Russell v. Franks

• Decision Date: 29 September 1938
• Docket Number: 34873
• Citation: Russell v. Franks, 120 S.W.2d 37, 343 Mo. 159 (Mo. 1938)
• Parties: S. P. Russell, Plaintiff in Error, v. J. S. Franks, Laura Franks, George A. Franks, Elmer Exchange Bank, Ezra P. Franks and L. E. Tansil, Defendants in Error
• Court: Missouri Supreme Court

120 S.W.2d 37

343 Mo. 159

S. P. Russell, Plaintiff in Error, v. J. S. Franks, Laura Franks, George A. Franks, Elmer Exchange Bank, Ezra P. Franks and L. E. Tansil, Defendants in Error

No. 34873

Supreme Court of Missouri

September 29, 1938

Writ of Error to Macon Circuit Court; Hon. Harry J Libby, Judge.

Reversed and remanded (with directions).

E M. Jayne and Ed. S. Jones for plaintiff in error.

(1) This being an equity case wherein fraud was charged and there being evidence which raised some presumption of fraud, or which constitutes "badges of fraud," a duty devolved on J. S. Franks and Ezra P. Franks to come forward and explain the transaction and purge themselves of any fraud, and they having failed to do so the fraud is presumed and considered as definitely established. MacDonald v Rumer, 8 S.W.2d 592; Bank of Pocahontas v. Miller, 223 S.W. 908; Howard v. Zweigert, 197 S.W. 46; Cass County v. Green, 66 Mo. 498; Leeper v. Bates, 85 Mo. 224; Goldsby v. Johnson, 82 Mo. 602; Mabray v. McClurg, 74 Mo. 575; Baldwin v. Whitcomb, 71 Mo. 651; Henderson v. Henderson, 55 Mo. 534; Hendrix v. Goldman, 92 S.W.2d 733. Courts of equity will grant relief upon the ground of fraud established by presumptive evidence which evidence courts of law would not deem sufficient to justify a verdict. King v. Moon, 42 Mo. 551. (2) The note to Ezra P. Franks having been shown to be fraudulent, or in any event suspicious and he having failed to show that it was not fraudulent, the entire deed of trust is tainted with the fraud and is void even though the indebtedness to the other beneficiaries is a bona fide indebtedness. Gregory v. Setlington, 54 Mo.App. 60; Fink v. Algermissen, 25 Mo.App. 186; Munford v. Sheldon, 9 S.W.2d 907. (3) It was shown by the testimony of J. S. Franks, as preserved in his deposition, and was not contradicted by any of the other defendants, that defendants George Franks and Elmer Exchange Bank had offered to discount their notes providing defendant J. S. Franks would secure the payment of the same. Notwithstanding this offer he gave and they accepted a deed of trust securing the full amount, principal and accrued interest of their notes and this act renders the entire conveyance void as against creditors even if there were nothing else which did so. Munford v. Sheldon, 9 S.W.2d 907; Gregory v. Setlington, 54 Mo.App. 60. (4) The fact that the beneficiaries in the deed of trust did not know of the transaction, and consequently did not participate in the fraud before or when it was committed, does not relieve them when they afterwards undertake to retain the benefits of the fraudulent act. Goldsby v. Johnson, 82 Mo. 602. (5) Defendants are bound by the opening statement of their counsel. Eaton v. Curtis, 4 S.W.2d 819. (6) This court having acquired jurisdiction of this cause will not relax its grasp upon the res until it has done complete justice either by entering the decree that the trial court should have entered or by directing the trial court what decree to enter. Munford v. Sheldon, 9 S.W.2d 907. (7) Defendants are not entitled to a reversal in an equity case in order to have an opportunity to offer evidence. Munford v. Sheldon, 9 S.W.2d 907.

William M. Van Cleve and Waldo Edwards for defendants in error.

