Opinion
Submitted on brief March 22, 1927
Modified May 17, 1927 On motion to supplement record Motion denied April 13, 1926
From Klamath: A.L. LEAVITT, Judge.
For appellant, Mr. J.H. Carnahan.
For respondents, Messrs. Oneill Irwin.
For respondents there was a brief and oral argument by Mr. J.H. Carnahan.
For respondents there was a brief over the name of Messrs. Oneill Irwin.
IN BANC.
MOTION TO SUPPLEMENT RECORD DENIED.
This was a suit to impeach transfers made by the defendant to his wife the other defendant. In the course of the proceedings, she denied any claim or interest in certain lots involved in the controversy. The case was decided in favor of the defendant, and an appeal was taken by the plaintiff to this court. An application is now on file for leave to file, with the transcript in this case, a quitclaim deed made to this same property by Marie G. Davenport to Mary R. Motschenbacher, which deed bears the date of September 24, 1925, long after the decree was rendered.
We are aware of no theory upon which this can be permitted. An equity case is tried here upon the evidence submitted in the lower court, and to allow this deed to be filed with the transcript here would be practically allowing new evidence to be submitted in this court. If the cause were still pending in Klamath County, a motion to open up the case and take additional testimony might possibly be allowed, but the deed, and other papers accompanying it, can have no possible relevancy here and the motion is denied. MOTION DENIED.
ON THE MERITS.
This is a suit by the trustee in bankruptcy of the estate of W.C. Davenport, bankrupt, to set aside certain deeds, made by said bankrupt during his lifetime to his wife Marie G. Davenport, upon the ground that said conveyances were fraudulently made to defraud the creditors of the bankrupt estate. The facts, which are admitted, are so clearly established as to be indisputable, and are as follows:
On April 26, 1923, W.C. Davenport, who then and for a long time previous had been a jewelry merchant in the City of Klamath Falls, Oregon, was duly adjudged bankrupt in the District Court of the United States for the District of Oregon. Thereafter the plaintiff Van Riper was elected trustee of the estate, filed his bond and qualified as such trustee. On and for some time prior to February 12, 1922, the bankrupt Davenport held in his own name, and of record, lot 6 in block 37, First Addition to Klamath Falls, Oregon, together with two dwelling-houses thereon, the southerly 35 feet of lot 2, block 41, First Addition to Klamath Falls, and the timber claim listed in his schedules and therein described as the south half of the southwest quarter of section 3; west half of the northwest quarter of section 10, township 38 south, range 14 east, W.M.
On October 17, 1919, by a contract appearing in the evidence, he purchased from E.H. DuFault a portion of lots 1, 2, 7 and 8 of block 37, Original Town of Klamath Falls, Oregon. He listed in his schedules in bankruptcy the timber claim, which netted $725 on sale by the trustee, at $3,500.
On February 17, 1922, W.C. Davenport conveyed all of the said real property, except the timber claim, together with the personal property he had bought from Beaudreaux to his wife Marie G. Davenport.
On May 22, 1919, W.C. Davenport signed a statement to the National Jewelers Board of Trade which, he expressly stated over his signature, was made to form a basis for credit with the members of the National Jewelers Board of Trade, in which he claimed to own cash on hand and in bank, $750; notes from customers, $200; accounts receivable, $350; cost value of merchandise on hand, $1,500; real estate and buildings, $10,000; machinery and tools, $250; office furniture and fixtures, $300, or a total of $13,350, against which he owed liabilities amounting to $1,350; in addition to which he had insurance on merchandise of $100 and insurance on other property amounting to $4,250, with a repair trade of $3,000 per year according to the above statement.
At the moment of his bankruptcy, the bankrupt owed debts according to his own schedule amounting to $17,897.97. The claims actually filed and approved by the referee amounted to $18,880, which it may be assumed was the amount which he actually owed at the moment of bankruptcy. The bankrupt's property, including the jewelery store, inventoried at $6,940. The stock in trade sold for $3,000 and the timber claim sold for $725, making the total assets of the bankrupt, which were turned over to the trustee for distribution to creditors, $3,725.
In a letter dated May 22, 1919, being plaintiff's exhibit "M," addressed by Davenport to the National Jewelers Board of Trade, he stated:
"I have one six-room furnished house, one four-room furnished house, both up-to-date and modern; 360 acres of timber land and don't owe a cent on any of them. Have my taxes and improvements paid."
The court found in favor of the defendants on all of the controverted questions and from that decision the plaintiff appealed. MODIFIED.
