Opinion
12621
March 28, 1929.
Before DENNIS, J., Marlboro, July, 1927. Affirmed.
Suit by the E. Sternberger Company against J.W. Summerford and wife. Decree for defendants, and plaintiff appeals. Affirmed.
The following is the report of the Special Referee:
"This case was referred to me by consent order signed by his Honor, W.H. Townsend, presiding Judge in the Fourth Circuit, on February 25, 1926, for the purpose of taking testimony and passing upon all of the issues of law and fact and with instructions to report my findings to the Court with all practical dispatch.
"I held a reference in the office of Tison Miller on March 17, 1926, at which several witnesses were examined and their testimony taken down by agreement stenographically by Miss Juliet Leef, and the testimony is herewith submitted to the Court.
"The action is an effort to have set aside and canceled a deed from J.W. Summerford to Elizabeth Summerford recorded in Book 33, page 272, of Deeds and Conveyances in the office of the Clerk of Court for Marlboro County.
"The plaintiff by its complaint and amended complaint alleges that the deed was in violation of the Statutes of Elizabeth (Civ. Code 1922, § 5218) and of the Assignment Act (Civ. Code 1922, §§ 5511-5513) of South Carolina, and asks that the same be set aside and canceled. In addition to the witnesses, certain written and printed evidence was introduced, and is also herewith submitted to the Court.
"While this action may not be said to grow out of a former action between the plaintiff, E. Sternberger Company, and the defendant J.W. Summerford, it might be termed a result of said action.
"At the reference plaintiff was represented by R.D. Miller, Esq., of the firm of Tison Miller, and the defendant by his attorney, J.W. LeGrand, Esq. The plaintiff introduced in evidence as Exhibit A judgment roll No. 4766 in the case of E. Sternberger Company against J.W. Summerford, and as Exhibit B the execution issued in said case, which has indorsed thereon the return `Nulla Bona.' The printed case on appeal was used before me rather than the original judgment roll. This printed case, along with the other exhibits hereinafter referred to, is submitted as a part of the testimony.
"Both parties to this action relied in presenting its case or defense upon certain parts of the former case, but the whole case was introduced in evidence as above stated. The former case of E. Sternberger Co. v. J.W. Summerford was referred to me, and finally resulted in a decision from the Supreme Court sustaining my findings therein. 134 S.C. 63, 131 S.E., 322. The present case can be best understood by briefly referring to the former case, especially certain parts thereof.
"At the beginning of January, 1920, J.W. Summerford did not owe the plaintiff, E. Sternberger Company, anything. He made application to the company to be furnished in the year 1920, and on January 7, 1920, he executed to the plaintiff a crop mortgage to secure the plaintiff for supplies to the amount of $3,000, which the plaintiff agreed to furnish him. Said mortgage debt by its terms fell due October 1, 1920. (See folios 227 to 238, pages 57 to 60, inclusive of the printed case.)
"During that year the plaintiff furnished defendant supplies to the amount of $2,979.54. In cash the defendant paid plaintiff $430.94 on October 6, 1920, and the plaintiff had already given him credit on September 17th of the same year for $18 overcharge for bagging. In addition to this, the defendant delivered to the plaintiff in the latter part of 1920 and the first of 1921 eight bales of long staple cotton and twelve bales of short staple cotton on the mortgage debt, and this was shipped to Norfolk and held by plaintiff in its own name until July, 1921, at which time it was sold, and the plaintiff gave the defendant credit for the net proceeds of said sale. The controversy in the former action hinged largely upon the manner in which the cotton was handled. That question, however, is not a question in this case; hence this brief statement as to the crop mortgage of 1920 is sufficient.
"The itemized statement of the account exhibited by plaintiff against defendant can be found at folios 9 to 24 of the printed case, inclusive. On January 1, 1921, plaintiff claimed a balance against defendant of $2,548.60 (See folio 16 of printed case.) On March 19, 1921, the defendant J.W. Summerford executed and delivered a crop mortgage, which included the $2,548.60 claimed to be unpaid at that time, and $500 which the plaintiff agreed to furnish the defendant in the year 1921. (See folio 240 of printed case.)
