Travelers Indem. Co. v. Cormaney

• Decision Date: 16 November 1965
• Docket Number: No. 51834,51834
• Parties: The TRAVELERS INDEMNITY COMPANY, Appellee, v. Melvin E. CORMANEY et ux., Appellants.
• Court: Iowa Supreme Court

Page 50

138 N.W.2d 50

258 Iowa 237

The TRAVELERS INDEMNITY COMPANY, Appellee, v. Melvin E. CORMANEY et ux., Appellants.

No. 51834.

Supreme Court of Iowa.

Nov. 16, 1965.

West, McGrane & Haugan, Des Moines, for appellants.

Bannister, Carpenter, Ahlers & Cooney, Des Moines, for appellee.

RAWLINGS, Justice.

In action by plaintiff subrogee of former employer, trial court entered decree in equity holding former defendant employee had embezzled funds of former employer, that subsequent transfer of all properties of former employee to informed defendant spouse by means of property settlement agreement, made part of divorce decree, and placing one tract of land in name of daughter of defendants, constituted fraudulent conveyances, granted judgment to plaintiff against defendant former employee, impressed lien accordingly upon all realty involved, and ordered excution to issue.

Appealing defendants, Melvin E. and Alma L. Cormaney, were married in 1942. They had one child, a daughter, hereafter referred to as LaNonne. In 1946 Melvin became a grain elevator manager at Cumming, Iowa, for Cargill, Inc. His starting salary was $160 a month. Commencing in 1955 he received 'provisional salary checks' ranging from $1100 to $1800 each year. He had full power to buy, sell, and store grains of all kinds, and to issue checks in the name of the employer.

Alma first claimed about $4000 in government bonds held by the Cormaneys in 1946, which had been acquired by the saving of Melvin's military service allotments, were used as a start in acquiring real estate holdings. Later she admitted use of some of these funds for the purchase of livestock. In any event, by March of 1960, these real estate holdings, acquired subsequent to 1950, were appraised and given a total reasonable value of $62,662, subject only to a $4800 mortgage encumbrance. In addition Melvin had acquired, paid for, and had on hand a $10,000 truck, two cars, some insurance, household goods, some accumulated cash, and grains either in the field, stored, or sealed. Incidentally he had also purchased an automobile for a 'girl friend'. Some of the real estate was held by Melvin individually and some by Melvin and Alma as joint tenants. The deed to one 20 acre tract disclosed LaNonne to be the questionable grantee. A total of about 340 acres is involved.

The Cormaneys separated in November of 1959. On January 20, 1960, Alma retained attorney Wilson Quderkirk and filed her first petition for divorce, claiming cruelty on the part of Melvin. According to a stipulation dated January 19, 1960, entered into as a part of this first action, Alma was to get about one-third of accumulated assets, a note for $5000 to be paid within ten years, to remain beneficiary on $12,500 life insurance, and to receive $150 each month from February through September of 1960.

About February 3, 1960, Alma dismissed her first action, retained her present counsel, and filed a new petition for divorce. At the same time she sought and obtained a writ of attachment to secure the sum of $15,000. Melvin appeared Febryary 17 by Attorney J. Rudolph Hansen and on February 19 filed a cross petition asking that he be granted a decree of divorce.

The latter part of January 1960, a Mr. Mayhew, representating Cargill, was contacted by Alma. She then told Mayhew about the domestic problems, but at that time Cargill had received no warning as to the fund manipulations which were being carried on by Melvin. In April of 1960, some irregularities in Melvin's dealings were noticed and on the 21st of that month some Cargill representatives contacted Melvin who soon admitted having enriched himself at the expense of his employer. This he had done by means of devious and sometimes involved manipulations of grains and funds and the issuance of fictitious or split checks. At that time Melvin admitted no knowledge as to the extent of his unjust enrichment, but estimated the amount to be from $5000 to maybe $25,000. Alma was promptly contacted, advised as to Melvin's machinations as an employee of Cargill, and the admitted embezzlement in a substantial sum not yet fully determined. She promptly contacted her divorce attorney and he immediately stepped in as counsel for Melvin in connection with the Cargill confrontation.

An audit was immediately commenced by Cargill. It was then discovered that by reason of Melvin's varied manipulations any audit as to grain transactions must unavoidably be conducted upon a gross bushels-in and gross bushels-out basis. The audit, completed in August or September of 1960, disclosed a $56,760 shortage.

