The State Bank of Chase v. Chatten

• Decision Date: 07 May 1904
• Docket Number: 13,549
• Citation: 77 P. 96,69 Kan. 435
• Parties: THE STATE BANK OF CHASE, ETC., v. FANNIE CHATTEN
• Court: Kansas Supreme Court

77 P. 96

69 Kan. 435

THE STATE BANK OF CHASE, ETC., v. FANNIE CHATTEN

No. 13,549

Supreme Court of Kansas

May 7, 1904

Decided January, 1904.

Error from Rice district court; ANSEL R. CLARK, judge. Opinion filed June 11, 1904. Affirmed.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. FRAUDULENT CONVEYANCE -- Burden of Proof upon Subsequent Creditor. A creditor whose claim originated after the making of a conveyance which he attacks as fraudulent has the burden of proving actual fraud before he can derive a benefit from section 7881 of the General Statutes of 1901, which provides that a trust shall result in favor of creditors when a conveyance is fraudulently made to one person upon a consideration paid by another.

2. FRAUDULENT CONVEYANCE -- Subsequent Creditor, with Notice, Estopped. A subsequent creditor who, at the time he extended credit, knew that a deed has been made to a third person upon payment of the consideration by his debtor cannot attack such conveyance as fraudulent.

3. FRAUDULENT CONVEYANCE -- Facts Stated, and Bank Held a "Subsequent Creditor." A debtor paid the consideration for a deed of real estate made to his wife. Afterward a creditor sued him and caused garnishment process to be issued and served. Thereupon, the defendant disputing the amount demanded, an adjustment was had and an agreement made to settle the claim for a less amount; payments were to be made at intervals in the future, for which certain security was to be given, and the garnishment action was to be dismissed. Notes for the payments were given and accepted and the action was dismissed, in pursuance of the agreement. The new notes not being paid at maturity they were placed in judgment, which the plaintiff sought to have declared a charge upon the real estate. Held, that he should have been considered a "subsequent creditor." (Lanphear v. Ketcham, 53 Kan. 799, 37 P. 119.)

Adams & Adams, Samuel Jones, and C. F. Foley, for plaintiff in error.

C. W Burch, and O. E. Hopkins, for defendant in error.

MASON J. All the Justices concurring.

OPINION

MASON, J.:

The State Bank of Chase brought an action against Fannie Chatten, seeking to subject real estate standing in her name to the payment of a judgment against her husband, E. L. Chatten. The bank was denied relief, and brings this proceeding to review the judgment.

The facts found by the trial court, so far as necessary to exhibit the disputed questions of law, were as follows: In 1891 E. L. Chatten owed the bank $ 5196, due not later than June of that year. On January 11, 1892, the real estate here involved was bought at a sheriff's sale by E. L. Chatten in the name of his wife, he paying the consideration, $ 3375, by a check drawn on another bank. Soon after this the cashier of the State Bank of Chase had information that such a check had been given by Chatten for the land, and expressed surprise that he had that amount with which to pay for it. A sheriff's deed naming "Mrs. E. L. Chatten" as grantee was executed on March 8, 1892, and recorded on May 27, 1892. In June, 1893, Chatten's debt to the bank was renewed by the giving of several notes, including one due August 15, 1893, for $ 696.32, and two due September 15, 1893, for $ 900 and $984, respectively. As early as March, 1894, the bank's cashier had actual notice that Chatten had bought the land in the name of his wife, and that the deed had been taken in her name. On May 23, 1894, the bank sued on the notes for $ 696.32 and $ 900, and caused garnishment process to be served on two other banks. On the next day a written agreement was entered into between the bank and Chatten. It recited that the bank held the three notes just described, which embraced all its demands against Chatten, and that Chatten disputed the correctness of the amount claimed. It then provided for an adjustment of all such claims and disputes and the settlement of the indebtedness in consideration of $ 2000, to be paid at various times in the future, for a part of which certain security was to be given, and that the garnishment action should be dismissed. Notes partially secured were given at once for the agreed payments, and the action was dismissed in pursuance of the agreement September 4, 1894. At the time of this settlement Chatten was insolvent, and the bank knew of the fact. His financial condition before this was not shown.

On December 4, 1894, the bank sued Chatten upon the new notes, and upon obtaining judgment began the present action to subject the real estate in controversy to its payment. It was not found that the conveyance was fraudulent, and there was a general finding for the defendant. Plaintiff in error claims that under these circumstances it was entitled to recover by virtue of sections 7880 and 7881 of the General Statutes of 1901, reading as follows:

"When a conveyance for a valuable consideration is made to one person and the consideration therefor paid by another, no use or trust shall result in favor of the latter; but the title shall vest in the former, subject to the provisions of the next two sections.

"Every such conveyance shall be presumed fraudulent as against the creditors of the person paying the consideration therefor; and where a fraudulent intent is not disproved, a trust shall in all cases result in favor of prior creditors to the extent of their just demands, and also in favor of subsequent creditors if there be sufficient evidence of fraudulent intent."

These sections are, in effect, the same as those adopted in several other states, from which they differ only in being somewhat more specific, the language employed having the evident purpose to cover by express declaration matters elsewhere left to implication. (For references to such statutes, and decisions under them, see 15 A. & E. Encycl. of L., 2d ed., 1166.) The purpose of the first section quoted is to prevent the trust that would otherwise arise in favor of one paying the consideration upon the conveyance of land to another. In the absence of the statute, property so conveyed would, in consequence of such trust, be liable...