Union Securities Co. v. Smith

• Decision Date: 09 October 1916
• Docket Number: 13119.
• Citation: 160 P. 304,93 Wash. 115
• Parties: UNION SECURITIES CO. v. SMITH et al.
• Court: Washington Supreme Court

160 P. 304

93 Wash. 115

UNION SECURITIES CO. v. SMITH et al.

No. 13119.

Supreme Court of Washington

October 9, 1916

Department 1. Appeal from Superior Court, Adams County; Bert Linn Judge.

Action by the Union Securities Company against R. P. Smith and others. Judgment for plaintiff, and both parties appeal. Remanded for modification.

Wm. O. Lewis, of Ritzville, and V. T. Tustin, of Spokane, for plaintiff.

G. E Lovell, of Ritzville, for defendants.

ELLIS J.

Action to set aside as fraudulent certain deeds and a mortgage of real estate, and to subject all of the property to the lien of a judgment held by plaintiff as assignee of the Bank of Lind.

Prior to 1907 R. P. Smith and his son Warren Smith, with a number of other farmers of Adams county, had become stockholders in the Farmers' Warehouse Company of Lind, a co-operative company organized to facilitate the marketing of their grain. In 1907 these two and number of other stockholders signed a bond guaranteeing the indebtedness of the warehouse company to the bank. On July 23, 1913, the bank brought suit on this bond. Summons was served on that day, and on June 10, 1914 it recovered a joint and several judgment in the sum of $5,474.74 against all of the signers of the bond.

On August 7, 1913, Warren Smith and wife conveyed to his mother, Janette P. Smith, wife of R. P. Smith, the north half of section 6, in township 16 north, range 35, E. W. M., which is called in the record the 'Peasley land.' Warren Smith had acquired title to this land in the spring of 1912. On the same day Warren Smith and wife executed to Janette P. Smith a mortgage covering the north half of section 26, in township 17 north, range 34, E. W. M., and the northeast quarter of section 32, in township 17 north, range 35, E. W. M., purporting to secure a debt of $15,000. This land is known as the 'Warren Smith land.' The deed was filed for record on June 6, 1914; the mortgage on June 9, 1914. One purpose of this suit was to declare this deed and mortgage fraudulent as to the plaintiff's judgment, and to subject the land as belonging to Warren Smith to the judgment against him.

About August 7, 1913, Warren Smith and wife also executed to Janette P. Smith a chattel mortgage on all of their stock, teams, and farming implements, purporting to secure a debt of $5,000. This was satisfied by a bill of sale of this property from Warren Smith and wife to Janette P. Smith executed June 8, 1914, and recorded June 9, 1914. This transaction is not assailed.

In 1907, R. P. Smith and Warren Smith negotiated the purchase of the northeast quarter of section 4 in township 16 north, range 35, E. W. M., and the southeast quarter of section 32, in township 17 north, range 35, E. W. M., known as the 'Cartwright land.' Title was taken in the name of Janette P. Smith. The consideration paid was about $12,000. The money was raised, $8,000 at a bank on joint notes of Warren Smith and wife, Janette P. Smith and R. P. Smith, $1,750 by a mortgage given by Warren Smith and wife on their homestead, and $1,750 by a mortgage given by R. P. Smith and Janette P. Smith on their homestead. All of these obligations were paid in 1908. Plaintiff seeks to have this tract declared community property of R. P. and Janette P. Smith, and subjected to the lien of its judgment.

In 1897, and prior thereto, Janette P. Smith acquired title to a half section of land known as the 'Railroad land,' and another tract of 400 acres, known as the 'Boyles land.' Plaintiff sought to subject these, as community property of R. P. and Janette Smith, to the lien of its judgment. But the only evidence on the subject shows, and it now seems to be conceded, that these two tracts, though acquired after her marriage with R. P. Smith some 40 years ago, were paid for with money she inherited from her father before her marriage and are therefore Janette P. Smith's separate property.

