Summary
In National Bank v. Yegen, 83 Mont. 265, 271 P. 612, this court said: "Where a conveyance is made by a debtor of property to which he has the legal title, but as to which another has an equitable claim, though such equity is not enforceable in any court, such debtor may recognize such equitable claim, and convey the estate to the claimant without being guilty of any fraud as against his other creditors."
Summary of this case from Fousek v. DeForestOpinion
No. 6,334.
Submitted October 6, 1928.
Decided November 9, 1928.
Fraudulent Conveyances — Conveyance by Mother to Daughter — When Fraudulent, When not — Insolvency — Pleading and Proof — Fraudulent Intent — Presumption — When Grantee Becomes Party to Fraud — Equity — Findings — Appeal. Appeal — Equity — Findings — When Conclusive. 1. In an equity case the appellant, assailing the findings of the trial court, has the burden of showing that the evidence proponderates against them, otherwise they will not be disturbed. Fraudulent Conveyances — Conveyance by Wife Holding Property Under Agreement With Husband, Who Furnished Purchase Price for Benefit of Children, to Daughter in Trust, Held not Fraudulent. 2. Where lands, alleged to have been conveyed for the purpose of defrauding plaintiff creditor, had been purchased by the husband of defendant more than twenty years before plaintiff secured judgment against her and placed of record in her name with the understanding that they should be held by her for the benefit of their children who knew of the arrangement, and defendant transferred them to a daughter for the benefit of all the children without consideration some eight months before plaintiff commenced suit against defendant on a promissory note, and plaintiff had made no attempt to fix a lien upon the lands under the judgment recovered by him or otherwise, until a year and a half after the conveyance, the trust assumed by defendant and subsequently discharged by conveyance to the daughter for the benefit of all the children was sufficient to protect the transfer from attack as fraudulent. Same — Voluntary Conveyance by Mother to Daughter — What not Defense to Charge of Fraud. 3. Defendant's testimony as to lands, other than those mentioned in the paragraph above, which she had acquired in her own right unimpressed with a trust, that she had bought them for her children, who so understood it, was insufficient to show any legal or moral obligation on her part to prevent her from disposing of them as she saw fit, and insufficient as a defense against the claim of a creditor bank that a conveyance of the lands to her daughter without consideration made at a time she was indebted to it in a large amount, was in fraud of its rights. Same — Plaintiff must Show Insolvency of Defendant at Time of Conveyance. 4. A creditor, seeking to set aside a transfer as fraudulent, must allege and prove that the debtor was insolvent at the time the latter made the conveyance and that he had no other property out of which the former's claim could be satisfied or enforced by legal process. Same — What Constitutes Insolvency of Grantor. 5. One who, after conveying away his property, has none left accessible to legal process to satisfy the legal demands of a creditor, is, in the eyes of the law, insolvent. Same — Insolvency of Grantor — Evidence — Sufficiency. 6. Evidence in an action to set aside a transfer of realty as made in fraud of plaintiff creditor's rights reviewed and held to preponderate against the trial court's finding that plaintiff's evidence was insufficient to show that at the time defendant voluntarily conveyed property to her daughter she was insolvent. Same — Existence of Fraudulent Intent — Presumption. 7. Where one makes a voluntary conveyance of his property without retaining sufficient to satisfy the legal demands of his creditors, plaintiff in his action to set it aside as fraudulent is not required to show the existence of an actual fraudulent intent, the law presuming that by her voluntary act she intended the natural and inevitable consequences to flow therefrom, to-wit, to hinder, delay or defraud the plaintiff in the collection of his judgment secured after the conveyance, the result being fraud in fact. Same — Debtor must be Just to Creditor Before Generous to Others — Moral Turpitude in Transaction Immaterial. 8. A debtor, charged with having conveyed his property to escape payment of his debts, must be just before he is generous, and where he is generous before he is just, the law denounces his act as fraudulent as to those to whom he is not just even though the act may involve no moral turpitude. Same — By Accepting Property Without Paying Value, Transferee Becomes Party to Fraud. 9. Where a transferee of property receives it without paying anything of value therefor, he in effect becomes a depositary of it for the grantor, undertaking to hold it for the purpose of defeating the rights of the grantor's creditors, and by so doing makes himself a party to the fraud.
