Grimes Sav. Bank v. McHarg
| Decision Date | 14 December 1937 |
| Docket Number | 43927. |
| Citation | 276 N.W. 781,224 Iowa 644 |
| Parties | GRIMES SAV. BANK v. McHARG et al. (MYERLY, Intervener). |
| Court | Iowa Supreme Court |
Appeal from District Court, Polk County; Russell Jordan, Judge.
Defendants appeal from a judgment and decree setting aside deeds found to have been made for the purpose of defrauding creditors.
Affirmed.
Charles E. Hunn and Hiram S. Hunn, both of Des Moines, for appellants.
J. G Myerly, of Des Moines, for Grimes Sav. Bank and J. G. Myerly.
J. B Ryan, of Des Moines, for D. W. Bates, receiver.
During the year 1919, Maggie McHarg subscribed for stock in the Associated Packing Company in the amount of $25,000 and gave her notes in payment for the stock. Three of the notes aggregating $5,000 were purchased by Grimes Saving Bank on December 19, 1919. In August, 1920, the bank brought suit on the notes. There were three trials of this law action and three appeals to the Supreme Court. The last trial resulted in a verdict against Maggie McHarg on January 29, 1930, in the sum of $9,444.05. This judgment was affirmed on appeal.
On September 24, 1924, after a reversal of the judgment in favor of defendants in the first trial, 197 Iowa 1393, 199 N.W. 365, Mrs. McHarg in consideration of " love and affection and the promise of the grantee to support and maintain and keep the grantor as long as she lives," conveyed the S. 1/2 of the S.E. 1/4 of section 15 except the N. 24.54 acres thereof and the N.E. 1/4 of the S.W. 1/4 of section 15, all in township 80 N., range 25, Polk county, to her daughter, Ethel McHarg Kuefner, with whom she was then living in Ethel's home. This deed was not recorded until October 8, 1925. On October 8, 1925, Ethel Kuefner and husband conveyed the above real estate to C. E. Hunn as trustee, who testified that the conveyance was for the benefit of Mrs. McHarg. This latter deed was recorded April 7, 1932. The deed to the 96 acres from Mrs. McHarg to Ethel Kuefner is referred to in the record as Exhibit A. The deed to the same land from Ethel Kuefner and husband to C. E. Hunn, trustee, is referred to as Exhibit I. On September 30, 1930, Grimes Savings Bank brought this action against Maggie McHarg and the grantees in the deeds to set aside the conveyances, alleging that they were made without consideration and with the intent to hinder, delay, and defraud creditors, and especially to defraud plaintiff and prevent it from collecting the amount of its judgment. J. G. Myerly, intervener, joined with plaintiff in its petition to set aside the deeds.
The trial court found for the plaintiffs, set aside the conveyances from Mrs. McHarg to her daughter, Ethel, Exhibit A, and the deed from Ethel Kuefner and husband to C. E. Hunn, trustee, Exhibit I, and subjected the real estate to the payment of the judgment on the notes.
Appellants claim there was no fraud in the transaction and that there was an adequate consideration for the deeds. The consideration named in the deed, Exhibit A, is love and affection and the provision for future support. It is well settled in this jurisdiction that a conveyance of property in consideration of future support is voluntary as to existing creditors. A debtor will not be permitted to place his property beyond the reach of his creditors under an agreement that it will be used for his benefit. His duty is to pay his debts rather than provide for his support. Seekel v. Winch, 108 Iowa 102, 78 N.W. 821; Mallow v. Walker, 115 Iowa 238, 88 N.W. 452, 91 Am.St.Rep. 158; Harris v. Brink, 100 Iowa 366, 69 N.W. 684, 62 Am.St.Rep. 578.
A conveyance in consideration of love and affection is voluntary and will not support conveyances as against existing creditors. Shaw & Kuehnle v. Manchester, 84 Iowa 246, 50 N.W. 985; 27 C.J. 571, 572.
The conveyance being voluntary, it was constructively fraudulent as to the bank unless the conveyance was sustained by defendants by showing the grantor retained sufficient property to pay the grantor's debts existing at the time of the conveyance. The burden of proof of showing that the grantor, McHarg, retained sufficient property to pay her debts was on defendants. Dolan v. Newberry, 200 Iowa 511, 202 N.W. 545, 205 N.W. 205; Campbell v. Campbell, 129 Iowa 317, 105 N.W. 583.Mrs. McHarg, in addition to her indebtedness to the plaintiff, owed the Associated Packing Company for the stock, and substantially all the property Mrs. McHarg possessed, other than the property conveyed, was a $6,000 note of Frank Prunty. The evidence is that in 1924, the year the deed was given, Prunty was insolvent. The appellants having failed to sustain their burden, the deed was constructively fraudulent as to the plaintiffs.
