Payne v. Gilmore

• Decision Date: 05 February 1963
• Docket Number: No. 39743,39743
• Citation: 382 P.2d 140
• Parties: O'Dell PAYNE, Plaintiff in Error, v. Joe GILMORE, dba OK Furniture and Roofing Co., Defendant in Error.
• Court: Oklahoma Supreme Court

Page 140

382 P.2d 140

1963 OK 26

O'Dell PAYNE, Plaintiff in Error, v. Joe GILMORE, dba OK Furniture and Roofing Co., Defendant in Error.

No. 39743.

Supreme Court of Oklahoma.

Feb. 5, 1963.

Rehearing Denied June 4, 1963.

Syllabus by the Court.

1. In an action of equitable cognizance, this court on appeal will examine the record and weigh the evidence, and if the judgment rendered in the trial court is clearly against the weight of the evidence, it will be reversed.

2. 'Badges of fraud' are suspicious circumstances that overhang a transaction or appear on the face of the papers. The possible indicia of fraud are so numerous that no court could pretend to anticipate or catalog them. A single one may stamp the transaction as fraudulent, and, when several are found in combination, strong and clear evidence on the part of the upholder of the transaction will be required to repel the conclusion of fraud.

3. The legal liability of an employer to his employee under the Workmen's Compensation Law is included in the legal liability contemplated in 24 O.S.1961, Sec. 10.

Appeal from the District Court of Choctaw County; Howard Phillips, Judge.

Appeal by O'Dell Payne, judgment creditor, after certain proceedings against Joe Gilmore, judgment debtor, in aid of execution, from a judgment refusing to cancel certain conveyances of the debtor as being a fraud upon his creditors. Reversed and remanded with directions.

Lon Kile, Hugo, for plaintiff in error.

O. A. Brewer Hugo, for defendant in error.

JACKSON, Justice.

This is an appeal by O'Dell Payne, as judgment creditor, from a judgment and order of the district court in favor of Joe Gilmore, as judgment debtor, which was rendered after certain proceedings in aid of execution.

The question involved in the trial court was whether or not certain property conveyed by Joe Gilmore to his wife and son should be subjected to execution in satisfaction of a judgment held by Payne against Gilmore.

A statement of the history of the litigation, with particular attention to dates, is necessary for a proper understanding of the issues. On May 28, 1958, Payne filed a claim for workmen's compensation against Gilmore, basing the same upon injuries occurring in January and April of that year. Gilmore did not carry workmen's compensation insurance. On January 27, 1959, the case was heard and the cause submitted with the provision that either party could submit medical testimony by deposition within thirty days, which they did. On March, 9, 1959, Gilmore recorded deeds and conveyances by which he divested himself of all the property he owned in the state of Oklahoma, placing title thereto in the names of his wife, Leta Gilmore, and his son, Jack Gilmore, who was at that time a minor attending college in Durant. On March 23, 1959, the State Industrial Court made an award in the compensation case in favor of Payne and against Gilmore in the amount of approximately $3500.00.

The award was not paid, and Payne thereafter began proceedings in aid of execution. He was authorized, under the provisions of 85 O.S.1961 § 42, to file a certified copy of the award in the office of the Court Clerk of Choctaw County, which he did on November 12, 1959. District Court proceedings were then begun and a writ of execution was issued and returned endorsed no property found. Payne then began garnishment proceedings, under 12 O.S.1961 § 847 et seq., against Leta Gilmore and Jack Gilmore, as garnishees, alleging that they had in their possession property belonging to Joe Gilmore.

At hearings held in 1960 and 1961, the three members of the Gilmore family testified as to their business transactions and relations. The only other witness was the County Clerk of Choctaw County, Oklahoma, who testified that his reception record showed that the deeds and conveyances filed in his office on March 9, 1959, were brought in by, and returned to, Joe Gilmore. Some documentary evidence was introduced.

Payne then filed a 'Motion for Adjudication' in which he asked that the deeds and conveyances mentioned be set aside as a fraud upon the creditors of Joe Gilmore, that Gilmore be decreed to be the owner of the property he purportedly conveyed to his wife and son, and that the property be subjected to execution in satisfaction of the Payne judgment from the State Industrial Court.

From the order and judgment of the district court refusing to grant the relief sought, Payne has appealed to this court.

