Summary
In Holman v. Hudson, 188 Miss. 87, 193 So. 628, 629, the court used this language: "... but a conveyance made in good faith and for a valuable, though inadequate, consideration (the value of the property conveyed being substantially in excess of the consideration paid therefor) will be held in equity to be voluntary as to the grantor's creditors to the extent of the value of the property in excess of the consideration paid therefor.
Summary of this case from Mississippi Cottonseed Prod. Co. v. PhelpsOpinion
No. 33772.
February 12, 1940.
1. FRAUDULENT CONVEYANCES.
A voluntary conveyance which leaves grantor without property to which his creditors may resort is void as to the creditors.
2. FRAUDULENT CONVEYANCES.
A conveyance in good faith and for a valuable though inadequate consideration, the value of the property being substantially in excess of the consideration paid therefor, will be held in equity to be a "voluntary conveyance" as to the grantor's creditors, to the extent of the value of the property in excess of the consideration paid therefor.
3. FRAUDULENT CONVEYANCES.
A conveyance in good faith, for a valuable though inadequate consideration, will be sustained to the extent of the consideration and will be given the effect of a mortgage to secure the payment thereof.
4. FRAUDULENT CONVEYANCES.
Where property is conveyed in good faith for a valuable though inadequate consideration, the property will be sold for protection both of grantee and of grantor's creditors, and the proceeds thereof applied to cost of making sale, to payment of money expended by grantee in purchasing the property, to debts of complaining creditors of grantor, and remainder if any to grantee.
5. FRAUDULENT CONVEYANCES.
If property conveyed by debtor in good faith to creditor was properly subject to sale at instance of complaining creditor, court did not improperly direct payment of expense incurred in making sale from proceeds thereof before payment to grantee of money expended by her in purchasing the property.
6. FRAUDULENT CONVEYANCES.
If property conveyed by debtor in good faith to creditor was properly subject to sale at instance of complaining creditor, court did not err in not allowing grantee interest on debt due her by grantor from date of the execution of deed to her, in view of her possession after conveyance without liability to account for use and occupation.
7. FRAUDULENT CONVEYANCES.
If property conveyed by debtor in good faith to creditor was properly subject to sale at instance of complaining creditor, no error was committed by the court in not directing that grantee be reimbursed for taxes paid by her on the land.
8. FRAUDULENT CONVEYANCES.
Trial court before ordering a sale of property conveyed by debtor to creditor in good faith would be required to find that value of property at time of conveyance exceeded in substantial amount the consideration paid therefor, and decree finding only that property might exceed in value the indebtedness by an appreciable amount would be reversed in so far as it directed a sale and cause would be remanded for another trial on that issue.
APPEAL from the chancery court of Winston county; HON. J.D. GUYTON, Special Chancellor.
W.A. Strong, Jr., of Louisville, for appellant and cross-appellee.
Where a debtor, in good faith, conveys property to a creditor in payment of a valid, pre-existing debt, the conveyance will not be condemned as fraudulent unless the consideration is so grossly inadequate as to beget the belief that the sale was a contrivance to evade creditors.
12 R.C.L. 479; Kaufman v. Whitney, 50 Miss. 106.
The Supreme Court will take judicial notice of the general conditions throughout its territorial jurisdiction and that the value of land shrunk enormously from 1919 until 1932, and increased in value by 1938.
Wilson Banking Co. v. Colvard, 172 Miss. 804, 161 So. 123; Atl. Life Ins. Co. v. Klotz, 182 Miss. 243, 181 So. 519.
There is a strong moral, as well as legal, reason for a debtor to prefer his child to other creditors and he has a right to do so.
Donly v. Ray, 6 So. 324.
Where a conveyance or transfer is merely constructively fraudulent, the grantee is entitled to a first lien on the property conveyed for the consideration paid and to interest thereon.
27 C.J. 671; Thomas v. Beal, 154 Mass. 51, 27 N.E. 1004; Scoggins v. Schloath, 15 Or. 380, 51 N.W. 354.
Where money is loaned and there is no agreement as to whether or not interest will be charged, interest at the rate of 6 per cent should be allowed.
Sec. 1946, Code of 1930; Berry et al. v. Folkes et al., 60 Miss. 576; Thompson v. Matthews, 56 Miss. 369; Collins v. Carter, 156 Miss. 600, 125 So. 689; Stowell v. Clark, 152 Miss. 32, 118 So. 370.
The grantee should also be allowed the amount expended for taxes.
27 C.J. 677.
An insolvent debtor may convey his homestead, or any part thereof, with or without consideration, and his creditors cannot complain.
Secs. 1766, 1767, 1770, Code of 1930; O'Connor v. Ward, 60 Miss. 1025; Hodges v. Hickey, 67 Miss. 715; DeBardeleben Coal Co. v. Parker 164 Miss. 728.
