Friedel v. Bailey

• Decision Date: 20 November 1931
• Docket Number: 29779
• Citation: 44 S.W.2d 9,329 Mo. 22
• Parties: George Friedel and Anton Snyder, Appellants, v. Phoebe E. Bailey and Stephen W. Bailey
• Court: Missouri Supreme Court

44 S.W.2d 9

329 Mo. 22

George Friedel and Anton Snyder, Appellants, v. Phoebe E. Bailey and Stephen W. Bailey

No. 29779

Supreme Court of Missouri

November 20, 1931

Appeal from Lincoln Circuit Court; Hon. Edgar B. Woolfolk Judge.

Reversed and remanded (with directions).

Chas J. Macauley, C. C. Worthy and Grover C. Huston for appellants.

(1) A deed absolute on its face but executed subject to a secret trust is fraudulent as to existing creditors of the insolvent grantor. The warranty deed, while absolute on its face, was subject to a secret trust created by agreement between Bailey and his wife for the husband's benefit. That deed was used as the means of concealing and hiding the interest which he had in the property in question. Munford v Sheldon, 320 Mo. 1077; McDonald v. Hoover, 142 Mo. 495; Robert v. Barnes, 127 Mo. 416; Martin v. Estes, 132 Mo. 409; Hunter v. Anthony, 209 Mo.App. 5; Bank v. Powers, 134 Mo. 447. (2) It appears from the evidence that all that Mrs. Bailey claimed her husband owed her was the sum of $ 4,903. It also appears from the evidence that she took property from Bailey which cost him $ 6,500, on which he, after getting it, made improvements at a cost of $ 2,700, then spent about the place $ 1,000 and then gave her the rentals amounting to $ 492.80, making a grand total of $ 10,692.80, less a deed of trust for $ 2,000, which she took to satisfy an alleged debt of $ 4,903. The result of that transaction was to enable Bailey to withdraw the surplus from the reach of his creditors, which act rendered the transaction on the part of both defendants fraudulent as to Bailey's creditors. Bank v. Frey, 216 Mo. 36. (3) A participation of the wife in a fraudulent attempt on the part of her husband to conceal or cover up his property for the purpose of putting it beyond the reach of his creditors, though an honest and valid debt is thereby secured or paid, will render the whole transaction fraudulent as to both. Bank v. Trimble, 315 Mo. 971; Balz v. Nelson, 171 Mo. 682; Bank v. Winn, 132 Mo. 87; Riley v. Vaughan, 11 Mo. 176; Sexton v. Anderson, 95 Mo. 379; Farwell v. Meyer, 67 Mo.App. 566. (4) Even though Stephen W. Bailey was, as he contended, indebted to his wife in the sum of $ 4,903 at the time he executed the deed dated September 8, 1926, and even though he conveyed said property in payment, or as security for the payment of that indebtedness, said conveyance should nevertheless be set aside, for she aided him to conceal or cover up his property for the purpose of hindering, delaying or defrauding his creditors. Authorities above cited. (5) Where a person, while indebted, by conveyance strips himself of the last vestige of property, his intent to hinder, delay or defraud his creditors is thereby shown. Stephen W. Bailey, while indebted to plaintiffs, conveyed all of his property to his wife, and this defendants admit. His intent to hinder, delay or defraud plaintiffs, his creditors, was clearly shown. Citizens Bank v. McElvain, 280 Mo. 512; Snyder v. Free, 114 Mo. 376. (6) To avoid a voluntary conveyance it is not necessary that an "actual intent" to defraud be shown. The statute is satisfied with the "intent to defraud," and whatever satisfies the mind and conscience of the existence of fraud is sufficient. Snyder v. Free, 114 Mo. 361. (7) The intent of the debtor is immaterial. When he makes a voluntary conveyance of his property, available for the payment of his existing debts, whereby his creditors are hindered or delayed in collecting their claims, his acts are fraudulent and void as to them, although he contemplated no wrong. It is the effect of what he does and not the intent with which he does it that determines its fraudulent character. Needles v. Ford, 167 Mo. 495; Hoffman v. Nolte, 127 Mo. 136; Snyder v. Free, 114 Mo. 371; Jordan v. Buschmeyer, 97 Mo. 94; Shaw v. Tracy, 83 Mo. 224; White v. McPheeters, 75 Mo. 294; Patton v. Casey, 57 Mo. 118. (8) The consideration expressed in the deed from Stephen W. Bailey to Phoebe E. Bailey is one dollar, love and affection, and in the other two deeds the consideration expressed therein is one dollar. The consideration so expressed in those deeds is prima-facie evidence of the amount paid or agreed to be paid for the land in question. Buckholder v. Henderson, 78 Mo.App. 294; Robinson v. Dryden, 118 Mo.App. 540. (9) A conveyance based on love and affection made by an insolvent debtor, or one rendered insolvent by the conveyance, is voluntary and fraudulent as to existing creditors, regardless of the motive prompting the grantee and notwithstanding she may have been ignorant of the insolvency and of the fraud. Snyder v. Free, 114 Mo. 360; Lauder v. Ziehr, 150 Mo. 403. (10) When a deed is shown to be voluntary as to existing creditors the burden of proof rests upon the donee to establish the circumstances which will repel the presumption of a fraudulent intent. The conveyance stands condemned as fraudulent unless the facts which may give it validity are proved by the grantee therein. If no evidence is given to show that the donor had ample means to meet his indebtedness, then the transfer must be decreed void as against creditors. First Natl. Bank v. Hoppe (Mo. App.), 270 S.W. 407; Bump on Fraudulent Conveyances (3 Ed.) 276, 277; Snyder v. Free, 114 Mo. 360; Hoffman v. Nolte, 127 Mo. 136. (11) Transactions between husband and wife to the prejudice of the husband's creditors, must be scanned closely with a jealous and discriminating eye and their good faith must be shown that there can be no reasonable doubt of the honesty of the transaction. Ice & Cold Storage Co. v. Kuhlmann, 238 Mo. 685; First Natl. Bank v. Link, 275 S.W. 939; 27 C. J. 643, sec. 408; Bank v. Fry, 216 Mo. 24; Cole v. Cole, 231 Mo. 236. (12) The allegations in the pleadings and the proof offered at the trial of a case must correspond. No recovery can be had on a new or a different cause of action from that marked out in the written pleadings in the case. Munford v. Sheldon, 320 Mo. 1077; Mark v. Cooperage Co., 204 Mo. 262; Henry County v. Citizens Bank, 208 Mo. 225. There are no allegations in any of the pleadings charging that the warranty deed from Bailey to his wife was executed, delivered or intended by the parties thereto to be a mortgage; nor is there any prayer in the petition or either of the answers filed herein asking the court to construe it to be a mortgage. Since the court was limited to the issues contained in the pleadings it committed reversible error in construing said warranty deed to be a mortgage. Munford v. Sheldon, 320 Mo. 127; Carson v. Lee, 281 Mo.App. 178. (13) The appellate court, where all the evidence in an equity case is before it, is not confined to the special finding of facts by the chancellor, but will review the evidence and arrive at its own conclusion upon the facts. Courtney v. Blackwell, 150 Mo. 245; First Natl. Bank v. Link, 275 S.W. 939; Creamer v. Bivert, 214 Mo. 479.

