Sharp v. Fitzhugh

• Decision Date: 27 May 1905
• Citation: 88 S.W. 929,75 Ark. 562
• Parties: SHARP v. FITZHUGH
• Court: Arkansas Supreme Court

88 S.W. 929

75 Ark. 562

SHARP v. FITZHUGH

Supreme Court of Arkansas

May 27, 1905

Appeal from Crawford Chancery Court, J. VIRGIL BOURLAND, Chancellor.

Affirmed.

STATEMENT BY THE COURT.

This is a suit brought in the chancery court of Crawford County by H L. Fitzhugh, as trustee of the estate of John Sharp, a bankrupt, against said John Sharp and his wife, Ella Sharp and others, to subject certain property, real and personal held in the name of Ella Sharp, to the payment of the debts of said bankrupt.

John Sharp, prior to the year 1897, failed in business, and was indebted to creditors in large sums, which he did not pay. In April 29, 1902, he filed his petition in bankruptcy, and was duly adjudged a bankrupt, and appellee, H. L. Fitzhugh, was by the creditors elected as trustee of the estate of the bankrupt. This suit was brought by said trustee for the benefit of the creditors of the estate who had proved their claims, by direction of the bankruptcy court. It is alleged that John Sharp, while insolvent and with fraudulent intent to cheat, hinder and delay his creditors, purchased in the name of his wife, Ella Sharp, the following land, viz eighty acres of land, bought from the Union Central Life Insurance Company, designated in the proof as the "homestead tract;" forty acres, bought from H. H Hilton, trustee, for the sum of $ 200, known as the "Hilton forty;" one lot in town of Alma, bought from Hillyer and others for the sum of $ 200; another lot in the town of Alma, bought from Sam B. Locke, guardian, for the sum of $ 300; another lot in the town of Alma, bought from Jones and others for the sum of $ 300, and 782 acres, known as the "G. N. Wright farm," bought from the Union Central Life Insurance Company for the sum of $ 12,000, of which the sum of $ 1,000 was paid cash, the remainder on credit of ten years, with six per cent. interest, payable annually. It is further alleged that said bankrupt is the owner of the following personal property held in his wife's name, towit: $ 3,500 invested as partners in a mercantile business conducted in the town of Alma with defendant, Frank Wright, under the firm name of Wright & Co.; $ 750 invested in the capital stock of a sawmill company in Oklahoma Territory, and a note of defendant C. C. Montague for the sum of $ 250, executed to Ella Sharp in settlement of the purchase price of a pair of mules and a wagon and lot of corn sold to Montague. That said bankrupt was and is the real owner of said property, and placed the same in the name of his wife, the said Ella Sharp, for the purpose of defrauding his creditors.

The defendants, John Sharp and Ella Sharp, filed their joint answer, denying that any of the property described was owned by John Sharp, or that title was taken in the name of Ella Sharp for the purpose of defrauding his creditors, and alleging that all of it was the separate property of Ella Sharp, and was bought with her money, except the homestead eighty, which was conveyed to her by the Union Central Life Insurance Company in consideration of her joining her husband in a conveyance to said company of her dower in the equity of redemption of a farm, known as the "Sharp place," upon which the company held a mortgage.

Mrs. Sharp also filed a separate supplemental answer, claiming the homestead eighty and the Hilton, forty as her homestead. The chancellor, in the final decree, dismissed the complaint as to this property, and declared the same to be her homestead, and no appeal from that part of the decree was taken by the plaintiff.

The Union Central Life Insurance Company and C. C. Montague were made defendants, and served with process, but failed to appear.

The court rendered a decree in favor of the plaintiff, except as to the 120 acres held to be the homestead of the defendants, and cancelled the legal title to Mrs. Sharp thereto, and declared the same to be assets of said bankrupt estate in the hands of the trustee, subject, however, to the lien of the Union Central Life Insurance Company on the Wright farm for $ 11,000, balance of the purchase price.

The defendants John Sharp and Ella Sharp appealed to this court; John Sharp died pending the appeal, and upon suggestion of his death the cause as to him was abated.

Decree affirmed.

J. E. London and W. S. McCain, for appellant.

No part of the debtor's labor should go to his creditors. 55 S.W. 441; 23 Wis. 301; 33 Vt. 459; 25 Mich. 200; 40 S.W. 382; 67 Ark. 110. An insolvent may take property subject to execution, and invest it into a homestead that is exempt. Thompson, Homestead, § 305; 39 Ark. 571. An interest in land by merely paying off purchase money notes cannot be acquired. 29 Ark. 612; 30 Ark. 66; 40 Ark. 62. Where a husband uses his wife's money, he may afterward invest a like amount in her name. 34 S.W. 652; 52 Ark. 234; 81 Wis. 151; 39 Minn. 242; 28 Ark. 351; 21 Ark. 268; 58 Ark. 20; 34 N.Y. 297; 55 Pa.St. 437; 54 N.J.Eq. 702; 37 W.Va. 242. The appellee was guilty of laches. 34 Ark. 467; 55 Ark. 94; 168 U.S. 696.