"During the year 1921 the supplies furnished amounted to $695.52, making the total debt, including the balance brought over from 1920, to amount to $3,244.12. During that year the defendant paid on his account to plaintiff from the crops produced in 1921, $1,561.28, and the plaintiff gave the defendant credit for the net proceeds of the twelve bales of short staple cotton sold in July, 1921, $431.49, and for the eight bales of long staple cotton $333.57, which reduced the entire indebtedness down to $917.78. This can be more clearly understood by reference to the statement of account in the printed case on appeal.
"On March 6, 1922, the defendant J.W. Summerford executed a crop mortgage to the plaintiff in which was included the $917.78 account existing at the end of 1921; also $73.42 interest on that account and $1.10 recording fee of the mortgage, making $992.30; also the sum of $2,000 in addition, which the plaintiff agreed to furnish the defendant in the year 1922; during that year the defendant did not call for the full amount provided to be furnished under the terms of the mortgage, only taking up supplies to the value of $438.89. He was not as successful with his crops in 1922 as he was in 1921, and at the end of the year 1922 had paid only $493.93 from the crops that year, paying, of course, something more than actually furnished in 1922, but leaving a balance at the end of that year of $837.23.
"No mortgage was made by the defendant to plaintiff, and nothing was furnished by plaintiff to defendant in 1923, but it appeared in the former case before me, and now appears at folio 23 of the printed case, that on July 2, 1923, the defendant J.W. Summerford executed a note to the plaintiff for $66.98 for interest on the account during 1922, which note appears to have been paid by check on September 24, 1923; and the fact that such note was made and paid had much influence on my mind as referee in former case in finding against the defendant. I then came to the conclusion that the execution and payment of the note just mentioned acted as a waiver on the part of the defendant J.W. Summerford of the right to require the plaintiff to give to the defendant credit for the eight bales of long staple cotton and the twelve bales of short staple cotton delivered by the defendant to the plaintiff from the crop of 1920 at the value of the cotton when delivered. There was testimony in the former case before me by Mr. Strauss for the plaintiff that, if the defendant J.W. Summerford had been given credit for the value of the cotton in question when delivered, the account would have been settled, but there was also testimony on the part of the plaintiff tending to prove waiver on the part of the defendant and which I thought supported the claim of waiver, and I therefore found and reported in the former case against the defendant J.W. Summerford.
"There were a great number of letters introduced in the former case bearing the signature of J.W. Summerford, which indicated that he was able to write, and such strengthened the case against him, while there was only his own testimony that he could not write, and no testimony as to who did the writing for him, and for these reasons I was impressed with the idea that he was not giving a correct statement as to his ability to read and write. The writing of these letters was shown in the present case to have been by the wife of J.W. Summerford. This somewhat puts a different phase on his testimony concerning his ability to write.
"Fraud having been charged in the present case, the rules of evidence are not so strictly enforced, but can take a wider range.
"`Where fraud is charged, the inquiry assumes a wide range, and the rules of evidence are not so strictly enforced as in other cases.' Border State Lumber Co. v. Edwards, 103 S.C. 391, 88 S.E., 537.
"Both plaintiff and defendant have made it possible to examine in a general way the former case, and I think it is well that they have, since the facts in that case have some bearing on issues of fraud raised in this case.
"From the testimony I find:
"That the defendants J.W. Summerford and Elizabeth Summerford were married in the year 1901. That at the time of their marriage neither of them had any property or money. That for some time after their marriage the only support they had was such as was received by J.W. Summerford from his labor as a carpenter. That they determined to try to provide themselves with a home. That prior to 1916 they had both saved a little money, all of which they kept at their home. That in 1916 they had a very successful year in farming and saved some money, a part of which was turned over to Elizabeth Summerford. That she has always since their marriage worked as a farmhand during the time they were farming and saved what she received in cash. That in 1917 they were again successful in farming, and in the fall of that year, feeling that they were ready to provide for themselves a home, and having a small family growing up, J.W. Summerford, after negotiations with J.K. Owens, Esq., attorney for Etiwan Fertilizer Company, purchased the tract of land now in question for $5,500.00. The title to the land was executed in the name of J.W. Summerford on the 24th day of November, 1917; $2,000.00 of the purchase price was paid in cash on that date when the deed was delivered and a bond for the balance, to wit, $3,500.00, divided into four equal annual payments, was executed and delivered to Mr. Owens on the same date, secured by a mortgage covering the land in question.