If husband receives or appropriates to his own use the property or money of his wife, he becomes debtor to his wife for the amount so used or appropriated.
Sec. 1945, Code of 1930.
If a husband uses his wife's money in purchasing land, taking title in his own name, he becomes her debtor, and may convey the land to her in payment of said debt free from claims of other creditors provided the value of the land does not exceed the amount of the indebtedness.
Wylie v. Gray, 36 Miss. 510; Kaufman v. Whitney, 50 Miss. 103; Surget v. Boyd, 57 Miss. 485.
A husband, though insolvent, has a right to prefer his wife and protect her interest by conveying all of his property to her, even though the conveyance is made on account of pending suits against him by other creditors, provided the value of the property conveyed to his wife does not greatly exceed the amount of the debt due her.
Graham v. Morgan, 83 Miss. 601, 35 So. 874.
One who lends money to another is entitled to interest upon the amount so lent, although nothing is said about interest.
33 C.J. 201, Sec. 57.
Where there is nothing said about interest, or the time the debtor is to be paid, interest should be allowed from the time the debt is demanded.
33 C.J. 233, Sec. 123.
Where a contract for the payment of money fixes no time when it shall be paid, the contract is payable immediately and interest runs from the date of the contract.
17 C.J. 920, Sec. 211; White v. Van Horn, 159 U.S. 3, 15 S.Ct. 1027, 40 L.Ed. 55; Lambert v. Schmalz, 118 Cal. 33, 50 P. 13; Francis v. Castleman, 40 Bibb. 282; Horn v. Hanson, 56 Minn. 43, 57 N.W. 315; Chester v. Jumel, 125 N.Y. 237, 26 N.E. 297; Purdy v. Phillips, 8 N.Y. Super. 369; Collier v. Gay, 1 Overt. 110; Hershbrook v. Milder, 1 Penn. 643.
Where there is no agreement as to interest the legal rate will be allowed from the time the debt is due and payable.
Stowell v. Clark, 152 Miss. 32, 118 So. 370.
Before the court is justified in condemning a sale for inadequacy of consideration the inadequacy must be so gross as to beget the belief that the sale is a contrivance to evade creditors.
Kaufman v. Whitney, 50 Miss. 106.
A judgment or decree is erroneous if the supporting foundation for same is not more substantial than conjecture or possibility.
N.O. N.E.R.R. Co. v. Holsomback, 168 Miss. 493, 151 So. 720; Tyson v. Utterback, 154 Miss. 381, 122 So. 496; Hercules Powder Co. v. Calcote, 138 So. 583, 161 Miss. 860; Williams v. Lumpkin, 152 So. 842, 169 Miss. 146; Shell Petroleum Corp. v. Eagle Lbr. Co., 158 So. 331, 171 Miss. 539; Dr. Pepper Bottling Co. v. Gordy, 164 So. 236, 174 Miss. 392; Mo.-Pac. Transport Co. v. Beard, 176 So. 156, 179 Miss. 764; Kramer Service v. Wilkins, 186 So. 625.
A conveyance by a debtor to a creditor in payment of pre-existing debt will be sustained unless the amount of the debt is greatly less than the value of the property conveyed.
27 C.J. 534, Sec. 227; 12 R.C.L. 583, Sec. 100; Kaufman v. Whitney, 50 Miss. 106.
Whenever a judgment is based upon a decision or finding they must be sufficiently comprehensive, certain and consistent to sustain the judgment and justify it as a matter of law.
33 C.J. 1171; Elliott v. Am. Surety Co., 281 Fed. 829; Zimmerman v. Trimmerman, 193 N.Y. 486, 86 N.E. 540; Abbey v. Merrick, 27 Miss. 320; Whitfield v. Whitfield, 40 Miss. 352.
Interest follows the debt as an incident thereto after it becomes due and it is not necessary to claim interest in the pleadings.
Washington v. Planters Bank, 2 Miss. 230, 28 Am. Dec. 333.
R.W. Boydstun, of Louisville, for appellee and cross-appellant.
We have here as defendants a whole family, mother, dad, daughter, and foster son. Dad became indebted on a surety claim and had in his own name five hundred thirteen acres of land.
After dad became indebted as above stated, and was about to be sued, and his family found out "about this Rawleigh business," Dad suddenly became indebted to each member of his family, a man who had for fifty years been a very prosperous farmer suddenly became a pauper, the only daughter that he had nurtured, and the foster son whom he had nursed and supported as his own suddenly loved him so greatly that they took everything he had for the debts he owed them. This daughter that he had reared and educated, and who according to the evidence had never cooked a meal for dad, nor ever done him a kind deed, received property for which her father had only a short while before paid $2400 in payment of a debt of $800.
The court well understood the situation. Having for many years been in private practice, the chancellor knew that the complainant in his court had been mistreated.