Appeal from District Court, Yellowstone County; O.F. Goddard, Judge.
Mr. J.B.C. McKnight and Messrs. Johnston, Coleman Johnston, for Appellant, submitted a brief; Mr. W.M. Johnston argued the cause orally.
Respondents base their claim to trust solely upon an alleged oral understanding between Laura B. Yegen and her husband. This court, in the case of Chowen v. Phelps, 26 Mont. 531, 69 P. 54, holds that: "To create an express trust there must be a conveyance in writing showing the purpose for which the grantee holds the property and there must be an acceptance by him." ( Rutherford v. Talent, 6 Mont. 135, 9 P. 921; Lynch v. Herrig, 32 Mont. 267, 80 P. 240; MacGinniss Realty Co. v. Hinderager, 63 Mont. 172, 206 P. 436.)
The evidence is insufficient to constitute a trust in this property for the further reason that the terms of the alleged trust are not stated. Section 7905 of the Code of 1921 provides that: "The nature, extent and object of the trust must be expressed in the declaration of trust." ( Bliss v. Bliss, 20 Idaho, 467, 119 P. 454, 455; Sims v. Sims, 94 Va. 580, 64 Am. St. Rep. 772, 27 S.E. 437; Ferguson v. Robinson, 258 Mo. 113, 167 S.W. 453; Renz v. Stoll, 94 Mich. 377, 34 Am. St. Rep. 358, 54 N.W. 277; Weaver v. Spurr, 56 W. Va. 95, 48 S.E. 856; 26 R.C.L., "Trusts," sec. 43.)
Under the deeds conveying the property to her, Laura B. Yegen had the absolute right to control and dispose of all of this property as she saw fit. Absolute control and power of disposition of property is inconsistent with the idea of a trust. (26 R.C.L., "Trusts," sec. 22; Towle v. Wood, 60 N.H. 434, 49 Am. Rep. 327; Hospes v. Northwestern Mfg. Car. Co., 48 Minn. 174, 31 Am. St. Rep. 637, 15 L.R.A. 470, 50 N.W. 1119.)
Parol evidence is not admissible to prove that a deed absolute on its face created a trust. ( Carpenter v. Gibson, 104 Ark. 32, 148 S.W. 510; Barker v. Barker, 75 N.J. Eq. 305, 72 A. 1002; Louisville N.R. Co. v. Ramsey, 134 Ga. 107, 67 S.E. 653; Illinois Steel Co. v. Konkel, 146 Wis. 556, 131 N.W. 845; Longe v. Kinney, 171 Mich. 312, 137 N.W. 122; McGuire v. Smith, 54 Ind. App. 509, 103 N.E. 71; Curry v. Dorr, 210 Mass. 430, 97 N.E. 87; Ryder v. Ryder, 244 Ill. 297, 91 N.E. 455; Flanders v. Booge, 146 Iowa, 675, 125 N.W. 662.)
If any attempt was made by Laura B. Yegen and her husband to create a trust in this land it was not such a trust as is allowed by the laws of Montana concerning real property. (Secs. 6783, 6787, Rev. Codes 1921; 39 Cyc. 37, 38; In re Fair's Estate, 132 Cal. 523, 84 Am. St. Rep. 70, 60 P. 445; 23 R.C.L., "Trusts," secs. 8, 16.)
