Gleitz v. Schuster
| Decision Date | 29 March 1902 |
| Parties | FRANCISTA GLEITZ, Appellant, v. SCHUSTER et al |
| Court | Missouri Supreme Court |
Appeal from Andrew Circuit Court. -- Hon. A. D. Burnes, Judge.
Affirmed.
Charles M. Street and Culver & Phillips for appellant.
(1) The court correctly found from the evidence that the transfer was made with the intention on the part of Schuster to hinder delay and defraud his creditors. The court refused to find that the grantees participated in that intention and for that reason dismissed appellant's bill. In this the chancellor erred. The court must have found that the grantor made the transfer to hinder, delay and defraud his creditors upon one or both of these theories: (a) that a portion of the consideration was a fictitious debt; (b) that the title to the property was lodged in the children for the use and benefit of the father so as to keep it beyond the reach of the other creditors. This is necessarily so since no other theory was presented by the evidence, and no other theory is possible from the circumstances of the case. As the court found either one or both of these theories to be true, it should have found that the grantees participated in the fraud of the grantor, for proof of either theory necessarily makes the grantees participants in the fraud. It is conceded that Schuster was insolvent at the time of the transfer; that Mrs Ackhurst, who represented all the children, knew that fact at the time the deed was executed. It is agreed that the value of the property conveyed was $ 6,000. Now, if the court found that the transfer was fraudulent on the theory that the consideration was partly a fictitious debt trumped up by Schuster and his children, then the acceptance of the deed by the grantees made them participants in the fraud of the grantor. Baldwin v. Short, 26 N.E. 928. It is well settled that if a portion of the consideration is fictitious the conveyance is absolutely fraudulent and void as against the creditors of the grantor, because the grantee necessarily, by the acceptance of the conveyance, participates in the fraud of the grantor. Seger's Sons v. Thomas, 107 Mo. 644; Lumber Co. v. Mining Co., 78 Mo.App. 681; Freybe v. Treman, 13 S.W. 370; State ex rel v. Hope, 102 Mo. 430; Cordes v. Straszer, 8 Mo.App. 61; Imhoff v. McArthur, 146 Mo. 372; Keykendall v. McDonald, 15 Mo. 420; Lumber Co. v. Kahn, 71 Mo.App. 372; Barton v. Singleton, 128 Mo. 164. (2) If the transfer was fraudulent so far as Schuster's creditors are concerned, the property remained his. When the bank transferred its interest in the property to Mary Ackhurst, Ida Schuster and Lillie Schuster, the sole consideration paid to the bank for the transfer was August Schuster's property. None of the grantees of the bank paid for the conveyance to them with their own money or property. If they had paid for the bank's title with their own money or means, their title would have been good even though the conveyance by their father to them in the first instance had been fraudulent. But if they paid for it with property fraudulently transferred to them by their father, then their title is defeasible. Lillard v. Johnson, 148 Mo. 23. The principle is the same as if the property had belonged to the bank in the first instance and it conveyed to the children, the consideration being paid by the father. Where an insolvent debtor pays for property the title of which is taken in another, the grantee is a trustee for the debtor so far as creditors are concerned, and the property is subject to the payment of his debts. Bay v. Sullivan, 30 Mo. 191; McLaren v. Mead, 48 Mo. 115; Waite on Fraud. Conv. (3 Ed.), sec. 57, p. 107.
Johnson, Rusk & Stringfellow and Booher & Williams for respondents.