Joseph R. Palmer for respondents.

(1) Phoebe E. Bailey was a bona-fide creditor of Stephen W. Bailey. He had the right to prefer her over other creditors. (a) A debtor in failing circumstances may convey property to one of his creditors and thus prefer such creditor over other creditors if the conveyance is for the bona fide purpose of discharging the debt. 27 Cyc. 613; First Natl. Bank v. Link, 275 S.W. 936; Pew v. Price, 251 Mo. 641; Cole v. Cole, 231 Mo. 255. (b) The husband who honestly owes a debt to his wife may prefer her over other creditors, and the wife is in no different position in her rights to such preference than an ordinary creditor. 12 R. C. L. 589, sec. 105; Jewell v. Knight, 123 U.S. 327, 31 L.Ed. 1126; Riley v. Vaughan, 116 Mo. 169; Alkire Grocery Co. v. Ballenger, 137 Mo. 369. (c) The conveyances were for the honest purpose of settling a valid existing debt from Bailey to his wife, and not for the purpose of delaying and defrauding the creditors of Bailey. Sec. 3003, R. S. 1929; Columbia Savings Bank v. Winn, 132 Mo. 80; Jones v. Elkins, 143 Mo. 647; Orr v. Union Trust Co., 236 S.W. 649; Winn v. Riley, 151 Mo. 61. (2) The grantee must have had knowledge of the fraudulent purpose of grantor and must have participated in such fraud before the deed can be held void. The burden of proof of fraud and knowlledge of grantee is always on plaintiff. Farmers Bank of Concordia v. Worthington, 145 Mo. 91; Ettlinger v. Kahn, 134 Mo. 498; Phipps v. Markin, 208 S.W. 106. (3) In equity cases on appeal this court proceeds de novo to hear and determine the cause, deferring somewhat to the findings of the circuit court. Blount v. Spratt, 113 Mo. 48; Courtney v. Blackwell, 150 Mo. 267; State ex rel. v. Jarrott, 183 Mo. 204. (4) Deed direct from husband to wife conveys all title of husband. Givens v. Marbut, 259 Mo. 223. (5) Husband remaining in possession and exercising dominion over farm is no evidence of fraud. Givens v. Marbut, 259 Mo. 223.

Hyde, C. Ferguson and Sturgis, CC., concur.

OPINION

HYDE

Appellants, as creditors of respondent Stephen W Bailey, brought this action, in equity, against him and his wife, Phoebe E. Bailey, to set aside deeds made by him to his wife (alleged to be without consideration) and to declare the property, conveyed by such deeds, to be subject to judgments obtained by appellants against Bailey. Respondents claim the deeds were made, in good faith, in consideration of the settlement of indebtedness due from Bailey to his wife, and that the land was their homestead.

Both parties rely upon the testimony of the Baileys themselves. Appellants offered in evidence the depositions of Bailey and his wife taken before the trial, and they testified, in their own behalf, at the trial. Their evidence on both occasions was substantially the same. It was to the effect...