Baker v. Harvey

Macfarlane, J. This is a suit in the nature of a creditor’s bill to set aside, as fraudulent, a conveyance by defendant J. Gr. L. Harvey to his brother T. R. E. Harvey and a deed from the latter to the wife of the former. The petition charges in substance, and the evidence shows conclusively, these facts: In September, 1884, the said defendant J. G. L. Harvey became indebted to Deering & Company in the sum of $732.50, evidenced by two promissory notes. For a balance on these notes judgment was rendered against him November 22, 1886, for $353.67. A sale of lot 100 in the city of Marshall, was made under execution upon this judgment on November 12, 1891, and plaintiff was the purchaser for $10.50, to whom the sheriff made and delivered a deed. In December, 1884, said defendant was, and prior thereto had been, engaged in a mercantile business in Marshall. He owned said lot 100 and occupied it as a residence. He also owned a valuable farm in the county of Saline. The cash market value of the aggregate property at the time, which was one of depression in real estate values, was about $10,000, though thought to be intrinsically of greater value. The farm was incumbered by a deed of trust amounting to $4,000 and some unpaid interest. Defendant failed in his business and became wholly insolvent. He owed including the deed of trust near or quite $15,000. His brother, T. R. L. Harvey, was a man of considerable means who lived on a farm in said county. Defendant called upon his brother for assistance. Fruitless efforts were made by the two to borrow money with which to pay the creditors. A sale of the land under the deed of trust was threatened. Suits also had been commenced or were threatened. This being the condition of affairs on the thirty-first of December, 1884, defendant made to his brother — 658 — a deed conveying to him all his real estate including said lot. The consideration expressed in the deed was $15,000. At the same time and as the real consideration, the grantee assumed the payment of the deed of trust, and also unsecured debts of defendant, the whole amounting to about $15,000. The particular debts assumed were specified and listed. The brother by borrowing money on his own land was able to pay and did pay all the debts assumed. The debt of Deering & Company was not one of them. After the parties supposed all the assumed debts had been paid the balance of the $15,000 purchase price amounting to between $300 and $400 was paid to defendant. The brother afterward paid on a disputed debt, by way of compromise, the sum of $600. Defendant with his family, soon after conveying the property to his brother, moved to Kansas City, where he continues to reside. Erom the time of the conveyance the said T. R. E. Harvey rented lot 100 and paid the net rents to his brother up to May 18, 1890, when he conveyed the same, in consideration of $1, to the wife of his brother, who is also defendant in this suit. Between these periods the said T. R. E. Harvey gave or paid said ■defendant sums aggregating between $500 and $600. The grantee T. R. E. Harvey was the only witness examined. He testified that the purchase was absolute. There was no agreement or understanding that the grantor should retain any right or interest in the land or to the proceeds of sales above the purchase price. He bought the land for the purpose of aiding his brother in the payment of his debts and to prevent a sacrifice of the property which would result from a forced sale at that time. The price paid was more than the market value of the property. In payment he assumed the payment of certain specified debts amount — 659 — ing to about $15,000. These debts he paid. The Deering & Company debt was not one of them. After paying these debts a balance of between $300 and $400 was paid to his brother. He kept an account of the receipts and expenditures in managing and disposing of the property, not for the benefit of his brother, or with a view of accounting to him for the net proceeds, but for his own satisfaction in order that he might know the financial results of the transaction. While there was no understanding with his brother it was his intention, after he had reimbursed himself, to do something for him. Carrying out this intention he made the conveyance of lot 100 to his brother’s wife. He gave his brother a statement of the account he had kept because he thought it would be some satisfaction for him to know how the property had been managed. The account as kept and entered on the books commenced: T. B. B. Harvey in account with real estate bought of J. G. L. Harvey, Dec., 1884: 1884. Dee. By amount of purchase money.................$ 15,000 00 Then follows an account of expenditures. The items include payments to J. Gr. L. Harvey of $550, in August and September, 1889. On the other side of the account, headed with the same statement, are charged against himself receipts for rent of the farm, and receipts on sale of one tract. The evidence was all introduced by plaintiff, and at its conclusion the court sustained a demurrer thereto and entered judgment dismissing the bill. Plaintiff appealed. I. The case is presented in two aspects: First, that by the agreement between the parties to the conveyance made in 1884 the grantee took and held the — 660 — property, as trustee merely for the purpose of disposing of the same and paying the debts of the grantor, and afterward of accounting to him for any surplus; and, second, that the conveyance was fraudulent and void as to existing creditors. The undisputed facts that the grantee kept an account of the receipts and expenditures of money in the management and sale of the land; that he credited himself for amounts paid the grantor before the land was sold; that he submitted to the grantor a statement of the account after the land