State Bank of Indiana v. Backus

• Decision Date: 26 May 1903
• Citation: 160 Ind. 682,67 N.E. 512
• Parties: STATE BANK OF INDIANA v. BACKUS et al.
• Court: Indiana Supreme Court

160 Ind. 682

67 N.E. 512

STATE BANK OF INDIANA

v.BACKUS et al.

Supreme Court of Indiana.

May 26, 1903.

Appeal from Superior Court, Marion County; Vinson Carter, Judge.

Action by the State Bank of Indiana against Victor M. Backus and wife and others. From a judgment of the Appellate Court (66 N. E. 475) affirming a decree giving to the wife priority of lien, plaintiff appeals. Transferred from Appellate Court under specification 3, § 10, Act March 12, 1901 (Acts 1901, pp. 565, 567, codified as Burns' Rev. St. 1901, § 1337j). Affirmed.

John W. Claypool and Daniel Wait Howe, for appellant. Pierre Gray, Wilson & Townley, and F. C. Cutter, for appellees.

DOWLING, J.

This suit was brought by the appellant to foreclose a mortgage upon real estate in the city of Indianapolis; also to set aside as fraudulent a certain deed and mortgage upon the same property executed by the appellee Backus to his wife, and to subject the premises to four judgments in favor of the bank and against Backus. The appellees Backus and wife each filed an answer in denial. The Rand Drill Company, another appellee, filed an answer setting up a judgment against Backus held by it. By a supplemental complaint, the bank demanded the recovery of certain taxes paid by it after the commencement of the suit; making the appellee Robinson a defendant, and requiring him to answer as to his interest. Robinson filed a disclaimer, and the other defendants separately answered, denying the matters stated in the supplemental complaint. At the request of the parties, the court made a special finding of facts, with its conclusions of law thereon. The appellant excepted to the third and fourth conclusions, and the court rendered judgment upon the finding. Motions by the appellant to modify the judgment were made and overruled. These decisions are assigned for error.