"That in the fall of 1918, about the time the first installment was due, the defendants concluded that they would pay off the mortgage, and the defendant Elizabeth Summerford, having saved up to that time a little in excess of $1,400, paid said amount on the mortgage debt. Part of the balance was raised by J.W. Summerford in cash, and the other part was borrowed, all of which was sufficient when put together to pay off the mortgage debt. This tract of land I will call the Etiwan tract to distinguish it from another tract which I call the Allen tract.
"They built a little home on the Etiwan tract, where they have resided ever since. This tract of land did not give them any road frontage, and only a small acreage of land capable of cultivation, to wit, approximately 40 acres, the balance being in the swamp. In 1919, desiring to purchase other arable land, and feeling themselves able to do so, acting through Mr. Owens, J.W. Summerford purchased from J.F. Allen, Sr., 59 acres of land which extended from the place where they were then living to the road, and thus added about 54 acres of open land. This land appears more valuable than the Etiwan tract. The deed to the Allen tract was on the 1st day of November, 1919, recorded in Book 22, page 349, of Deeds and Conveyances, in the office of the Clerk of Court for Marlboro county, and is an exhibit in this case. The consideration named in the deed is $6,000. Only $2,000 of this was paid in cash, and on the same date of the execution of the deed a bond for the balance, to wit, $4,000, was executed by J.W. Summerford to J.F. Allen, Sr., payable in four payments of $1,000 each to cover the unpaid balance of purchase price, secured by a mortgage on the lands purchased, and both delivered to Mr. Allen. It is needless for me to call attention to the deflation and adverse conditions that have taken place since the beginning of 1920, since such fact is generally known. Only a part of the interest on this last mortgage seems to have been paid and no part of the principal.
"In the summer of 1922, the health of J.W. Summerford to some extent broke down, which finally necessitated his going to the hospital for an operation in the latter part of December. He was indebted to the Union Savings Bank to the extent of nearly $2,000, and his wife, Elizabeth Summerford, had paid $1,400 of her money for the purchase price of the Etiwan fertilizer property, and, both being of very limited education, the defendant, J.W. Summerford, being unable to either read or write, he sought the advice of both Mr. E.P. Miller, the president of Union Savings Bank, and Mr. Owens, his attorney, which resulted in his conveyance of the Etiwan tract to Elizabeth Summerford by deed bearing date July 12, 1922, which is Exhibit C in this case.
"I find that the consideration for the conveyance was made up of $1,400, which Elizabeth Summerford had paid on the purchase price, a $1,000 debt which she assumed on the date of conveyance, and executed a mortgage therefor to Union Savings Bank, and various other small sums of money which she had paid on the purchase price, including a part of cash paid when the deed was executed. This consideration I find to have been a valuable and adequate consideration for said premises.
"After the testimony was taken in this case, I went down to observe the lands. Some of the witnesses for the plaintiff had testified that the land was worth from fifty to sixty-five dollars per acre. To my surprise, I found the larger part of the land of an inferior quality, and the most valuable, which was approximately 40 acres of open land, I do not think exceeds over $40 per acre in value. I fix the value of the balance of the 170 acres of said tract at not exceeding $5 per acre. The timber is all cut therefrom, it is swamp land, and, in so far as I could see, useless for farming purposes.