Jesse Turner, Sam R. Chew, Henry L. Fitzhugh and Ben L. Moore, for appellee.

Any conveyance made by Sharp, who was insolvent, is void as to creditors. 50 Ark. 42; 48 Ark. 419; 46 Ark. 542; 45 Ark. 520; 10 Ark. 225; 22 Ark. 145; 23 Ark. 494; 32 Ark. 251, 465; 52 Ark. 493; 20 S.W. 807; 13 S.W. 478; 43 F. 702; 71 Ark. 611; 83 S.W. 913. Both good faith and valuable consideration are necessary to make the conveyances valid. Bisp. Eq. 305. The burden was upon Mrs. Sharp. 46 Ark. 542; 94 U.S. 580; 21 Pa.St. 355; 14 Am. & Eng. Enc. 489; 68 Ark. 166; 29 W.Va. 441; 6 Am. St. 664. Fuller and clearer evidence is required than if the parties were strangers. 39 F. 665; 84 Ala. 271; 106 Ala. 411; 37 Fla. 78; 35 W.Va. 754. The transactions will be presumed fraudulent. 83 S.W. 913; 45 Ark. 520; Wait, Fraud. Con. 300-308; 94 U.S. 580. A husband cannot devote his time and skill to his wife's property without making the proceeds subject to the payment of his debts. 26 L. R. A. 537; 94 Am. Dec. 478; 100 Am. Dec. 260; 36 Ark. 525; Pom. Eq. Jur. § 1103; 68 Md. 540; 50 Ark. 42; 19 Oh. St. 509; Kirby's Dig. § 5226. Where there is fraud, time will not run against the fraud until after its discovery. 61 Ark. 527. If Mrs. Sharp had any claim at all, she could only subject the land to the payment of her claim as a creditor. 46 Ark. 542; Bisp. Eq. § 243.

OPINION

MCCULLOCH, J., (after stating the facts.)

1. Appellants raise here, for the first time, a question as to the power of the trustee to maintain this suit, urging that he is empowered to sue to set aside only such conveyances in fraud of creditors as were made within four months next before the adjudication of bankruptcy. It is doubted that this question, though it goes to the power of the trustee to maintain the suit, can be raised here in the case, when no such objection was made below, either by demurrer or answer. It seems clear, however, that under subdivision e, section 70, of the Bankruptcy Act of 1898, the trustee is clothed with plenary power to sue to avoid any transfer made by the bankrupt of his property which any creditor may have avoided, whether made within four months prior to the adjudication of bankruptcy or not. Collier on Bankruptcy (4th Ed.), p. 523; Brandenburg on Bankruptcy (3d Ed.), p. 438; In re Gray, 3 Am. B.R. 647, 47 A.D. 554, 62 N.Y.S. 618.

2. It appears from, the evidence in this case that in the beginning of the year 1897 appellants, John Sharp and his wife, Mrs. Ella Sharp, were practically without any property except the homestead, eighty acres of which the Union Central Life Insurance Company had, the preceding year, bargained to Mrs. Sharp, and which that company conveyed to her the next year. They were then occupying this tract as a homestead, and on January 29, 1897, bought the Hilton forty-acre tract, adjoining the homestead. The large farm formerly owned by John Sharp had been taken under a mortgage held by the insurance company.

The G H. Wright farm, which is in controversy, it appears, was formerly the property of Mrs. Sharp's father, and was then owned by the Union Central Life Insurance Company. During that year Mrs. Sharp obtained a judgment against said company for recovery of about $ 1,000 upon some liability, the character of which is not disclosed in this record, but which is conceded to be disconnected from the subject-matter of this controversy. She realized out of this judgment only the sum of $ 465, the remainder going to the attorney who conducted that litigation for her, as contingent fee. In December of that year (1897) the insurance company bargained the Wright farm to Mrs. Sharp for the sum of $ 12,000, of which $ 1,000 was paid cash and the remaining sum of $ 11,000 was agreed to be paid in ten years from date with interest at the rate of six per cent. per annum, payable annually. The interest has been paid regularly; the principal is not due, and remains unpaid. It is shown by the testimony of Mrs. Sharp and of the agent for the insurance company, who is now one of the attorneys for appellant in this case, that this bargain was made personally by Mrs. Sharp and the agent, and that she made the payment of $ 1,000 by satisfaction of her part ($ 465) of said judgment, and the remainder, $ 535, in cash. John Sharp and Mrs. Sharp testify that the $ 535 paid in cash were realized from the crops raised on the homestead eighty and the Hilton forty during the year 1897, which belonged to Mrs. Sharp, and this is uncontradicted, save as to some contradictory evidence as to the amount of crops raised by the tenants on the place. Notwithstanding this contradiction, we think it satisfactorily appears by the proof that the payment was made with funds realized from crops raised on that place, which...