Harvey v. Phillips

• Decision Date: 07 March 1922
• Docket Number: 34573
• Citation: 186 N.W. 910,193 Iowa 231
• Parties: GEORGE W. HARVEY, Appellee, v. WALTER PHILLIPS et al., Appellants
• Court: Iowa Supreme Court

186 N.W. 910

193 Iowa 231

GEORGE W. HARVEY, Appellee, v. WALTER PHILLIPS et al., Appellants

No. 34573

Supreme Court of Iowa, Des Moines

March 7, 1922

Appeal from Marion District Court.--H. S. DUGAN, Judge.

ACTION in equity by plaintiff, judgment creditor of the defendant Walter Phillips, to set aside a deed to Lot 3 of the north half of Lot 4, Block 6, in the town of Tracy, Iowa, executed by one England to the defendant Nellie Phillips, in January 1920, and recorded in April, 1920, for a consideration of $ 1,000, subject, however, to a mortgage of $ 750, and to subject said lots to the payment of a deficiency judgment rendered some time ago in favor of one Farr and against the plaintiff herein, Harvey, and defendant Walter Phillips and others, which judgment provided that, in case the plaintiff herein was compelled to pay any part of the original judgment, he should have recourse against the defendant herein, Walter Phillips. Plaintiff alleges that he was forced to pay the balance of said judgment in the sum of about $ 1,200, which amounted, with interest, at the time of the trial, to $ 1,376.16. By a second amendment to the petition plaintiff alleges that the equity of defendants in the foregoing described property is not sufficient to pay his claim, and he asks the same relief in regard to the equity of defendants in an 80-acre tract of land in Lee County, which at the time of the trial, was, according to the evidence worth $ 125 an acre. There was a mortgage of $ 8,000 against this property. It does not appear clearly from the record whether this mortgage was on the property at the time, but we assume that it was, and that only the equity was purchased, since it appears that it was taken in a trade for Texas land. As said, the evidence shows that the land is now worth about $ 10,000, but its value in 1913 is not shown. We take notice of the fact that land generally increased in value between 1913 and the time of the trial. In so far as the consideration or any claimed inadequacy in consideration is concerned, the value should be taken as of that time, rather than the present. This tract was deeded to defendant Nellie Phillips by her husband, her codefendant. Walter Phillips, about 1913 or 1914, or was taken in her name. The original judgment in favor of Farr against this plaintiff and defendant Walter Phillips and others was rendered in June, 1920. Defendant Nellie Phillips was not a party to that judgment. Plaintiff's claim is that, while the title to the properties was in defendant Nellie Phillips, it was held by her in trust for her husband, and that the conveyances were made with intent to defraud creditors, and especially this plaintiff who became a creditor subsequent to the conveyances. The trial court found for plaintiff, that the amount of the judgment June 10, 1920, was as before stated, that defendant Walter Phillips is, in fact, the owner of the properties before described, and that he caused said real estate to be conveyed to his wife for the purpose of defrauding his creditors; and decreed that the judgment against defendant be a lien on the Tracy property before described, and that, upon filing transcript of said judgment with the clerk of the district court of Lee County, said judgment be declared a lien upon the 80-acre tract, and that execution issue for the sale of said premises in satisfaction of the judgment. The defendants appeal.

Reversed.

C. C. Orvis and Crozier & Hockersmith, for appellants.

Vander Ploeg & Johnson, for appellee.

PRESTON, J. STEVENS, C. J., WEAVER and DE GRAFF, JJ., concur.

OPINION

PRESTON, J.