"An examination of the account of plaintiff against the defendant will disclose that in the year 1921 from the crops of that year produced by J.W. Summerford on this and other lands there was paid $1,561.28. There is no testimony which even indicates that the prospects in July, 1922, were not just as good for the production of an equal amount of crops during that year. Certainly on July 12th, when the deed to the Etiwan lands was made, in so far as the testimony discloses, and in so far as this Referee knows, there was nothing to indicate that they would not make as good crop that year as in 1921. If those expectations could have been realized, the account that is found in the printed case shows that the entire indebtedness could have been paid, and necessarily there would not have been any first case to be tried. This certainly had a very great bearing on my mind as to the issue of fraud. I do not think that any account or debt which E. Sternberger Company claimed against J.W. Summerford on July 12, 1922, at the time the deed was made by J.W. Summerford to Elizabeth Summerford, even entered into the mind of either of them. Certainly the prospects were good at that time that the crops would be as good that year as 1921, and, had such been the fact, the debt would have been paid, and there never would have been a case in the first instance against Summerford.
"In addition to this at that time, when the deed was executed, J.W. Summerford had title to, and for a long time thereafter continued to hold title to, the Allen tract, the purchase price for which was $6,000, and on which $2,000 had been paid. It may or may not have entered into his mind in the summer of 1922 that he would not be able to satisfy the Allen mortgage. The testimony shows that in the fall of 1922, which was some time after he had made the conveyance to his wife, he was trying to borrow money from both Mr. E.P. Miller, president of Union Savings Bank, and Mr. Strauss, manager of E. Sternberger Company, with which to pay off the Allen debt, thereby indicating that he had faith in the value of the Allen lands. He was unsuccessful in his efforts to borrow money with which to pay off the Allen mortgage, but retained title to that land until September 14, 1923, at which time he reconveyed the land to J.F. Allen, Sr., thereby losing himself the $2,000 which he had paid in cash at the time the deed was executed.
"Both J.W. Summerford and his wife seem to have had in those days an idea that they could best take care of their money without placing same in a bank, and, as a matter of fact, it appears from the testimony that the first deposit that was made by either of them was about November 15, 1917, during the time the negotiations were going on, which resulted in the same year in the purchase of the Etiwan tract of land.
"I have already called attention to the fact that during the three years 1920, 1921, and 1922, when the plaintiff furnished J.W. Summerford, he took each year a crop mortgage covering the amount to be furnished and the old debt. This strengthens my view that, at the time the conveyance was made in July, 1922, which is now sought to be set aside, the question of avoiding any debt to the plaintiff did not enter into the mind of any of the parties, but, on the other hand, J.W. Summerford had the right to expect that the crop of 1922 would be as valuable as that of 1921, and, as I have already stated, the testimony shows that, if same had been as valuable, the entire debt would have been paid, and there never would have been any action such as the one on the account necessary under the circumstances.
"I have looked in vain of the testimony, for anything tending to prove that Elizabeth Summerford was a party to any fraud on the plaintiff or anyone else, and I was convinced by her testimony and by my observation of her on the stand that she was telling the truth. There was no convincing testimony tending to prove that any fraudulent intention on the part of J.W. Summerford entered into any of the transactions, unless the simple fact that he made the conveyance on the 12th day of July, 1922, of the Etiwan tract to his wife before his account for supplies for that year covered by his mortgage to the plaintiff and the old debt secured by that mortgage, and the fact that he owed a large part of the purchase price on the Allen tract, could be construed into an intention of wrong, and I do not think that such a view of the testimony should be taken. To offset any inference of fraud that might be drawn from the conveyance is the testimony of J.W. Summerford and his wife that they did not even know that the debt to the plaintiff had anything to do with the transaction; and the mortgage on the crop covering said debt then held by the plaintiff, and the fact that in the year 1921 the crop had been very valuable, and they had reasonable expectation of an equally as valuable crop in 1922 at that time, forced my mind to the conclusion that the deed from J.W. Summerford to Elizabeth Summerford was based upon valuable and adequate consideration; that there was no fraud or essence of fraud in the transaction; that, if anything that J.W. Summerford did in connection with the transaction could be construed into a badge of fraud, such could not be imputed to the defendant. Elizabeth Summerford, the grantee. Throughout the whose case she has borne herself in such manner as to convince me that, if there was any fraud, she was not a party to same.