Insolvency: Mrs. Yegen was the owner of forty shares of stock on the day the alleged conveyance was executed. At $150 a share its aggregate value would be $6,000 — $1,450 less than the principal of her note to the bank, to say nothing of the accumulated interest. The authorities are agreed that she was then insolvent whether her stock was worthless or worth $150 per share. It is immaterial whether she had property of no value at the time the conveyance was made or property of insufficient value to pay her then indebtedness. (12 R.C.L., pp. 594, 595, secs. 108, 109; Jones v. Williams, 94 Vt. 175, 109 A. 805; Aman v. Walker, 165 N.C. 255, 81 S.E. 164; Kehr v. Smith, 20 Wall. (U.S.) 35, 22 L.Ed. 313; Ogden State Bank v. Barker, 12 Utah, 13, 40 P. 767; note to 14 Am. Dec. 706; 27 C.J. 502, 503, sec. 168.)
Where a person makes a voluntary conveyance of his property an actual fraudulent intent is not necessary to make the conveyance fraudulent as to his creditors. (Note to Am. Dec. 14, p. 706; 12 R.C.L. 596, 597; 27 C.J., pp. 502, 503, sec. 170; 12 R.C.L. 537-539; Clarke v. Philomath College, 99 Or. 366, 193 P. 474, 195 P. 822.) A voluntary conveyance by one indebted is presumed to be fraudulent. (27 C.J. 498; Ogden State Bank v. Barker supra; Ross v. Wellman, 102 Cal. 1, 36 P. 403.)
"As to creditors at the time of the conveyance, the question of the good faith of the parties thereto is not involved. Such a conveyance is fraudulent and void as to them, although no actual fraud was intended." ( Jones v. Williams, 94 Vt. 175, 109 A. 805; Thysell v. McDonald, 134 Minn. 400, 159 N.W. 959; 12 R.C.L., pp. 594, 595, sec. 108; Hessian v. Patten, 154 Fed. 833, 83 C.C.A. 545; Salmon v. Bennett, 1 Conn. 525, 7 Am. Dec. 239; Morris v. Fidelity Mortgage Bond Co., 187 Ala. 262, 65 So. 811; Metz v. Patton, 63 W. Va. 439, 60 S.E. 400; Farmers' National Bank v. Thompson, 74 Vt. 442, 52 A. 963; Bailey v. Ballow, 69 N.H. 414, 44 A. 114; Adams v. Prather, 176 Cal. 33, 167 P. 538; Kolb v. Mall, 187 Iowa, 193, 174 N.W. 227.)
Messrs. Hurd, Rhoades, Hall McCabe, for Respondents, submitted a brief; Mr. E.J. McCabe argued the cause orally.
The view that a valid trust in all respects was impressed upon the real estate conveyed by Laura B. Yegen to Virginia Yegen, we believe, is sustained by the authorities hereinafter cited. From the uncontradicted testimony it appears that the greater and most valuable part of the property was conveyed to Laura B. Yegen by her husband in trust for the children, and as part of the consideration for such transfer she agreed to hold property which she acquired in trust also for the children. It is true that this agreement was not in writing, but nevertheless Christian Yegen transferred the property to Laura B. Yegen with that understanding, and the children had knowledge of the fact that the property was being held for them during the succeeding years.
Pursuant to such understanding, and on March 4, 1924, the children having reached their majority, the agreement between Christian Yegen and Laura B. Yegen was put into complete operation and effect by the execution of the deed in controversy. Independent of the question of the trust character of the property, the arrangement had between the husband and wife certainly was sufficient to defeat any inference or claim that the deed constituted a fraudulent conveyance. The rule is that a conveyance to satisfy a moral obligation is sufficient to defeat the claim of fraudulent conveyance. ( Paris Grocer Co. v. Burks, 56 Tex. Civ. App. 223, 120 S.W. 552; Bowler v. Curler, 21 Nev. 158, 37 Am. St. Rep. 501, 26 P. 226; Sanguinetti v. Rossen, 12 Cal.App. 623, 107 P. 560; Alaniz v. Casenave, 91 Cal. 606, 27 P. 521; Cooney v. Glynn, 157 Cal. 583, 108 P. 506; Jones v. Jones, 140 Cal. 587, 74 P. 143; Marcellus v. Wright, 51 Mont. 559, 154 P. 714; Huffine v. Lincoln, 52 Mont. 585, 160 P. 820.)
