Holden v. Walker

• Decision Date: 29 April 1933
• Docket Number: No. 6065.,6065.
• Citation: 248 N.W. 318,63 N.D. 372
• Parties: HOLDEN v. WALKER et al.
• Court: North Dakota Supreme Court

63 N.D. 372

248 N.W. 318

HOLDEN

v.WALKER et al.

No. 6065.

Supreme Court of North Dakota.

April 29, 1933.

Syllabus by the Court.

1. When a debtor transfers to a creditor practically all of his property, the consideration being a debt grossly inadequate to the value of the property transferred, love and affection, and a promise to support the debtor for the remainder of his life, so that the debtor is thereby rendered insolvent, such transfer is a constructive fraud upon other creditors, even though there may not have been a definite purpose on the part of the grantor and grantee to actually defraud creditors.

2. Where a transfer of property is fraudulent as to a creditor, such creditor may treat the conveyance as void as against him, and the property as that of the debtor. Such creditor is not prevented from attaching the interest of his debtor in the property, though held by a third person. In such case the levy of a writ of attachment upon the transferred property is to be deemed an election by the creditor to treat the conveyance as void.

3. To support such an attachment, it is not necessary for the record title to be in the name of the debtor. The warrant of attachment requires the sheriff to attach the property of the debtor, and it is immaterial in whose name or possession the property may be.

4. Where a creditor attaches property held by third persons, on the theory that such real property belongs to his debtor, and obtains a judgment giving him a lien on whatever interest the debtor has in such real property, he may thereafter commence an action to determine adverse claims to said property, making such third persons parties to this action; and it is not necessary for the creditor to have an execution issued on the original judgment.

5. A debtor has a right to prefer a creditor, and, where a transfer is made in payment of debt, without the deliberate purpose of defrauding creditors, even though under circumstances as amount to a constructive fraud upon other creditors, the grantee has a lien upon the property so transferred for the amount of the indebtedness due him at the time of the transfer.

6. Where a transfer is made under the foregoing circumstances, and the grantee has taken possession of the estate and advanced his own money in payment of interest on prior liens, taxes, etc., for the protection of the estate, the grantee has a lien on the property benefited for the amount expended, superior to that of the attaching creditor.

7. In the case at bar the record is examined, and it is held: That the transfer made by J. H. Smith to the codefendants amounts to a constructive fraud against the plaintiff herein; that as between Holden, Walker, and Morris the defendant Walker has a lien upon all the property transferred to her for the amount of the indebtedness actually owing to her by the defendant Smith at the time of the transfer, which lien is superior to the lien of the plaintiff; that for money advanced by the defendants Walker and Morris, or either of them, for the payment of interest on liens superior to that of the plaintiff, or for the payment of taxes, the advancer has a lien in his favor on all property benefited, superior to that of the plaintiff; and the plaintiff has a lien on the property attached superior to any other interest in said property which the defendants may have.

Appeal from District Court, Ramsey County; C. W. Buttz, Judge.

Action by Thomas Holden against Eva S. Walker, Charles W. Morris, and another. Judgment in favor of the plaintiff, and the defendants named appeal.

Cause remanded for taking of further testimony.

F. R. Stevens and Traynor & Traynor, all of Devils Lake, for appellants.

F. T. Cuthbert and Sinness & Duffy, all of Devils Lake, for respondent.

BURR, Judge.

The issue involved in this case is largely one of fact, and involves title to the west half of the southeast quarter and the east half of the southwest quarter of section 2 in township 152, range 62; the northeast quarter of section 19, in township 155, range 61; the southeast quarter of section 17 in township 154, range 62; and the north half of the northwest quarter of section 24 and the south half of the southwest quarter of section 13, township 155, range 62, in Ramsey county.

Defendant Eva S. Walker is the daughter of defendant Smith, and the record indicates she and her children are his only heirs. Defendant Smith was born in 1846. In 1885 he came to Ramsey county and maintained his home in Crary until the year 1929, when he removed permanently to California, in the meantime having spent many winters in California at the home of his daughter. In Ramsey county Smith became interested in the banking and mercantile business, and by 1929 owned forty quarters of land in Ramsey county and one in Cavalier county, valued by the trial court at $200,000, with incumbrances of $30,000 to $40,000 (seven quarters of the land being clear of incumbrance), two quarters in McKenzie county and one in McLean county valued at $12,000, owned notes and other securities of face value of $10,000-valued at that time at $7,500-some town lots in Crary with a store building, the rear of which was used by and owned by a bank, shares of stock in the First National Bank of Crary of the par value of $15,000, and other personal property.

