Blanks v. Klein

LOCKE, District Judge, after stating the facts as above, delivered the opinion of the court. The only question for determination in the case before us is the good faith of Mrs. E. B. Klein in purchasing the property in question, and receiving and holding the deed, and finally having it recorded. The fraudulent intent of any one else, if proven, could not affect her title, unless it could he shown that she was a party to it, intending that it should he used to the injury of the creditors. The substance of the assignment of errors is contained in the eighth assignment,— that the court erred in finding the law and the facts against the complainants, and in dismissing the bill. In determining this question all others will be considered. Mrs. Klein denied on oath any fraudulent intent, and testified positively to the good faith of the I ransaction, the payment of the consideration in full, her utter ignorance of the involved condition of her husband and son’s bank, and her not knowing the necessity of recording the deed, or of any injurious effect from the nonrecording of it; and the question is whether the circumstances of the failing-health of her husband, John A. Klein, the nonrecording of the deed until the day preceding tbe failure of the bank, tbe lack of notice to tenants of the sale, and the con! inued collecting of the rents and caring of the property by George M. Klein, were sufficient to establish the presumption of fraud on the part of Mrs. Klein. The burden of establishing by legal proof the charges In the hill is upon appellants. The first ground taken by them is that John A. Klein, at the time of the pretended conveyance, was so feeble in mind as not to comprehend any business matters, and therefore without capacity to contract. If this was so, the conveyance would, of course, be null and void. Examining the entire evidence upon that question, the first that we find is contained in the answer of Mrs. Klein in the case of the Valley National Bank of St. Louis vs. Geo. Irving et al., in which she says her husband “had been afflicted with disease which was [438] surely and gradually undermining Ms intellect and understanding, and that for about a year he had become wholly non compos mentis, and was incapable of understanding any business transaction;” and in a deposition of George M. Klein, taken in the same case, who says: “My father was in the mental condition that he was at the time of the failure of the bank about a year before that time. I can’t say within a few months, but that is my recollection.” In that same deposition he says: “From a period about six months after that time, until the failure of the bank, I perceived that his mind was growing so much weaker with Ms physical decline that, although he talked with me frequently about business matters, I saw that his mental condition was such as not to warrant me in acting upon any suggestion he might then make me.” The time from which he measures a period of six months was the time of signing a power of attorney, which was July 5, 1882. A period of six months would carry it to January 5, 1883, or some days after the date of the execution of the deed. These are the only items of evidence tending to show the mental incapacity of John A. Klein. His mental condition at the time of executing this deed was not a question under consideration in the suit in which this answer was made, and deposition taken, but from this answer alone it is claimed that Mrs. Klein is stopped from denying Ms condition as set up in that answer at that time. Even were these assertions direct and positive, (wMch they are not,) we do not consider they would estop her from setting up and proving a different condition of things in this case. Judicial admissions and pleadings of a party in another suit than the one under consideration are open to explanation or rebuttal, or it may be shown that they were made by mistake. “Pleadings of a party in one suit may be used in evidence against him in another, not as estoppel, but as proof, open to rebuttal and explanation, that he admitted certain facts.” 2 Whart. Ev. § 838. “The qualities of an estoppel which are imputable to a party’s plea, so far as concerns the particular case in which they are pleaded, are not imputable to such pleas when offered in evidence collaterally.” Id. § 1117. If the allegations of tMs answer are not accepted as an estoppel, (as we do not consider they are,) they can be contradicted, by the direct and positive evidence of eight witnesses, including the medical attendant and the pastor of Mr. Klein, as well as the explanation of Mrs. Klein, as.to the circumstances of her signing the answer referred to without reading it; and we can but come to the conclusion that Mr. John A. Klein was mentally competent to contract at the time of the execution of this deed, and that, when made, it was valid and binding. It matters not the manner of payment, — whether the proceeds of her mother’s property in Kew Orleans were remitted in cash or by credit to the bank, and so placed to her account. The amount stood there to her credit, properly and legally obtained, whether in cash, checks, or credits. Whether or not she was aware of the manner in wMch the collections and transmissions had been made could raise no presumption of a collusive or fraudulent intent oh her part. George M. Klein had had charge of the transaction of his mother’s business, the collecting and keeping accounts of rents, for years. She [439] had implicitly trusted him, and there is nothing to show that she had the least cause to believe or suspect that her confidence was misplaced, or that there was any reason why that course should not be continued. He