Appellant contends that since Laura B. Yegen was insolvent on March 4, 1924, and on that date conveyed the property in controversy without any consideration to respondent, Virginia Yegen, at a time when the former was indebted to the old bank, it is to be presumed that the conveyance was fraudulent as to appellant. The vice of appellant's argument is that it adopts for the premises facts not proven, and upon which appellant had the burden of establishing, to-wit, existing indebtedness; insolvency and want of consideration for the conveyance.
The lower court correctly held that under the circumstances no fraudulent intent could be inferred, and under the statute and rule of decisions of this court it could have logically arrived at no other conclusion. The question of fraudulent intent is one of fact and not of law, and a transfer cannot be adjudged fraudulent solely on the ground that it was not made for a valuable consideration. (Sec. 8606, Rev. Codes, 1921.) The principles applicable to this case are forcefully and succinctly stated by this court in Harrison v. Riddell, 64 Mont. 466, 210 P. 460; see, also, Mueller v. Renkes, 31 Mont. 100, 77 P. 512. Concerning the rule applicable to transactions between mother and her children in transfer of property, this court enunciated the principles in Wilson v. Harris, 21 Mont. 374, 417, 418, 54 P. 46, since adhered to. ( Security State Bank v. McIntyre, 71 Mont. 186, 228 P. 618.)
The facts and circumstances shown under which the conveyance was executed are convincing by way of disclosing lack of any fraudulent intent upon the part of the respondent, Laura B. Yegen, grantor, and evidence of such facts was clearly admissible as a part of the res gestae of the transaction, to-wit, the conveyance as illustrating its character and purpose. (22 C.J., sec. 535, pp. 443-451; 22 C.J., sec. 559, p. 470; Wimberly v. Winstock, 46 Okla. 645, 149 P. 238.) See, also, Hooker, Corser Mitchell Co. v. Hooker, 170 N.Y. Supp. 570, in which the court further, in discussing proof of fraudulent intent, stated the rule to be that neither the intent to defraud nor the validity of a conveyance attacked can depend upon subsequent events.
That the property in question was actually acquired for the use and benefit of the children, concerning which there is no evidence to the contrary, and eventually went to Virginia Yegen, for herself and the others, about which there is no controversy, ends the inquiry so far as plaintiff is concerned, and completely refutes the charge of fraudulent intent in the transfer. Any other course pursued by Laura B. Yegen would have resulted in the violation of her trust. ( Huffine v. Lincoln, 52 Mont. 585, 160 P. 820.)
A consideration of the evidence and the foregoing authorities demonstrates most convincingly that the deed in controversy was executed and delivered without any fraudulent intent upon the part of any of the parties thereto.
This action was brought for the purpose of having set aside a conveyance of certain real property made by the defendant Laura B. Yegen to her daughter, Virginia Yegen (now Virginia Yegen O'Meara), on March 4, 1924, and to subject the same to the satisfaction of a judgment for $8,230.72 and interest thereon, rendered against the defendant Laura B. Yegen and in favor of the plaintiff on December 30, 1924. The lands involved consist of four separate parcels:
(1) A tract of about twenty acres, described by metes and bounds and designated as the westerly half of lot 6 in section 2, township 1 south, range 26 east.
(2) An undivided interest in the north half of the southwest quarter, the west half of the southeast quarter of the southwest quarter, and lot 5 of section 2, township 1 south, range 26 east.
(3) All of block 14 of the Highland addition to the city of Billings.
(4) Lots 13, 14 and 15 in block 139 of the original town of Billings.