By 1929 the bank required assessments on stock to maintain its credit and to protect the bank. Smith made contributions from time to time amounting to $30,000. He was also a surety and guarantor on bonds, undertakings, and notes to various banks amounting to over $30,000, owed doctors' bills amounting to $6,600, an account of $400 and plaintiff's claim.

Until a few years ago he gave his personal attention to his own business, and then for some time he relied upon one H. S. Pond, who was associated with him in the banking business. In 1929 he employed the defendant Morris to take charge of his business. At this time he knew that he was liable also to the creditors of the bank for additional $15,000, on his stock, and determined, because of his advancing age and the distance he lived from his property, to arrange his affairs in such a way that he would be able to pay all of his debts-approximately $60,000-secure enough to sustain him for the remainder of his life, and leave some property to his daughter and her children.

The defendant Walker has resided in Southern California for many years. While there she accumulated some property; her father assisting her in the purchase of a residence. Upon the death of her mother she received half of the mother's estate. The record shows that in the estate of the mother the property involved in the final distribution consisted of cash in the bank, $9,678.31, certificates of deposit, totaling $4,183.74, shares of stock in the bank appraised at $1,000, 59 shares of stock in the Northern States Power Company appraised at $5,900, one share of stock in the Empire Gas & Fuel Company appraised at $1,100, promissory notes appraised at $2,000, real estate mortgages exceeding $2,200, and $4,000 distributed prior thereto. Defendant Walker was entitled to one-half of this, and all was turned over to her father. When a child friends gave her various sums amounting in all to four or five hundred dollars, and from time to time prior to her marriage she received small gifts from her father, all being invested in a half section near Crary which she owned. Upon divorce from her husband, she was awarded $600 per month alimony, and got from him $5,000 through the sale of oil equipment. The amount of alimony paid is not shown. By 1929 she owned property, real and personal, which she valued at $20000, all of which, except the land, she turned over to her father to be paid back to her later out of his property. Her claim is that her father owed her $20,000.

The defendant Morris has resided in Southern California all his life, and for many years was engaged in the real estate and other business. In 1929 he became acquainted with the defendant Smith. His testimony is that his annual income from his business at the time Smith employed him was $7,500.

In May, 1929, there was a conference between the three defendants in which the affairs of Smith were discussed. On January 1, 1930, Smith borrowed from Morris the sum of $3,000 giving his note for it. It was agreed Smith was to give Morris a general power of attorney, Morris was to give his whole time to the work, cancel the note for $3,000, so manage the property that all of the debts and liabilities of Smith would be paid, Smith would live the remainder of his life with his daughter, and whatever property was left was to be divided equally between the defendants Morris and Walker, as payment to Morris for what he had advanced, what he lost in “sacrificing” his business and for services, and to Mrs. Walker for what she had advanced, for taking care of her father for the rest of his life, and for “love and affection.”

The agreement to transfer property, Exhibit C, made between Smith and his daughter is dated February 5, 1929, and shows that “certain indebtedness in favor of Eva S. Walker-in excess of $20,000-the exact amount of which cannot be determined, and certain inheritance to which said Eva S. Walker was entitled” upon the death of her mother and “cancellation of any and all indebtedness owing by him to her, to have his future maintenance, comfort and support,” is the consideration which passed between them. In the document Smith agrees “with his said daughter Eva S. Walker, to convey by deed absolute in form, under the laws of the State of North Dakota, and thereby vest in Eva S. Walker, an unmarried woman as her sole and separate property, free and clear of all incumbrances except those hereafter mentioned,” certain real estate, and then describes five town lots, and thirty-two parcels of land containing over 8,000 acres mortgaged for an amount exceeding $50,000.

While this Exhibit C is signed “accepted, Eva S. Walker,...