The court adjudged: (1) That plaintiff's judgment as against R. P. Smith is a lien on the community property of R. P. and Janette Smith; (2) that an undivided one-half of the 'Cartwright land' is community property of R. P. and Janette P. Smith and as such subject to execution to satisfy the judgment; (3) that the mortgage covering the 'Warren Smith land' is a valid mortgage; (4) that the 'Peasley land' is the separate property of Janette P. Smith and is not subject to the lien of plaintiff's judgment.

Both parties having appealed, we shall designate them throughout as plaintiff and defendants. We shall consider each branch of the judgment separately.

1. Both R. P. and Janette P. Smith testified that during all of their married life they have conducted their business separately; that at the time of the marriage she had a considerable amount of property inherited from her father; that at or about that time it was agreed between them that whatever she acquired should be hers, and upon her death should go to her children, and that whatever he acquired and his personal earnings should be his, and upon his death should go to his two children by a former marriage. Three disinterested witnesses who had known the Smiths for many years and had transacted business with both of them testified that they had always conducted their business separately. Their sons, Warren Smith and Newell Smith, the former 38 years old, the latter 29, testified that such had been the case as long as they could remember. This evidence fairly establishes the agreement and shows that in the main it had been continuously acted upon. Though this was an oral agreement, it does not appear that it was made before the marriage. It is not assailed as a contract made upon consideration of marriage, hence void because verbal, as we held in Koontz v. Koontz, 83 Wash. 180, 145 P. 201. The statute of frauds is neither pleaded nor discussed. Such agreements made after marriage and mutually observed are valid. Gage v. Gage, 78 Wash. 262, 138 P. 886; Dobbins v. Dexter Horton & Co., 62 Wash. 423, 113 P. 1088; Yake v. Pugh, 13 Wash. 78, 42 P. 528, 52 Am. St. Rep. 17.

R. P. Smith testified that he purchased the stock of the warehouse company, ten shares of $10 each par value, with money earned by himself, that his wife was in no manner concerned in the purchase, and that he signed the bond as a stockholder. We are clear that his signing the bond did not create a community obligation. Way v. Lyric Theater Co., 79 Wash. 275, 140 P. 320. The court erred in holding the judgment a lien on the community property of R. P. and Janette P. Smith.

2. The giving of the joint notes of the two communities and the two mortgages to raise the original purchase price of the Cartwright land strongly supports the view that an undivided one-half of this land belonged to each of the communities composed of R. P. Smith and Janette P. Smith and Warren Smith and wife. All of these parties, however, testified that the title was taken in the name of Janette P. Smith, because the land was purchased for her, and that she paid off all of these obligations from her own funds. But it fairly appears that the money came partly from the crops growing upon the land when it was purchased, partly from money in bank in Warren Smith's name, and about $2,500 from money inherited from her father by Janette P. Smith. It also appears that Warren Smith for many years had rented his mother's lands for half the crops after deducting seed and feed, and that when from time to time these crops were disposed of, the proceeds, both of his part and hers, were deposited in the bank to his credit. There was no evidence that R. P. Smith contributed anything toward discharging the obligations created on the purchase of this land. On the whole we are satisfied that an undivided one-half of this land is the property of the community composed of Warren Smith and wife, and the other half the separate property of Janette P. Smith, and we so hold. There can be no question that plaintiff's judgment as against Warren Smith binds the community property of Warren Smith and wife. It is therefore a lien on their undivided one-half of this land.

3. For convenience in consecutive discussion we shall next consider the 'Peasley land.' This land was purchased for $12,000 at an administrator's sale in the spring of 1912. We are satisfied that it was purchased by Warren Smith for Janette P. Smith, that through mistake the return of sale was made in his name, and that soon afterwards he attempted to have the mistake corrected, but was told that the easiest way to correct it was to deed the land to her, his wife joining. Both he and Janette P. Smith so testified, as did also two attorneys whose advice they took at the time. There is no evidence to the contrary. Warren Smith had been farming Janette P. Smith's lands during the years 1908 to 1911 inclusive, but had paid her no rent since 1907. He borrowed money at a bank and paid for this land, giving his own check for something over $8,000 of the purchase price, and turning over two certificates of deposit,...