Deposit Bank v. Rose

Opinion op the court by JUDGE HOBSON Reversing. J. A. Rose and wife, Billie Rose, were married in the year 1890. About three years after that she abandoned him, leaving- him in possession of 420 acres of land, which was her general estate. Some time after this she sued him for possession of ihe land, claiming that under the act for the enlargement of the rights of married women, passed in 1894, she was entitled to contTol it. The court sustained a demurrer to her petition. She appealed to this court, and the judgment was affirmed. Rose v. Rose, 104 Ky., 48 (20 R., 417) (46 S. W., 524, 41 L. R. A., 353, 84 Am. St. Rep., 430). In the meantime he had made an assignment for the benefit of his creditors. She desired to become divorced from him; and to recover- possession of her land. As long as they remained husband and wife, he was entitled to the use and possession of it. She could not obtain a divorce, as she had abandoned him, hut, as the abandonment had existed over a year, lie could maintain the action. Under this condition of things, she proposed to him that she would pay him $500 in money and convey to him 120 acres of the land, worth $40 an acre, if he would surrender to her the remainder of the land, and file suit, and obtain a divorce. He declined this proposition, but afterwards proposed that, if she would pay him the $500, and convey the 120 acres of land to his mother, Sallie M. Rose, he would file the suit, obtain the divorce, and surrender the rest of the land. She accepted this proposition, paid him the $500 in cash, and by deed, in which he also united, conveyed the [949] 120 acres to his mother. He brought the suit, obtained the divorce, and surrendered the remainder of the land. His creditors then filed this suit against him and his mother to subject to their debts the land which had been conveyed to her, charging that it was only a device to defraud them, he being- insolvent. The allegations of the petition were denied, and on final hearing the court dismissed it. It is urged in support of the judgment that whatever interest J. A. Rose had in the land of his wife was not subject to the debts oi his creditors, as the statute provided that neither the land of the wife nor its rents should be liable for the husband's debts (Gen. St., p. 721), and that, therefore, he gave nothing that his creditors could complain of his vesting in another. Section 1906, Kentucky Statutes, declares void all sales aiid conveyances made with intent to hinder and delay creditors. Tender such statutes the rule is settled that the law takes no cognizance of a fraud that injures no one, and that, although the intent is fraudulent, unless the thing conveyed is something that the law would appropriate to the payment of the debt, the creditor can not comjjlain, for he is not injured by the execution of the deed, and would not be benefited if it were declared void. Thus a conveyance of a homestead can not be assailed under the statute. 14 Am. & Eng. Ency. Law, .255, 256. But this action is based upon a different statute. Sections 2353, 2354, Kentucky Statutes, are as follows: “When a deed shall-be made to one person and the consideration shall be paid by another, no use or trust shall result in favor of the latter, but this shall not extend to any case in which the grantee shall have taken a deed in his own name without the consent of the person paying the consideration, or where the grantee in violation of some trust shall have purchased the lands deeded with [950] the effects of another person.” “Such deeds shall be deemed fraudulent as against the existing debts and liabilities of the person paying the consideration.” At common law, where property was purchased, and the convev.ance was taken in the name of one person, while the price was paid by another, a trust at once resulted in favor of the party paying the price, and the holder of the legal title became a trustae for him. 2 Pom. Eq. Jur., section 1037. The statute above quoted abolished the resulting trust, and under it the rule is, where the contract is not illegal, that, if the party receiving the title refuses to execute the trust or return the money, an auti-on will lie upon the implied promise raised by law to refund the money. Martin v. Martin, 68 Ky., 47. It has also been held that, if the property is in fact held in secret trust for the party paying the consideration, his creditors may subject it, although their debts were subsequently created. Matthews v. Albritton, 83 Ky., 32 (6 R., 786). In this case the debts were in existence at the time of the conveyance. The statute was designed to draw a distinction between the existing debts and those subsequently created. The provision that such deeds shall be deemed fraudulent as, against the existing debts and liabilities of the person paying the consideration applies, although there may be no proof that the property is held in secret trust for the party paying the consideration. The reason for this distinction is that secret trusts are difficult of proof, and that it is a fraud on the creditor for the debtor to place his property in the hands of others, leaving hi® debts unpaid. The operation of the statute does not depend upon the amount of the consideration. If a debtor buys for $1,000 property worth $10,000, and places the title in another, the property, and not the $1,000 that was put in it, is subject, under the [951] statute, to liis existing liabilities. The meaning of the statute is that property which would be subject to the existing claims of creditors is conveyed to the debtor shall-be in like manner subject to their claims where he pays the-consideration, and the title is taken by his procurement to-another. As to existing debts, the statute, by declaring such deeds fraudulent, dispenses with proof, and establishes a conclusive presumption that the property conveyed to another is held in trust for the party paying the consideration. Its purpose is to prevent such a shift or device shielding the property from his existing debts. In other words, as to these debts it regards the' party paying the consideration as the beneficial owner of the property, and treats the property as though conveyed to him. To hold that it does not apply in all cases, but- only where the consideration paid was in such shape that the creditors might have subjected it to their debts, would be to narrow the terms of the statute, and add to it an exception that the Legislature lias, not seen fit to make. If this land had been conveyed directly to the husband, it would unquestionably have been liable to his debts. The only reason why he had it conveyed to his mother, and not to himself, was to shield it from his creditors. The proof leaves no doubt of this. The deed was, therefore, fraudulent as to creditors, and the property may be subjected in the hands of Mrs. Sallie M. Ruse just as it could have been if conveyed to the real purchaser, J. A. Rose. I-Ie gave for it a valuable consideration, and, whether this consideration was moral or immoral, or such as the court would enforce, we can not now inquire. The contract has been executed, and he will not be allowed to keep its fruits on the-ground of its immorality; and his mother, under the statute, is in no better shape than he. His inchoate right [952] of curtesy in the landed estate of his wife, with the right to use the rents, was of great value, for the reason that, .aside from the annual rents, the death of his wife might at. any time make the estate an absolute right of curtesy. His foregoing all of this, and bringing a suit and obtaining a divorce, were a valuable consideration for the deed which the wife made; and, when the chancellor is- called upon under the statute to subject the land so conveyed, he will not stop to inquire as to the amount of the consideration, or whether his creditors could have reached it in its condition at the time and subjected it to their debts. Judgment reversed, and cause remanded for a judgment subjecting the 120 acres of land to the debts of appellant.