Preston Nat. Bank of Detroit v. Pierson

• Decision Date: 27 April 1897
• Citation: 70 N.W. 1013,112 Mich. 435
• Court: Michigan Supreme Court
• Parties: PRESTON NAT. BANK OF DETROIT v. PIERSON ET AL.

70 N.W. 1013

112 Mich. 435

PRESTON NAT. BANK OF DETROIT v. PIERSON ET AL.

Supreme Court of Michigan

April 27, 1897

Appeal from circuit court, Genesee county, in chancery; George W Smith, Judge.

Bill in aid of execution by the Preston National Bank of Detroit against Herman L. Pierson and Mary E. Pierson to set aside a conveyance as fraudulent. Decree for complainant, and defendants appeal. Affirmed.

D. P. Halsey (Ed S. Lee and George H. Durand, of counsel), for appellant Mary E. Pierson.

Newton & Gold (Geer & Williams, of counsel), for appellee.

MONTGOMERY J.

This is a bill filed in aid of execution. The defendant Herman L Pierson was president of the Thread Flouring-Mills Company and owner of one-fourth of its stock. On the 10th of November, 1892, the milling company made its note for $10,000, due in six months, which note was indorsed by defendant Herman L. Pierson and discounted by complainant. When this note became due it remained unpaid for some 30 days, when $1,000 was paid upon it, and new notes were given for $5,000 and $4,000, respectively. After the maturity of these notes, another $1,000 was paid, and two notes, each in the sum of $4,000, were given. Upon these last-mentioned notes judgment was obtained on the 17th of August, 1893, against the milling company, Herman L. Pierson, Clarence M. Harris, and Ira H. Wilder, who became indorsers upon these later notes. The liability of the milling company and Pierson continued throughout the transactions. After the making of the first note of $10,000, and before its maturity, namely, on the 28th of February, 1893, a disastrous fire occurred, by which the milling company lost its plant and a large quantity of wheat stored in its elevators; the total loss amounting to from $25,000 to $30,000 above insurance. Again, on December 1, 1894, the mill, which had been rebuilt by the company, burned, and a further loss was sustained by the company. The property sought to be reached by this proceeding is a farm of 280 acres near the city of Flint, worth, substantially, $16,000. This was transferred by the defendant Herman L. Pierson to his wife, Mary Pierson, by a deed bearing date June 2, 1891, and recorded on the 29th of December, 1892; the consideration expressed being one dollar. The testimony of the parties is that this deed was without consideration other than natural affection, but that the defendant Mary Pierson, who was the second wife of complainant, agreed at the time of the conveyance to divide the property at the death of the parties between the two sons of defendant Herman L.,-one by his former wife, and one by the defendant Mary Pierson. It further appears by the proofs that at the time of this conveyance, in June, 1891, defendant Herman L. Pierson, besides his interest in the milling company, which was valued at $9,000, owned $3,000 in bank stock, worth par; a mortgage, known as the "Middleton Mortgage," of $2,000; lands in Dakota worth about $3,000; and a lot adjoining the homestead, of $250; or he owned unincumbered property amounting to $17,250. He also owned his homestead, in the city of Flint, worth $4,000 and upward, subject to a mortgage to his wife of $2,500. His personal indebtedness at this time was $1,100 to his son, an indebtedness to his wife of $2,800 or thereabouts, $800 to his nephew, and about $500 additional. Shortly after the making of the first $10,000 note, the deed to Mrs. Pierson was placed of record, $2,000 of bank stock was transferred to his son, to whom he owed $1,100, and later, in October, 1894, the Middleton mortgage was transferred to his wife; so that, undeniably, at the time that the judgment was obtained, defendant Herman L. Pierson had no property subject to levy and sale on execution,-his homestead being worth nothing above his exemptions and the mortgage to his wife. The testimony fairly shows that at the time of their marriage, many years before the transactions in question, Mary E. Pierson received from her father's estate about $3,750, and that defendant Herman L. Pierson had had the benefit of this money. The mortgage of $2,500 was given to secure a portion of it, and the balance, together with accumulations of interest, remained a debt against Herman L. Pierson. The court below entered a decree setting aside the conveyance of the farm, and subjecting it to a sale under the execution of complainant. Defendants appeal. Two principal questions are presented: First, whether, in accepting new notes in place of the first, the complainant has lost its right to pursue this remedy; second, whether, if it be determined that the complainant has the same right which it would have had of proceeding under the first note, the deeding of this farm was fraudulent as to this creditor.

1. The defendants, to sustain their contention under the first proposition, rely upon the case of Childs v. Pellett, 102 Mich. 567, 61 N.W. 54, and contend, on the authority of that case, that this note of $10,000 was paid by the giving of new notes in renewal of the first. That case is not in point. The question there involved was whether one who is liable upon paper as a partner continues liable upon the renewal of such paper by his former partner after the dissolution of the firm, and was well decided upon the principle that after the dissolution of the firm the retiring partner is a mere surety for the performance of the obligations of the firm, and any renewal or extension of time releases him from such obligation. See Smith v. Shelden, 35 Mich. 42. But in this case the debt continued throughout, and the liability of Herman L. Pierson continued from first to last. We think, under these circumstances, the bank never lost its right to complain of the fraudulent transfer, if it be held fraudulent. See Boxheimer v. Gunn, 24 Mich. 372; Tucker v. Drake, 11 Allen, 145; McLaughlin v. Bank, 7 How. 220; Thomson v. Hester, 55 Miss. 656; Moore v. Spence, 6 Ala. 506; Blue v. Penniston, 27 Mo. 272; Bump, Fraud. Conv. � 490.

2. At the time this conveyance was made, in June, 1891, the defendant Herman L. Pierson was solvent. If we...