New England Nat. Bank v. Montgomery

• Decision Date: 20 February 1917
• Docket Number: No. 17641.,17641.
• Parties: NEW ENGLAND NAT. BANK v. MONTGOMERY et al.
• Court: Missouri Supreme Court

192 S.W. 941

NEW ENGLAND NAT. BANK v. MONTGOMERY et al.

No. 17641.

Supreme Court of Missouri, Division No. 1.

February 20, 1917.

Appeal from Circuit Court, Jackson County; W. O. Thomas, Judge.

Action by the New England National Bank against W. E. Montgomery and others. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

McCune, Harding, Brown & Murphy and Blatchford Downing, all of Kansas City, for appellant. Calvin & Rea, of Kansas City, for respondents.

BLAIR, J.

This is an appeal from a judgment for defendants, rendered by the Jackson circuit court in a suit instituted by appellant (plaintiff below) for the purpose of subjecting a one-third interest in certain lots in Kansas City to the payment of a judgment it had obtained against respondent Montgomery. The interest in question had been conveyed by Montgomery to his sister, respondent Addie M. Luker, the deed reciting a consideration of $5,000. This transfer is attacked as fraudulent. Appellant's judgment is based on a liability of Montgomery created long prior to the date of the deed. It is conceded the transfer rendered Montgomery insolvent, but insisted the conveyance was made in consideration of indebtedness due from Montgomery to Mrs. Luker and was accepted by her in good faith and to secure her claim. The trial court found the transfer valid, and rendered judgment accordingly.

A conveyance to a creditor, in liquidation of a bona fide indebtedness, of property no more than reasonably sufficient to discharge the debt, is valid though the transaction renders the grantor insolvent and is made by him with the intent to hinder and delay other creditors, and though the grantee knows of such effect and intent, provided such creditor acts in good faith and for the sole purpose of securing payment of his debt. First National Bank v. Fry, 216 Mo. loc. cit. 34, 35, 115 S. W. 439; Growney v. Lowe, 234 Mo. loc. cit. 696, 138 S. W. 33. Respondents contend the application of this rule to the facts must result in an affirmance of this judgment. They rely upon the principle that fraud is not presumed, but must be proved by him who alleges it; conceding it may be proved by facts and circumstances (St. Francis Mill Co. v. Sugg, 206 Mo. 148, 104 S. W. 45), they call attention to the rules that some deference is due the chancellor's finding, and that when a transaction is equally susceptible of two constructions, that one will be adopted which better harmonizes with honesty of purpose.

Appellant contends that in the light of the careful scrutiny to which equity, in such a case as this, subjects transactions between brother and sister (Bank v. Fry, 216 Mo. loc. cit. 42, 115 S. W. 439), our finding must be that the conveyance was not made in good faith; that the value of the interest conveyed exceeded the recited consideration; that the recited consideration exceeded the amount Mrs. Luker claims was due her from her brother, and that the amount she claims was due her exceeded, by far, the amount due in fact; that she knew her brother was wholly insolvent and indebted to appellant, and took the conveyance to defeat its claim. It is well settled that if more was conveyed than was reasonably sufficient to liquidate the debt actually due Mrs. Luker, i. e., if any part of the consideration was fictitious, the conveyance is voidable. Klauber v. Schloss, 198 Mo. loc. cit. 513, 514, 95 S. W. 930, 115 Am. St. Rep. 486; Bank v. Fry, 216 Mo. loc. cit. 35, 115 S. W. 439.

Appellant's judgment, to the payment of which it seeks to subject the realty involved, is based upon a note executed to it by a Mr. Dikes and respondent Montgomery. Mrs. Dikes is a sister of respondents Montgomery and Addie M. Luker. This note was first given some months, at least, prior to the conveyance to Mrs. Luker, and there is no doubt Mrs. Luker knew of it long prior to the execution of the deed here in question. She learned of it when it first fell due, but testified she thought it had been "settled and arranged," and considered it Mrs. Dikes' affair; admitted she knew of the note, and knew suit had been instituted on it at one time in 1910. The only "settling" or "arranging" of this note of which there is any hint is the execution of the renewal note sued on and the dismissal of the action appellant had begun.

Mrs. Luker testified she did not "know that Mr. Downing or the New England National Bank considered Dr. Montgomery a debtor; thought that had been satisfactorily arranged"; that she "thought Mrs. Dikes had arranged to look after it, and wasn't paying any attention to it; regarded it as Mrs. Dikes' affair." She does not say she thought the note was paid, or that respondent Montgomery's name was not signed to it. What she does say means really no more than that she thought Montgomery would not have to pay the note; that Mrs. Dikes would attend to that. While she did testify she knew of no indebtedness other than the judgment she paid at the time of the transfer and "some minor debts," it clearly appears her implied denial of knowledge of the Dikes note is to be understood as based upon her expectation that Mrs. Dikes was going "to look after it." As to her knowledge of other debts, her testimony discloses some vacillation, if not actual contradictions. Taking into consideration all her testimony, on this point all by deposition, including her admission of knowledge of the liability and the necessary inferences from her reasons why she "wasn't paying any attention to it," together with the fact that she testifies her brother talked over his business with her, and that she "raised him," and the fact of their relationship, far the more reasonable conclusion is that when she took the conveyance of his property she knew of his liability to appellant. Bank v. Fry, 216 Mo. loc. cit. 45, 115 S. W. 439; Leavitt v. La Force, 71 Mo. 353. She admits she knew the conveyance rendered Dr. Montgomery insolvent.

Was the transfer to Addie M. Luker accepted in good faith and in consideration of a discharge of an indebtedness reasonably equal to the value of the property conveyed? It is undisputed Mrs. Luker paid at the time of the transfer only the $1,100 necessary to satisfy a judgment of the Frankel Frank Millinery Company against her brother, Dr. Montgomery. It is also undisputed that the value of the interest conveyed to her was far in excess of this sum. The deed recited a consideration of $5,000. Respondent Mrs. Luker testified the maximum amount her brother owed her at any time was $4,000. She said she had paid taxes for him aggregating, "she expected," $400 or $500; that she had made him "little personal loans," aggregating, "she expected," $300 or $400, and that she loaned him $2,000 in an effort to save his millinery business, an enterprise upon which he embarked early in 1910. She produced no tax receipts. Dr. Montgomery was present at the trial, but did not testify, and in his deposition did not mention these tax payments. Mrs. Luker had no notes, no receipts for the little personal loans she mentioned, and Dr. Montgomery's deposition does not afford her any real support as to them. The principal item was the $2,000 loan she mentioned. Dr. Montgomery also testified concerning this matter. In...