Sheridan v. McCormick

Bruce, Ch. J. This action comes before us for a trial de novo, and is brought to set aside a fraudulent conveyance. On the 3d day of May the plaintiffs recovered a judgment against the McCormicks for the sum of $1,140.25. The indebtedness on which the judgment was' founded grew out of 'the sale of an abstract business by the plaintiffs to the defendants, on September 8, 1911, for $4,100, payable in monthly instalments of $50, and the action was brought on the instalments then due and unpáid-. The transfer which is sought to be set aside was made by the McCormicks to the defendant W. A. Overing, the father of Mrs. McCormick, on the 10th day of April, 1914, and on the day of the commence [645] ment of the action on which the judgment was obtained. The trial court found the issues for the plaintiffs, and “that the said deeds were executed and the land transferred wholly and voluntarily without consideration, and with the sole intent to hinder, delay, and defraud the plaintiffs in the collection of their claim, 'and to hinder, delay, and defraud all of their creditors, and that the said W. A. Overing, defendant, accepted and receivéd such debts and the transfer of such land, with full knowledge of all of such fraudulent intent, and with the full and sole intent on his part to assist the said L. J. McCormick and Luina McCormick in their fraudulent purpose.” After a full argument and a thorough examination of the record, we are constrained to affirm this finding, and nothing would be gained by relating the testimony at length. The matter, indeed, is one largely of probability, and of the credibility of the witnesses, and on the latter point the trial judge had the opportunity of personal observation, which is not presented to us. There can be no question that there was in the minds of the defendants the desire to prevent the plaintiffs from collecting their claim, and, as far as the consideration for the deeds is concerned, all that is presented is a claim for money alleged to have been advanced by the defendant Overing to the daughter some fourteen years before and before her marriage, but which not only was long since outlawed, if, in fact, it ever existed, but on and for which, according- to her own statements, no interest had ever been paid, no note given, and no payment even demanded, and the only evidence of which was a memorandum contained in a note book owned by the defendant Luina McCormick. It is true that the defendant Overing paid the past-due taxes and the interest on a prior mortgage just prior to the transfer, but the evidence clearly shows that he did this because he was led to believe that the deeds could not be recorded without these payments. The case, indeed, in our minds, is not one where a debtor has honestly preferred a creditor, but one which clearly comes within the general condemnation of the authorities, which seem to hold that the law will treat “as null and void all fraudulent contrivances to screen . . . [the property of a debtor] from the pursuit of his creditors. It is fraudulent to defeat them by reservations of benefits to himself; it is equally fraudulent to [646] defeat them by benefactions conferred upon others. It is hot the consideration but the intent with which a conveyance is made that makes it good or bad as against creditors. However valuable the consideration, if the conveyance be designed to delay, hinder, or defeat creditors, it is void.” Note to Hagerman v. Buchanan, 14 Am. St. Rep. 732; Daisy Roller Mills v. Ward, 6 N. D. 317, 70 N. W. 271; Fluegel v. Henschel, 7 N. D. 276, 66 Am. St. Rep. 642, 74 N. W. 996; Paulson v. Ward, 4 N. D. 100, 58 N. W. 792. The case also clearly comes within the provisions of § 7220 of the Compiled Laws of 1913, which provides that “every transfer of property or charge thereon made, every obligation incurred, and every judicial proceeding taken with intent to delay or defraud any creditor or other person of his demands is void against all creditors of the debtor and their successors in interest and against any persons upon whom the estate of the debtor devolves in trust for the benefit of others than the debtor.” There is, too, no doubt of the knowledge of the grantee Overing, of the fraudulent intent, nor of the applicability Of the rule of law announced by us in the case of Fluegel v. Henschel, 7 N. D. 276, 66 Am. St. Rep. 642, 74 N. W. 996, and wherein we said: “Where a conveyance of real estate is made by a grantor, with intent to hinder, delay, and defraud creditors, and the grantee, not being a creditor of the grantor, has knowledge of such fact, the consummation of the transfer is such a participation in the fraud by the grantee as will invalidate the transfer, even where full consideration is paid.” There is, of course, no merit in the contention that the abstract business was not worth what the defendants agreed to pay for it, and that therefore, the plaintiffs do not come into a court of equity with clean hands. The matter is precluded by the judgment on which the execution is issued. We must asume that in that case the defendants interposed all of the defenses, both legal and equitable, which they had, or deemed themselves entitled to; and no appeal was taken from that judgment. Nor do we believe that the defendant Overing is entitled to a lien for the taxes and interest paid by him. Our conclusion from the record is that he knew of and was a party to [647] the fraud which was sought to be consummated, and it is well established that “where at the time of the execution of the conveyances of real estate made and received for the purpose of defrauding the creditors of the grantors, the grantee, as a part of the same transaction, agrees with the grantors to pay off certain existing valid encumbrances upon the real estate so fraudulently conveyed, and subsequently, and in pursuance of such agreement, the grantee pays such encumbrances, he cannot, when such conveyances are declared fraudulent and void as against the creditors of the grantors, hold such conveyances as security for the amounts so paid.” Daisy Roller Mills v. Ward, supra. The judgment of the District Court, however, goes too far, as it holds that the conveyance is void as between the McCormicks and .Overing. As far as this action is concerned it is void only as to the lien of the plaintiff’s judgment and attachment. It is'modified to this extent and as so modified it is affirmed. Grace, J., being disqualified, the Honorable Frank Fisk, Judge of the Eleventh Judicial District, sat in his place.