Citizens' Bank v. Bowen

The opinion of the court was delivered by Horton, C. J.: This was an action instituted in the district court of Anderson county by Constance Bowen, as plaintiff, against the Citizens’ bank of Garnett, as defendant, to recover $1,161.64, and interest, which the petition alleged had been deposited by the plaintiff with the bank, as a banker, subject to call. The bank filed its answer, denying this .allegation, and many of the other averments of the petition, and alleged that the money sued for was the property of Preston Bowen, the husband of Constance Bowen; that he, being insolvent, had deposited it in the bank to the credit of his wife without any consideration; and that he was indebted to the bank upon a promissory note of $1,800, with interest from July. 1st, 1875, and then overdue, which was an amount greater than the deposit. This answer further alleged that before and at the time of making the deposit, Preston Bowen was, and had continued to be, indebted to the bank in the sum of $1,800, and interest; that the money sued for had been deposited in the bank under the following written agreement : “This agreement, made between Doc. P. Bowen and his wife and the Citizens’ bank of Garnett, witnesseth: That whereas, Doe. P. Bowen is indebted to said Citizens’ bank of Garnett in the sum of $1,800, due the 1st day of July, 1876, now said P. Bowen and his wife agree to and with the said Citizens’ bank to procure a loan of $2,000 or more on their farm, a homestead in Anderson county, Kansas; and he and his wife shall invest the proceeds of said loan in yearlings and two-year-old cattle, and give to the said Citizens’ bank of Garnett, when bought, a chattel mortgage on all the cattle so bought, to secure the payment of said amount of $1,800, reserving to themselves, however, the right and amount of the cost price of said cattle to himself and wife.» The growth or increase in value of said cattle above cost price is the only interest to be secured by the said mortgage, and the cost price of said cattle shall be reinvested whenever taken or received by P. Bowen and wife in the class of cattle above mentioned, by P. Bowen and wife; and the same, when purchased, shall be mortgaged to the Citizens’ bank in like manner as above, until said amount of $1,800 and interest is fully satisfied by said P. Bowen and wife. “Witness the hands of the parties hereto this 1st day of December, 1875. P. Bowen. Constance Bowen. Citizens’ Bank of Garnett, By J. T. Lanter, Pres.” And that the money was to bé kept, drawn out and used only in accordance with said agreement, and that said Preston and Constance Bowen had neglected and refused so to apply it. The answer asked that Preston Bowen be made a party to the suit, and that, upon the final hearing, the said sum of $1,161.64 should be applied as a credit and set-off against an equal sum of the note of Preston Bowen to the bank, and that judgment be rendered' in favor of the bank against him for the balance remaining due upon the note after the $1,161.64 had been credited thereon. Preston Bowen entered his appearance, and filed his pleading admitting the allegations of the petition, and denying generally, and without verification, the allegations of the answer of the bank. Constance Bowen replied, also denying, without verification, the allegations of the bank’s answer. The following facts were admitted or proved on the trial. On December 1, 1875, Preston Bowen made his note to the bank for $1,800, payable July 1st, 1876,- with twelve per cent, interest'from maturity, and at the same time he and his wife executed with the bank the written agreement above set forth. At the time of the execution of this agreement, and for many years prior thereto, the plaintiff below and her husband, Preston Bowen, and their family, had lived on a certain 160-acre farm in Anderson county, which was their homestead, and was so referred to in the agreement.' The title to this land was in the husband. On February 1st, 1876, Preston Bowen executed his note to the Phoenix Mutual Life Insurance Company, of Hartford, Conn., for $1,650, payable in five years from date, and this note was secured by a mortgage of like date on the said homestead in Anderson county, which mortgage was duly signed by both Preston and Constance Bowen. The money on this note thus secured was obtained from the said life insurance company through Henry Bogen, a loan agent. On February 26th, 1876, he deposited $1,283.14 of the money so raised upon the note and mortgage with the bank, under the instructions of Mrs. Bowen, had that amount passed to her credit, and the usual pass-book of a depositor was then given her. From that time up to May 17th, 1876, the checks of Mrs. Bowen were duly honored, and her account debited therewith in the usual course of banking business. On the 6th of January, 1877, this passbook was returned to the bank, the various checks entered on the debit side, and the account stated therein by the cashier, showing a balance in favor of Mrs. Bowen of $1,161.64. On the 17th day of January, 1877, she demanded this amount of the bank, and payment was refused. On the 23d of January, 1877, this action was brought in the court below. It was admitted that the husband, Preston Bowen, was insolvent. After the introduction of the evidence, the counsel for the bank asked the following instructions: 1. That if the money sued for in this action was the money of Preston Bowen when it was deposited with said bank, the jury should find for the defendant, the Citizens’ bank of Garnett. 