Givan v. Lambeth

• Decision Date: 02 May 1960
• Docket Number: No. 8955,8955
• Citation: 10 Utah 2d 287,351 P.2d 959
• Parties: d 287 Edwin B. GIVAN, Plaintiff and Appellant, v. Frank LAMBETH, sometimes known as Frank R. Lambeth, et al., Defendants and Respondents, Frank LAMBETH, sometimes known as Frank R. Lambeth, and Norman W. Esmeier, Third-Party Plaintiffs, v. Bertrand T. GIVAN and Ina Givan, and Helen Givan, Third-Party Defendants.
• Court: Utah Supreme Court

Page 959

351 P.2d 959

10 Utah 2d 287

Edwin B. GIVAN, Plaintiff and Appellant, v. Frank LAMBETH, sometimes known as Frank R. Lambeth, et al., Defendants and Respondents, Frank LAMBETH, sometimes known as Frank R. Lambeth, and Norman W. Esmeier, Third-Party Plaintiffs, v. Bertrand T. GIVAN and Ina Givan, and Helen Givan,

Third-Party Defendants.

No. 8955.

Supreme Court of Utah.

May 2, 1960.

Cline, Wilson & Cline, Milford, for appellant.

Sumner J. Hatch, Salt Lake City, for respondents.

CROCKETT, Chief Justice.

This is an appeal from the trial court's refusal to set aside, as fraudulent, certain conveyances by Frank Lambeth to his children. Plaintiff sued for moneys claimed upon four promissory notes executed by defendants, Frank Lambeth, Norman Esmeier and Corinne Lambeth Esmeier, his wife; and the court awarded plaintiff judgment for approximately $36,000 on these notes. But the trial judge, agreeing with an advisory jury, refused to find in accordance with plaintiff's contention that Frank Lambeth's conveyances of grazing lands, a sheep business and his home were fraudulent and refused to declare the $36,000 judgment a lien on said properties.

Plaintiff seeks review of the evidence, as is the duty and prerogative of this Court in a case in equity, ¹ contending that the facts and circumstances point so unerringly to fraudulent conveyances that the judgment must be reversed, which we would do only if the evidence clearly preponderates against the trial court's findings. ²

Plaintiff bases this action upon our Fraudulent Conveyance Act, Title 25, Ch. 1, U.C.A.1953:

Section 4--'Every conveyance made * * * by a person who is, or will be thereby rendered, insolvent is fraudulent as to creditors, without regard to his actual intent, if * * * made * * * without a fair consideration.'

Section 7--'* * * [or if made] with actual intent * * * to hinder, delay or defraud either present or future creditors is fraudulent as to both present and future creditors.

This suit follows Rule 18(b), U.R.C.P., which allows an action for money to be combined with one to set aside a conveyance as fraudulent, without first having obtained a judgment for the money. The gravamen of the inquiry here is whether the conveyances by Frank Lambeth to his children fall within the above quoted statutory provisions.

Edwin Givan, and his brother, Bertrand, as Givans, Inc., owned an Oldsmobile and G. M. C. truck dealership in Cedar City, Utah. In October, 1952, they contracted to sell it (1600 shares of stock in the corporation) to Frank Lambeth and his son-in-law, Norman Esmeier. Three thousand dollars cash was paid in October, 1952, on the $60,000 purchase price. In February, 1953, the stock was actually assigned for an additional $16,000 cash, $34,900 in interest-bearing notes and the cancelation of some personal indebtedness of the Givans to the corporation. The notes totaling $34,900 were secured by a lien on the stock of Givans, Inc., which, subsequent to the sale, with the exception of 20 shares, was owned by Frank Lambeth and Norman Esmeier in toto. Plaintiff, Edwin Givan, is the assignee of the interest in the notes of his brother, Bertrand.

