Knoop v. Kelsey
| Decision Date | 30 June 1890 |
| Citation | 14 S.W. 110,102 Mo. 291 |
| Parties | Knoop v. Kelsey et al., Plaintiffs in Error |
| Court | Missouri Supreme Court |
Error to Cole Circuit Court. -- Hon. E. L. Edwards, Judge.
Reversed and remanded.
Smith Silver & Brown and A. L. Thomas for plaintiffs in error, C T. and J. B. Kelsey and Nixon.
(1) The evidence fails to sustain the charge of fraud made in the petition. Fraud must be proved not conjectured. Hausman v. Hope, 20 Mo.App. 193; Priest v. Wray, 87 Mo 16; Funkhouser v. Lay, 78 Mo. 458; Loomis v. Higgins, 5 W. Rep. (Mo.) 408; Henderson v. Henderson, 55 Mo. 534. It is not required of a purchaser to inquire into the motives of a vendor in making a sale. State v. Merritt, 70 Mo. 275. (2) A sale with the intent to defraud, hinder and delay creditors is valid in favor of bona fide purchasers for a valuable consideration. Dougherty v. Cooper, 77 Mo. 528; Durkee v. Chambers, 57 Mo. 575; Henderson v. Henderson, 55 Mo. 534. Relationship is not a badge of fraud. State v. True, 20 Mo.App. 176; Bump on Fraudulent Conveyances, p. 56. Fraud will not be inferred from the fact of insolvency. State v. Merritt, 70 Mo. 275. A deed valid in its creation will not be invalidated by any subsequent fraudulent or illegal acts of the grantee. Gates v. Lebaumme, 17 Mo. 17. (3) An embarrassed creditor may dispose of his property to raise means to pay off his creditors. Dougherty v. Cooper, 77 Mo. 531; Singer v. Goldenburg, 17 Mo. 566. (4) The creditor, plaintiff here, having elected to sell J. B. Kelsey's equity of redemption, i. e., the land subject to the mortgage, he thereby affirmed its validity and is now estopped to deny the same. Freeland v. Freeland, 102 Mass. 478; Russell v. Dudley, 3 Met. 147; Flanders v. Jones, 10 Fost. (N. H.) 155; McWhortee v. Huling, 3 Dana (Ky.) 349; Brown v. Snell, 46 Me. 490; Messmore v. Huggard, 46 Mich. 563; Bigelow, Estoppel, p. 502. A party must abide by the case made by his own pleadings, and is estopped to deny any averment therein. Lenox v. Harrison, 88 Mo. 491; Speck v. Riggin, 40 Mo. 406.
Cosgrove & Johnston for plaintiff in error, Huffman.
(1) If the deed of trust was fraudulent as to creditors it was as to them void and created no equity of redemption liable to be taken on execution. 2 Hilliard on Mortgages [3 Ed.] p. 290, sec. 34; Bullard v. Hinckley, 6 Greenl. 289; 20 Am. Dec. 304. (2) By the levy and sale to defendant Huffman of the lands under execution, Huffman succeeded to all the rights of the plaintiff in the executions, and he alone can set up the invalidity of the deed of trust. Gentry v. Robinson, 55 Mo. 260; Eastman v. Schettler, 13 Wis. 362; Freeland v. Freeland, 102 Mass. 475; Dwinell v. Purley, 32 Maine, 197; Gibbs v. Thayer, 6 Cush. 30; Sands v. Hildreth, 14 Johns. 493; Bump on Fraud. Con., p. 463, et seq. (3) There is nothing in the levy as shown by the return of the sheriff on the executions nor in the deed of the sheriff to Huffman to indicate a sale only of the equity of redemption, or that the sale was made subject to the deed of trust; and what was in fact levied upon and sold is determined by the levy and the terms of the deed. And the interest levied upon and conveyed cannot be varied, enlarged or diminished by parol testimony. But even had the levy and sale under the executions been made in terms subject to the Kelsey deed of trust this would have been a recognition by the plaintiff in the execution of the validity of the mortgage, and he could not afterwards set up the contrary. 2 Hilliard on Mortgages [3 Ed.] p. 290, sec. 34, et seq.; Bullard v. Hinckley, 6 Greenl. 289; Perry v. Richardson, 5 Allen, 107. (4) It was at the option of the execution creditor to treat the deed of trust as void for fraud upon his rights, and to levy upon and sell the entire estate, or to treat the deed of trust as valid, and sell the right of redemption, but he could not do both. Russell v. Dudley, 3 Met. 147; Freeland v. Freeland, 102 Mass. 478; Freeman on Executions, sec. 382; Brown v. Snell, 46 Maine, 490; Adams v. Barnes, 17 Mass. 365.
