Simpson v. Twin Falls Feeder Co.

• Decision Date: 15 October 1931
• Docket Number: 5741
• Citation: 51 Idaho 193,3 P.2d 1100
• Parties: CHAS.E. SIMPSON, Respondent, v. TWIN FALLS FEEDER COMPANY et al., Appellants
• Court: Idaho Supreme Court

3 P.2d 1100

51 Idaho 193

CHAS.E. SIMPSON, Respondent, v. TWIN FALLS FEEDER COMPANY et al., Appellants

No. 5741

Supreme Court of Idaho

October 15, 1931

FRAUDULENT CONVEYANCES-INJURY NOT SHOWN.

1. Conveyance, to be fraudulent, must divest debtor of something that might be subjected to creditor's claim.

2. Conveyance of land expressly subject to outstanding contract on which default in payment had occurred held not fraudulent or void as against judgment creditor of assignee of vendee under such contract.

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. Wm. A. Babcock, Judge.

Action to have a deed set aside as in fraud of creditors. Judgment for plaintiff. Reversed and remanded.

Reversed and remanded with instructions. Costs to appellant.

Walters Parry & Thoman and J. R. Keenan, for Appellants.

More than a mere suspicion of fraud is necessary; it cannot be left wholly to conjecture, but must be proved. (12 Cal. Jur 1062.)

The respondent cannot claim that the transfer by Matt Schmidt of property owned by Matt Schmidt is a fraudulent conveyance as to respondent, since Matt Schmidt is not his debtor. (27 C. J. 418, 438; 12 Cal. Jur. 976; Day v. Rose, 181 Ky. 361, 205 S.W. 325; Louisville City Nat. Bank v. Wooldridge, 116 Ky. 641, 76 S.W. 542; Burns v. Bangert, 92 Mo. 167, 4 S.W. 677.)

J. H. Barnes, for Respondent.

In cases involving conveyances claimed to have been made to hinder, delay or defraud creditors, the rule that fraud is never to be presumed is overcome by proof that the transaction is clothed with any of the recognized "badges of fraud." (27 C. J. 715, and cases cited; 20 Cyc. 752.)

Fraud may be presumed from the effect which the transaction has or the collection or satisfaction of the creditor's claim.

Where a conveyance is claimed to be in fraud of creditors, proof that the transaction was for the purpose of hindering, delaying or defrauding creditors is all that is necessary; here the cause is proved by proving the effect, as the law then steps in and implies the fraud. (20 Cyc. 462, 463, and cases cited, 464, note 3, and cases cited; California Consol. Min. Co. v. Manley, 10 Idaho 786, 81 P. 50; Feltham v. Blunck, 34 Idaho 1, 7, 198 P. 763.)

LEE, C. J. Givens, Varian and McNaughton, JJ., concur.

OPINION

LEE, C. J.

On March 2, 1920, one, Wolfgang, and wife, the owners of the S. 1/2 of the SW. 1/4 of Sec. 23, T. 10 S., R. 17 E. B. M. in Twin Falls county, contracted to sell the whole thereof less some 4.1 acres to Kingsbury and Hicks. On May 11, 1923, Kingsbury and Hicks contracted to sell 23 acres of this portion to one, Jack France. On May 11, 1923, France and wife assigned their contract with Kingsbury and Hicks to the defendant, Twin Falls Feeder Company, an Idaho corporation: none of these contracts were put on record by the immediate parties. On December 29, 1925, Kingsbury and Hicks contracted to sell to Matt Schmidt all their interest in the original tract, subject to their contract with France for said 23 acres, which said contract they also by the same instrument assigned to Schmidt. Schmidt, therein agreed to pay off the original owner and vendor, Wolfgang. Schmidt paid Wolfgang, and in December, 1927, received from the latter and wife a warranty deed to the property subject to a prior $ 6,000 mortgage which Schmidt undertook and agreed to pay. The defendant Feeder Company, after having paid a substantial sum on the France contract for the 23 acres, defaulted in a $ 2,000 balance of the promised purchase price. Defendant and appellant, Central Realty Company, an Idaho corporation, paid this sum to Schmidt. Schmidt thereafter, on February 19, 1929, for a recited consideration of $ 6,000 deeded the property to said appellant. The conveyance was expressly declared to be subject to the Kingsbury-Hicks-France contract. This deed was recorded by the Realty Company March 8, 1929.

Charles E. Simpson, plaintiff and respondent, a creditor of defendant Feeder Company, having on March 22, 1930, and April 17, 1930, respectively recovered judgments against said defendant company, caused execution to be issued thereon. In his returns, the sheriff stated that he had been unable to find any property of the defendant within his county. Thereafter, according to his brief, respondent brought a suit in equity to have the deed set aside as in fraud of this creditor," expressly referring to it as the warranty deed from Matt Schmidt." Stripped by a motion to strike, the complaint substantially alleged that one, Jack France, had acquired "an interest" in the 80 acres hereinbefore described, with the exception of two delimited, small parcels; that defendant Feeder Company paid to the said Jack France "a large sum of money" for "his interest" in the property; that, prior to the recording of the Matt Schmidt deed in March, 1929, nothing had been placed of record to show the interest of the Feeder Company; that defendant, Central Realty Company, some of whose directors were also directors of said Feeder Company, was organized "for the sole purpose of taking over and holding" said property, "thus preventing the enforcement of the just debts of defendant, Twin Falls Feeder Company, being made against said property; that said transaction was designed and carried out for the purpose of hindering, delaying and defrauding creditors of defendant, Twin Falls Feeder Company, in collecting their just debts and liens against the property of said corporation; that there is no other property known to plaintiff nor is there any of record in Twin Falls County, Idaho, against which plaintiff can have execution issued to satisfy his said judgments"; that the defendant, Central Realty Company, "is not the owner of said described property but took the property subject to the rights of the said Jack France in said property, which said rights had by the said Jack France been sold and conveyed to the defendant, Twin Falls Feeder Company, and that the said Twin Falls Feeder Company now has 'an interest' in said property and is in the actual use and enjoyment of said real property and of the live stock feeding equipment located thereon, and is now the beneficial owner of said property." Respondent's judgments and futile levies were also plead. The main prayer for relief was "That a decree issue out of this Court, directing the Sheriff of Twin Falls County, Idaho, to levy upon and sell as the property of defendant Twin Falls Feeder Company, the real property heretofore described and enjoining the defendant, Central Realty Company, from in any manner interfering with the execution of said Writ and the satisfaction of said judgments." Appellant alone answered; and, upon issue joined, trial was had, a jury returning answers to submitted interrogatories. Adopting those of the jury, the court made the following findings:

"1. That the defendant Central Realty Company, prior to the completion of the transaction by which title to the property in question passed in its hands, knew that the plaintiff Charles E. Simpson, had a claim against the defendant Twin Falls Feeder Company.

"2. That the defendant Central Realty Company paid the taxes against said property in January, 1929.

"3. That the defendant Central Realty Company paid to Matt Schmidt the final $ 2000.00 and interest due him under the Kingsbury and Hicks contract of sale to Jack France.

"4. That the...