2. That if the money deposited was obtained upon a mortgage of Preston Bowen’s land, made by Preston Bowen and Constance Bowen, and a note made by Preston Bowen and secured by said mortgage, that they should find for the defendant. 3. That the proceeds of a note made by a husband and secured by a mortgage made upon the homestead by husband and wife, are subject to be applied to the payment of the husband’s ■ debts previously existing, and the husband cannot lawfully place such proceeds out of the reach of previous creditors by a gift of such proceeds to his wife, or by placing the same in her hands without any valid consideration. The court refused to give these instructions, or any one of them, and against the objections and exceptions of the bank, instructed the jury that the said Constance Bowen was entitied to a verdict for the sum of $1161.64, with interest thereon at seven per cent, from January 17th, 1877, and directed them to find a verdict accordingly against the bank. We may dismiss the within agreement of Dec. 1st, 1875, set up in the answer of the bank, with the single remark that it does not necessarily affect the case nor figure in the final • result. The court below was right in rejecting all consideration of such agreement as any defense under the pleadings to-the action of Mrs. Bowen, but not right in peremptorily instructing the jury to return her a verdict for the sum sued for. The money obtained on the note of February 1st, 1876, belonged to the maker, Preston Bowen. Its payment was •secured by a mortgage on land in his own name, and tine fact that such real estate was a homestead, and that it was necessary for the wife to sign the mortgage to make it valid, did not make the proceeds of the note the property of such wife. The husband was the principal, was solely liable on the note. The mortgage was a mere security creating a lien upon the property, but vesting no estate whatever. In one sense the wife might be said to be the surety for her husband, but in a very remote and attenuated sense. (Jenness v. Cutler, 12 Kas. 500.) When the note should be paid the lien would cease to exist. Nor would the proceeds of a note thus executed be exempt from the payment of the debts of the maker thereof, because the same was secured by a mortgage on a homestead. There is no theory of the law upon which any such principle can be sustained. If the rule were otherwise, then the husband could execute his notes, secure the same by a mortgage on his homestead, purchase other lands with the proceeds, which would be exempt .or belong to his wife, and after payment of the note from the proceeds of his lands, again issue other notes likewise secured, and repeat the operation, and thus forever cover up his property from the just claims of honest creditors, under the plea that the security for his notes was given on a homestead, which was signed by the wife. This result would lead to absurd consequences, and is an' unwarranted construction of the homestead provisions of the state. Viewing the money obtained on the note and mortgage as the personal property of Preston Bowen, any gift of it to his wife or the deposit of it in the bank to her credit without any consideration when he was insolvent, was fraudulent as against creditors and transferred no right or title. The money on deposit really belonged to Preston Bowen. He was a party to the action below, and the bank ought to have been allowed to set off his indebtedness to it as prayed for in its answer. The fact that Mrs. Bowen was the nominal owner of the deposit is no obstacle to the claim of the bank, because such ownership under the circumstances was utterly void, and of no effect as against the husband’s creditors. Under §1, ch. 62, Gen. Stat. 562, it is clearly evident that the real and personal property of a married woman received by her as a gift from her husband is still liable for his debts. The deposit of the money in the name of the wife being a mere covinous cloak to secrete it from an insolvent’s creditors, it was liable for such insolvent’s debts. There being no element of estoppel in the conduct of the bank or its officers precluding it from contesting the claim of Mrs. Bowen to the deposit, nor from having its set-off allowed, the judgment of the district court must be reversed, and the cause remanded for a new trial. All the Justices concurring. JANUARY TERM, 1879. PRESENT: Hon. ALBERT H. HORTON, Chief Justice. Hon. DANIEL M. VALENTINE, 1 Associate Justices Hon. DAVID J. BREWER, j ASS0GIATE dxJSTI0ES-