B. R. Richardson, Edwards & Davison and Draffen & Williams for defendant in error.
(1) The evidence is sufficient to justify the finding of the trial court, that the note and deed of trust were delivered, and the various transfers of the note were made, to prevent the same or its proceeds from being reached by the creditors of John B. Kelsey, and that in reality said note and deed of trust are held for his use and benefit. Bump on Fraud. Conveyances [2 Ed.] p. 483; Arnholdt v. Hartwig, 73 Mo. 485; Crow v. Beardsly, 68 Mo. 435; King v. Moon, 42 Mo. 551; Baldwin v. Whitcomb, 71 Mo. 651; Renney v. Williams, 89 Mo. 139; Hopkins v. Sewert, 58 Mo. 201.; Burgert v. Borchert, 59 Mo. 80; Mabary v. McClurg, 74 Mo. 575; Erskine v. Loewenstein, 82 Mo. 301; Chapman v. McIlwrath, 77 Mo. 38. (2) The sheriff's sale to Huffman will not prevent a court of equity from subjecting the mortgage debt to the payment of plaintiff's judgment. First. The sale having been made subject to the lien of the mortgage, the purchaser as such cannot now dispute its validity. Messmore v. Huggard, 46 Mich. 558; Jones on Mortgages, sec. 744; Wagner v. Jones, 7 N. Y. (Daly) 375; Conkling v. Machine, etc., 55 How. P. R. 269; Cramer v. Leper, 26 Ohio St. 59; Jones on Chattel Mortgages, sec. 346. Second. Plaintiff is not estopped to maintain his action because of the sheriff's sale. Bump on Fraud. Conveyances [2 Ed.] 464; Galbreath v. Newton, 30 Mo.App. 380; Bales v. Perry, 51 Mo. 449; St. Louis v. Ferry Co., 88 Mo. 615; Weise v. Moore, 22 Mo.App. 530. (3) "A court of equity adapts its relief to the exigencies of the case in hand." It will reach and apply any and every species of the debtor's property, fraudulently covered up though it may be, to the payment of his debts. Equity looks at the substance and administers substantial justice. Bump on Fraud. Conveyances [2 Ed.] pp. 250 and 589; Luce v. Barnum, 1 W. Rep. 732; King v. Beeson, 6 Cent. Rep. 559; Crawford v. Kirksey, 28 Am. Rep. 704; Farlin v. Look, 56 Am. Rep. 100; Murther v. Curley, 90 N.Y. 372; Kramer v. McCaughey, 11 Mo.App. 426.
OPINION
-- This is a suit in equity brought by C. H. Knoop against J. B. Kelsey, Charles T. Kelsey, Charles D. Nixon and Green Huffman. There was a decree for the plaintiff. It is insisted that the second amended petition, upon which the cause was tried, fails to state any cause of action, and this question runs through the whole case, so that it must be determined at the outset.
The facts stated are these: That on the twentieth of July, 1882, the defendant, J. B. Kelsey, was a banker at Versailles in Morgan county in this state; that he held himself out to be solvent when, in fact, he was insolvent; that he owned four hundred acres of land in that county, and on the twenty-second of July, 1882, made a deed of trust thereon to secure his note dated the first of August, 1882, for $ 3,000, payable to the defendant, Charles T. Kelsey, in five years after date, and that defendant Nixon is the trustee in the deed of trust; that on the fifth of August, 1882, plaintiff deposited with J. B. Kelsey $ 2,782, and at that time the deed of trust had not been recorded; that J. B. Kelsey failed on the twenty-second of said month, and his bank was closed by attachments; that the deed of trust to Nixon was made for the sole purpose of defrauding the creditors of J. B. Kelsey; that plaintiff obtained a judgment against J. B. Kelsey at the April term, 1883, for $ 1,703, being the balance then due upon the deposit, and upon which judgment execution was issued.
The amended petition then goes on to say: "Plaintiff further states that at the October term, 1883, of the Morgan county circuit court, the interest of J. B. Kelsey (being his equity of redemption in said real estate) was sold by the sheriff of Morgan county on several executions issued on several judgments against J. B. Kelsey, including plaintiff's execution; that the sheriff, in his advertised notice of sale, gave special notice that he would sell the land subject to all prior liens and incumbrances, and did also give the same notice to the bidders and bystanders at the sale, and that defendant, Green Huffman, who had been J. B. Kelsey's tenant and friend, became, for the nominal sum of $ 285, the purchaser of J. B. Kelsey's equity of redemption, subject to the deed of trust aforesaid, and with full knowledge of the same, it being then on record, and presumed by plaintiff and Huffman and all others to be a good and valid instrument and incumbrance; that said Huffman immediately entered into the possession of said land, and has ever since remained in possession as owner of J. B. Kelsey's equity of redemption therein; that the fact of the said deed of trust having been executed and recorded as aforesaid prevented said lands from selling at the sheriff's sale for as large a sum of money as they otherwise would have done, and plaintiff was thereby prevented from realizing the amount of his said judgment out of said lands."
The prayer is that the deed of trust be declared null and void, and that the titles of Nixon and Charles T. Kelsey, as the pretended trustee and beneficiary, be divested out of them, and that the land be subjected to plaintiff's judgment as the prior lien thereon, and that if said judgment be not paid and satisfied in such time as the court should direct, that the land be sold by the sheriff to satisfy said judgment and costs, and for general relief.
The answer of Chas. T. Kelsey and Nixon is a general denial. Huffman in his separate answer says he purchased the land at a sale on various executions, one of which was in favor of the plaintiff; that he purchased the land subject to prior liens and incumbrances, and is...
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