(1) The burden of proving the fraud alleged in plaintiff's petition and of making out his case by clear and convincing evidence was upon the plaintiff. Farmers & Merchants Bank of Festus v. Funk, 92 S.W.2d 587; Stahlhuth v. Nagle, 229 Mo. 570; Jones v. Nichols, 280 Mo. 653; Wall v. Beedy, 161 Mo. 625; Moss v. Fitch, 212 Mo. 484; Moberly v. Watson, 102 S.W.2d 886. (a) Fraud may be inferred from facts and circumstances, but it is never presumed without evidence or against evidence. Gittings v. Jeffords, 292 Mo. 678; Moberly v. Watson, 102 S.W.2d 886. (b) Fraud may be deduced from the circumstances of the case and acts of parties, yet mere suspicion is not sufficient, nor can it be presumed, but must be established by evidence as an affirmative fact. Bank v. Worthington, 145 Mo. 91; Gill v. Newhouse, 178 S.W. 495; Black v. Epstein, 221 Mo. 286; Moberly v. Watson, 102 S.W.2d 886. (2) The burden of proof was upon the plaintiff to prove that the deed of trust was a voluntary conveyance and without consideration, as alleged in his petition. Farmers & Merchants Bank v. Funk, 92 S.W.2d 587; Shelly v. Booth, 73 Mo. 77; Sexton v. Anderson, 95 Mo. 379; Dearing & Co. v. Collins & Son, 38 Mo.App. 79; State ex rel. v. Mason, 112 Mo. 380; Alberger v. White, 117 Mo. 363; Smit v. Straus Saddlery Co., 64 Mo.App. 120; Boot & Shoe Co. v. Bain, 46 Mo.App. 591; Morgan v. Wood, 38 Mo.App. 264; Bump on Fraudulent Conveyances, secs. 167, 168, 170, 171, 611; Albert v. Bessel, 88 Mo. 152; Nichols v. Ellis, 98 Mo. 344; Milling Co. v. Burns, 152 Mo. 376; Crothers v. Busch, 153 Mo. 606; State ex rel. v. Hope, 120 Mo. 428; Pettingill v. Jones, 30 Mo.App. 283; Holmes v. Corbin, 34 Mo.App. 396. (a) Where a transaction is as compatible with honesty as dishonesty, the law must presume it to be an honest transaction. Ulrich v. Pierce, 233 S.W. 401; Bank v. Worthington, 145 Mo. 91; Moberly v. Watson, 102 S.W.2d 889. (3) The conveyance of the land by the deed of trust to secure the creditors named therein as beneficiaries was a preference of those three creditors, and plaintiff, to recover, had to show (a) that J. S. Franks made the conveyance with fraudulent intent; (b) that the beneficiaries knew of such fraudulent intent and participated therein; (c) that J. S. Franks did not owe the beneficiaries named in the deed of trust; (d) that they accepted the deed of trust for the purpose of assisting J. S. Franks to defraud his creditors. Emlet v. Gillis, 63 S.W.2d 12; Wall v. Beedy, 161 Mo. 625; Vaughn v. Green, 29 S.W.2d 56; Peoples Bank v. Jones, 93 S.W.2d 903. (4) J. S. Franks had the legal right to secure the note to the Elmer Exchange Bank, the note to his brother and the note to his son, in preference to his other debts. Brennecke v. Riemann, 102 S.W.2d 877; Farmers Bank v. Funk, 92 S.W.2d 587; Friedel v. Bailey, 329 Mo. 22; Gust v. Happe, 201 Mo. 293; Pew v. Price, 251 Mo. 614. (5) There was no showing in this case of how much of this land J. S. Franks occupied as a homestead, and, as a homestead is exempt, there could be no fraud in its conveyance. Stam v. Smith, 183 Mo. 464; Spratt v. Early, 169 Mo. 257; May v. Gibler, 319 Mo. 672; Brennecke v. Riemann, 102 S.W.2d 877.

Bradley, C. Ferguson and Hyde, CC., concur.

OPINION

BRADLEY

This cause has recently been reassigned. We refer to the parties as plaintiff and defendants as styled below. The object and purpose of the cause is to set aside, as in fraud of creditors, a deed of trust on about 379 acres of land in Macon County, and executed on April 10, 1934, by defendants J. S. Franks, and his wife, Laura. Defendants, George A. Franks, Elmer Exchange Bank, and Ezra P. Franks are the beneficiaries, and defendant Tansil is the trustee. The chancellor below found for defendants; dismissed plaintiff's bill, and plaintiff brought the cause here by writ of error.

Plaintiff alleged, among other things, that J. S. Franks was not indebted to any of the beneficiaries, and that the deed of trust "was voluntary and without consideration and was made by the said J. S. Franks and accepted by said defendants, George A. Franks, Elmer Exchange Bank, a corporation, and Ezra P. Franks, to assist the said J. S. Franks in placing his property out of the reach of his creditors and particularly out of the reach of this plaintiff, and to aid and assist the said J. S. Franks in an effort and scheme to hinder, delay and defraud his creditors and particularly this plaintiff, and that the purported conveyance by the said J. S. Franks rendered the said J. S. Franks wholly insolvent."

Defendant Tansil, in his answer, admitted that he was the trustee named in the deed of trust. The other defendants filed joint answer alleging, in effect, that the notes secured by the deed of trust were bona fide obligations of J. S. Franks, and that 20 acres of the land described in the deed of trust was owned by defendant, Laura Franks, and denied that the execution of the deed of trust rendered J. S. Franks insolvent.

The record shows that, at the time the deed of trust was executed, J. S. Franks owed plaintiff a $ 1500 note, plus interest, dated January 1, 1926, due in two years, and executed by Vella and Minor King, and J. S. Franks. (The Kings are daughter and son in law of J. S. Franks. They borrowed $ 1500 from plaintiff and J. S. Franks signed the note as surety for them.) Also, J. S. Franks owed plaintiff a $ 400 note, plus interest, dated February 27, 1929, due one year, and executed by defendants Ezra P. Franks and J. S. Franks (Ezra is the son of defendants, J. S. and Laura Franks, and J. S. signed as surety for his son).

Plaintiff on November 9, 1934, obtained judgments on his notes, which judgments amounted to $ 2730, and thereafter he filed this cause. In addition to owing plaintiff, as above stated, when the deed of trust was executed, J. S. Franks owed his brother, defendant George A. Franks, a beneficiary in the deed of trust, $ 1094.22, balance due on a note dated March 4, 1930, due one year; defendant Elmer Exchange Bank, a beneficiary, $ 1464.40, balance due on a note dated November 3, 1930, and due on demand; the Farmers & Merchants Bank of Ethel about $ 1200 on two past due notes; and there is evidence that J. S. Franks owed Jack Patton $ 600. The record clearly shows that, at the time of the execution of the deed of trust, J. S. Franks owed past due debts (excluding the Ezra P. Franks note, mentioned presently) amounting to $ 6488.62. The deed of trust, in addition to securing the notes held by defendants, George A. Franks...