The defendants had received everything. The complainant certainly received only "crumbs" for comfort.
There is no evidence in the record that we can find which attempts to show that P.B. Worthy was ever indebted to the other defendants. All the evidence shows that he was allowed to purchase lands with money furnished by the other defendants for that purpose and take title thereto, and place same of record, in his own name, and the public was invited to deal with P.B. Worthy as a well-to-do land owner.
The learned chancellor in his decree wholly ignored the defense of the trust claimed and found that P.B. Worthy had executed the deeds in payment of indebtedness that he was due to the grantees.
We here submit that there is not one word of proof in the record showing that these grantees ever claimed an indebtedness against P.B. Worthy. The entire proof showed that P.B. Worthy had purchased these lands with the money of the other defendants and that he had for many years held the title to same in his own name and had done business upon the faith that these were his lands; had obtained credit therewith, and had sold land from time to time.
A person cannot allow a third person to take and hold property in his name for years without making an attempt to have the title placed in the name of the owner, then complain when an innocent creditor attempts to subject such property to the debts of the apparent owner.
The above stated principle, as applied to the case at bar, is this, "After Mr. Worthy was allowed by the other defendants, to hold title to this property from 1898, 1903, 1915, 1919, and 1927 and to hold out to the world that he was the owner of valuable lands and obtain credit and do business upon faith of such representations they are estopped to now set up the claim that they are the true owners of these lands as against bona fide creditors of P.B. Worthy. We admit that as between P.B. Worthy and the other defendants, cross-appellees here, P.B. Worthy has no rights in these lands, but the rights of the grantees are subordinate to the rights of J.E. Hudson."
Pomeroy Eq., Students' Ed., page 391, par. 805, page 395, par. 809; Smith v. Willard 174 Ill. 548, 66 A.S.R. 313; 57 A.S.R. 175.
We submit that the attempted dealing in this case regarding these lands between P.B. Worthy and Dick Parkes and Mrs. Josie Holman are condemned by the principles of common honesty and equity, and should not be tolerated; that the dealings concerning these lands between P.B. Worthy and Mrs. P.B. Worthy is in direct conflict with Sections 1943, 1944, Miss. Code 1930. We respectfully submit that this case should be affirmed on direct appeal and reversed and remanded upon cross-appeal.
Wilkerson v. Posey, 74 So. 125; Weaver-Loughridge Lbr. Co. v. Kirkland et ux, 126 So. 773.
We do not think that Mrs. Josie Holman is entitled to interest for any amount from any date.
She asked for no interest in the trial court.
The allowance of interest in this instance, if same should be allowed, would be in the nature of further relief, or affirmative relief, which can only be granted to a defendant upon a cross-bill.
Griffith's Chancery Practice, page 698, par. 616.
The evidence of Mrs. Josie Holman shows that she has never made demand upon P.B. Worthy for payment; he never promised to pay either principal or interest.
Interest is not a part of a contract and is not an incident of right thereto. Under the common law interest was not allowed, and all statutes and contracts providing for interest are in contravention of the common law and must be strictly construed against the allowance and collection of interest.
15 R.C.L. 2-15, paragraphs 1-11; Students' Edition, Browne's Blackstone's Commentaries, pages 375-379; Eastin v. Vandorn, Walk. (1 Miss.), 214.
Counsel for appellant, Mrs. Josie Holman, very graciously admits that interest could not be charged before the execution of the deed on August 29th, 1932. With that admission we are only concerned with the time since said date. There can certainly be no interest allowable after the execution of the deed.
As to the second query of this court, "Is the finding of the trial court a sufficient adjudication that the value of the property did in fact exceed Mr. Worthy's indebtedness to Mrs. Holman by an appreciable amount?", we answer this query in the affirmative for two reasons: (1) It is a sufficient finding by the trial court; (2) Mrs. Holman cannot possibly be injured by the decree and cannot be heard to complain here.
Griffith's Chancery Practice, page 683, par. 609.
We think the wording of the decree, "some appreciable amount" was certainly intended by the court below to adjudge that the value of the land is sufficient that Mr. Hudson would get something out of it. In legal meaning "may" carries with it the meaning "shall".
Carrollton v. North Carrollton, 109 Miss. 494, 69 So. 179.
Argued orally by R.W. Boydstun, for appellee and cross-appellant.
