Funkhouser v. Lay

• Decision Date: 31 October 1883
• Citation: 78 Mo. 458
• Parties: FUNKHOUSER, Appellant, v. LAY.
• Court: Missouri Supreme Court

78 Mo. 458

FUNKHOUSER, Appellant,

v.LAY.

Supreme Court of Missouri.

October Term, 1883.

Appeal from St. Louis Court of Appeals.

AFFIRMED.

E. McGinnis for appellant.

Cline, Jamison & Day and M. L. Gray for respondents.

PHILIPS, C.

This is an appeal from the St. Louis court of appeals. The facts as disclosed by the pleadings and proofs are substantially these: On the 30th day of March, 1877, one Thomas J. Pickering obtained judgment in the circuit court of the United States for the eastern district of Missouri, against the defendant John F. Lay for $8,670.48, on which was collected, under execution, the sum of $69.33, and the execution returned not satisfied as to the balance. John F. Lay then was and yet is a resident of the state of Illinois. In 1876 he owned certain real estate in said state. The said judgment was assigned by Pickering to plaintiff Funkhouser, who brought suit thereon against John F. Lay in Illinois on the 2nd day of October, 1877, which suit stood until the 14th day of February, 1879, when plaintiff voluntarily dismissed the same. On the 14th day of February, 1876, John F. Lay conveyed said land to one Drury in trust for one John E. Hayner to secure the payment of $4,000, money then borrowed of Hayner by John F. Lay; the note was payable three years after date, with interest payable semi-annually at ten per cent, with the provision in the deed of trust that if the interest was not paid when due the whole debt should become due and payment be enforced by sale by the trustee. In July, 1876, John Lay and wife conveyed said land to one Drummond, who shortly afterward conveyed the same to said John Lay's wife. In October, 1877, John Lay and wife conveyed the land to the defendant Charlotte Lay, who is the step-mother of John Lay. The consideration of this last deed is expressed to be $3,000 and subject to said deed of trust to Hayner. On March 28th, 1878, said Hayner, pursuant to the provisions of said trust deed, on default of payment of interest, had said land sold. The defendant Charlotte, through said Drummond, became the purchaser at the price of $4,600. She paid the costs and expenses of said sale, the accrued interest on the mortgage debt, and $100 of the principal, and received from the trustee a deed. On the same day she executed to said Hayner a deed of trust on said land to secure the payment of said $3,900, balance of purchase money. In August following, said Charlotte conveyed said land to Lizzie Lay, wife of said John Lay. This was a quit-claim deed, consideration $2,000, and the $3,900 debt to Hayner. On the 8th day of February, 1879, said Hayner caused said land to be again sold under his second deed of trust for non-payment of interest, and received a deed therefor.

The plaintiff brought this bill in equity setting up the foregoing facts, averring that all of said conveyances among the Lays and to Drummond and by Drummond to Mrs. Lay were fraudulent contrivances on the part of John Lay to defeat the collection of the Pickering debt, and that Drummond and Charlotte Lay were in all of said transactions actively aiding and abetting said John in said fraudulent attempts. No attack is made upon the integrity of Hayner's deeds of trust. The object of the petition is to charge Charlotte Lay as a trustee for plaintiff, and to have the value, rents and profits of said lands subjected to the payment of plaintiff's judgment, and to obtain judgment against John Lay for the said debt. The answer tendered the general issue. The multiform conveyances of the land in Illinois, to and fro among the family relatives of John Lay, with the attendant facts and circumstances in evidence, are such as to impress the mind very clearly with the belief that they were fraudulent as to the creditors of John Lay. And if the title acquired by Charlotte Lay had no other foundation than these family transfers, I should have no difficulty in deciding that she was a purchaser without consideration, and held the property in trust for the benefit of plaintiff as a creditor of John Lay.

But the circuit court and court of appeals evidently placed their ruling, in finding for defendants, on the ground that Charlotte Lay was an innocent purchaser, by reason of her purchase under the Hayner deed of trust. The learned judge, who wrote the opinion of the court of appeals, held that “the fact that Charlotte Lay paid no consideration for the equity of redemption, and that the conveyance by which she acquired it, was open to attack, did not deprive her of the right which she had, in common with the entire community, of purchasing at the trustee's sale.” This position is assailed by plaintiff's counsel, with so much earnestness and plausibility, as to render it respectful, if not necessary, to re-examine more fully the correctness of that opinion, and the logic and authority of the appellant's opposition to it. The argument against its validity may be summarized in the following propositions: 1st, That from all the facts and circumstances surrounding the purchase under the trustee deed and sale, Charlotte Lay did not design to acquire any adverse title to John Lay, but that her purchase was really made in his behalf; so that she continued to hold the title so acquired in secret trust for him; 2nd, That Charlotte Lay, by reason of her pretended ownership of the equity of redemption, was enabled to deter bidders at the sale, and thus to bid in the property for just the amount of the trust debt, as the presumption of outsiders would be that any surplus would go to the apparent owner of that equity; and that under the law the fraudulent holder of the right of redemption, cannot strengthen her title or throw off her character of trustee, by thus tacking on to her estate that of an innocent holder.

We will examine these propositions in their order.

FRAUD.

The first involves mainly a question of fact. Does the evidence justify the conclusion that Charlotte Lay bought in under the trustee sale for the use of John Lay? Fraud, it is sometimes said, may be inferred. But this expression must not be construed to warrant the mere assumption of a fact. This inference can only be drawn legitimately from some tangible, responsible fact in proof. It is a deduction which an intelligent mind may honestly make from the incidents and circumstances surrounding the case, and which appear to be inconsistent with the good faith and rectitude of the actor. If, however, the conduct of the party, and the transaction under consideration, reasonably consist as well with integrity and fair dealing, the law rather refers the act to the better motive. The evidence fails to show with any degree of satisfaction, that Hayner, the owner of the deed of trust, acted in collusion with either John or Charlotte Lay. On the contrary, Hayner, who was examined as a witness on plaintiff's part, testified in effect, that he foreclosed his trust deed because of John Lay's failure to pay the accrued interest. This his deed authorized him to do. It does not appear that he even communicated, directly or indirectly, with John or Charlotte Lay about the intended foreclosure. He was not required to consult them by the terms of his mortgage. He gave notice by advertisement as his contract stipulated. The first notice John and Charlotte had of the proceeding was observing in the newspaper the advertisement. Thereupon Charlotte wrote to Drummond to buy in the property for her. This he did announcing the fact at the time the property was stricken off. She seemed to anticipate, that as Hayner was selling to compel payment of the past due interest, he would probably be satisfied with that sum and the payment of costs, etc. To that end she sent Drummond her check for several hundred dollars. Hayner was content to take this past due interest and costs and $100 of the principal, all of which she then paid, and received a deed from the trustee, and at the same time executed back to Hayner her deed of trust to secure to him the $3,900, balance of purchase money. There is nothing unusual or unnatural in all this arrangement. There is no evidence that John Lay furnished one dollar of the money paid out about that sale. Without more the presumption would be that Charlotte Lay, who was the active participant in the transaction, furnished the money. The only evidence directly touching this point is that of Charlotte Lay, who testified: “I paid all the expenses in money, and gave my own notes secured on the property.” By the execution of her individual note to Hayner she became bound for the payment of $3,900, which he might hold her other property for, if any she had.

2. _____: intervention of bona fide purchaser.

In support of the second proposition, counsel is...