incumbrance. M. B. Hartsock, before the conveyance, had signed notes of considerable amounts, as co-surety with one Hummer. Hummer, three days before the deed in controversy was made, had conveyed all his real estate to his two sons. The Hartsocks were expecting trouble on these obligations. The son, Ernest, the grantee, testified that he knew that his father's creditors might try to get the land. With this knowledge, the father, mother, and son went to a lawyer, and spent two hours with him. They went back home, talked the matter over, went to the lawyer's office again, and spent three hours there. Ernest testified, in auxiliary proceedings, that nothing was discussed except his father's making the deed to him, and his giving notes. The entire farm consisted of 150 acres, and was improved and occupied by the family as their home. The buildings were in the center. Forty acres surrounding the buildings, consisting of parts of two government forties, were not included in the conveyance. The 110 acres consisted of 10 acres east of the buildings, 40 acres south of the buildings, 10 acres west of the buildings, and 50 acres north of them. Ernest disclaims any knowledge of the homestead laws, and says that his parents, at the time of the agreement later referred to, told him that, whenever they got ready to sell the 40, he would have a chance to buy it. The price claimed to have been agreed upon for the 110 acres was $ 82.50 an acre. The plaintiffs' evidence tends to show that it was worth, in that form, $ 100 or $ 110 per acre; that the whole farm would be worth $ 25 to $ 35 more per acre. The defendants' claim is that the land was poor, and a brother of M. B. Hartsock's placed a value of $ 70 an acre upon it. If the plaintiffs' evidence on this subject is correct, the consideration was inadequate. The defendants' description of the land and the value placed upon it make their claim that the son paid for it from its earnings with the rapidity which will be referred to later, even more improbable than if it were good land. The defendants' claim further is that Ernest was to have the use of the 40, and as compensation for that, was to "keep" his father, mother, sister, and two brothers. Their evidence is that the 40 was mostly pasture. Defendants claim that the father and mother wanted to keep the buildings for the 40 acres. Defendants testify that the father verbally sold the 110 acres to Ernest when he came of age, in January, 1917. Notwithstanding the character of the 40 acres, the father, after the alleged sale, spent $ 4,000 in building a barn, double corncrib, hog house, and chicken house on the 40. The defendants claim that the father sold to the son, not only the 110 acres, but all of his live stock and machinery. The mother, in auxiliary proceedings, testified that the sale of the personal property was some three years before Ernest became of age, and before the sale of the land. At the trial, all three testified that the personal property and the land were sold at the same time. They say that Ernest was to pay for the property as he made it from the land, $ 1,000 or $ 1,200 a year, if he could. If he could not pay that amount, he was to pay what he could. Ernest at that time had no property except a horse and buggy. Defendants testify that Ernest had previously announced that he was going to leave the home and try to buy a piece of land and equipment on his own account, as soon as he became of age; that his father and mother asked him to rent their farm, and he refused to do it, because he wanted to buy. He had not received any wages from his parents, and he testified:

"I was going to different parties I thought maybe I could see, and get some money and some help."

The defendants' claim is that the father was in ill health and unable to operate the farm. Ernest went into the army on May 13, 1918, and came back August 8, 1919. It is admitted that, during his absence, the father looked after the farm, but it is claimed that Ernest authorized him to hire the help, pay the expenses, and credit Ernest with the net proceeds. Defendants testify that, during that period, the father took in from...