Reinschmidt v. Hirsch

• Decision Date: 05 October 1937
• Docket Number: 8003.
• Citation: 275 N.W. 356,65 S.D. 498
• Parties: REINSCHMIDT et al. v. HIRSCH et al.
• Court: South Dakota Supreme Court

275 N.W. 356

65 S.D. 498

REINSCHMIDT et al. v. HIRSCH et al.

No. 8003.

Supreme Court of South Dakota

October 5, 1937

Appeal from Circuit Court, Bon Homme County; A. B. Beck, Judge.

Action by Martin Reinschmidt and others, as trustees in charge of the Farmers & Merchants State Bank of Tripp, South Dakota for purpose of liquidation, against Margaret Hirsch and others. From an order granting the plaintiffs a new trial the defendants appeal.

Affirmed.

F. B Morgan, of Wagner, and W. W. French, of Yankton, for appellants.

Hitchcock & Sickel, of Mitchell, and Stanton L. Clark, of Tripp, for respondents.

SMITH Judge.

Plaintiffs, as the liquidating trustees of a judgment creditor of Margaret Hirsch, seek, by this action, to nullify a certain conveyance of real property by Margaret Hirsch to the defendant the Midwest Realty Company as fraudulent. The defendants admit that the conveyance was delivered in execution of a parol trust reposed in Margaret Hirsch by her late husband, F. H. Hirsch, deceased, for the benefit of their children, Ray, William, Alden, Olivia, Arthur, and Emil Hirsch. The Midwest Realty Company is a corporation, of which the children were incorporators. They testified that it was organized for the purpose of holding and managing this and other property. The defendants contend that F. H. Hirsch deeded the land to Margaret Hirsch during his lifetime, pursuant to an express understanding resting in parol that she would hold the legal title in trust for the children during her lifetime, and that she should have and enjoy the net income therefrom during that period. On trial the testimony of Margaret Hirsch and some of her children was received over the objection of plaintiffs based on the second subdivision of section 2717 of the Revised Code of 1919. This testimony tended to establish the existence and terms of the parol agreement between Margaret and F. H. Hirsch. Findings were made, based on this testimony, from which it was concluded that the conveyance attacked was made in performance of a parol trust, and the decree of the court subjected no more than the life estate of Margaret Hirsch to the claim of plaintiffs. Thereafter, the court ordered a new trial, assigning as its reasons: (1) Insufficiency of the evidence to show delivery of the deed from F. H. Hirsch to Margaret Hirsch; (2) incompetency of the testimony of the widow and children with reference to the understanding between Margaret Hirsch and F. H. Hirsch; and (3) the insufficiency of the evidence to show an executed parol trust. The appeal is from the order granting a new trial.

May a creditor complain because a debtor conveys property in execution of a trust which is not enforceable because created by a parol? Both reason and authority command a negative answer to this question. To render unto the beneficiaries of such a trust that which in all good conscience and right is theirs does not in fact defraud the creditors of the trustee. The authorities are collected in a note in 64 A.L.R. 576. It is equally clear that no right of the creditor of the trustee is violated by a conveyance to a corporation formed by the beneficiaries in lieu of a conveyance or other method of passing the property on to the beneficiaries. The rights of the creditor only relate to the individual property rights of the trustee.

Was the testimony of the widow and children competent under subdivision 2 of section 2717? This proviso or exception to the general rule of competency of testimony of interested parties or persons is not to be applied to any witness or testimony not clearly within its terms. Hornstra et al v. Avon State Bank et al., 55 S.D....