(1) Not only must the grantor have a fraudulent intent, but such intent and purpose must be participated in by the grantees, and even if the grantee has knowledge of the fraudulent purpose of his grantor in making a transfer, still, if he is a creditor with a bona fide debt, he has the right to accept payment or security to the extent of his debt; and the courts will protect him in this right. Crothers v. Busch, 152 Mo. 606; Milling Co. v. Burns, 152 Mo. 350; State to use v. Mason, 112 Mo. 374; Alberger v. Bank, 123 Mo. 313; Shelley v. Booth, 73 Mo. 74; Schomacker v. Ludington, 77 Mo.App. 415; Mapes v. Burns, 72 Mo.App. 411; Ross v. Ashton, 73 Mo.App. 254; Bank v. Russey, 74 Mo.App. 651. (2) While it is true, as contended by appellant, that if a portion of the consideration was in fact fictitious, this would vitiate the transfer in toto, as being in fraud of the rights of creditors of the grantor, it is essential to the application of this rule that the grantees have knowledge that a portion of the alleged consideration is fictitious. What vitiates a transfer of this kind in every case, is the knowledge and participation by the grantee in the fraud of the grantor. This rule is recognized in Baldwin v. Short, 26 N.E. 928, cited by appellant, and by numerous decisions in this State and elsewhere, included in which are the cases cited by appellant. Davis v. Schwartz, 155 U.S. 631; Smith v. Whitfield, 2 S.W. 822; Bump, Fraud. Con. (3 Ed.), pp. 44, 45; State to use v. Mason, 112 Mo. 381; Motley v. Sawyer, 38 Me. 68; Cravern v. Miller, 65 Pa. St. 456; McFadden v. Mitchell, 54 Cal. 628; Becker v. Kendall, 66 Iowa 703; Kempner v. Churchill, 8 Wall. 369; Ames v. Gilmore, 59 Mo. 537; Cagney v. Cuson, 77 Ind. 494; Wood v. Harmison, 23 S.E. 560. (3) The fact that afterwards these children permitted the rents to be used to support the grantor as well as the dependent children who were among the grantees, would not of itself have any effect upon the bona fides of the conveyance. The most that could be argued from this fact would be that it was evidence of an antecedent agreement or understanding, but all of the evidence is positively to the effect that there was no such agreement or understanding, and the circumstances of the case are corroborative of the direct and positive testimony on this point.
Plaintiff, a judgment creditor of defendant August Schuster, files this suit in equity to set aside two deeds made by her debtor to the other defendants, who are his children, on the ground that they were made to defraud his creditors in general and the plaintiff in particular.
The petition sets forth the plaintiff's judgment at law for $ 1,675, the insolvency of the judgment debtor, his ownership of the property, which consists of certain lots with improvements in the city of Savannah, the conveyance to the other defendants, his children, which it alleges was "without any consideration whatever" and for the purpose of placing the same beyond the reach of his creditors. The answer was a general denial. There was a decree for defendants dismissing the bill, and the plaintiff appeals.
The only statement in the petition as of a fact constituting the alleged fraud is that the insolvent debtor made the conveyance to his children "without any consideration whatever." The consideration for the deeds was the only point in dispute at the trial. It was agreed that the property conveyed was worth $ 6,000. It is conceded by appellant that at the date of the deeds, March 3, 1894 defendant, August Schuster owed his six children $ 4,087.83, but it is contended that one-sixth of that sum was owing to a daughter, Mrs. Smissen, who was not named in the deeds, or had previously been paid to her and that the amount then due the five children who were grantees in the deeds was only $ 3,406, which was about $ 2,600 less than the value of the property. The amount conceded to be due was made up of $ 1,000 given by the children's grandfather to their father for them in 1885 and a legacy left them in their grandfather's will of which their father was executor, amounting to $ 1,749.28, and six per cent interest on these two sums. The testimony on the part of the defendants tended to show that in addition to those two sums the grandfather of these children had, as far back as 1860, 1862, and 1873, given to their father the sums of $ 150, $ 200, and $ 500 for them and that he agreed to hold it for them in trust, use it and pay them interest on it. The grandfather, Graff, had six children, and at the times he made these three last mentioned gifts he gave an exact equal amount to each of his other children, giving the several amounts to each of his other five children in person, but the share to defendants' mother, who was then living, was given to her husband, and the plaintiff contends that under the common law which was then in force the gifts of money to the wife into the hands of her husband made it his. Although the only testimony in the case as to the express...
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