Liddle v. Allen

• Decision Date: 24 January 1894
• Citation: 90 Iowa 738,57 N.W. 603
• Parties: LIDDLE ET AL. v. ALLEN ET AL.
• Court: Iowa Supreme Court

90 Iowa 738

57 N.W. 603

LIDDLE ET AL.

v.ALLEN ET AL.

Supreme Court of Iowa.

Jan. 24, 1894.

Appeal from district court, Shelby county; N. W. Macy, Judge.

This suit is a controversy between the creditors of the defendant H. R. Allen, an insolvent debtor, on the one side, and the defendants Smith & Cullison, who claimed to have purchased the property of said Allen, on the other. It is claimed by Smith & Cullison that they took a bill of sale of the personal property of said Allen, and a deed or conveyance of his real estate, in good faith, and for a valuable consideration. The creditors maintained that the transfer of the property from the insolvent was fraudulent as to his creditors. A decree was entered in the district court in favor of the creditors, and Smith & Cullison appeal.Smith & Cullison, for appellants.

Byers & Lockwood and Jesse B. Whitney, for appellees.

ROTHROCK, J.

1. It would be an almost endless undertaking to set out this whole controversy as shown by the pleadings. It will be sufficient to state the facts and issues in a general way. For some time prior to April 6, 1889, the defendant Allen was engaged in mercantile business at Irwin, in Shelby county. He was the owner of the lot and building used by him in his business. He owned the stock of goods in the building, and the notes and accounts against customers, and the store furniture and fixtures. He was somewhat in debt, but there were no liens on his property. On said 6th day of April, 1889, he executed a chattel mortgage on his stock of goods and merchandise, furniture and fixtures, and notes and accounts, to one M. Humphrey and to A. C. Allen, the wife of said H. R. Allen. The consideration named in the mortgage was $4,818, and on its face it appeared to have been given to secure the payment of six promissory notes. The mortgage was not filed for record until the 24th day of July, 1889. The filing of this mortgage precipitated a crisis in the business career of Allen. Two days thereafter, some of the wholesale merchants who had claims against him commenced actions, and sued out attachments, and levied the same on his stock of goods. At about the same time, Allen made another chattel mortgage upon his stock of goods, notes, and accounts to his wife, to secure the payment of a note for $1,760. This mortgage was made subject to the mortgage for $4,818 previously given to Humphrey and A. C. Allen. He also gave to A. C. Allen a real-estate mortgage on the lot and building, to secure the payment of said sum of $1,760. On the same day, and after the writs of attachment had been levied on the stock of goods, and while the same was in the possession of the sheriff under said writs, H. R. Allen made and delivered to Smith & Cullison a bill of sale of all of said personal property, notes, and accounts, subject to the mortgages above referred to, for a named consideration of $1,000; and on the same day said Allen and his wife made and delivered to Smith & Cullison a warranty deed for the lot and building, for the same consideration. Within a few days thereafter, other wholesale merchants commenced actions on their claims against Allen, and garnished Smith & Cullison as supposed debtors of Allen. In all of these actions judgments were obtained against Allen. Later on, other creditors commenced actions, and recovered judgments against Allen, and issued executions, which were returned unsatisfied, and the judgment creditors filed petitions in equity to subject the said real estate to the payment of their judgments. Issues were made upon all these garnishment cases, and on the petitions of equity, and all of the actions were, by agreement, consolidated and tried as one case, which was by said agreement transferred to the equity side of the court, and tried as in equity; and it is here for trial anew in the same manner.

The ultimate question for determination is whether the bill of sale and the deed to Smith & Cullison were void as to the creditors of H. R. Allen. If it was a good-faith transaction, the case demands no further consideration. But it appears without conflict in the evidence that Smith & Cullison knew, when they took the bill of sale and deed, that attachments had been levied on Allen's stock of goods, and that his career as a merchant was practically closed. They also knew that there were other creditors, who had not yet commenced actions against Allen. Smith & Cullison paid no consideration whatever for the transfer of the property to them. It is true that they claim that they performed legal services for Allen for quite a large amount, but all of this claim for legal services, except a mere nominal sum, accrued and was earned in this very litigation with the creditors of Allen. A large part of it was earned in a protracted trial of an action of replevin from the sheriff of part of the goods in which the rights of Mrs. Allen as a mortgagee was the question at issue, and in which she was defeated. This action in replevin was a direct contest between Mrs. Allen and the creditors, and Smith & Cullison were attorneys against the creditors. We need not set out the evidence in detail. The district court was unquestionably right in finding that the whole transaction between Allen and Smith & Cullison was a fraud upon the creditors. We seldom cite authorities upon elementary principles of the law. In view of further questions to be determined, we may say that, even if Smith & Cullison had paid $1,000 in cash for the transfer of the property, under the facts of the case the transaction would be fraudulent. If property be conveyed with the design on part of the vendor, participated in by the vendee, to hinder, delay, or defraud creditors,...