The complaint alleges that on November 25, 1924, the plaintiff commenced its action against the defendant Laura B. Yegen in the district court of Deer Lodge county to recover judgment on a promissory note given by her to the predecessor in interest of plaintiff on December 10, 1923, for the sum of $7,450, payable six months after date, with interest at six per cent per annum, which had been duly assigned to it, and that such proceedings were had in said action that on December 30, 1924, a judgment of said court was duly given and made in favor of the plaintiff and against the defendant therein for the sum of $8,230.72, which was duly docketed by the clerk of the court, that the plaintiff is the owner of said judgment, and that no part of the same has been paid.
It is further alleged that on March 4, 1924, and for a long time prior thereto, the predecessor in interest of the plaintiff was the owner and holder of said promissory note, and that the defendant Laura B. Yegen was then indebted to plaintiff on account of said promissory note, and that while she was so indebted to the predecessor in interest of the plaintiff she did, for the purpose of and with the intent to hinder, delay, defeat and defraud plaintiff of the amount so owing by her to the predecessor in interest of the plaintiff, wrongfully and fraudulently execute a warranty deed for the above-mentioned premises, conveying the same to Virginia Yegen, her daughter, which deed was delivered to the grantee and recorded in the office of the county clerk of Yellowstone county, Montana; that no consideration whatever was paid therefor; that at the time of the conveyance said property was of a reasonable value in excess of the amount of plaintiff's judgment against the defendant Laura B. Yegen, who has been at all times since the owner thereof, although title thereto stands upon the records in the name of Virginia Yegen.
It is further alleged that subsequent to the date of said judgment, and prior to September 11, 1925, a transcript thereof was duly docketed in the office of the clerk of the district court of Yellowstone county; that on September 11, 1925, an execution upon said judgment was duly issued out of the district court of Deer Lodge county, under and by virtue of which the sheriff of Yellowstone county levied upon the above-mentioned real property as the property of the defendant Laura B. Yegen, standing on the records in the name of the defendant Virginia Yegen.
It is further alleged that the defendant Laura B. Yegen has no property, other than her interest in said real property above described, out of which the plaintiff's judgment may be satisfied, in whole or in part; that the defendant Virginia Yegen, at the time she accepted and received said deed, knew that the same was executed and delivered to her by the defendant Laura B. Yegen with the fraudulent purpose and intent of the defendant Laura B. Yegen to hinder, delay, defeat and defraud the plaintiff of the amount due to it on account of said promissory note.
The answer of the defendants admitted the execution and delivery of the deed by the defendant Mrs. Yegen to her daughter, Virginia, but put in issue all the other allegations of the complaint. The cause was brought to trial before the court without a jury, and resulted in findings and a decree in favor of the defendants. The plaintiff has appealed, and in its brief has specified as error the refusal of the court to adopt each of its requested findings of fact and conclusions of law, as well as the action of the court in making its findings of fact and conclusions of law in favor of the defendants. In fine, the assignments of error raise but the single query whether the evidence preponderates against the court's findings and the decree entered in accordance therewith.
In an equity case such as this, the burden is upon the one who [1] assails the findings of the trial court to show that the evidence preponderates against them, and, if he is unsuccessful in this, they will not be disturbed. ( Gravelin v. Porier, 77 Mont. 260, 250 P. 823; Allen v. Petrick, 69 Mont. 373, 222 P. 451; Scott v. Prescott, 69 Mont. 540, 223 P. 490.)
The record shows without dispute that the lands described in [2] paragraphs 2 and 3 above were purchased by Christian Yegen, husband of the defendant Mrs. Yegen, more than twenty years before the matters at issue in this action arose, and that by proper conveyance the title thereto was placed of record in the name of Mrs. Yegen under an express oral agreement that she should hold said lands for their children, for the purpose of providing a competency for them, independent of and distinct from her husband's property. All the children were advised of and understood this arrangement, and the conveyance of the lands just mentioned was made on March 4, 1924, to Virginia for the benefit of all the children, without any money consideration, but to carry into effect the agreement made when the title thereto was placed in Mrs. Yegen's name.
The action against Mrs. Yegen, upon which judgment was rendered against her in Deer Lodge county, was not commenced until November 25, 1924, and no attempt was made to fix a lien upon the above lands under the judgment rendered therein or otherwise, until the eleventh day of September, 1925, or about a year and a half subsequent to the conveyance which it is sought to have set aside.
