Kan. Moline Plow Co. v. Sherman

• Citation: 41 P. 623,1895 OK 74,3 Okla. 204
• Parties: THE KANSAS MOLINE PLOW COMPANY v. G. W. SHERMAN.
• Decision Date: 07 September 1895
• Court: Supreme Court of Oklahoma

1895 OK 74

41 P. 623

3 Okla. 204

THE KANSAS MOLINE PLOW COMPANY v. G. W. SHERMAN.

Supreme Court of Oklahoma

Decided: September 7, 1895

Error from the District Court of Oklahoma County.

Syllabus

¶0 FRAUDULENT CONVEYANCE -- Notice. Where a transfer of property is made for the purpose, or with the intent, on the part of the person making such transfer, to hinder and delay creditors, it is fraudulent and void; and the conveyance is fraudulent and void also, as to the transferee, if, at the time, or before the making, of the transfer, the transferee had notice of such facts and circumstances as would arouse the suspicion of an ordinarily prudent man and cause him to make inquiry as to the purpose for which such transfer is being made, which would disclose the fraudulent intent of the maker; and it is not necessary, in order to defeat such a transfer to show that the transferee had actual notice of, or was a participant in, the fraud of the maker of the transfer. The former holding of this court on this question in the case of Chandler v. Colcord, 1 Okla. 260, is overruled.

Selwyn Douglass, for plaintiff in error.

Amos Green & Son, for defendant in error.

BIREER, J.:

¶1 The Kansas Moline Plow company brought suit in the district court of Oklahoma county on the 11th day of September, 1893, against J. R. Sherman, to recover the sum of $ 1,821.76, in which amount the plaintiff claimed J. R. Sherman was indebted to it upon certain promissory notes and an open account for goods, wares and merchandise sold and delivered to J. R. Sherman. The next day, an order of attachment was issued in the case and the property in controversy levied upon. G. W. Sherman, by leave of court, interplead in the cause, claiming that he was the owner of the goods attached by virtue of a purchase made from J. R. Sherman on the 6th day of September, 1893. Upon issues being formed upon this interplea, a trial was had before the court and a jury, and a verdict and judgment given and rendered for the interpleader, G. W. Sherman, for the value of the property, and damages, from which the plaintiff appeals.

¶2 The evidence given upon the trial of the case is quite voluminous, and it is unnecessary to give it in detail. It is sufficient to state briefly that there is evidence tending to show that J. R. Sherman engaged in the hardware and implement business in Oklahoma City in July, 1892, having purchased a stock of a former merchant; that on the 6th day of September, 1893, he was largely indebted to various creditors, a part of which indebtedness was falling due and was unpaid. G. W. Sherman, a brother of J. R. Sherman, who had been residing in northern Ohio, after some correspondence with J. R. Sherman, came to Oklahoma City during the latter part of August, 1893, and went into his brother's store, where he clerked for a couple of weeks before September 6, 1893. He brought with him from Ohio some six or seven hundred dollars, and with little, if any, other visible means, knowing that his brother was indebted to various creditors in amounts which he states he believed to be about $ 2,500, he purchased the entire stock of goods of his brother, which was all the visible assets his brother had, and all the property subject to execution, although J. R. Sherman states that he had notes in the bank uncollected, and some in his own possession, amounting to several thousand dollars. An invoice hurriedly made, and without attracting the attention of the clerks in the store up to the very date of the alleged transfer of the stock of goods, amounted to about $ 4,000, and the stock and about $ 600 worth of notes were transferred by contract and bill of sale to G. W. Sherman in consideration of the payment of $ 600 in cash and of eight notes (though J. R. Sherman says he does not know whether there was eight or nine) of $ 500 each, due in successive payments, one each two months, beginning two months from the date of the sale. The stock was transferred to G. W, Sherman, he giving back to his brother a chattel mortgage thereon to secure these deferred payments. J. R. Sherman remained in and about the store, transacting business to all appearances as before, and made purchases of goods, which were charged to him the same as before, excepting that G. W. Sherman employed the clerks. Before the goods were attached G. W. Sherman paid from the sales of the goods $ 300 additional in cash, and subsequently, and before the trial, turned back to his brother the accounts which he had purchased with the stock, it is stated, for collection, and J. R. Sherman delivered back to his brother all of the $ 500 notes excepting three, although no further payments were made thereon. There is also testimony tending to show that about the 9th day of September, 1893, the representative of one of the wholesale houses to which J. R. Sherman was indebted, presented an account of $ 165 for payment, but J. R. Sherman told him that he could not pay this account because he had not gotten his money yet from the sale of the stock.

