Imhoff & Co. v. McArthur

Burgess, J. This is an equitable proceeding by plaintiff to set aside a conveyance in the nature of a mortgage upon a lot of ground in Memphis, Scotland county, Missouri. Briefly stated the facts as disclosed by the record are that for many years prior to June, 1886, the Mc-Arthurs resided in said city where H. C. McArthur the husband of Aurelia, and father of George J. McArthur, owned the property involved in this litigation. About that time they moved to Lincoln, Nebraska, where the senior McArthur embarked in the drug business. Thereafter he became indebted to plaintiff, a banking company, in about the sum of $2,000, for which it recovered judgment in Nebraska before the institution of this suit. At the time of executing the mortgage by H. C. McArthur to George J. McArthur, which was on the fourteenth day of May, 1894, H. O. McArthur was insolvent, and on the sixteenth day of May, 1894, two days thereafter he executed mortgages on his [375] stock of drugs to various parties to secure debts largely in excess of the proceeds arising from the sale of the stock of drugs which was thereafter made under the senior mortgage. At the time of the execution of the mortgage by H. C. McArthur to his son, George J. McArthur, he claims to have been indebted to him in the sum of $2,000 for money borrowed, and for hire as clerk, which was then due, and for the purpose of securing its payment he indorsed and delivered to him a note of $1,000, dated March 22, 1888, bearing ten per cent per annum, and executed to him by EL C. McArthur & Son, a firm composed of H. C. McArthur and his son, W. B. McArthur, and another note for $1,000, dated March 22, 1887, payable to Mrs. EL C. McArthur and bearing interest at eight per cent per annum from its date. H. C. McArthur and son were also the makers of this note, which by the request of her husband, EL- C. McArthur, was also assigned to George B. on the same day that the other note was by Mrs. McArthur. At the time of the assignment of these notes they were both barred by the statute of limitations of Nebraska where the parties lived, but H. C. McArthur for the purpose of relieving them of this infirmity, on the day after the assignment paid to the holder $25, on each one of said notes. The property embraced in the mortgage is a brick store house and lot in the city of Memphis, worth about $3,500. Soon after the notes were assigned to George J. McArthur he assigned them to R. D. Cramer one of the defendants in this suit for collection; suit was at once brought upon them in the circuit court of Scotland county, service of pi'ocess waived by EL C. McArthur, and on the twentieth day of August, 1894, judgment rendered against him for the amount of the notes and interest to wit, $3,358.61, and the mortgaged [376] property ordered sold. This judgment was for something over $1,300 more than the debt claimed tobe due George J. McArthur by both himself and his father at the time of the assignment of the notes to him, and the execution of the mortgage which was given to secure its payment. Before the institution of this, suit, plaintiff brought suit by attachment on its claim in the circuit court of Scotland county and had the property in question levied upon under the writ of attachment issued in that cause. The attachment was sustained and final judgment rendered against the property, etc. Plaintiff prosecutes this suit to set aside the mortgage to George J. McArthur, upon the ground that it was executed by H. C. McArthur to defraud, hinder and delay his creditor, and that the mortgagee George J. McArthur was a party to the fraud. A jury was impaneled, and the trial of the cause proceeded with, but before it was terminated the court discharged the jury, and having heard the evidence rendered judgment for defendants, dismissing plaintiff’s bill, and for costs. Plaintiff appeals. The principal witness on the part of plaintiff was the defendant Henry C. McArthur and he having testified to the tona fides of the assignment of the notes to his son, and of the execution of mortgage to secure the payment of the $2,000 which he claimed to have owed him at that time, the question is, is plaintiff' by making him its witness estopped from showing that transaction to have been fraudulent, if it clearly appears from his testimony, and other evidence adduced, that the transaction was for the purpose and intent of defrauding the creditors of said witness and that defendant participated in the fraud? [377] The rule which precludes a party to a suit from impeaching his own witness, applies alike to an adverse party to the suit whom he makes his witness, and to his witness who is not a party to the suit. He is no more bound by the statements of one than he is by the statements of the other, as in either case he may show the facts upon which he relies, notwithstanding they be at variance with them as stated by his own witness, otherwise he would be at the mercy of any witness introduced by him who testifies to facts which he did not expect, and in fact not true. When an adverse party to a suit is made a witness by the opposing party it is not upon the ground that he is a party to the suit that the party whose witness he is, is precluded from impeaching his testimony, either by general evidence showing his bad character for truth, or by evidence of statements made by him on some previous occasion contradictory of his testimony at the trial, but it is upon the ground that he is his witness, and for whose veracity he vouches. Thus in Brown v. Wood, 19 Mo. 475, it was said, “A party can not discredit his own witness, that is he can not introduce evidence whose sole purpose is to discredit his witness; but when he introduces a witness in order to establish a fact, and that witness disappoints him, and fails to prove it, the party is not precluded from proving the fact by another witness, although, in so doing, he may show the first witness guilty of perjury.” See, also, Wallach v. Wylie, 28 Kan. 138. So that it is perfectly clear that plaintiff is not concluded by the testimony of this witness to the effect that the transactions between himself and son were bona fide, but if from his testimony and other facts in evidence it appears that the transfer of the notes, and the execution of the mortgage were fraudulent, and the notes transferred and the mortgage executed for the [378] purpose of defrauding the creditors of H. C. McArthur and covering up his property so that it could not be subjected to the payment of his debts, and George J. was a party thereto, the mortgage will be set aside; and when the fact that H. C. McArthur was insolvent at the time, that he executed mortgages on his stock of drugs to secure debts owing by him in excess of their value, two days after he executed the mortgage to his son, the relation between the parties, the amount of the indebtedness to his son, and the value of the property upon which the mortgage was executed to secure its payment,'there is no escape from the conclusion that the whole transaction was fraudulent, and that George J. was a party thereto. But if for no other reason, the mortgage must be held fraudulent and void as to plaintiff upon the ground that the mortgage was given and accepted by the mortgagee to secure the payment of about $1,300 in excess of the amount which he must have known was due him at the time of its execution. Under such circumstances the entire mortgage was and is void against creditors. Boland v. Ross, 120 Mo. 208; State ex rel. Robertson v. Hope, 102 Mo. 410; Baldwin v. Short, 125 N. Y. 553; Wallach v. Wylie, supra. There are other questions raised by plaintiff in its brief upon which we do not pass, for the reason that from what has already been said the judgment must be reversed. We reverse the judgment and remand the cause with directions to the court below to enter up a decree setting aside the mortgage in accordance with the prayer of plaintiff’s petition. Gantt, P. J., and Sherwood, J., concur.