Hatheway v. Hanson

• Decision Date: 06 May 1941
• Docket Number: 45370.
• Citation: 297 N.W. 824,230 Iowa 386
• Parties: HATHEWAY v. HANSON et al.
• Court: Iowa Supreme Court

297 N.W. 824

230 Iowa 386

HATHEWAY v. HANSON et al.

No. 45370.

Supreme Court of Iowa.

May 6, 1941

Appeal from District Court, Harrison County; Whitney Gillilland Judge.

Action in equity to set aside a mortgage as a fraudulent conveyance. The court found for the plaintiff and entered decree accordingly. The defendants appeal.

Affirmed.

William M. Tatum and Welch, Acrea & Welch, all of Logan, for appellants.

Roy E Havens and Michael Murray, both of Logan, for appellee.

MILLER, Justice.

The plaintiff's petition, filed February 11, 1939, asserts that she is the executrix of the estate of Harry Z. Hatheway, deceased; defendants Dora G. Hanson and C. L. P. Hanson are wife and husband and Augustus T. Hanson is their son; on April 1, 1937, Dora Hanson owned an 80-acre farm free of encumbrance; about that date she and her husband executed and delivered to Augustus Hanson a mortgage thereon in the sum of $8,000 which was recorded on April 28, 1937; at that time Dora Hanson was indebted to Harry Z. Hatheway upon two promissory notes, one for $2,000 and one for $1,000; judgment was recovered on said notes on September 30, 1938; plaintiff is the owner of said judgment which is wholly unpaid; the conveyance to Augustus Hanson was fraudulent, in fraud of creditors, in that the grantors knew that an action was about to be instituted on the notes aforesaid, the conveyance was made and accepted to prevent a judgment on the notes becoming a first lien on the 80-acre farm and with intent to hinder, delay and defraud Hatheway; the conveyance was without consideration or for inadequate consideration, voluntary, fraudulent and void; Dora Hanson has no other property out of which plaintiff's judgment could be satisfied; the mortgage rendered her insolvent and unless it be set aside plaintiff's judgment must remain wholly unpaid; plaintiff has no adequate remedy at law. Certain interrogatories were attached to the petition. The prayer was that the mortgage to Augustus Hanson be declared void as against the plaintiff, the real estate be subjected to plaintiff's lien and the judgment satisfied therefrom.

The answer of defendants admitted the identity of the parties, the ownership of the 80-acre farm by Dora Hanson, the execution and delivery of the mortgage to Augustus Hanson, the recovery of judgment by the plaintiff and denied all other allegations of the petition. The prayer was that the action be dismissed.

The interrogatories, attached to the plaintiff's petition, were addressed to defendants, Dora Hanson and Augustus Hanson. The questions asked sought information concerning the consideration, if any, for the mortgage to Augustus. Both defendants filed answers to the interrogatories which asserted substantially the same facts, to wit: that Dora Hanson was indebted to Augustus on April 1, 1937, in the sum of $5,240.33 by virtue of an oral contract whereby Augustus was to render services as manager and farm hand for a period of eight years commencing on January 3, 1932, and was to receive therefor $1,000 per year, and board, room, clothing, spending money and the use of the family automobile which was to be registered in his name; the agreement was made with both parents but the mother agreed to pay Augustus to the full extent of her ability without contribution from the father if possible to do so; there were five children in the family; Dr. Harold C. Hanson, a dentist, now 44, who attended college 5 years; Nellie Moore, now 33, who attended college 4 years; Dr. Lawrence C. Hanson, (M. D.) now 31, who attended college 7 years; Augustus Hanson, now 28, who only completed the 10th grade in public schools; Carl Hanson, now 20, who graduated from high school; the father opposed financing the collegiate education of the three older children and the mother agreed to repay him from the 80-acre farm; $16,000 was spent for such collegiate training; in 1927, the father was 67 years old, in failing health, Augustus left high school and worked their farms without compensation until he attained his majority on January 3, 1932, on which date he demanded an agreement with his parents for compensation; the aforesaid agreement was then made; the eight-year period, specified therein, would be concluded some 34 days before Carl Hanson would attain his majority; Augustus has performed his part of the agreement but has received only his board, lodging, clothing, spending money and use of the family car; all the income of the farms has been placed to the account of the father; about April 1, 1937, Augustus demanded written evidence of the agreement; the three defendants consulted a lawyer and were advised that the simplest way to evidence the agreement was the execution of a note and mortgage for $8,000, which was done for the purpose of discharging the mother's obligations to Augustus and to the father.

