James v. Mallory

McCurroch, J., (after stating the facts.) The testimony as to the financial condition of Stephen James at the time he executed the deed in question is conflicting, but we think by a fair preponderance his insolvency is established. It is shown that, in addition to the debt to appellees, he was indebted in a large amount to another firm of merchants in Memphis, Tenn., who were unable to collect anything from him, and whose debt remains unpaid. There is some evidence tending to establish the fact that he caused the conveyance to be executed to his children without any actual fraudulent intent, and under the honest belief that he was solvent and would be able to pay all his debts. He owned a large quantity of land, and perhaps expected to receive at some time sufficient sums from the sale of this land to pay his debts; but this hope was never realized. On the contrary, the lands upon which appellees held a lien as vendors were sold under decree, leaving him hopelessly insolvent. If he was in fact insol-, vent at the time, and voluntarily conveyed away his property without consideration, the conveyance is void as against creditors, even though he had no actual intent to defraud. It is contended on behalf of appellants that the conveyance of lands by Stephen James to appellees on January 16, 1893, extinguished his debt to them, and that his notes for the price of the lands reconveyed to him by them was a new debt created subsequent to the conveyance to King. It 'is proved, however, that the conveyance to appellees was not in extinguishment of the debt, but as security therefor, and appellees must be treated as creditors whose debts existed at the time of the fraudulent conveyance. In a recent decision on this subject we said: “The conveyance must be judged according to the real intent of the parties. If there is a debt subsisting between the parties, and it is the intention to continue the debt, it is a mortgage; but if the conveyance extinguishes the debt, and the parties intend that result, a contract for a resale at the same price does not destroy the character of the deed as an absolute conveyance.” Hays v. Emerson, 75 Ark. 551, 87 S. W. 1027. Applying the rule thus announced to the facts of this case as proved with reference to the conveyance, it must be treated as a mortgage. But counsel for appellant say that appellees, by suing to foreclose the lien reserved in the quitclaim deed, elected to treat the original debt as having been extinguished, and are now estopped to assert that the conveyance was only a security. Not so. The form of the debt only was changed, and the suit was to foreclose the security on the land, and the position assumed in this suit is not inconsistent with their position in the former suit. It is urged here that a portion of the land was the homestead of Stephen James, and that a conveyance thereof could not have been fraudulent. The proof is not sufficient to establish the homestead right. No reference is made in the pleadings to the homestead question, and no direct proof introduced to show that the land was the homestead of James. If it was in fact his homestead, it could easily have been proved; but no witness was asked a question calculated to elicit information on the subject. All that was said about it in the testimony came out incidentally. Witness King said that James spoke of redeeming a portion of the land which his home was on, in section twenty-seven. This is too vague to base a finding upon that the land was his homestead at the time he made the conveyance in question. If that fact had been relied upon, direct proof should have been introduced tending to establish it. Steele v. Robertson, 75 Ark. 228, 87 S. W. 117. The recent case of Baldwin v. Williams, 74 Ark. 361, 86 S. W. 423, settles the question of limitations against the contention of appellant. ' We there held that there must be an actual adverse holding of the property for the statutory period before a creditor is barred of his right to set aside a fraudulent conveyance and subject the property to the payment of his debt, so long as the debt itself is not barred by limitation. In this case the debt was not barred, and there is no proof of adverse occupancy. On the contrary, it appears that Stephen James, the debtor, remained in possession of the property until the commencement of this suit. The suit is not barred. . We find no error in the decree, and the same is affirmed.