Under these circumstances the moral obligation assumed by Mrs. Yegen when she took legal title to the lands in her own name for the benefit of her children, which obligation she subsequently discharged by conveying the property to her daughter Virginia for the benefit of all the children, was sufficient to protect such conveyance from the attack of creditors on the ground that the same was without consideration and fraudulent, where the creditors had made no effort to subject the property to the payment of their claims by the imposition of a lien thereon prior to the conveyance. ( Paris Grocer Co. v. Burks, 56 Tex. Civ. App. 223, 120 S.W. 552; Clark's Admr., etc., v. Rucker, 7 B. Mon. (Ky.) 583; Bicocchi v. Casey-Swasey Co., 91 Tex. 259, 66 Am. St. Rep. 875, 42 S.W. 963; Powell v. Ivey, 88 N.C. 256; Silvers v. Potter, 48 N.J. Eq. 539, 22 A. 584; First Nat. Bank of Appleton v. Bertschy, 52 Wis. 438, 9 N.W. 534.) In the last-mentioned case the court said: "Where a conveyance is made by a debtor of property to which he has the legal title, but as to which another has an equitable claim, though such equity is not enforceable in any court, such debtor may recognize such equitable claim, and convey the estate to the claimant, without being guilty of any fraud as against his other creditors."
For the reasons above set forth, and in the light of the authorities cited, we shall dismiss from further consideration the conveyance of the lands described in paragraphs 2 and 3 above, and hold that as to them the conveyance should not be disturbed.
The situation with reference to the twenty-acre tract [3] described as the west half of lot 6, in township 1 south, range 26 east, and lots 13, 14 and 15 in block 139 of the original town of Billings, mentioned in paragraphs 1 and 4, is wholly different from that of the lands we have just considered. These parcels were acquired by Mrs. Yegen in her own right, without any assistance from her husband or anyone else. The substance of her testimony in reference to the manner in which she became possessed of this property, and in which she held the title, is that she bought it for the children, and that they so understood it, before and at the time she bought it. Such statements were purely voluntary, and did not impose upon her any legal or moral obligation, which would prevent her from disposing of the property to such persons, at such times, upon such terms, and for such considerations as she might select, and were not sufficient to protect her voluntary conveyance thereof to her daughter Virginia from attack by her then existing creditors, on the ground that it was in fraud of their rights. As stated by counsel for appellant in their brief: "If it were otherwise, then all one would have to do, to prevent his creditors from taking his real property in payment of his just debts, would be to make a statement to his children at the time of its purchase that he was buying the property for them."
It is the rule in this state that a creditor, seeking to set [4] aside a transfer as fraudulent, must allege and prove that the debtor was insolvent at the time he made the conveyance, and that he had no other property out of which his claim could be satisfied or enforced by legal process. ( Hale v. Belgrade Co., Ltd., 75 Mont. 99, 242 P. 425; Security State Bank v. McIntyre, 71 Mont. 186, 228 P. 618.) In this case the court, [5, 6] from the evidence, found as a fact thatthe plaintiff failed to prove that, at the time the conveyance was made from Mrs. Yegen to her daughter Virginia, she was insolvent, or that she did not have other property adequate in value to discharge the judgment against her, if plaintiff had sought to subject the same to that purpose. It is now necessary to consider this finding, in the light of the evidence introduced at the trial, to determine whether it can be sustained under the rule above set forth.
The only property, aside from that transferred by the deed in question, which Mrs. Yegen owned at the date of the execution of the deed to her daughter Virginia, was forty shares of the capital stock of the Anaconda National Bank, the predecessor in interest of the plaintiff. A great deal of testimony was introduced at the trial in an effort to fix and determine the value of this stock. We have endeavored with care to follow out the ramifications of this testimony, but do not consider it necessary to undertake the task of attempting to analyze and harmonize it, since the highest value claimed for it by counsel for defendants in their brief is $150 per share, or $6,000 for the forty shares. Without assenting to the conclusion that the testimony justifies the claim of counsel, we may accept that valuation for our present purpose.