In 1926, P.B. Worthy, J.J. Pearson, and J.E. Hudson executed a written agreement guaranteeing the payment to W.T. Rawleigh Company of merchandise to be sold by it to Wilbur K. Bennett. The Rawleigh Company sued on this guaranty and obtained a joint judgment of $300 against the guarantors. This judgment was collected by the Rawleigh Company from Hudson, who then instituted a suit in equity against Worthy for the recovery of one-third thereof. He also alleged that Worthy had fraudulently conveyed all of his property to the appellant, his daughter, and to Dick Park, conveying to each separate parcels of land by separate deeds. The prayer of the bill was for the recovery sought from Worthy and for the setting aside of these conveyances made by him, and the subjection of the property conveyed to the payment to the appellee of one-third of the W.T. Rawleigh Company judgment, which he had paid off. The case was heard on bill, answer, and proof, and a decree was rendered granting the recovery sought against Worthy by adjudging that all of the deeds sought to be cancelled were executed in good faith in payment of debts due by Worthy to each of the grantees. As to the conveyance to the appellant, the decree recites that it was made in consideration of $800.00 then due her by Worthy, but that the property conveyed to her "may exceed in value the said indebtedness by some appreciable amount . . . and therefore the court finds that said property should be sold by a commissioner at public sale for cash on the 5th day of November, 1938, after advertising said sale in the issue of the Winston County Journal. That the proceeds of said sale shall be used first in paying the cost and expenses of sale and second in paying to Mrs. Josie Holman the sum of $800.00 being the amount she has invested in said place and third the sum herein adjudged to complainant and balance if any, to Mrs. Josie Holman."
There is an appeal by Mrs. Holman and a cross-appeal by Hudson. The evidence sustains the finding of the court below that these deeds were made in good faith for a valuable consideration. Consequently, this finding will not be disturbed. We come then to the decree ordering the sale of Mrs. Holman's land.
Mrs. Holman's complaints are: (1) That having found that Worthy's deed to her was made in good faith for a valuable consideration, the court below should have dismissed the bill of complaint as to her; (2) the evidence does not disclose that the value of the property conveyed to her was substantially in excess of what she paid therefor and the court below did not in fact so find; (3) that she should be paid in full out of the proceeds of the property before the payment of the costs incurred in selling it; (4) she should have been allowed interest on the debt due her by Worthy from the date of the deed from him to her; and (5) taxes paid by her on the land should be added to the amount to be paid her from the proceeds of the sale of the land.
A voluntary conveyance, one without consideration, which leaves the grantor without property to which his creditors may resort, is void as to the creditors, but a conveyance made in good faith and for a valuable, though inadequate, consideration (the value of the property conveyed being substantially in excess of the consideration paid therefor) will be held in equity to be voluntary as to the grantor's creditors to the extent of the value of the property in excess of the consideration paid therefor. Willis v. Gattman, 53 Miss. 721. But, there being no actual fraud on the part of the grantee, the conveyance will be sustained to the extent of the consideration therefor, and will be given the effect of a mortgage to secure the payment thereof. 27 C.J. 544, and 671. Cf. McLean v. Letchford, 60 Miss. 169; and Stovall v. Farmers' Merchants' Bank, 8 Smedes M. 305, 47 Am. Dec. 85. For the protection both of the grantee and of the grantor's creditors, the property will be sold under the order of the court and the proceeds thereof applied as ordered by the court below, (1) to the cost of making the sale; (2) to the payment of the money expended by the grantee in purchasing the property; (3) to the debts of the complaining creditors of the grantor; and (4) the remainder, if any, to the grantee. Authorities, supra; and Haggett v. Jones, 111 Me. 348, 89 A. 140.
Pretermitting for the present, but returning later to the order in the decree for the sale of the land and disposing of the other assignments of error first, we will say that if under the rule hereinbefore announced this land should be sold for the benefit of the grantor's creditors, no error was committed by the court below (1) in directing the payment of the expense incurred in making the sale from the proceeds thereof before payment therefrom to Mrs. Holman. The sale is for her benefit, as well as for the benefit of the grantor's creditors, to enable her to subject the property to the payment of the consideration paid by her in good faith therefor; (2) in not allowing Mrs. Holman interest on the debt due her by the grantor from the date of the execution of the deed to her. She was thereafter in possession of the land or with the right thereto, without liability to account for the value of its use and occupation, or for rent thereon or profits therefrom. If such liability here appeared and was sought to be enforced, a different question would be presented, as to which we express no opinion; (3) for the same reason no error was committed in not directing that Mrs. Holman be reimbursed for the taxes paid by her on the land.
We come now to the order for the sale of the land. In order to apply the rule hereinbefore announced, the trial court must find the value of the property at the time of its conveyance and that the value so found exceeds in a substantial amount the consideration paid therefor. We express no opinion as to the necessity for the court's decree to recite the finding of these facts, it not being necessary for us so to do for the reason that the court's decree not only does not recite such findings of fact, but on the contrary affirmatively negatives any such findings. It discloses that the court found only that the "property may exceed in value the said indebtedness by some appreciable amount."
The decree of the court below will be reversed insofar as it directs a sale of the land conveyed to Mrs. Holman, and will be remanded for another trial on that issue only.
So ordered.