MacDonald v. Rumer

• Decision Date: 03 July 1928
• Docket Number: 26723
• Citation: MacDonald v. Rumer, 8 S.W.2d 592, 320 Mo. 605 (Mo. 1928)
• Parties: Margaret A. MacDonald and St. Louis Brewing Association, Intervener, Appellants, v. Richard O. Rumer, Trustee of Bankrupt Estate of Michael J. O'Donnell, Appellant, and Michael O'Donnell and Catherine O'Donnell
• Court: Missouri Supreme Court

8 S.W.2d 592

320 Mo. 605

Margaret A. MacDonald and St. Louis Brewing Association, Intervener, Appellants, v. Richard O. Rumer, Trustee of Bankrupt Estate of Michael J. O'Donnell, Appellant, and Michael O'Donnell and Catherine O'Donnell

No. 26723

Supreme Court of Missouri

July 3, 1928

Appeal from Circuit Court of City of St. Louis; Hon. Victor H Falkenhainer, Judge.

Reversed and remanded (with directions).

Taylor R. Young and Abbott, Fauntleroy, Cullen & Edwards for appellant.

(1) Transactions where one person purchases property and puts title in another are fraudulent as against creditors in equity and independently of the statute, either on the ground that the grantee holds the property in trust for the debtor or that the conveyance is voluntary. Garrett v Wagner, 125 Mo. 450; Patton v. Bragg, 113 Mo. 595; Hart v. Leete, 104 Mo. 315; Rinehart v. Long, 95 Mo. 396; Gutzwiller v. Lackman, 23 Mo. 168; East St. Louis Ice Co. v. Kuhlmann, 238 Mo. 685; Stifel's Brewing Co. v. Weber, 194 Mo.App. 605. (2) A conclusive presumption that the transfer was made with intent to hinder, delay or defraud creditors arises from a voluntary conveyance itself, since it cannot be made without hindering, delaying or defrauding creditors. Oldham v. Oldham, 241 Ky. 526; Boonville Comm. Bank v. Vollrath, 135 Mo.App. 63; Hessian v. Patten, 154 F. 829, 83 C. C. A. 545. (3) A voluntary conveyance may be fraudulent as to existing creditors, although the grantor was not actually insolvent at the time he executed the conveyance. Lionberger v. Baker, 88 Mo. 447; Bohannon v. Combs, 79 Mo. 305; Payne v. Stanton, 59 Mo. 158; Patten v. Casey, 57 Mo. 118; Potter v. McDowell, 31 Mo. 62; U.S. Trust Co. v. Sedgwick, 97 U.S. 304. (4) Where a voluntary conveyance, however meritorious it may otherwise be, includes all or so much of the debtor's property as leaves him without the means of paying debts existing at the time of the conveyance, it is fraudulent and void. Hayti Citizens' Bank v. McElvain, 280 Mo. 505; Barrett v. Foote, 187 S.W. 67; Needles v. Ford, 167 Mo. 495; Snyder v. Free, 114 Mo. 360; Patten v. Casey, 57 Mo. 118; Saunders v. St. Louis Ry. Co., 57 Mo. 117; Woodson v. Poole, 19 Mo. 340; Farmers' Bank v. Price, 41 Mo.App. 291; Oberneir v. Treseler, 19 Mo.App. 519. (5) Where facts, commonly denominated "badges of fraud," appear which are sufficient to raise a presumption that the conveyance is in fraud of the grantor's creditors, the burden of showing good faith is shifted to the parties to such conveyance. Howard v. Zweigart, 197 S.W. 46; Miller v. Allen, 192 S.W. 967; Scharff v. McGaugh, 205 Mo. 344; State v. Smith, 31 Mo. 566; Star v. Penfield, 155 Mo.App. 302; Vandeventer v. Goss, 116 Mo.App. 316. (6) The weight of authority supports the rule that the burden of proving that the transferor retained sufficient means to pay existing creditors is on defendant. In other words, the burden of proving solvency in such a case is on the party seeking to sustain the validity of the transfer. Miller v. Allen, 192 S.W. 967; Wm. J. Lemp Brew. Co. v. Correnti, 177 S.W. 612; Scharff v. McGaugh, 205 Mo. 344; Clark v. Thias, 173 Mo. 628; Hoffman v. Nolte, 127 Mo. 120; Snyder v. Free, 114 Mo. 360; Walsh v. Ketchum, 84 Mo. 427. (7) Where the circumstances under which a transfer of property by a debtor is made are suspicious, the failure of the parties to testify or to produce available explanatory or rebutting evidence is a badge of fraud. The presumption is that if they could have truthfully testified to facts showing the bona-fides of the conveyance they would have done so. Leeper v. Bates, 85 Mo. 224; Goldshy v. Johnson, 82 Mo. 602; Glenn v. Glenn, 17 Iowa 498; Trice v. Rose, 79 Ga. 75; Linn v. Brown, 182 Ky. 166. (8) A transfer between near relations may, in connection with other circumstances, carry a suggestion of fraud, or even furnish satisfactory proof of fraud. Amsterdam First Nat. Bank v. Miller, 153 N.Y. 164; Riker v. Gwynne, 129 A.D. 112, 113 N.Y.S. 404; Black v. Epstein, 221 Mo. 286. (9) The burden is cast upon those seeking to uphold the conveyance to show that the conveyance was executed and accepted in good faith by the parties thereto, and that the grantor had abundant means left to pay all his debts, and in the absence of rebutting evidence, the presumption of fraud is conclusive. Ga Nun v. Palmer, 216 N.Y. 603; Coleman v. Burr, 93 N.Y. 17; Cole v. Tyler, 65 N.Y. 73. (10) Insolvency of the grantor at the time of his conveyance renders it fraudulent as against existing creditors, where the conveyance is not based on a valuable consideration. Childers v. Pickenpaugh, 219 Mo. 376; Scharff v. McGaugh, 205 Mo. 344; Miller v. Allen, 192 S.W. 967; St. Francis Mill Co. v. Sugg, 206 Mo. 148; Needles v. Ford, 167 Mo. 495; Ridenour-Baker Grocery Co. v. Monroe, 142 Mo. 165; Snyder v. Free, 114 Mo. 360.

