Krueger v. MacDougald

• Decision Date: 14 September 1918
• Docket Number: 705.
• Citation: 96 S.E. 867,148 Ga. 429
• Parties: KRUEGER ET AL. v. MACDOUGALD.
• Court: Georgia Supreme Court

96 S.E. 867

148 Ga. 429

KRUEGER ET AL. v. MACDOUGALD.

No. 705.

Supreme Court of Georgia

September 14, 1918

Syllabus by the Court.

It is an elementary rule of construction, as applied to a pleading that it is to be construed most strongly against the pleader and that, if an inference unfavorable to the right of a party claiming a right under such a pleading may be fairly drawn from the facts stated therein, such inference will prevail in determining the rights of the parties.

Where a wife, with knowledge that her husband has taken title in his own name to property purchased with funds belonging to her permits him to retain title and possession, and credit is extended to him upon the faith of his apparent ownership, she will be estopped from asserting her secret equity as against a trustee in bankruptcy seeking to recover the property to be applied upon debts arising from credits extended on the faith of the husband's apparent ownership.

A loan of money by a wife to her husband creates as between them the relation of debtor and creditor, and this relation is not changed into that of trustee and cestui que trust in consequence of a promise of the husband, at the time the loan is made, that he will invest the money in a particular property for the benefit of the wife. A failure to comply with such a promise on his part amounts to nothing more than a breach of an executory promise, and leaves her in no better position than that of an ordinary creditor whose cause of action arises from a breach of any other simple contract.

In such a case, the right of the wife is that of a general creditor and while the husband has the right, so far as concerns the law of this state, to prefer his wife to other unsecured creditors, and may pay her as well in property as in money, provided the property so conveyed in satisfaction be reasonably proportioned to the amount of the debt, the conveyance by him to her of property in a sum grossly in excess of the amount due to her amounts to a conveyance made with intent to hinder, delay, and defraud creditors, within the legal conception of that term; and this is true notwithstanding both husband and wife claim to have acted in good faith in the transaction, and such conveyance will be set aside as a fraud upon other creditors.

None of the assignments of error show cause for reversal.

Error from Superior Court, Fulton County; J. T. Pendleton, Judge.

Action by Daniel MacDougald, trustee in bankruptcy, against Charles Krueger and others. Judgment for plaintiff, and defendants bring error. Affirmed.

Where a wife loans money to a husband, it creates the relation of debtor and creditor, and not of trustee and beneficiary, because of promise of husband, when loan is made, to invest money in certain property for benefit of his wife.

Suit was brought by a trustee in bankruptcy against Charles Krueger, a bankrupt, and his wife, to cancel certain conveyances of real estate and transfers of certain corporate stocks; the plaintiff alleging the property so conveyed was the property of Charles Krueger and had been conveyed by him to his wife in fraud of his creditors, and praying, amongst other things, that the property be subjected to the payment of two debts against the bankrupt, the one in favor of Mrs. J. R. Patillo for $3,328, besides interest, and the other in favor of the Atlanta National Bank for $2,509.06, besides interest. The defendants filed answers. In that of the wife, amongst other matters, she alleged as follows: "This defendant denies that, at the time of the execution of Chas. Krueger's indorsement on the notes of Mrs. Patillo, the said Chas. Krueger was the owner of the property referred to, and which is the home place and where defendant and her family are living on McDonough road. Further answering, this defendant says: That she and her husband were living in Pensacola, Fla., prior to 1905, where the father of this defendant, Mr. Louis Boley, lived, and who was a man of very large means. That after coming to Atlanta, where they were forced to move on account of Chas. Krueger's health, defendant and her husband boarded for a while and then lived in rented houses until about September, 1906, when defendant purchased the property on McDonough road, where she now lives. Prior to this time this defendant had owned a home in Pensacola, Fla., which defendant's father had given her, and which he sold for her during the first year defendant and her husband were in Atlanta. From the proceeds of the sale of the Pensacola place, this defendant received $4,000 from her father, and desired to buy a home in Atlanta. The said Chas. Krueger (this defendant being without business knowledge) had always transacted most of her business for her, doing so most of the time in his own name. When this defendant purchased the McDonough road property, about $1,800 was to be paid in cash, a mortgage of $1,000 assumed, and about $1,200 to be spent on the house, which had to be practically rebuilt. In view of all these transactions that had to be made, and the amount of detail necessary to carry it out, the said Chas. Krueger took the title to the property in his own name without this defendant's knowledge, because he had always looked after this defendant's business, and desired to save this defendant from the trouble of managing this property, improving the same, and signing all the necessary papers. The said Chas. Krueger never put one dollar of his money in the purchase of said place. It was all paid for out of the money this defendant's father had given her. Defendant further says: That when she discovered that the law of Georgia was different from the law of Florida, in this, that a husband can sell his property without his wife joining in the deed, this defendant demanded that the said Chas. Krueger place the title in her name, as she had always supposed that he could not sell it without joining this defendant in the deed, and that the said Chas. Krueger made the deed to her in compliance with her request, and because the property was hers and he had no interest therein. * * * Chas. Krueger is not and has not been in possession of said real estate, but that the same was paid for with her money, and that she has been in possession of the same, and until she demanded a deed from her said husband she had always believed that as his wife she would have to join in the making of a deed before the same could be sold. * * * This defendant * * * went to Florida and borrowed $10,000 from her father, and sent this amount back to Atlanta and loaned it to her husband under the express understanding that he would use it in getting the company out of bankruptcy, and he was to turn the whole thing over to her so she would have something to pay her father back the money she owed him. That she was not in the office of said company and did not know anything about how its stock was issued. That when the stock was issued to her husband she did not know of it, but when she found that it stood in his name she immediately demanded that it be put in her name and turned over to her. That this was done, and that the stock is now in her possession. That this stock was paid for with her money loaned by her father, and that she was entitled to the same from the day it was issued, and that it was issued, and that it was no fault of hers that her husband had it in his name. * * * She is the owner of the tract of land referred to, * * * and of the stock in the Krueger Manufacturing Company referred to, and that the said Chas. Krueger has no right, title, or interest in or to the same; but that the same were transferred to her for the reasons set out in * * * her answer."

After the filing of this answer, the plaintiff amended his petition by filing a pleading in the nature of a replication, in which it was alleged that even if the defendant Mrs. Krueger had an equitable interest in the property in question, resulting from the use by her husband of her money in its purchase, she was estopped to assert it as against the creditors upon whose behalf this suit was brought.

The plaintiff proved the debts sued upon, and showed that Chas Krueger held the legal title to both the real estate and the corporate stocks in question at the time the credit was extended, the former under conveyance to him duly executed and recorded in the year 1906, and the latter under stock certificates issued to him at dates ranging from 1905 to March 1, 1911; all of these dates being anterior to the extension of the credit upon which the debts sued upon were based. It was further shown that upon investigation the creditors named found the title to the property in question to be in the bankrupt, and that the credits were extended upon the faith of the apparent ownership of the property by him. Mrs. Krueger testified to the allegations as laid in her answer, that her money paid for the real estate, and that her husband took the title in his name under the...