The next step necessary to be taken is to ascertain the amount of Mrs. Yegen's indebtedness to the predecessor in interest of the plaintiff at the date of the transfer in question. This indebtedness was evidenced by a note for $7,450, dated December 10, 1923, due six months after date, bearing interest at the rate of six per cent per annum. The evidence showed that this note was the renewal of a note given to the predecessor of plaintiff several years before that time, which had been periodically renewed, and that it was the note which was the basis of the judgment rendered against Mrs. Yegen on December 30, 1924, in the district court of Deer Lodge county. Mrs. Yegen contended, and at the trial was permitted to testify, over objection, that this note was given by her to the bank in connection with the issuance in her name of certificates for fifty shares of the capital stock of the Anaconda National Bank; that it was "not a promissory note, but an accommodation note, not obligating any property that I hold for myself or the children, and this note was to be paid for in dividends, and the stock would be delivered to me in ten years, if it was paid for at that time, or if the bank needed all or a part of the stock at any time, I was to release it and be free of all obligations, and they could take all or a part of the stock at any time they required." This fifty shares of stock, prior to the time it was issued in the name of Mrs. Yegen, stood in the name of one Edwards, who had been connected with the bank in an official capacity, but apparently had not been paid for. Edwards severed his connection with the bank, and it was arranged to have his stock transferred to Mrs. Yegen, and this was accomplished by having her give the original note above referred to. This note was indorsed and its payment secured by Yegen Bros., a partnership comprised of Christian Yegen and Peter Yegen. In one part of her testimony Mrs. Yegen testified that she never saw this stock. She further testified that five shares of this stock were absolutely transferred to her husband, Christian Yegen, and a like amount to Peter Yegen, and in connection with this transfer she testified that she received a telegram to transfer (the stock) and get it off in the mail and send it to Anaconda. The stock certificate book of the bank, produced in evidence, showed that two certificates of stock were issued to and receipted for by Mrs. Yegen on November 6, 1921, one for forty shares of stock and one for ten shares; that the latter certificate was returned to the bank, indorsed by Mrs. Yegen, and that two certificates were issued in lieu thereof, one for five shares to Christian Yegen, and one for a like amount to Peter Yegen, on February 3, 1922. The cashier of the bank testified that neither the ten-share certificate nor the forty-share certificate issued to Mrs. Yegen was ever held by the bank as collateral security for any purpose; that he did not know what was done with either of them, and never saw either of them until the ten-share certificate was returned by Mrs. Yegen for cancellation and reissuance as above related. Christian Yegen testified that the certificates for shares of stock were never delivered to Mrs. Yegen, and were put in a safety deposit box in Butte. Mrs. Yegen was not asked, and did not undertake to explain, why she did not appear in the action brought against her on this note in the district court of Deer Lodge county and make the defense therein which she sought to inject into this suit. The record shows that judgment was taken against her therein by default.
From the foregoing circumstances, and in view of all of the evidence introduced in the case, we are impelled to the conclusion that Mrs. Yegen was mistaken in her contention that there was never to be any personal liability on her part on account of this note, and that the same was to be paid only out of the dividends from the stock. We conclude that the same was a valid and subsisting obligation upon her part on March 4, 1924, when she executed and delivered the deed in question to her daughter Virginia, and that at that time she was justly and legally indebted thereon in the amount of said promissory note, to-wit, $7,450, with interest thereon at six per cent per annum from December 10, 1923.