Since the relief sought in the trial court consisted of a cancellation of deeds and conveyances on the ground that they were made for the purpose of defrauding creditors, this case is one of equitable cognizance. Bert Whiteis, Inc., v. Motor Mortgage Co., 182 Okl. 384, 77 P.2d 698; 50 C.J.S. Juries § 32. This court will therefore examine the record and weigh the evidence, and if the judgment is against the clear weight of the evidence, it will be reversed. Richard v. Richard, 172 Okl. 397, 45 P.2d 101.

We now review the evidence in this case, keeping in mind 24 O.S.1961 § 10, which provides as follows:

'Every conveyance of real estate or any interest therein, and every mortgage or other instrument in any way affecting the same, made without a fair and valuable consideration, or made in bad faith, or for the purpose of hindering, delaying or defrauding creditors, shall be void as against all persons to whom the maker is at the time indebted or under any legal liability.'

The evidence in the trial court establised beyond doubt that no monetary consideration was paid for the property conveyed to the wife and son. The conveyances were admittedly between parties closely related; they were made about a year after the injury which was the basis of Payne's workmen's compensation claim; they were made after the claim was filed in the State Industrial Court, and were filed only two weeks before judgment was entered. After the transfers, the judgment debtor, Joe Gilmore, continued to work as manager of the place of business involved, and the purported transferee thereof, his son, continued to attend college, at least during a part of the time. When given a direct opportunity to do so, the son refused to deny that at the time of the transfer, he knew of the Payne compensation claim against his father. The mother denied that she knew of the claim. The son testified that in making the conveyances, the father 'stripped himself of everything he owned'.

The portion of the evidence above summarized is substantially uncontradicted.

In Ebey-McCauley Co. v. Smith, Okl., 353 P.2d 23, 28, we quoted from Leonardo v. Leonardo, 102 U.S.App.D.C. 119, 251 F.2d 22, 26, as follows:

'In the law of fraudulent conveyances, the term 'badge of fraud' means any fact tending to throw suspicion upon the questioned transaction. It raises an inference that the conveyance was fraudulent, and throws upon the parties to the transaction the burden of making a satisfactory explanation by more persuasive proof of good faith than is ordinarily required.'

We then said:

'Among the indicia, or badges, of fraud, are: inadequacy of consideration (Leonardo v. Leonardo, supra), insolvency of transferrer, relationship of the transferer and transferee, pendency or threat of litigation, and transfer of the debtor's entire estate. 24 Am.Jur. 'Fraudulent Conveyance', section 14. * * *'

We hold that the evidence above summarized, being substantially uncontradicted, is more than sufficient to establish the existence of the five 'indicia, or badges, of fraud' listed in Ebey-McCauley v. Smith, supra.

In Toone v. Walker, 115 Okl. 289, 243 P. 147, this court held in the third paragraph of the syllabus:

"Badges of fraud' are suspicious circumstances that overhang a transaction, or appear on the face of the papers. The possible indicia of fraud are so numerous that no court could pretend to anticipate or catalog them. A single one may stamp the transaction as fraudulent, and, when several are found in combination, strong and clear evidence on the part of the upholder of the transaction will be required to repel the conclusion of fraud.' (Emphasis supplied.)

We now further examine the record and evidence in this case to see if there is 'strong and clear evidence on the part of the upholder of the transaction * * * to repel the conclusion of fraud'.

All members of the Gilmore family testified that Joe Gilmore's health was bad, and that he had a 'bad heart condition'. Because of this condition, Gilmore felt that he could no longer run the business; he testified that his health was the 'impelling reason' for the transfers.

The property involved consisted generally of a business known as the OK Furniture and Roofing Company, a half interest in 160 acres of farm land and an undetermined number of rental or residential units (all transferred to the son, Jack); a hotel building and the Gilmore home (transferred to the wife, Leta). There were mortgages in substantial amounts against some of the property, but at least part of it was free of mortgage liens. The record does not clearly show the total amount of the mortgage indebtedness, and there is no evidence as to the total value of the property transferred, although the son, admittedly not an expert witness, testified that the hotel building was worth from forty to fifty thousand dollars.

Concerning the business, the son testified that his father gave it to him; his father testified that his son 'accumulated it by working'; that he 'just worked himself into it', presumably (from the son's testimony), during summer vacations and on week ends while he was in school, between the ages of 17 and 20.

There was also testimony that sometime in 1958 (Payne's first injury was in January, 1958), a man named Ballard bought a half interest in the OK Furniture and Roofing Company from Joe Gilmore. The record does not show what he paid for it or whether he thereafter participated in the management thereof. Although the son testified that the...