"The Supreme Court in the case of Sotille v. Stokes, 111 S.C. p. 482, 98 S.E., 335, uses this language:
"`The Court calls attention of litigants to a too free use of the charges of fraud. Fraud should not be charged, unless there is proof of fraud, and not even then, unless fraud is necessary to a just dicision of the cause.'
"The case of Bell v. Thompson et ux., 122 S.C. on page 403, 115 S.E., 634, quotes from a former case ( Monaghan Co. v. Dickson, 39 S.C. 149, 17 S.E., 698, 39 Am. St. Rep., 704) the following:
"`In order to make out a case of actual fraud so as to set aside a mortgage, it is necessary to show concurrence in the fraudulent acts by the mortgagees as well as the mortgagors. There was here no proof of combination with the mortgagees, for most of them were not present and had nothing to do with procuring the execution of the mortgage.'
"In the case of Knighton v. Desportes Merc. Co., 119 S.C., pp. 345 and 346, 112 S.E., 344, is as follows:
"`The consideration in a deed of conveyance is neither an essential nor a vital element therein, unless it be of a contractual nature. It has no legal status except to estop the grantor from alleging that it was without consideration and to prevent a resulting trust in the grantor. The validity of a deed does not depend upon the real consideration being expressed therein. The expressed consideration is the least important of all the elements of that instrument. It, in itself, grants no right, vests no title, and warrants no promise. Its purpose and function is complete when it fixes and identifies itself as either a "good" or "valuable" consideration. * * * The question is: Is it of such character as to vest the title to the property therein described? It is a fact of general knowledge, and a practice well known to the Courts, that the real consideration of a deed is often withheld for secret reasons and business purposes. A consideration, to be sufficient, need not be adequate; it need only be a valuable consideration, however small.'
"From the case of McElwee v. Kennedy, 56 S.C. p. 170, 34 S.E., 91, I quote as follows:
"`To annul for fraud a deed based upon a valuable consideration, it must not only be shown that the grantor intended thereby to hinder, delay or defraud creditors, but it must also appear that the grantee participated in such fraudulent purpose.'
"The case of Manship v. Newton is a Marlboro County case, and is found in 105 S.C. pp. 1 to 13, inclusive, 89 S.E., 467. This last-cited case, among other things, reaffirms the principle that, in order to set aside a deed on the ground of fraud, the grantor and grantee must both participate in the fraud; and the deed in that case was sustained as valid largely on the point made that, whether or not there was sufficient evidence to establish fraud on the part of the grantor, the grantee did not participate in the fraud, if there was fraud, and for that reason the deed could not be set aside.
"I find that there was no fraud in the transaction; that the conveyance was based upon valuable and adequate consideration; that it was neither in violation of the Statutes of Elizabeth or the Assignment Act; that, even if anything that was done by J.W. Summerford in connection with the transaction could be construed as tending to prove fraud, such could not be imputed to Elizabeth Summerford since she was not any party to any fraud, and, in so far as I have been able to discover, had no knowledge of any intention to commit fraud.
"It is true that the consideration paid by J.W. Summerford to Etiwan Fertilizer Company in November, 1917, was as shown by the deed $5,500. This purchase was made at a time when the peak was about reached in high prices of lands in Marlboro County. The conditions existing in 1922 when the land was conveyed by J.W. Summerford to Elizabeth Summerford by deed now sought to be set aside and for the period since the fall of 1920 up to the present time cannot be compared with the conditions that existed from the beginning of 1916 to the fall of 1920, I do not think, however, that an experienced real estate man would have paid anything like $5,500 for the lands in question in 1917. The land is largely swamp land with no timber thereon, and said swamp land is unfit for cultivation, and could not be placed in condition for cultivation without a tremendous outlay for drainage, and there is no testimony tending to show that the character of the land has been changed since the purchase of 1917 up to this time. There was some testimony tending to place the value of the land at 50 to 60 dollars per acre, but there was other testimony tending to show that it is of far less value. A large body of land containing over 700 acres adjoining this tract with a splendid two-story dwelling house and sufficient tenant and other outhouses thereon, and of apparently better value than the Summerford land, sold in 1923 for less than $24 per acre, and there is no testimony tending to show other lands that were sold in that community during that time, and there is also no testimony tending to show that the price of the large body of land just mentioned was sold at less than its value.