collected the rents from her other property, and the fact that he still continued to collect the rents from this property after the purchase is, to us, no evidence that she must have permitted him so to do with a fraudulent knowledge. Had the transactions been between strangers, who had never before had such intimate business relations, the presumption would have been much stronger; but a change of the confidential business relations which had existed between Mrs. Klein and her son so long would have been more apt to awaken suspicion of her knowledge of the embarrassed condition of their affairs than would a continuation of such trust and confidence. It does not appear that she ever examined or scrutinized the accounts of the hank as to her rents or their collections, but left the keeping of them entirely to the employes, and accepted them without, question. We can see nothing in her course of trust in her son, and her confiding her business transact ions to his care, that can raise the presumption of had faith. In regard to the holding of the deed from record, the language of the supreme court of Mississippi in the case of Day v. Goodbar, 12 South. Rep. 30, (recently deeded, and not yet officially reported,) may well be cited as expressing the law of that state upon that, subject. Campbell, O. J., in that case, says: “This appeal presents another instance of the misleading influence of Hilliard v. Cagle, 46 Miss. 309, a case valuable only as showing a state of facts which led the court to the conclusion that the scheme then condemned was fraudulent as to subsequent creditors. In so far us it may be deduced from the opinion in that case that the withholding from record of any instrument which by law is good as to third persons not having notice only from the time of its being filed for record is anything more than a circumstance to be considered on the question of fraud, we have corrected that error in Klein v. Richardson, 64 Miss. 41, 8 South. Rep. 204, where the announcement is made that one who fails 1,o record an instrument simply takes the risk of a supervening right to or lien on the land or other thing. * * We arc unable to perceive a distinction between a contemporaneous instrument and one executed before, tnd brought into being as to third persons by being filed for record before such persons obtained a lion. I may trust my debtor in the assurance that he will protect me when danger threatens, and, if he does, by a judgment confessed, or a mortgage, or a deed of trust, or sale, before anybody'else acquires a specific claim, I am entitled to my advantage; and it is no legal ground of complaint by others that they did not know of my claim, or that there was an understanding or agreement that I was to he protected. The law does not require a proclamation of debts or credit. It only requires good faith, and it does not denounce as had faith confidence reposed between debtor and creditor. ” This we consider the la,w applicable to this case, and we find no evidence of had faith in withholding the deed from record. Had the deed been given for full consideration, and in payment of a valid debt, the very day before the fail uro, when it was filed for record, it would have been valid, and passed the property to Mrs. Klein. Gan it make such transaction less valid that the deed had been executed and in her possession some months before? We think not. We find no evidence that the grantor concealed the deed or had any connection with retaining it from record. It was delivered to the grantee at, the time of execution, and in her keeping until the day [440] of its being filed for record. Nor do we find any evidence or anything to raisé the presumption that it was through the connivance or suggestion of the grantors that it was kept from record, or that there was any fact calculatéd to put her on inquiry, and which, if followed up, would have led to the discovery that the vendor’s intent was fraudulent. We also fail to find satisfactory evidence that the nonrecording of this deed of conveyance affected injuriously the interests of the bank’s creditors, or that on that account it was enabled to obtain' greater credit, or that the withholding of it from record in the least affected the business of the bank, or-that appellants gave credit upon the faith of the ownership of this property. Several witnesses have testified generally that, had they known that this property had been sold to Mrs. Klein, they would have had their confidence in the bank shaken to some extent; but there is no evidence'that any of them searched the records for the purpose of ascertaining whether or not any of the property had been conveyed away, or that they would have known ifc if the deed had been placed on record at the time of its execution, or that they kept informed upon the purchases and sales of property by the bank. When we consider that these lots were but a small part of the real estate that was held by the Kleins, which was estimated at something over $400,000, and that their liabilities exceeded $1,000,000, and that a very large business was done, large payments made, and deposits received, the very day preceding the failure, we cannot believe from the evidence that the sale of these pieces of property for a full cash value would have affected the standing of the bank or the action of the complainants in making deposits, had it been known at the time of the'execution of the deed. In the entire case we fail to find evidence of bad faith on the part of appellee herein, or any presumption arising from her conduct which would render void the title by which she holds the property in question, and the judgment of the court is affirmed, with costs.