The appellants contend that the consideration for the deed was not only future support, but support furnished the grantor prior to the execution of the deed, Exhibit A. They assert that an oral arrangement was entered into between Mrs. McHarg and her daughter on some day during the years from 1912 to 1919 and prior to September 24, 1924, under which Mrs. Kuefner was to keep and support her mother in consideration of the conveyance of the 96 acres. It is not alleged when the deed was to be given, but it was in fact given on September 24, 1924, after a reversal in the Supreme Court of the judgment in favor of Mrs. Maggie McHarg obtained in the first trial of the law action on the notes. The deed states that the consideration is " the promise of grantees to support and maintain and keep the grantor as long as she lives." Appellee relies on the rule that, if the consideration consists of a specific promise by the grantee and the consideration is clearly expressed and is contractual in its nature, such as a promise by a grantee to do a specific thing, it is no more subject to modification by parol or extrinsic evidence than any other part of the contract. Slump v. Blain, 177 Iowa 239, 158 N.W. 491; Blumer v. Schmidt, 164 Iowa 682, 146 N.W. 751; Banwart v. Shullenburg, 190 Iowa 418, 180 N.W. 190.However, it is a fundamental doctrine that the rule does not apply to actions between a stranger to the instrument and parties to the instrument. As stated in the case of Aultman Engine & Thresher Co. v. Greenlee, 134 Iowa 368, 111 N.W. 1007, 1009:" And where the stranger to the instrument is thus free to vary or contradict it by parol evidence, his adversary, although a party to it, must be equally free to do so." See Nissen v. Sabin, 202 Iowa 1362, 212 N.W. 125, 50 A.L.R. 1216; Peters v. Goodrich, 192 Iowa 790, 185 N.W. 903.Under this latter rule the appellants had the privilege of proving that Mrs. McHarg and her daughter Ethel Kuefner entered into such arrangement some time between the years of 1912 and 1919 and prior to September 24, 1924, the date of the deed. If such contract was, in fact, entered into prior to the time the appellee bank purchased the notes, the bank would not be an existing creditor at the time of the contract, though the deed, Exhibit A, to the 96 acres was given after the bank's claim originated. Farmers' & Merchants' Bank v. Daiker, 166 Iowa 728, 148 N.W. 1020.
Neither Ethel Kuefner nor Maggie McHarg testified at the trial. Their failure to testify is an unfavorable circumstance and gives rise to an inference that, if they had been called on and testified as witnesses in the case, their contention would not have been aided by their testimony. Shideler v. Naughton, 163 Iowa 616, 145 N.W. 280; Glasgow v. Nicholls, 124 Wash. 281, 214 P. 165, 35 A.L.R. 419; 22 C.J. 121.
To establish the arrangement, the appellants rely on the testimony of Albert Kuefner, husband of Ethel Kuefner, and C. E. Hunn, their attorney. Albert Kuefner did not testify that the contract relied on by defendants was entered into. No such arrangement was referred to in his examination. The most that can be gathered from his testimony is that the rents from the 96 acres were used for the support of the family; that is, Mrs. McHarg and Kuefner and his wife. Mr. Hunn does not purport to have been present when the arrangement was made. His testimony was hearsay evidence. He states that when the deed was executed in September, 1924, that he was told of the arrangement by the parties involved. The witness stated, " As I recall it they advised me that their agreement was made in 1915 or 1916, some where back there."
A noticeable inconsistency in the claims of appellants in regard to this alleged contract is that they insist that Maggie McHarg was never the real owner of the N.E. 1/2 of the S.W. 1/4 of section 15, which is a part of the 96 acres, and yet, disregarding such assertion, allege that the services rendered were in consideration of the conveyance of the entire 96 acres by Maggie McHarg to Ethel Kuefner, who paid no taxes on the property until after 1924. The appellants entirely failed to establish the contract, and the appellee bank was an existing creditor at the time of the conveyance. As above stated, the deed, being voluntary, was constructively fraudulent as to appellees.
Appellants further contend that the judgment at law upon which this creditor's bill is based is void because the promissory notes, which were the subject matter of the litigation, were never delivered to the clerk for cancellation as required by Code, § 11582-c1, and therefore there was neither a valid judgment nor a lien when this suit was commenced. Code, § 11582-c1, is in the following language:
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