Gillespie v. Cooper

• Decision Date: 26 April 1893
• Citation: 55 N.W. 302,36 Neb. 775
• Parties: GILLESPIE ET AL. v. COOPER ET AL.
• Court: Nebraska Supreme Court

36 Neb. 775

55 N.W. 302

GILLESPIE ET AL.

v.COOPER ET AL.

Supreme Court of Nebraska.

April 26, 1893.

Syllabus by the Court.

1. Under section 12 of the Civil Code an action for relief on the ground of fraud can only be commenced within four years after a discovery of the facts constituting the fraud.

2. The cause of action mentioned in said section is the fraudulent act complained of, and the cause of action accrues when discovered, and it is discovered when the party seeking relief is in possession of sufficient facts to put a person of ordinary intelligence and prudence on an inquiry which, if pursued, would lead to a discovery of the fraud; and the statute begins to run against a creditor from the discovery of the fraudulent act on the part of his debtor, whether the creditor's claim has been reduced to judgment or not, as he is not limited to a creditor's bill in order to obtain relief on the ground of fraud, but may attach the property fraudulently conveyed. Irvine, C., dissents.

3. A party defrauded must be diligent in making inquiry. Means of knowledge are equivalent to knowledge. A clue to the facts, which, if followed up diligently, would lead to a discovery, is, in law, equivalent to discovery. Accordingly, where a party who was known by her creditors to have recently failed in business, and to be insolvent, conveyed all her real estate by deed recorded October 28, 1884, in the county where she resided, and she, in conversation with her creditors at that time, said that the object of the conveyance was to beat her foreign creditors; that she had been advised to put her property out of her hands; that she intended to put her property in other hands until she could settle matters; that she had made arrangements by which she could pay all her home creditors; that there were some debts she did not feel bound to pay; that the object of the deed was to secure a debt to the grantee, and the surplus to be paid her,--it was held that these facts were a discovery by the creditors, on the date of recording of said deed, that the same was fraudulent, and the statute of limitations commenced to run from that date.

4. It seems that the fraud, within the meaning of said section 12, is discovered when the fraudulent deed is recorded in the county where the debtor lives.

5. On the 28th day of October, 1884, C., being largely indebted to various parties, conveyed all her property--four city lots--to one R., with a secret agreement between them that R. should sell the lots, and retain the amount of the debt owing him by C., and return the surplus property, or proceeds thereof, to C., or such person as she might designate. Held, that this was a fraud on the other creditors of C., but, as this fraudulent conveyance was discovered by them on the date of its record, their suit to set it aside, commenced more than four years thereafter, was barred. But where it also appeared that while R. held the title to the said four lots he agreed with C. that if she would find a purchaser for, or sell, them, he would pay her as commission all that remained of the lots, or their proceeds, after the payment to him of her debt; two of the lots were sold, R.'s debt paid, and at C.'s request the remaining two lots were conveyed to her husband, without consideration,-- held, that the two lots thus conveyed were C.'s property, acquired from R. by purchase, and were conveyed to C.'s husband for the purpose of defrauding her creditors. Held, further, that this was not a continuation or consummation of the fraud of October 28, 1884, but a new and independent one, and as the suit of C.'s creditors to set aside the conveyance of October 28, 1884, also assailed this conveyance of the two lots purchased by C. from R., and conveyed to her husband, and was commenced within four years of the recording of such conveyance, it was not barred as to the lots purchased by C. of R.

Commissioners' decision. Appeal from district court, Lancaster county; Chapman, Judge.

Creditors' bill by Luella Gillespie and others against Philip H. Cooper and another. From a decree entered, defendants appeal. Modified and affirmed.

Lamb, Ricketts & Wilson, for appellants.

Harwood, Ames & Kelly, Stevens, Love, Cochran & Teeters, and W. S. Summers, for appellees.

RAGAN, C.