The material facts found by the court were: That Backus owned certain real estate in the city of Indianapolis. That on February 4, 1894, he borrowed $4,000 from one McCarty, for which he executed his two notes, for $2,000 each, with interest coupons attached, and secured the same by a mortgage on the real estate described in the complaint. That the mortgage was duly recorded. That the time for the payment of said notes was afterwards extended by agreement until February 2, 1898, and that on April 24, 1897, McCarty sold and assigned the two notes, with the unpaid interest coupons, to the bank. That afterwards, as the result of certain dealings between Backus and his wife, which need not be set out in detail, in which she advanced and loaned moneys to him, or for his use, Backus became justly indebted to his wife to the amount of $8,656.39, which indebtedness Backus agreed, in writing, with his wife, to secure or pay. That in February, 1895, Mrs. Backus went to San Antonio, Tex., where her husband was engaged in business with other persons in the construction of a public sewer, and procured from Backus a warranty deed to the said premises, which recited a consideration of $24,000, but the actual consideration of which was money, advanced and to be advanced by her for the construction of a house on said premises, a claim for money loaned by her to her husband in the years 1882, 1883, and 1886, and certain notes of her husband, to the amount of $10,000, executed by him to the Shaw Carriage Company, purchased by Mrs. Backus from the receiver of that company, and for which she paid not less than $100, nor more than $300. That the said deed was never recorded, but it still held by Mrs. Backus. That said deed, although absolute in form, was in fact intended to secure said indebtedness. That about April 3, 1896, Mrs. Backus was advised by counsel that the said instrument was, in legal effect, a mortgage; that it was misleading, on account of its form; and that she ought to obtain from her husband a mortgage securing the amount claimed to be owing to her by her husband. That on April 3, 1896, Backus executed to his wife a note for $10,750, and secured the payment of the same by a mortgage upon the real estate in controversy in this suit, which mortgage was on April 17, 1896, duly recorded in the office of the recorder of Marion county, Ind. That the consideration of the said note was $8,250 in money loaned or advanced by Mrs. Backus to her husband, and before that used for the purpose of building a house on said premises, and the sum of $2,500 in money claimed to have been loaned by her to him in 1882, 1883, and 1886. That in January, 1895, Backus entered into a partnership with James W. Wilding, Luther A. Marshall, and William R. Hines, the purpose of which firm was the construction of a public sewer in the city of San Antonio, Tex. That on April 30, 1895, said firm borrowed from the appellant $10,000. On the same day said appellant bought two notes, each for $2,500, executed by said firm. On the same day said firm borrowed from the appellant the further sum of $5,000. And on June 4, 1895, a further loan of $5,000 was made by the appellant to said firm. That all these notes, except the two purchased by the appellant, were indorsed by each member of the said firm, and were renewed from time to time. That none of said notes was paid. That said firm, after prosecuting the work on said sewer at San Antonio for a short time, became insolvent. That suits were brought by the appellant on the said several notes in the Marion superior court, of Marion county, Ind., and that judgments were recovered by the appellant against Backus, Hines, and Wilding as follows: July 1, 1896, a judgment for $6,545.91; July 1, 1896, a judgment for $5,424.78; September 19, 1896, a judgment for $10,759.94; August 21, 1896, a judgment for $2,781.76-all of which judgments are due and unpaid. That on April 20, 1895, when the appellant made its first loan of $10,000 to the said firm, it inquired of the said Victor M. Backus as to the real estate then owned by him, and that he represented to the appellant that he owned the real estate in controversy in this suit, and that he owed nothing upon it, except the said McCarty mortgage debt of $4,000 and interest. That after making said loan of $10,000 said appellant caused an examination of the records in the office of the recorder and treasurer of Marion county to be made, and ascertained that said real estate was in the name of the said Victor M. Backus, and did make said loan of $10,000, and all of the subsequent loans and renewals heretofore mentioned, relying on the truth of the representations of said Victor M. Backus, and believing that he was the owner of said real estate described in the complaint herein, and that there were no liens or incumbrances of any kind against the same, other than the said McCarty mortgage. That in the years 1892 and 1893 the appellee Victor M. Backus held the office of treasurer of Marion county, Ind., from which office he realized profits during said term amounting to $40,000. That at the time of the execution of the deed for the property in controversy by Victor M. Backus to his wife, Mary J. Backus, on May 23, 1895, the said Victor M. Backus was the owner of real estate, including the property in controversy, of the value of $40,000. That he also had personal property of the value of $4,000. That said real estate was incumbered at the time to the amount of $10,000. That the other indebtedness of the said Victor M. Backus, including the indebtedness to his wife, amounted to $12,000. That the total value of the property owned by Victor M. Backus at said date was $44,000. That the total amount of his indebtedness at said date was $22,000. That at said date the defendant Marshall was insolvent. That the said defendants Wilding and Hines were both solvent, and were worth, between them, at least the sum of $20,000. That at said time the indebtedness of said firm was $45,000. That the assets of said firm at said time were at least $15,000. That at the time of the execution and delivery of said deed of May 23, 1895, by Backus to his wife, she knew that the business in which his firm was engaged was in some degree a hazardous one, in which large profits might be made, and large losses sustained. That she also knew that said firm was then indebted to the appellant for money loaned by it to said firm in a sum between $10,000 and $15,000, and that she also knew that the recording of said deed would impair the credit of her husband, and for that reason she withheld it from record. That at said time the appellant had no knowledge or notice of the agreement in writing between Backus and his wife, by which he agreed to secure or satisfy her claim against him, nor of the alleged indebtedness of the said Backus to his wife, and that it did not obtain knowledge of such indebtedness until after the recording of the mortgage executed by Backus to his wife April 3, 1896, which recording took place April 17, 1896. That between the 23d day of May, 1895, and the 3d day of April, 1896, the appellee Victor M. Backus sold and conveyed a large proportion of his real estate, and on said 3d day of April, 1896, he was the owner of real estate, including the property in controversy in this action, of the value of $28,075. That his individual indebtedness, including the debt to his wife, amounted to $16,956; leaving a surplus of assets over individual indebtedness at that date of $11,119, but that by reason of his liabilities as a member of said firm of Wilding, Marshall, Backus & Hines, he was then insolvent. That on May 23, 1895, the true amount of indebtedness from Backus to his wife was as follows, to wit: For money paid on construction of the house on the property in controversy, including the sums which she had promised to furnish and did furnish within the next 60 days thereafter, $8,156.39; money previously loaned to the said Victor M. Backus, $2,500; total, $10,656.39. From which sums should be deducted the money paid by Victor M. Backus upon the purchase price...