Laughlin, Frumberg, Blodgett & Russell for respondents.

(1) The exclusive right to bring suits to set aside the conveyance of a bankrupt is vested in the trustee in bankruptcy. Bankruptcy Act, secs. 67, 70; Glenney v. Langdon, 98 U.S. 20; Trimble v. Woodhead, 102 U.S. 647; Moyer v. Dewey, 103 U.S. 301; Blake v. Meadows, 225 Mo. 26; Riggs v. Price, 277 Mo. 333. (2) A stranger cannot voluntarily inject himself into a pending suit as a defendant. Siemers v. Kortjohn, 29 Mo.App. 271; Boyer v. Hamilton, 29 Mo.App. 521; Browning v. Hilig, 69 Mo.App. 594; Skinner v. Slater, 159 Mo.App. 589; State ex rel. v. Railroad, 193 S.W. 932; Addison v. Savings Bank, 205 Mo.App. 622. (3) A defendant cannot, under the guise of a cross-bill, maintain an independent suit against his codefendants. Joyce v. Growney, 154 Mo. 253; Fulton v. Fisher, 239 Mo. 116; Mathiason v. St. Louis, 156 Mo. 196. (4) Fraud is never presumed, but must be proven, and, when the circumstances are as consistent with honesty as with fraud, the presumption of honest conduct is not overcome. Bank v. Hutton, 224 Mo. 42; Garesche v. MacDonald, 103 Mo. 1; Henderson v. Henderson, 55 Mo. 555; Jones v. Nichols, 280 Mo. 653; Funkhouser v. Lay, 78 Mo. 462.