It is thus seen that, after the conveyance of the real property mentioned in paragraphs 1 and 4, the defendant Mrs. Yegen did not have property accessible to legal process to satisfy the legal demands of the plaintiff against her. In the eyes of the law, one who is so situated is regarded as insolvent. ( Stadler v. First National Bank, 22 Mont. 190, 74 Am. St. Rep. 582, 56 P. 111; Smith v. Collins, 94 Ala. 394, 10 So. 334; Mitchell v. Bradstreet Co., 116 Mo. 226, 38 Am. St. Rep. 592, 20 L.R.A. 138, 22 S.W. 358, 724; Walton v. First National Bank, 13 Colo. 265, 16 Am. St. Rep. 200, 5 L.R.A. 765, 22 P. 440; Lamberton v. Windom, 18 Minn. 506 [Gil. 455].) It follows, necessarily, that the court was in error in its finding to the effect that the insolvency of the defendant Mrs. Yegen was not established, and that finding must be rejected as being against the preponderance of the evidence.
It is not contended that the defendant Virginia Yegen paid any consideration to her mother for the transfer of the property to her. In fact, the record is replete with admissions that she did not. The conveyance was, therefore, purely voluntary.
By the provisions of section 8603, Revised Codes of 1921, a [7] fraudulent conveyance is void as to the creditors of the grantor. Where, as in the instant case, one makes a voluntary conveyance of his property without retaining sufficient to satisfy the legal demands of his creditors, it is not necessary to show the existence of an actual fraudulent intent, since by the law it is presumed that a person intends the ordinary consequences of his voluntary act. (Subd. 3, sec. 10606, Rev. Codes 1921; Ogden State Bank v. Barker, 12 Utah, 13, 40 P. 765; Jones v. Williams, 94 Vt. 175, 109 A. 803; 22 C.J. 502.)
Counsel for respondents seem to contend that, because of the provisions of section 8606, Revised Codes of 1921, to the effect that the question of fraudulent intent is one of fact and not of law, and that a transfer cannot be adjudged fraudulent solely on the ground that it was not made for a valuable consideration, the mere fact of the conveyance without consideration, with the resultant effect of leaving the grantor insolvent and without property sufficient to meet the plaintiff's demands, is not proof enough to establish the fact of fraudulent intent.
As it is heretofore pointed out, Mrs. Yegen must be deemed to have intended the natural and inevitable consequences of her act in making the conveyance, and that the result was to hinder, delay and defraud the plaintiff in the collection of its judgment against her, and therefore fraudulent in fact. (Bump on Fraudulent Conveyances, pp. 22 and 272.) The rule of law is that [8] one must be just before he can be permitted to be generous. If one undertakes to reverse the rule, and be generous before he is just, the law interferes, and says his act is fraudulent as to those to whom he is not just, even though the act may involve no moral turpitude.
Virginia Yegen being a voluntary transferee, it is immaterial [9] whether she knew of the facts and circumstances from which fraud is imputed to her grantor. This, of course, is on the theory that she parted with nothing of value, that she got something for nothing, and became a sort of a depositary of the property for her grantor, which she undertakes to hold so as to defeat the rights of the creditor, and, by so doing, makes herself a party to the fraud. ( Graham Grocery Co. v. Chase, 75 W. Va. 775, 17 A.L.R. 723, 84 S.E. 785; Waite on Fraudulent Conveyances, 3d ed., secs. 200-208.)
It is not necessary to make reference to further authorities to show that, so far as it affected the real property mentioned in paragraphs 1 and 4, above, being the twenty acres described by metes and bounds and designated as the westerly half of lot 6 in section 2, township 1 south, range 26 east, and lots 13, 14 and 15 in block 139 of the original town of Billings, the conveyance from Laura B. Yegen to Virginia Yegen will not withstand the attack made upon it by the plaintiff, and should be set aside as being in fraud of its rights.
The cause is remanded to the district court of Yellowstone county, with direction to modify the judgment heretofore entered, in accordance with the views above expressed. The plaintiff will recover its costs from the defendants.
Remanded for modification.
ASSOCIATE JUSTICES MATTHEWS and GALEN concur.
MR. CHIEF JUSTICE CALLAWAY and MR. JUSTICE MYERS not sitting.