Mendenhall v. Elwert
| Decision Date | 29 January 1900 |
| Parties | MENDENHALL v. ELWERT et al. |
| Court | Oregon Supreme Court |
Appeal from circuit court, Multnomah county; Loyal B. Stearns Judge.
Bill by E. Mendenhall against J.B. Elwert and others. From a decree for plaintiff, defendants appeal. Affirmed.
This is a suit to set aside certain deeds of real estate and a chattel mortgage, to cancel the assignment of several promissory notes and mortgages, and to subject the property and securities affected thereby to the satisfaction of plaintiff's judgments. The facts are that plaintiff, on April 6, 1896, obtained a judgment against the defendant Carrie M. Elwert in the justice's court for East Portland district for the sum of $225 and $17.10 costs, and within the time prescribed by law caused the same to be docketed in the judgment docket of the circuit court for Multnomah county and on September 6, 1896, he obtained a judgment against the defendants Mrs. J.B. Elwert and her daughter, the said Carrie M. Elwert, in said circuit court, for the sum of $470 and $15.50 costs. Executions were issued on said judgments, and delivered to the sheriff of said county, who, being unable to find any property of either of said defendants upon which he could levy, returned them wholly unsatisfied. It appears from the transcript: That Mrs. Elwert, until March 12, 1894, was the owner in fee of lot 4 and the south five feet of lot 3 in block 218, in the city of Portland, upon which she erected a new building in 1893, and also repaired an old one. That she loaned money, taking promissory notes payable to her order, secured by real-estate mortgages, executed by the persons, on the dates, and for the sums following, to wit William Morton, November 10, 1890, $7,500; A.K. Velton, February 9, 1891, $3,500; Mary E. Knott, June 24, 1891, $3,000; R.S. Perkins, July 11, 1892, $27,500; P.A. Marquam, August 6, 1892, $15,000; and J.W. Hodson, August 10, 1893, $4,000; and also purchased and took an assignment of a note and mortgage executed by Frank Bode to Rachel L. Hawthorne for the sum of $966.66. That she caused some of these mortgages to be foreclosed, the premises therein described being purchased by Carrie M. Elwert, who, upon securing the sheriff's deeds therefor, executed conveyances thereof to her brother, the defendant Charles P. Elwert, to whom Mrs. Elwert assigned the remaining notes and mortgages. She also, on March 12, 1894, for the expressed consideration of $36,000, executed to Charles P. Elwert a deed to lot 4 and the south five feet of lot 3, in said block 218. George Weidler, on December 31, 1890, executed a mortgage securing notes payable to Charles P. and Carrie M. Elwert for the sums of $8,000 and $13,000, respectively, and Carrie M. Elwert assigned to her brother the latter note, and all her interest in said mortgage. She also executed to him a mortgage of her household goods and furniture, purporting to secure the payment of a promissory note for $1,000, and Mrs. Elwert, on September 3, 1894, gave him her note for $4,567.77. The value of the property thus conveyed to C.P. Elwert, as evidenced by the consideration recited in the several deeds, notes, and mortgages executed or assigned to him, is $124,034.43. Plaintiff, referring to the amount involved in his respective judgments, alleges: "That at the time of making said deeds, assignments, and transfers, and for a long time prior thereto, said J.B. Elwert and Carrie M. Elwert were indebted to this plaintiff in a large proportion of the sum before mentioned; all of which the defendant C.P. Elwert knew at the time." It is also alleged, in substance, in the complaint, that said conveyances and chattel mortgage were executed, and the notes and mortgages assigned, without any consideration therefor, and with the intent to hinder, delay, and defraud the creditors of Mrs. J.B. Elwert and her said daughter. The separate answer of Mrs. Elwert, after denying the material allegations of the complaint, avers that her said son loaned her about $45,000, for which she executed to him her promissory notes, and that of such sum she expended about $36,000 in making the improvements on lot 4 and the south five feet of lot 3 in said block 218, and in furnishing the buildings erected thereon; that the money loaned by her also belonged to her said son, who, at the time such loans were made, was a practicing physician in the city of New York; that said notes and mortgages, for the sake of convenience only, were taken in her name and that of her daughter; and that her said daughter, for the same reason, acted as her son's trustee in taking in her name the legal title to real property sold under said decrees of foreclosure. She also alleges that, being unable to pay her son the money so borrowed, she executed to him a deed of her property in part payment of the debt. The separate answer of Charles P. Elwert denies the material allegations of the complaint, and avers, in substance, that, being possessed of a large sum of money for which he was seeking investment, he sent it to the First National Bank of Portland, to be loaned, for the reason that a greater rate of interest could be obtained in the state of Oregon than in the city of New York; that this money was loaned in Multnomah county, and notes and mortgages therefor were taken in the name of his sister or his mother, for the purpose of convenience, they having no right or interest therein, and holding the legal title thereto in trust for him. The allegations of new matter in these answers having been denied in the replies, a trial was had, resulting in a decree as prayed for in the complaint, and defendants appeal.
L.B. Cox, for appellants.
E. Mendenhall, George E. Chamberlain, and M.L. Pipes, for respondent.
MOORE J. (after stating the facts).
The question presented by this appeal is whether the defendants, Mrs. Elwert and her daughter, were indebted to Charles P. Elwert to the extent claimed at the time the deeds and the chattel mortgage were executed and the notes and mortgages assigned to him. If truly answered in the affirmative, it follows that the decree must be reversed, for the rule is well settled in this state that a debtor may prefer a creditor, to whom he may transfer all his property in payment of his debt. Sabin v. Fuel Co., 25 Or 15, 34 P. 692. The creditor's knowledge that the debtor is in failing circumstances, that he has other creditors, or that the satisfaction of his own debt exhausts all of the debtor's property, will not defeat his right to accept a transfer or mortgage thereof if there be no intent upon the part of the preferred creditor to hinder, delay, or defraud the other creditors of the debtor. Currie v. Bowman, 25 Or. 364, 35 P. 848. It is only when the grantor or mortgagor reserves to himself some benefit which he expects to derive from the execution of a deed or mortgage of his property, that a court of equity will intervene at the suit of a creditor, and set aside such transfers as a fraud upon the latter's right. Jolly v. Kyle, 27 Or. 95, 39 P. 999. The transfer by a debtor of all his property is not an ordinary transaction, and whenever it occurs courts of equity regard it as a badge of fraud. Bump, Fraud.Conv. 34; Wait, Fraud.Conv. (3d Ed.) § 231. So, too, when a debtor conveys his property to a relative, and his creditors sustain any loss in consequence thereof, such relation imposes upon the parties to the conveyance the burden of showing that the transfer was made in good faith and for a valuable consideration. Bump, Fraud.Conv. 54; Jolly v. Kyle, supra; Flynn v. Baisley (Or.) 57 P. 908; Aultman v. Obermeyer, 6 Neb. 260; Carson v. Stevens (Neb.) 58 N.W. 845; Seitz v. Mitchell, 94 U.S. 580, 24 L.Ed. 179. Thus, where a debtor conveys the whole of his estate to a brother, ostensibly in satisfaction of his debt to the latter, in a suit by creditors to set aside the deed for...
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