We will address ourselves to the condition of the property situated on lot 6, in block 37, referred to in the foregoing statement. W.C. Davenport purchased this lot in 1908 and upon the southerly half of it he erected a house which then, and up to the date of his death, was occupied by himself and family as a home. It is not claimed that this was purchased otherwise than with W.C. Davenport's own money. Subsequently there was erected a cottage on the northerly half of the lot, which the defendant Marie G. Davenport claims as her separate property by reason of the fact that, with the assent of her husband to the arrangement, the cottage was built thereon with her own means and for her own use and benefit. This lot 6 is the principal portion of the property involved in this controversy. There is no competent evidence of the fact that defendant Marie G. Davenport built this house at her own expense or under an agreement with her husband that it should belong to her, excepting her own statement, and the fact that no other evidence was introduced on this point is very significant. If she received $500 from her mother's estate, her testimony on this point could easily have been corroborated by the usual records of the administration of the estate, and by such checks, drafts or orders in probate as would have indicated the source from which she derived the money. If, as she says, she received the rents which she estimated from $25 to $35 a month from 1910 to the date of the conveyance of the property to her by her husband in 1922, some evidence that she received these amounts certainly could have been available. We learn from the testimony that there were banks in the City of Klamath Falls and, if she had been in receipt of these sums of money, her bank account would have been available as to testimony tending to show when, where and how she kept these accounts; but no such testimony was proffered and the court is asked to believe her bare statements uncorroborated by a bank account or by a single check or draft showing that she was carrying on the business, managing this property and receiving the rentals; and that the sum so received amounted to $3,840 from the time that the cottage was built in 1910 until the date of the conveyance of the property to her by her husband in 1922. The profits of the faithful servant mentioned in the scriptures, who put his master's five talents at usury, pale into insignificance beside the profits of this little cottage.
It is hornbook law in this state that in a suit to set aside a voluntary conveyance made by a husband to his wife, the latter has the burden of proving that she is an innocent purchaser for a valuable consideration, if that question is involved, and where a conveyance made to a near relative is attacked as fraudulent by creditors, the burden is on the grantee to show that he purchased without notice of fraudulent intent, and for a valuable consideration: Blackabee v. Seaweard, 112 Or. 675 ( 231 P. 146); Stubling v. Wilson, 50 Or. 282 ( 90 P. 1011, 92 P. 810); Walker v. Harold, 44 Or. 205 ( 74 P. 705); Robson v. Hamilton, 41 Or. 239 ( 69 P. 651); Weber v. Rothchild, 15 Or. 382 ( 15 P. 650, 3 Am. St. Rep. 162); Marks v. Crow, 14 Or. 382 ( 13 P. 55). We do not think that the defendant has made such a showing. In addition to this negative argument against her present position is the positive fact shown by her own admissions before the referee in bankruptcy that she was aware of the statements made by her husband to the jewelers association in 1919, in the first of which he impliedly represented himself to be the owner of the whole of the property in question, and in the second, by which he absolutely represented himself as the owner without any disclosed objection or remonstrance on the part of his wife Marie G. Davenport. In other words, at that date when he made these statements, as she must have known with a view of obtaining present and future credit upon them, she allowed him to hold himself out as the owner of lot 6 and the buildings thereon, which, if her contention is true, would have been an implied assent to gross fraud and misrepresentation as to present and future creditors. These statements do not appear to be in any way modified until just before the day W.C. Davenport became a bankrupt.
It is true that in her testimony in the Circuit Court she denied that she knew the contents of exhibits "L" and "M" and claimed that her statement before the referee in bankruptcy was a mistake; but this is incredible as in her testimony before the referee in bankruptcy she gave a reason for not protesting against her husband making such representations. This change of front, after discovering how vital the admission before the referee was to her case, tends to discredit her later testimony. As to the testimony of Davenport before the referee in bankruptcy, he convicted himself of wilful imposture on his existing and expected creditors and his statements are worthless.
As to this lot 6 and the two buildings thereon, we are constrained to hold that they were the property of the bankrupt W.C. Davenport, and that this conveyance was made in order to place them beyond the reach of his creditors. The same may be said of the property purchased of E.H. DuFault for which a contract was in existence and which contract was assigned to the defendant Marie G. Davenport and a deed placed in escrow. It is claimed by the defendant that the contract has been forfeited, and she expressly disclaimed any right therein upon the trial. It may be doubtful whether there is much which can be realized out of this property, but the trustee in bankruptcy may have some equities in the property which could be enforced for the benefit of the estate. As to the property consisting of lot 2, block 41, it appears probable that some portion of Marie G. Davenport's money went into it and as to that the decree of the Circuit Court ought to be sustained. It is undoubted that the defendant Marie G. Davenport has a valid claim for a homestead on the southerly half of lot 6 subject to the usual course to be pursued in regard to such a homestead and subject to her homestead rights therein; and to her dower right in all of lot 6, the conveyance to her should be set aside as fraudulent as to creditors; and the same result should follow in respect to the property contracted for with DuFault so far as that course is applicable. As to the other property, the decree should stand as above stated, and a decree will be entered here in accordance with this opinion. Under the circumstances, neither party will recover costs in this court or in the court below. MODIFIED.