McKillip v. Farmers' State Bank of Des Lacs, North Dakota

• Decision Date: 16 February 1915
• Court: North Dakota Supreme Court

151 N.W. 287

29 N.D. 541

NORA McKILLIP v. FARMERS' STATE BANK OF DES LACS, NORTH DAKOTA

Supreme Court of North Dakota

February 16, 1915

Appeal from the District Court of Ward County, Leighton, J.

Action to determine adverse claims to real estate. Judgment for Plaintiff. Defendant appeals.

Affirmed.

Blaisdell Murphy & Blaisdell, for appellant.

There was constructive fraud in the transfer of the property in question. The failure of an honest grantee to place his deed of record is held to operate as an estoppel in favor of the creditors of the grantor. It is negligence, and constitutes constructive fraud. Smith v. Cleaver, 25 S.D. 351 126 N.W. 589; Rev. Codes 1905, § 5294; Hopkins v. Joyce 78 Wis. 443, 47 N.W. 722.

The defendant had a lien and could have maintained an independent action as plaintiff to enforce it. He has been brought into this action, and the court has power to do complete justice between the parties. The nullity of the transfer is not based on the absence of another remedy, but on its fraudulent character. Probert v. McDonald, 2 S.D. 495, 39 Am. St. Rep. 796, 51 N.W. 212; Carson v. Stevens, 40 Neb. 112, 42 Am. St. Rep. 661, 58 N.W. 845, 58 N.W. 845; David Adler & Sons Clothing Co. v. Hellman, 55 Neb. 266, 75 N.W. 877.

Anything out of the usual course of business is a sign of fraud. McCarvel v. Wood, 68 Minn. 104, 70 N.W. 871.

That the plaintiff does not testify or personally appear in this case is a sign, and raises the presumption of fraud. 20 Cyc. 450; Manhard Hardware Co. v. Rothschild, 121 Mich. 657, 80 N.W. 707; Probert v. McDonald, 2 S.D. 495, 39 Am. St. Rep. 796, 51 N.W. 212.

Palda, Aaker & Greene and F. M. Oseth, for respondent.

The doctrine of constructive fraud is not only analogous to, but is based upon, the doctrine of estoppel in pais; since it arises only where, by the omission of a duty imposed by law upon one person, another has been actually and bona fide mislead to his prejudice. Rev. Codes 1905, § 5294; Smith v. Cleaver, 25 S.D. 351, 126 N.W. 589.

The presumption that services of a member of the family are gratuitous may be overcome by actions and appearance; it is entirely overcome and destroyed by a distinct agreement. Since a father may emancipate his minor child, it has been held, that if he so does, and enters into a bona fide contract with the child under such contract, such services are a sufficient consideration to support a conveyance by the father to the child as against the father's creditors. 20 Cyc. 532, 533, and cases cited.

The transfer in this case was of exempt property, and therefore not open to question by grantor's creditors. It was property to which the liens of creditors did not attach, and was beyond the reach of an execution. It was not possible to defraud creditors by transferring property to which they could not look for the collection of their claims. Olson v. O'Connor, 9 N.D. 504; Dalrymple v. Security Improv. Co. 11 N.D. 70, 88 N.W. 1033; Baldwin v. Rogers, 28 Minn. 544, 11 N.W. 77; Blake v. Boisjoli, 51 Minn. 296, 53 N.W. 637; Merchants' Nat. Bank v. Kopplin, 1 Kan.App. 599, 42 P. 263; White Sewing Machine Co. v. Wooster, 74 Am. St. Rep. 100 and note, 66 Ark. 382, 50 S.W. 1000; Note to Kettleschlager v. Ferrick, 76 Am. St. Rep. 626.

OPINION

BRUCE, J.

This is an action to determine adverse claims to real estate. It direct object is to have the lien of an attachment set aside. This attachment was issued in an action not against the plaintiff and respondent, but against her father and grantor, Thomas McKillip, and the question to be determined is the validity of the conveyance to his daughter, and whether the land on which the attachment was levied belonged to the father and debtor, Thomas McKillip, or to his daughter, the plaintiff and respondent herein. The land was deeded to Nora McKillip, on the 15th day of March, 1910, and the attachment was levied on the 19th day of October, 1912. The question is, Was or was not the deed of March 15, 1910, a valid deed? In other words, was it issued for a good or valuable consideration, and was it free from actual or constructive fraud? The trial court found that it was, and we are asked upon this appeal to reverse its findings.

The record shows that in 1909 the plaintiff and respondent's father sold and indorsed to the defendant bank a certain promissory note for $ 350, which was executed in his favor by one T. W. Young; that on said note becoming due and on April 20, 1911, and a year and twenty-five days after the date of the execution of the deed herein in question, the said plaintiff's and respondent's father and the said T. W. Young executed and delivered to the said bank a new note for $ 302.44, and which note was given for the purpose of taking up the indebtedness still due on the prior note. The record shows that at the time of the giving of the second note the said McKillip had some $ 500 worth of personal property, which he disposed of in 1912, a year after the giving of the last note and some two months before the recording of the deed by his daughter, which was on the 1st day of June, 1912. The whole contention of defendant is that it had no knowledge whatever of the existence of the deed until shortly after it was recorded, and that had it known of the deed it would never have accepted the note but would have sued McKillip on the former note, in payment of which the note of April 20, 1911, was given, and would have levied on his personal property and collected its claim in full.

The burden of proof is, of course, upon the defendant and appellant to prove its allegation of fraud, and such proof must be clear and convincing. Englert v. Dale, 25 N.D. 587, 142 N.W. 169. We find no such proof in the record before us. The deed, it is true, was not recorded until the 1st day of June, 1912. The writ of attachment, however, was not issued until the 19th day of October, 1912, nor was the action in which it was issued begun until such date. At the time of the execution of the deed to his daughter, the liability of Thomas McKillip to the defendant, the Farmers' State Bank, was that of an indorser merely, and there appears to be nothing unusual in an old man deeding his...