In the meantime some other tinted transactions were taking place. Melvin's attorney in the divorce action received a typewritten letter dated May 4, 1960, signed by Melvin, directing that the attorney approve a typed property settlement agreement submitted with the letter. By this agreement Alma was to receive all property, real, personal or mixed, to the exclusion of any interest therein by Melvin, leaving him with no assets whatsoever. Stated otherwise, it was self-evident Melvin was to be left insolvent. Melvin's divorce counsel neither participated in any property settlement discussions, nor did he prepare the agreement. In fact this letter and agreement were both prepared in the office of James P. McGrane, attorney for Alma in the divorce matter and, coincidentally, attorney for Melvin in connection with the Cargill claim. The property settlement agreement bears a notation by attorney Hansen to the effect Melvin had arranged his own settlement, that the agreement was approved as to form only, at Melvin's direction, and that the decree was not one to be recommended. In fact he later classified it as inequitable.

In any event Alma appeared in court May 6, 1960, with her attorney, but neither Melvin nor his attorney were present. A decree was then entered granting a divorce to Alma and by reference adopting the all embracive property settlement agreement. Both Alma and her attorney were then well aware of the fact Melvin had appropriated funds of Cargill in a substantial amount and knew Melvin was, by the property settlement agreement, left with no assets with which to reimburse Cargill in whole or in part. Significantly the record fails to disclose this was ever mentioned to the trial court during the divorce proceedings. Deeds and instruments of conveyance, prepared by Alma's Attorney, were signed by Melvin in the absence of attorney Hansen.

As a result of the audit, plaintiff bonding company entered into negotiations with Cargill and finally a settlement was agreed upon. Cargill conceded Melvin had at times shorted himself in the process of shortchanging his employer. So, after according Melvin credit for $6157, plaintiff finally paid Cargill $50,365 and became subrogated to all rights of the latter against Melvin.

Plaintiff then brought action in equity against Melvin and Alma, aided by attachment, asking judgment against Melvin, that the court set aside all conveyances of real estate or rights in real estate by Melvin to Alma, impress plaintiff's lien upon all realty held by Alma, and order issuance of execution to satisfy the judgment with interest and costs. In addition plaintiff, by amendment to petition, asked the court to adjudge Melvin to be the sole owner of a 20 acre tract described in the deed designating LaNonne grantee, this tract then to stand with other lands to satisfy plaintiff's claim. Except for the question raised as to jury trial defendants do not question plaintiff's action procedurally.

The trial court granted plaintiff judgment against Melvin in the sum of $49,682.34, being the amount finally prayed by plaintiff after amendment to conform to proof, set aside all transfers of realty to Alma, impressed plaintiff's judgment lien upon all real estate held by Alma, except the homestead and subject to a mortgage encumbrance, and impressed a like lien upon the 20 acre tract standing in the name of LaNonne as grantee, with other relief as prayed.

Cases such as this are not novelties because of newness, the only newness being in the novelties of such cases as they arise.

I. The first proposition relied upon by defendants for reversal was the denial of their request for jury trial. There is no merit to this claim.

Regardless of the nature of the action it was brought in equity, and absent timely motion was triable in that forum. In re Hasselstrom's Estate, Iowa, 135 N.W.2d 530, 532, and Dugdale Construction Co. v. Operative Plasterers, Iowa, 135 N.W.2d 656, 662.

In any event, the action as brought stands in equity. Lambert v. Reisman Co., 207 Iowa 711, 717-720, 223 N.W. 541, and 37 C.J.S. Fraudulent Conveyances § 319, page 1147. And since the case was presented in equity it properly remained there for any purposes necessary to effect a complete disposition of all issues involved. Rehder v. Rankin, 249 Iowa 1201, 1206, 91 N.W.2d 399. Furthermore, the record discloses Alma filed answer November 28, 1960, followed by Melvin's answer on December 2, 1960, but jury demand was not filed until July 18, 1962, the date trial commenced. In the absence of good cause shown there was no reversible error in overruling the belated demand. Rules of Civil Procedure 177 and 178, 58 I.C.A.; and Hampton v. Burrell, 236 Iowa 79, 83, 17 N.W.2d 110. Defendants waived their right, if any, to a jury trial.

As a result the case comes to us for hearing de novo. Simpson v. Bostwick, 248 Iowa 238, 243, 80 N.W.2d 339. While we are not bound by the findings of the trial court, we still give weight to them when considering credibility of witnesses. Iowa Rules of Civil Procedure, 344(f) 7, 58 I.C.A.

II. Plaintiff does not challenge Alma's right to sue for or to obtain a divorce from Melvin. However, as a creditor, or one standing in the shoes of a creditor, plaintiff does vigorously assail the use of a decree of divorce as a tool with which to make and effectuate a fraudulent...