was sold; that he paid to-him the rents of the homestead property, and that he-conveyed the same property to his wife, are all circumstances having much weight in support of the first-theory. But the evidence of the grantee evidently satisfied the learned circuit judge that these circumstances were overcome and that the conveyance was an absolute one in fact as well as in form. The generosity of the grantee in voluntarily returning to the wife of the grantor the homestead property would be open to suspicions which might not ordinarily be overcome by the mere statement of one of the parties. But the circumstances must be weighed along with the testimony of the witness. The circumstances-are not inconsistent with the explanation. The generosity of the grantee in taking the property and burdening himself with debts amounting to much more than its value, satisfactorily explains his subsequent acts of generosity in giving his brother money and in returning to his family a part of the ultimate profits realized on the transaction. The question for the chancellor was whether the evidence of the witness was credible in the face of the circumstances. The chancellor necessarily found that the sale was absolute and unconditional, arid what was subsequently done were voluntary acts of generosity on the part of the grantee. — 661 — We think the evidence justified the conclusion reached. There can be no doubt if the conveyance was without condition, and was not affected with fraud, the grantee had the right to give the homestead property to his brother’s wife or otherwise dispose of it as he saw fit. II. Was the conveyance vitiated by fraud? Defendant was insolvent and immediate sale and probable sacrifice of his property was threatened. His ■debts .greatly exceeded the market value of his property including his homestead. He made ineffectual efforts to raise money on his property to pay his liabilities. He sold the property for its full value. The sale included the homestead upon which'the creditors had no claim. The entire purchase price was appropriated to the payment of his debts. He selected the creditors who should be paid and the evidence shows he included all' he could at the timfe recall. It is not shown that any of the secured creditors were delayed or hindered in the collection of their debts. Some of them by agreement extended the time of payment. Assuming, as has been found, that the sale was unconditional, in what does the fraud consist? “An embarrassed debtor may make sale of his property which he deems advantageous to enable him to raise the necessary means for paying off his creditors and to prevent its sacrifice at forced sale under execution, and for this purpose the law recognizes his right to sell for cash or on time.” Dougherty v. Cooper, 77 Mo. 531, and cases cited; State ex rel. v. Purcell, 131 Mo. 312. This right of course depends upon the purpose of the sale being honest, and not to withdraw his property from process for his just debts. The fact that creditors are thereby hindered or delayed does not necessarily render the sale fraudulent. A debtor without — 662 — cash or credit can only pay his debts by sale of his property. Honesty requires him to appropriate his property to the payment of his debts. To tie the hands of a debtor in such circumstances would mean a sacrifice of property and generally a loss to creditors. The conveyance was not fraudulent for the reason that the debt of Deering & Company was not secured or provided for. An insolvent debtor has the right to prefer one or more of his creditors to the exclusion of others. This right has been recognized by many decisions of this court. Sexton v. Anderson, 95 Mo. 373; Goddard, etc., Co. v. McCune, 122 Mo. 431, and cases cited. In Nichols v. Ellis, 98 Mo. 344, the question decided is thus stated in the headnote to the opinion: “Where a father, who was insolvent, deeded his land to his three sons upon consideration ^ that they discharge certain of his debts amounting to the full value of the land, which they in good faith did, the conveyance will not be held fraudulent as against other creditors whose debts the sons did not agree to assume.’’ Much importance is attached to the fact that the grantor was for a time permitted to occupy the homestead property and afterward to receive the rents and profits of the same. These facts undoubtedly suggest with much force the conclusion that some interest was retained by the grantor in this property. They would, however, only constitute evidence, or badges, of fraud in the conveyance. They are not conclusive. The grantee though bona fide had the right to permit his brother to occupy the premises and to receive the income therefrom if he desired to do so. Such acts do not carry with them the degree of suspicion, when allowed by a prosperous person to his unfortunate brother, as in case no such relationship exists. Robinson v. Dryden, 118 Mo. 534. — 663 — We accept the conclusion of the trial court that the evidence of fraud appearing from the conduct of the parties is fully rebutted by the testimony of the witness. We reach this conclusion more readily in view of the fact that this property was the homestead of the grrmtor and was not liable for the debts of his creditors. There was no occasion for him to sell it if - he wished to preserve it from sale by his creditors. It was secure from them when standing in his own name, so long as its homestead character continued. Why attempt to secure by fraudulent means an advantage he already held under the law? Macke v. Byrd, 131 Mo. 682. The question' is suggested here whether the sale and conveyance of the homestead could be attacked for fraud by creditors of the grantor, but as we find that no fraud in the conveyance was proved, we need not pursue the question. The judgment is affirmed. All concur.