Dora Hanson, as a witness for plaintiff, testified that she owned no other property. The 80 acres are unimproved. She knew that Harry Hatheway died in April, 1937. She identified the note and mortgage herein. Both are dated April 1, 1937. The note promises to pay $8,000 three years after date without interest. She also identified her answer to the interrogatories attached to the petition and same was offered by plaintiff " without vouching for the credibility of the statements so made" . Defendants objected to such limitation on the offer. On cross-examination, over objection by plaintiff, she testified to the facts set forth in such answer. She also testified that the interest on the Hatheway notes was paid for several years, the money being supplied primarily by her son Harold. The $2,000 was borrowed to enable Harold to open a dental office. The $1,000 was borrowed to enable him to buy a practice at Loup City. The two notes were signed by Harold with his mother as surety. When the agreement was made with Augustus, she supposed Harold would take care of the Hatheway notes as he had said he would. The taxes on the 80-acre farm are over $3 per acre. The income over the taxes is a good deal less than $1,000 per year.

R. H. Stoneman, a farmer, fixed the value of the 80 acres at $75 per acre and the reasonable wages for farm hands at $25 per month with board and room. When they work by the day, it is $1.50, $2 or $2.50 per day.

Augustus Hanson testified that in March, 1939, he signed an assessment roll listing $8,000 as moneys and credits. Before that he had never returned an assessment. Since the note did not bear interest and was not due he didn't think it had any value.

Plaintiff testified that Harry Z. Hatheway died April 24, 1937. Judgment on the notes was obtained September 30, 1938. In March, 1938, she had a conversation with Augustus Hanson about Harold's default on the notes. Augustus maintained that he did not know of the notes. He said he would tell his father about it and something would be done. Later, after she was served with notice that Harold had taken bankruptcy, she had another talk with Augustus. He offered her $2,000 for the notes and she refused. On neither occasion did he tell her that he had a mortgage on the 80 acres or that his parents were indebted to him. After plaintiff recovered judgment on the notes, she spoke to Augustus about his mortgage, that it was a big one. He smiled, said the land was not worth that much and said, " I guess when a person is doing anything they might as well do it right." Plaintiff asked, " Where did you get the money to pay your mother?" He said, " My uncle died in California and left me the money." He said nothing about his mother owing him for work. Later he told her his mother owed him the mortgage for work and that plaintiff would not get her money until his father died. He tried to compromise the notes but plaintiff insisted upon full payment.

G. M. Rock, a day laborer, testified that he worked on the C. L. P. Hanson farm; that laborers get $1.50 to $2 per day and $25 to $30 per month.

Dr. Lawrence Hanson, as a witness for defendants, testified that his father objected to spending the money for his collegiate education and that there was discussion about the fact that his mother was to repay his father for the education Lawrence received, which amounted to about $7,000. Nellie Moore testified similarly concerning her education which cost approximately $4,000. C. L. P. Hanson corroborated their testimony and that of Dora Hanson above reviewed. He also testified that 10 or 15 years ago he deeded his 120-acre farm to his wife on advice of a lawyer while director of a bank. He paid off what he owed and the farm was deeded back to him. A. E. Bassett testified that Augustus quit school when his father had a stroke and has been running the farms, that he is a sober, industrious, hard-working boy. M. L. Johnson testified that Augustus has worked on his father's farm since he was 16 years old, doing more work than any hired man would have done, has only seen him in town on Saturday nights.

Augustus Hanson testified that he did not know his mother had signed the notes to Harry Z. Hatheway until plaintiff told him, which was after April 1, 1937. He denied discussing any inheritance with plaintiff, suggested he might have said, " Do you suppose I got that from my rich uncle," but did not remember doing that. He tried to keep Harold from taking bankruptcy. The only way he could stop him was to get a release from Mrs. Hatheway and the other creditors; he told plaintiff if she would allow Harold " to stop bankruptcy", they would pay the whole note as soon as they could get the money, but she wouldn't even talk. His version of the contract for $1,000 a year and the execution of the note and mortgage was substantially the same as his parents.

B. F Pippitt testified that he observed Augustus working on...