Kantola v. Hendrickson

• Decision Date: 01 July 1932
• Docket Number: 5870
• Citation: 52 Idaho 217,12 P.2d 866
• Parties: FRANK KANTOLA, Respondent, v. WALTER HENDRICKSON, Sheriff of Shoshone County, Idaho, and HAROLD MELLERUP, Appellants, and BEDA JOHNSON, WILLIAM JOHNSON (Sometimes Known as WM. JOHANSON) and VERA S. JOHNSON, Defendants
• Court: Idaho Supreme Court

12 P.2d 866

52 Idaho 217

FRANK KANTOLA, Respondent, v. WALTER HENDRICKSON, Sheriff of Shoshone County, Idaho, and HAROLD MELLERUP, Appellants, and BEDA JOHNSON, WILLIAM JOHNSON (Sometimes Known as WM. JOHANSON) and VERA S. JOHNSON, Defendants

No. 5870

Supreme Court of Idaho

July 1, 1932

FRAUDULENT CONVEYANCES-EVIDENCE-NOTICE-BANKRUPTCY-ACTIONS AGAINST BANKRUPT.

1. Evidence held insufficient to sustain finding that conveyance made by debtors to minor daughter, after institution of suit against them, was free from fraud (C. S., sec. 5435).

2. Where conveyance by debtors to daughter was prima facie fraudulent, grantee's successor had burden of showing good faith, and that consideration was paid (C. S., sec 5435).

3. Actual knowledge of any fact putting purchaser from fraudulent grantee on inquiry as to intent to defraud creditors will deprive him of position as bona fide purchaser.

4. Purchaser for value, who takes from fraudulent grantee with notice of fraud, acquires title subject to infirmities.

5. Finding that original grantors' confidential agent, who took conveyance from fraudulent grantee after property had been attached in action against original grantors, was innocent purchaser, held not sustained by evidence.

6. Filing of petition in bankruptcy does not prevent commencement of action against bankrupt.

7. Judgment taken by default held not void because of prior adjudication of defendant's bankruptcy.

8. In action to quiet title, plaintiff claimed strength of his own title, irrespective of bankruptcy of former owner.

APPEAL from the District Court of the First Judicial District, for Shoshone County. Hon. Albert H. Featherstone, Judge.

Action to quiet title and to restrain execution sale. Judgment for plaintiff. Reversed, with instructions.

Judgment reversed, with instructions. Costs awarded to appellants.

Edward H. Berg, for Appellants.

Elements and badges of fraud: Indebtedness at time of transfer prima facie presumption of fraud. (12 R. C. L. 476, cited in Benson v. Harriman, 55 Cal.App. 483, 204 P. 255; 5 R. C. L. Supp. 3128.)

Competent to show embarrassed circumstances of debtor. (Ferbrache v. Martin, 3 Idaho 573, 32 P. 252; Sweetland v Oakley State Bank, 40 Idaho 726, 236 P. 538.)

Fraudulent transactions determined by circumstances of case. (Sears v. Lydon, 5 Idaho 358, 49 P. 122; California Consolidated Min. Co. v. Manley, 10 Idaho 786, 81 P. 50; Barr v. Minto, 65 Ore. 522, 133 P. 639.)

Disparity between consideration and real value a badge of fraud. (12 R C. L. 478, and cases cited in 5 R. C. L. Supp. 3129.)

Conveyance pending litigation a badge of fraud. (12 R. C. L. 481; 5 R. C. L. Supp. 3129, and cases cited.)

Relationship in connection with other circumstances often sufficient to show fraud. (12 R. C. L. 488; 5 R. C. L. Supp. 114, and cases cited.)

Burden is upon purchaser to show bona fide purchase without notice. (Weber v. Rothchild, 15 Ore. 385, 3 Am. St. 162, 15 P. 650; Brown v. Whittington, 39 Ore. 300, 64 P. 649; Bank of Colfax v. Richardson, 34 Ore. 518, 75 Am. St. 664, 54 P. 359.)

Chas. E. Horning, for Respondent.

Relationship of grantor and grantee is not a "badge of fraud," and particularly where same relationship exists between grantor and creditor. (Hale v. Belgrade Co., 75 Mont. 99, 242 P. 425; Swain v. Bailey, 71 Okla. 30, 174 P. 1065; Crandall v. Lee, 89 Wash. 115, 154 P. 190; Crumpacker v. Bank of Washington County, 38 Idaho 534, 223 P. 229.)

Grantor's indebtedness or pendency of litigation is not proof of fraudulent intent. (Vickers v. Buck Stove & Range Co., 60 Kan. 598, 57 P. 517; Coffey v. Scott, 66 Ore. 465, 135 P. 88; Crumpacker v. Bank of Washington County, 38 Idaho 534, 223 P. 229.)

Original grantor having filed petition in bankruptcy, the appellant as creditor of original grantor was prohibited from commencing or prosecuting suit against bankrupt and the judgment obtained against bankrupt was void, and valid execution could not be issued thereon. (Mueller v. Bruss, 112 Wis. 406, 88 N.W. 229; Federal Bankruptcy Act, sec. 11, subd. a (U. S. Comp. Stats., secs. 9585-9656); Leavengood v. McGee, 50 Ore. 233, 91 P. 453, 455.)