Insofar as we are concerned, it is to be assumed that the defendants were satisfied with their bargain when they purchased this business. But the facts are that its assets consisted primarily of buildings and land which were heavily mortgaged and that the business had been in financial difficulties. However, Norman Esmeier had been its secretary and knew of these facts. By April, 1953, it was apparent that the new owners were not succeeding and that it was in financial straits. Creditors started suing during May of that year, and the corporation was forced out of business before the end of 1953, as a result of judgments obtained by secured creditors.

In May, 1953 Frank Lambeth and his oldest son, Keith, recorded deeds and a bill of sale conveying Frank's land and sheep business to his four sons and the family home in Cedar City to all seven of his children. The deeds and bill of sale bear date and notary's acknowledgment of August 1, 1950. The evidence was that the father, Frank Lambeth retained possession of these documents until the summer of 1952, shortly prior to his entering into this business transaction, when he delivered them to his son, Keith, on behalf of the children.

The plaintiff argues that because of the nature of this action he must rely upon circumstances to prove his case and places emphasis on the facts above recited, and the more significant ones that it was in February, 1953, six months after the delivery of the conveyances, Frank Lambeth mortgaged his home for $10,000. (This money he turned over to the Givan brothers.) In connection therewith he signed a statement which contained a clause that 'he is the owner in fee of the above described premises free and clear of any encumbrances, and that he will warrant and defend the same against all persons and claimants'; that likewise he borrowed an additional $1,500 giving a second mortgage on this property in June, 1953; and also that in both his 1952 and 1953 income tax returns he reported ownership of the sheep business and the sons showed their income from it to be wages. The plaintiff insists that the foregoing circumstances are sufficient to compel a finding that the conveyances were fraudulent, notwithstanding any explanation offered by the defendants.

We agree with the plaintiff's contention that it is of little or no importance that the deeds and bill of sale were executed in 1950. It is not uncommon for a grantor to make such documents and retain possession of them. This is sometimes done in lieu of drawing up a will, a practice which is not without legal pitfalls with which we are not here concerned. But such conveyances are not effective until there is an actual delivery with intent to transfer ownership. This could not have been until their delivery in the summer of 1952. The question is whether the facts and circumstances surrounding the delivery render the conveyances subject to nullification for fraud.

The problem of attempting to set aside an allegedly fraudulent conveyance is not new either in this court or in the history of English and American law. A landmark case in the development of the law relating to fraudulent conveyances is known as Twyne's Case, a Star Chamber case decided in 1601. ³ It coincidentally involved certain sheep. The debtor Pierce owed Twyne 400 pounds and was sued by a third party for 200 pounds. Before trial Pierce conveyed all of his property to Twyne reciting as consideration the prior debt. But he continued in possession, sold some of the sheep and evidenced all of the perquisites of ownership. The conveyance was set aside as fraudulent, the court assigning the following reasons, which have often since been referred to as the badges of fraud: that in the conveyance Pierce reserved nothing even for his own use even though he continued in possession and used the property as his own; that this evidenced a secret trust between the parties; that the conveyance was made pending the suit; and was kept secret; and finally that the conveyance itself 'protested too much' in reciting that it was made 'honestly, truly, and bona fide.'

The decision also discussed conveyances between members of a family:

'And when a man, being greatly indebted to sundry persons, makes a gift to his son, or any of his blood, without consideration, but only of nature, the law intends a trust betwixt them, that the donee would, in consideration of such gift being voluntarily and freely made to him, and also in consideration of nature, relieve his father, or cousin, and not see him want who had made such gift to him * * *'

* * *

* * *

'And because fraud and deceit abound in these days more than in former times, it was resolved in this case by the whole Court, that all statutes made against fraud should be liberally and beneficially expounded to suppress the fraud.'

Human nature doesn't seem to have changed very much and we still take for granted that transactions between close relatives under circumstances of this kind are to be closely scrutinized when attacked by creditors of the grantor. ⁴ However, the mere fact that the transaction is among close relatives does not necessarily mean that it is invalid, but the true facts are subject to proof.

Plaintiff assails the finding that the deeds were delivered in August, 1952, on the ground that it rests solely upon the testimony of the defendants and there was no recording at that...