In 1883 the appellant Sarah Cooper was the owner of lots Nos. 4, 5, 6, 7, 8, and 9, in block No. 124, in the city of Lincoln, and, together with her husband, the appellant Philip H. Cooper, occupied, of said lots, as a homestead, Nos. 8 and 9. Mrs. Cooper was engaged in the mercantile business, and about October 1, 1884, failed, owing appellees debts contracted on the faith and credit of her property and business. On January 8, 1883, Mrs. Cooper conveyed by quitclaim deed said lots Nos. 8 and 9 to the State National Bank of Lincoln to secure the payment of a debt she owed it. On January 7, 1884, she was still indebted in the sum of $4,500 to said bank, as an evidence of which said debt she executed and delivered to it her note, due in 60 days, on which, prior to October of said year, there were indorsed $1,300. At this date all these lots were incumbered by a mortgage of $3,500 held by one Bowles. On October 27, 1884, Mrs. Cooper and her husband, by a warranty deed, and for the expressed consideration of $5,200, conveyed to John R. Richards, then president of said bank, four of said lots, namely, Nos. 4, 5, 6, and 7. This deed contained this clause: “The party of the second part, as a part of the purchase money of said premises, agrees to pay, and have applied on a certain mortgage executed by the parties of the first part to one Kate Bowles, the sum of $2,000, and which said mortgage also covers lots 8 and 9 in said block, and is to secure $3,500, and is recorded in book V of Mortgages, in Lancaster county, Nebraska. The balance of said mortgage, being $1,500 and interest, the parties of the first part are to pay, and if not paid, and is enforced by foreclosure, said lots Nos. 8 and 9 are to be first sold, and the proceeds to be applied to the payment of said balance of $1,500 and interest.” On the day of the execution of this deed to Richards the State National Bank executed and delivered to Mrs. Cooper a quitclaim deed for the said lots Nos. 8 and 9, previously conveyed by her to the bank as security. The deeds from Mrs. Cooper and husband to Richards, and from the bank to Mrs. Cooper, were both recorded October 28, 1884. About this last date, Mrs. Cooper and husband conveyed said lots Nos. 8 and 9 to one Hyde, and he at once conveyed them to appellant Philip H. Cooper, who thereupon gave his wife a written receipt or paper reciting that he accepted said conveyance from Hyde in full payment of $1,300 before then loaned by Mr. Cooper to his wife, and agreeing to hold said lots as the homestead of the family. It appears that this $1,300 was the money indorsed on the $4,500 note. Some time after the date of the deed from Mrs. Cooper and husband to Richards, he was succeeded as president of the bank by one Brown, and at that time Mr. Richards conveyed said lots 4, 5, 6, and 7 to him, (Brown.) About April 1, 1886, Mr. Brown sold and conveyed two of said lots, namely, lots Nos. 4 and 5, to one Patrick, for $4,500; and, on April 14th of the same year, Brown conveyed to appellant Philip H. Cooper the other two lots, namely, lots Nos. 6 and 7, the consideration expressed in the deed being $1.

The appellees brought this suit, a creditor's bill, to the district court of Lancaster county, alleging their judgments against Mrs. Cooper; that the debts on which they were based were contracted while she was owner of the record title of said lots Nos. 4, 5, 6, 7, 8, and 9, and on the faith and credit of the same; her insolvency; that said lots were of the value of $9,000,--the homestead of herself and husband; that they had conveyed them to Hyde, and caused him to convey them to Philip H. Cooper, without consideration, and for the express purpose of defrauding the creditors of Mrs Cooper. As to said lots 4, 5, 6, and 7, appellees, in their amended petition, alleged that on October 27, 1884, the appellant Mrs. Cooper was indebted to the State National Bank of Lincoln in the sum of $3,200, and, to secure the payment of the same she and her husband conveyed all said lots to said Richards, president of said bank, and that it then was, and at all times prior and subsequent thereto continued to be, well understood and agreed by and between the said Coopers and the said Richards, and the bank of which he was president, that Richards received said deed, and the title to said lots, in trust, only, and by way of mortgage to secure an indebtedness of $3,200 from the said Sarah Cooper to the said bank, and that upon the payment of said indebtedness said lots should be reconveyed to the said Sarah Cooper, or to such person as she might direct, or that in case said lots should be sold the bank should be first paid out of the proceeds of the sale, and the residue, if any, should be paid over to the said Sarah Cooper, or to such person as she might direct. Appellees further alleged that some time after that one Brown succeeded Richards as president of said bank, and that thereupon Richards conveyed said lots to Brown on the same terms under which they were conveyed to him by the Coopers, and that in pursuance of the trust and agreement between the said Coopers and the said Richards and Brown and the bank, in April, 1886, Brown sold, of said lots, Nos. 4 and 5, to one Patrick, for a sum of money sufficient to pay the indebtedness of Mrs. Cooper to the bank, and did, with the proceeds of said sale, pay off and discharge Mrs. Cooper's indebtedness to the bank, and thereupon, on the 14th of April, 1886, at the request of Mrs. Cooper, and with the intention to hinder, delay, and defraud her creditors, and without consideration, conveyed said lots Nos. 6 and 7 to the appellant Philip H. Cooper. The appellees further alleged...