"I have been on the Etiwan tract of land for the special purpose of trying to fix the value and am satisfied that $40 per acre is and was at the time of the conveyance to Elizabeth Summerford, the full value of the arable land which includes about 40 acres, and $5 per acre is, and was at said time, the full value of the balance of the land which amounts in acreage to about 130 acres. I therefore fix the value of the land at the time of said conveyance to Elizabeth Summerford to be $2,250. The testimony proves to my mind that the consideration for the conveyance was the $1,400 in cash which Elizabeth Summerford paid on the purchase price in 1918, and the $1,000 to Union Savings Bank she assumed at the time of the conveyance as shown by her mortgage to the bank of that date, and, in addition thereto, a part of the cash payment made to the bank on the debt on the date of the conveyance, and that the consideration paid was in excess of the actual value of the land.
"I find that the deed to Elizabeth Summerford by J.W. Summerford was a valid transaction based upon valuable and adequate consideration, and I sustain the same, and recommend that it be not set aside."
The decree of Judge Dennis follows:
"This is an action to set aside a deed from J.W. Summerford to his wife, the defendant Elizabeth Summerford, as a fraud on creditors, and comes before me upon exceptions to the report of H.J. Riley, as referee.
"I concur in the finding of the referee that in the fall of 1918 the defendant Elizabeth Summerford paid the sum of $1,400 on the purchase-money mortgage executed by her husband and that should be secured to her. The land is also subject to the mortgage of $1,000 and interest.
"I cannot agree with the referee in his conclusion as to the value of the land, and think the best way to determine this would be to sell the land at public auction and pay to Elizabeth Summerford the amount due her after payment of the mortgage she executed, and whatever amount is left should be the property of J.W. Summerford. In other words, treat the deed in this case as if it were a mortgage to Mrs. Summerford to secure her for money due her, second in lien to the mortgage she executed on the land, and it is so ordered.
"Let the parties apply for such further orders as will carry out these findings."
Messrs. Tison Miller, for appellant, cite: As to assignment act: Sec. 5511, Code; 11 S.E., 337; 42 S.E., 169; 16 S.E., 398; 44 S.C. 181; 119 S.E., 583; 132 S.E., 473; Sec. 5218, Code. "Fraud": 27 C.J., 416. Voluntary deed constructively fraudulent, where necessary to resort to lands so conveyed for payment of debts: 12 S.E., 561; 99 S.E., 815. Where conveyance between parties is attacked as a fraud on grantor's creditors, burden on grantee to establish good faith by clearest evidence: 14 S.E., 936; 82 S.E., 639; 99 S.E., 814. Presumption of fraud may be rebutted: 20 S.C. 232. Facts from which law infers fraud as to creditors, unless satisfactorily explained, are sufficient to set aside conveyance where no actual fraud shown: 30 S.E., 603. Valuable and bona fide consideration necessary for deed to be good: 42 S.E., 171; 77 S.E., 742; 27 C.J., 746. Actual fraud will be imputed to grantee though not present when conveyance made: 43 S.E., 393; 63 S.E., 62.
Mr. J.W. LeGrand, for respondent, cites: As to charge of fraud: 111 S.C. 482. Necessary fraud to set aside conveyance: 122 S.C. 400. Consideration: 119 S.C. 345, 346; 56 S.C. 170.
March 28, 1929.
The opinion of the Court was delivered by
The facts and questions involved in this case are fully set forth in the report of the Special Referee, H.J. Riley, Esq., to whom the case was referred for the purpose of taking the testimony and passing upon all issues of fact and law. For the reasons stated in the report of the Referee and the decree of the Circuit Judge, Hon. E.C. Dennis, it is the judgment of this Court that the judgment of the Circuit Court be, and is hereby, affirmed.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES COTHRAN, BLEASE and STABLER concur.