The question presented is largely one of fact, and of the proper inferences to be drawn from the evidence. The plaintiff placed both defendants on the stand as his witnesses, and relies almost entirely upon their testimony, to show the intent and the alleged fraudulent purpose in making the conveyances. By placing the defendants on the stand as witnesses, to a certain extent he vouches for their truthfulness, and he may not impeach them, although, of course, he may contradict, and may rely upon the proper inferences to be drawn from the circumstances testified to by them. Under such circumstances, we may not construe their evidence only as it is against the defendants, but must construe it as well in their favor. In other words, the evidence must be taken all together. Generally, fraud is not presumed, and ordinarily, in a civil action, only a preponderance of the evidence is required; but still, to establish the evidentiary facts of bad faith, the proof must be clear, satisfactory, and convincing. Ley v. Metropolitan Life Ins. Co., 120 Iowa 203, 209, 94 N.W. 568; Severson v. Kock, 159 Iowa 343, 347, 140 N.W. 220; 20 Cyc. 120. We held, in Schrimper v. Chicago, M. & St. P. R. Co., 115 Iowa 35, 40, 82 N.W. 916, and Johnson v. Tyler, 175 Iowa 723, 733, 157 N.W. 184, that, to justify a decree setting aside or reforming a deed because of alleged fraud, the evidence must be clear and satisfactory, and that a mere preponderance is not sufficient; that any other rule would be highly dangerous, and tend to weaken confidence in all titles. It may be that the instant case is not one, strictly speaking, to set aside a deed, and yet that is the effect of it, so far as the defendant Nellie Phillips is concerned; for she is deprived of her title by the finding of the trial court. We held, in Lillie v. McMillan, 52 Iowa 463, 3 N.W. 601, that, in a case where fraudulent conveyance is charged, a preponderance of evidence is all that is required. That case is cited on that proposition alone. We might not now agree to some of the discussion therein, that the same degree of proof is required in a civil as in a criminal action, where the cause of action is based upon a crime. State v. Carey, 188 Iowa 1308, 1324, 177 N.W. 522. Even though only a preponderance of the evidence is required, still we think that the evidentiary facts of the alleged fraud should be established by clear evidence, as stated in Ley v. Metropolitan Life Ins. Co., supra.

It is true, of course, that, in cases of this character, there are certain badges of fraud from which certain inferences may be drawn from facts proven. 12 Ruling Case Law 537 and 514. It is doubtless true that a conveyance from husband to wife requires less proof to show fraud than if the transaction were between strangers. But if the wife is the bona-fide creditor of her husband, he may transfer property to her in satisfaction of her debt, just as he might do in the case of any other creditor. 12 Ruling Case Law 515, 589. Other cases hold that the mere existence of the relation of husband and wife does not create an implication as to fraud against creditors, especially where it is not shown that the creditor was such at the time of the conveyance. 12 Ruling Case Law 514.

It is urged by appellants that plaintiff is not entitled to the relief prayed, because he was not a creditor at the time of the alleged conveyances; that he became such only subsequent thereto. It appears that, at the time of the conveyance of the land in 1913, the plaintiff and defendant Walter had not had any dealings whatever, and the debt which plaintiff claims defendant assumed in the conveyance of certain land by plaintiff to defendant was about 1918, when, as plaintiff claims, defendant assumed the mortgage on the land upon which the judgment was later rendered against both plaintiff and defendant Walter. The deed to defendant Nellie from England to the Tracy lots was after the judgment now held by plaintiff.

The trial court relied upon the case of Brundage v. Cheneworth, 101 Iowa 256, 263, 70 N.W. 211. That case was decided on demurrer to the petition. The petition alleged that the lands were conveyed to the wife with the intent of hindering, delaying, and defrauding his creditors. Such allegation was admitted by the demurrer. It was said at page 261 that the petition set forth a good cause of action, and that, if the wife held the property in trust for the husband, the grantor, as was alleged, and he remained the real owner, then his creditors, whether existing or subsequent, were entitled to have said conveyance set aside, and to have the land subjected to the payment of their claims. The rule was stated at page 263 thus:

"(1) A conveyance which is merely voluntary, and when the grantor had no fraudulent view or intent, cannot be impeached by a subsequent creditor. (2) A conveyance actually and intentionally fraudulent as to existing creditors, as a general rule, cannot be impeached by subsequent creditors. (3) If a conveyance is actually fraudulent as to existing creditors, and merely colorable, and the property is held in secret trust for the grantor, who is permitted to use it as his own, it will be set aside at the instance of subsequent creditors. The second rule above laid down is subject to some exceptions, among which may be mentioned cases in which the conveyance is made by the grantor with the express intent and view of defrauding those who may thereafter become his creditors; cases wherein the grantor makes the conveyance with the express intent of becoming thereafter indebted cases of voluntary conveyances, when the grantor pays existing creditors by contracting other indebtedness in a like amount, and wherein the subsequent creditors are subrogated to the rights of the creditor whose debts their means have been used to pay; cases in which one makes a conveyance to avoid the risks or losses likely to result from new business ventures. * * * We have not overlooked the fact that there are respectable authorities holding that a conveyance actually fraudulent as to the existing creditors may, for that reason alone, be avoided by subsequent creditors. We are not,...