Abbott, Fauntleroy, Cullen & Edwards, Samuel Klamon and Taylor R. Young for appellants in reply.

(1) The contention of respondent that Richard A. Rumer, the trustee in bankruptcy, cannot maintain this suit is based upon an erroneous misconception of the facts. This suit was instituted by the plaintiff some ten days before bankruptcy was instituted. When bankruptcy was instituted the adjudication in bankruptcy operated to transfer the title of the cause of action to Rumer, the trustee in bankruptcy, and, by the express terms of the statute, Rumer, as trustee, might become substituted as plaintiff. Sec. 1354, R. S. 1919. Upon said statute and the state practice an assignee or transferee of a cause of action pending may be substituted as plaintiff. Spurlock v. Sproule, 72 Mo. 503; Coe v. Ritter, 86 Mo. 277; Springfield to use v. Weaver, 137 Mo. 650; Goza v. Sanford, 79 Mo.App. 95; Neilon v. Railway, 85 Mo. 599. And the court will substitute the transferee as plaintiff on the latter's petition. Childs v. Thompson, 81 Mo. 337. The same procedure is authorized under the bankruptcy acts. Atkins v. Globe Bank (Ky.), 124 S.W. 879; Blick v. Nimmo, 121 Md. 139; Bunch v. Smith, 116 Tenn. 201; Miller v. New Orleans Acid Co., 211 U.S. 496. (2) The status which Rumer takes in this case must be determined by the allegations of the pleading filed by him, and not by the name that is given to the pleading. An examination of the pleading filed by him will demonstrate that it is in its entire scope and tenor a petition by the trustee asking for affirmative relief against the debtor in the execution, and contains all the necessary allegations of a good bill in equity to divest title. (3) If a trustee, upon his appointment, finds a suit already commenced and in progress in a state court by one or more of the creditors to set aside a fraudulent conveyance by the bankrupt, he may apply to the court of bankruptcy for permission to intervene in such action, and leave will generally be granted if it appears to be for the best interests of the estate. 11 U.S.C. A., sec. 110, p. 277, and note 958, p. 595; In re Riker, 107 F. 96, 5 Am. Bankr. Rep. 720; Davis v. Vandiver, 143 Ala. 202; Tharp v. Tharp's Trustee (Ky.), 119 S.W. 814; Atkins v. Globe Bank & Trust Co. (Ky.), 124 S.W. 879; Block v. Nimmo, 121 Md. 139; Bunch v. Smith, 116 Tenn. 201. The very general practice has been to permit a trustee to come in and continue such a suit as the one here pending. Jones v. Meyer Bros. Drug Co., 61 S.W. 553; Davis v. Vandiver (Ala.), 38 So. 850; Title "Intervention," 33 C. J. 477. (4) It may be true that after the adjudication in bankruptcy neither the St. Louis Brewing Association nor Margaret A. MacDonald were proper plaintiffs in this case, but of this the respondents cannot take advantage, because they did not demur or otherwise attack the pleadings in the lower court, and by virtue of the statute they have most effectively waived any questions of misjoinder or improper parties. Secs. 1226, 1230, R. S. 1919.

OPINION

Atwood, J.

This is a suit commenced by Margaret A. MacDonald on January 3, 1925, in the Circuit Court of the City of St Louis, against Michael J. O'Donnell and Catherine O'Donnell. Her petition charged that on March 18, 1921, she obtained judgment against defendant Michael J. O'Donnell, upon which there was due a balance of $ 1861.70 with costs; that she caused an execution to issue on said judgment, and that a nulla-bona return had been made thereon; that on April 26, 1923, defendant Michael J. O'Donnell had purchased with his own money an apartment building at 5252-5254 Page Avenue, St. Louis, Missouri, but for the purpose of preventing plaintiff from collecting her judgment said defenda...