¶3 J. R. Sherman denied that the transfer was made with the intent to hinder, delay or defraud his creditors, as did also his brother. The case was submitted to the jury, evidently, on the theory that the evidence was such as made the question of the existence of fraud a question of fact for the jury to determine, and this theory of the case seems to have been considered proper on both sides. At least no objection seems to have been made to the court considering it in this way, and it was so considered. The only question raised in the case is as to the correctness of the instructions given by the court to the jury, and it is claimed that the court erred in refusing, on the application of plaintiff, to instruct the jury that if the transfer was made by J. R. Sherman to defraud his creditors, it was also fraudulent as to the vendee, G. W. Sherman, if he was in a position where a reasonably prudent man could, and would, have known of the fraudulent intent of the vendor, and that if the vendee had notice of such facts as would awaken the suspicion of a man of ordinary prudence and lead him to make inquiry, which, if pursued, would have led to his full knowledge of the fraud of the vendor, he was chargeable with notice of the vendor's fraudulent intent. The plaintiff asked these instructions in different forms so that the question as to whether or not the plaintiff was entitled to an instruction of this character is clearly raised. The court refused this request, but gave the instruction in a modified form, to the effect that the jury could not find that the transfer was fraudulent and void as against G. W. Sherman, unless they should find from a preponderance of the evidence that he had notice or knowledge of the fraudulent intent on the part of J. R. Sherman. It is claimed by plaintiff in error, and it is not disputed by the defendant in error, that it was the view of the learned judge who tried the case below that it was entitled to the instruction asked, but that it could not be given because of the decision of this court in the case of Chandler v. Colcord, 1 Okla. 260, 32 P. 330, where it was held erroneous to give the jury just such an instruction. If we consider the decision of Chandler v. Colcord upon this question to be good law, no further consideration of this case would be necessary, but the matter would end at once by affirmance of the judgment of the court below. But we do not believe that the conclusion there reached on the proposition of law here involved was correct, either as a determination of what the law of fraudulent conveyances is in this territory by virtue of the adoption of the laws of another jurisdiction, or from a consideration of the decisions generally upon the question. We would, in fact, were it not for the Chandler v. Colcord decision, consider the question so well settled by the authorities as to make it entirely unnecessary for us to consider the matter at any length. But this court, having decided the law differently from what it is contended to be by plaintiff in error, the overruling of our former decision should be attended by such a consideration of the matter as to show that we are not only justified, but are required to do so. The question involved in the Chandler v. Colcord case in point in this, was, as to the correctness of two instructions given by the probate court, the one of which pertinent to the case at bar, is as follows:

"First. The court further instructs the jury, that when a transfer of property is made, with intent, on the part of the person making it, to hinder, delay or defraud his creditors, and the party to whom the transfer is made had knowledge of the facts and circumstances, from which such fraudulent intent might reasonably and naturally be inferred by an ordinarily cautious person, then such transfer is fraudulent and void as as against the rights of the creditors."

¶4 Concerning this instruction, the court held:

"As to the instructions which appear to have been given at the instance of appellee, the first and third were erroneous and should not have been given. A fraudulent intent on the part of a vendor, or mortgagor, to hinder, delay and defraud his creditors, is not of itself sufficient to defeat the sale, or mortgage. It is essential to that end that the vendee, or mortgagee, should participate in that design. The fraudulent intent must be mutual." (Maxsell v. Williamson, 35 Ill. 529; Herkelrath v. Stookey, 63 Id. 486.)

¶5 The matter for consideration in that case was, as is also in the case at bar, a question of notice, rather than the question of fraud itself. It was a question of good faith on the part of the transferee rather than the question as to whether or not the transfer itself was in violation or the rights of creditors, and therefore void. The conclusion reached by the court that the instruction there given, and designated as "first" of the two which were being considered together, was...