LEEPER, J. Lee, C. J., and Budge, Givens and Varian, JJ., concur.

OPINION

LEEPER, J.

In 1922 William and Beda Johnson, husband and wife, acquired a house and lot in the village of Mullan, which is the property in controversy in this action. On February 10, 1930, one Harold Mellerup commenced action against them on a promissory note in the circuit court of Multnomah county, Oregon, and on the thirty-first day of January, 1931, obtained judgment in the total sum of $ 2,104.35. On March 8, 1931, Mellerup filed suit in Shoshone county against William and Beda Johnson upon his Oregon judgment and attached this property. On the twenty-second day of April, 1930, the Johnsons deeded the aforesaid property to their minor daughter, Vera, by warranty deed, which was recorded on the following day.

The Johnsons, with their daughter Vera, had left Mullan in the year 1928, leaving this plaintiff in charge of their property, he thereafter tending to the renting of it. He continued in this capacity until May 1, 1931, and collected rents to the total amount of $ 570, all of which he remitted to Johnson, except $ 80 thereof retained to pay interest due him from Johnson on another loan. It appears that during that time Kantola made certain payments for taxes, insurance, etc., and rendered certain labor on Johnson's behalf aggregating $ 276.78, for which he was never paid.

On May 23d, upon motion of attorney for defendants, William and Beda Johnson, and without notice, an ex parte order was entered by the district judge, dismissing the action theretofore instituted by Mellerup in Shoshone county and dismissing the attachment issued therein, upon the sole ground that the complaint was not signed by a resident attorney or the plaintiff. The fact is that the complaint was verified by the plaintiff, but was signed by a nonresident attorney. On the same day Vera Johnson executed a warranty deed to Kantola, which was acknowledged before the same attorney who had represented her parents. Plaintiff testified that he actually bought this property and paid therefor $ 500 cash, evidenced by a check indorsed by Vera Johnson, the balance of the consideration being the $ 276.78 owing him from Johnson. On June 5th Kantola obtained a quitclaim deed from William and Beda Johnson.

On July 24, 1931, shortly after learning of the dismissal of his attachment, plaintiff refiled his action and again attached the property, this suit going to judgment on August 19, 1931. Thereafter execution was issued and the property advertised for sale. This action is brought by Kantola to quiet his title and to restrain Mellerup from selling the property. All of the Johnson have defaulted and judgment was rendered in favor of the plaintiff and against Mellerup and the sheriff. Kantola, Mellerup and Johnson are all related by marriage, they having married sisters. The defense set up was that the conveyance to Vera Johnson was in fraud of creditors and that Kantola was not an innocent purchaser.

The court found "that no proof has been made of any fraud which would or did render void the title of the said Vera S. Johnson in and to said property, and the court finds that no such fraud existed." This finding is attacked for insufficiency of the evidence, which is substantially undisputed. We believe the assignment is well taken. The evidence discloses that at the time the deed was executed Vera Johnson was a minor daughter and a member of the household of William and Beda Johnson, that Mellerup had instituted suit against the grantors shortly prior to the execution of the deed, that no ostensible change of possession of the premises was made and that Kantola continued to collect the rent and remit it to the Johnsons after the execution of the deed without any notice thereof. It is true that plaintiff could not produce direct evidence as to the exact dealings between Vera Johnson and her parents and to negative consideration, but the foregoing is amply sufficient to make out a prima facie case of fraudulent transfer under C. S., sec. 5435, which would stand until rebutted.

While the evidence is not direct there is sufficient in the record to indicate that at the time of the deed to Vera Johnson the grantors were insolvent. Mellerup had brought suit for some two thousand dollars which he had been unable to collect from them. There is also some rather indefinite evidence in the record to the effect that the Johnsons were adjudged bankrupt some time later. Under such circumstances the grantee (or, as in this case, her successor with notice) must assume the burden of showing good faith in the transaction, in accordance with the principle announced in Moody v. Beggs, 33 Idaho 535, 196 P. 306: "In cases of this character where the relations are so close and confidential as those between husband and wife, the wife who asserts a claim such as is asserted by respondent in this case must assume the burden of showing a transaction that will bear the most searching inquiry." The rule is sustained in other jurisdictions. (Chalupa v. Preston, 65 Colo. 400, 177 P. 965; Seeley v. Ritchey, 76 Neb. 427, 107 N.W. 769, 110 N.W. 1105; Plummer v. Rummel, 26 Neb. 142, 42 N.W. 336; Coffey v. Scott, 66 Ore. 465, 135 P. 88; Goodale v. Wheeler, 41 Ore. 190, 68 P. 753; Robson v. Hamilton, 41 Ore. 239, 69 P. 651.)

While there is a suggestion in the record that the Johnsons at some time owned other property, there is absolutely no evidence that at the time the deed was executed the grantors had retained property adequate in value to pay their debts or had made provision otherwise therefor, thus...