Aiken v. Timm

BROWN, C. J. This action was brought by plaintiff, as receiver in statutory sequestration proceedings, against the Old Colony Land Company, an insolvent corporation, to set aside a conveyance of certain real property owned by the corporation alleged to have been fraudulent and void as to creditors. Plaintiff had judgment and defendants appealed from an order denying a new trial. The facts as disclosed by the findings of fact made by the trial court are substantially as follows: The Old Colony Land Company is a [319] Minnesota corporation and insolvent and unable to pay its debts. Tbe company owned the tract of land involved in the action, and on February 14, 1917, the same was conveyed to defendant Anna Timm, the wife of defendant H. H. Timm. The conveyance was in due form and was subsequently filed for record in the office of the register of deeds. It was executed on the part of the corporation by defendant H. H. Timm, who was vice president thereof, and C. W. Somers, as secretary. The corporation was insolvent at the time, to the knowledge of’Timm, the vice president. William A. Rossman was a creditor, and brought suit to recover on his claim. Judgment was rendered in his favor against the corporation for the sum of $110 and costs, on October 18, 1917, upon which execution was issued and subsequently returned by the sheriff unsatisfied. Rossman then brought the sequestration action in which plaintiff herein was appointed receiver by order of the court. The trial court found that the conveyance to Mrs. Timm was fraudulent as to creditors; that the only consideration therefor was an indebtedness claimed against the company by both the Timms, and that the transfer to Mrs. Timm was an attempt to prefer them over other creditors of the corporation. The court further found that subsequent to the conveyance defendants made certain improvements on the premises, but that they were not made in good faith; that they also paid the taxes assessed against the land, and the interest accruing upon a mortgage indebtedness for which the land was liable, but that the payments were not made in good faith. Those findings were made in response to claims presented by the answer of defendants under the occupying claimants’ statute, section 8070, G. S, 1913. The court also found that the land was encumbered by a mortgage in the sum of $1,000, but that the value thereof exceeded that debt. On defendants’ motion for an amendment to tlie findings'in certain respects the trial court indicated in its order disposing of the same that there.was no intention in the original findings to predicate the decision upon the theory of actual fraud, and that there was constructive fraud only, and that arising from the attempt of defendants in securing the conveyance of the land to prefer themselves over other, creditors of the corporation, a violation of the fiduciary relations existing between Timm [320] and the corporation and its creditors, Timm being -the Tice president and general manager of the company at the time. The principal contentions in support of the appeals are that there is no evidence of the insolvency of the corporation at the time of the transaction, that the court was not justified in finding that the conveyance to Mrs. Timm was either fraudulent or unlawful, or that there were creditors to be defrauded; and, further, that there is no finding or evidence that Eossman, plaintiff in the sequestration suit, was a creditor of the company at the time of or prior to the conveyance; aud, again, that the court erred in finding that the improvements made upon the premises after the conveyance, the payment of taxes and a judgment against the company, were not made or paid in good faith. 1. A careful reading, of the record leads to a conclusion adverse to defendants upon each of the points stated. The insolvency of the company was clearly shown; in fact, the question does not seem to have been controverted on the trial. At any rate there was evidence, found in the testimony of Timm, the managing officer of the company, that there were unpaid claims against the company, including that of Eossman, at the time the land was conveyed to Mrs. Timm; that the land so conveyed was all the property, real or personal, the company then owned, and that it was encumbered by a mortgage in excess, as defendants now claim, of its value. And although the court made no express finding as to the existence of creditors at the date of the conveyance, or that Eossman was such, the findings necessarily imply their existence, and, though technically defective, should "be so' construed. The court did find that the purpose of the conveyance to Mrs. Timm was to prefer the Timms to other creditors, and for that reason that it was fraudulent. In this situation, the insolvency and existence of creditors being shown, and from which but one finding could well be made, we construe the findings in the light of the undisputed evidence on the question, and supply by intendment the omission of an express finding thereon. Sprague v. Stroud, 114 Minn. 64, 129 N. W. 1053; Ware v. Squyer, 81 Minn. 388, 84 N. W. 126, 83 Am. St. 390. It is not important that the evidence and findings do not disclose the amount of the different items of existing indebtedness. That will be a matter for ascertainment when [321] funds are in the bands of tbe receiver for distribution. The creditors necessarily will have to present their claims for allowance in the usual procedure in such cases. The findings of fact are therefore sufficient and sustain the conclusion of law. 2. The contention that the court erred in' finding that in the payment of taxes against the land, interest on the mortgage indebtedness, and improving the land by the repair of old and erection of new buildings by defendants, they did not act in good faith, is not sustained. At the time the conveyance was executed to Mrs. Timm, defendant H. H. Timm, the general manager of the affairs of the corporation, knew of the outstanding indebtedness of the company, and of the fact that it was insolvent; he was the agent, as he testified, of his wife in the transaction, and executed the deed to her in payment of a claim she had against the company, and also a like claim of his own; he knew that by the conveyance he and his wife were taking all the assets of the company in payment of their claims, to the exclusion of all other creditors. When questioned whether he did not know that creditors of the company would likely attack the conveyance, he disclosed an utter indifference to their rights in the matter. His reply was: “Well, but I wouldn’t pay any attention to anything like that, because I supposed that the title was perfect — that Mrs. Timm had a perfect title to those, lands.” Though he may have supposed that he had acquired rights superior to other creditors, no such rights had, in fact, been acquired. The title in the wife was subject to the claims of creditors, for as to them, in appropriate proceedings, the transfer of the land was fraudulent as a matter of law. Taylor v. Mitchell, 80 Minn. 492, 83 N. W. 418; Minnesota L. & T. Co. v. Peteler Car Co. 132 Minn. 277, 156 N. W. 255. Taking the evidence as a whole the court was fully justified in finding bad faith. 3. This disposes of the ease and results in an affirmance of the order appealed from, for we find no reversible error in any of the assignments challenging the rulings of the court. But there is a matter to which attention may be called, not covered by the assignments of error, or the motion below for an amendment of the. findings, and that is the unqualified conclusion of law found by the trial court that defendants have no title, right or interest in the land,- and should be ejected from [322] the possession of the same. The conveyance to Mrs. Timm is not a nullity, as the conclusions of law seem to hold, but voidable, and to the extent only as it may constitute an obstruction to the enforcement .of the claims of creditors existing before the transfer was made. The title remains in Mrs. Timm subject to those claims. This is a suit in behalf of creditors and not one by the corporation in protection of its rights. The company is not complaining of the conveyance, and the creditors may do so only to the extent stated. 1 Dunnell, Minn. Dig. § 3905; Brasie v. Minneapolis Brewing Co. 87 Minn. 456, 92 N. W. 340, 67 L.R.A. 865, 94 Am. St. 709; Raymond v. Hayes, 116 Minn. 403, 133 N. W. 1016; Coons v. Lemieu, 58 Minn. 99, 59 N. W. 977. We mention the point, not in modification of the findings, but fio enable the parties, if the matter be deemed of sufficient importance, to avoid another appeal by application for appropriate relief to the trial court. Order affirmed.