Case ID: ohio-st_48/html/0379-01.html
Source: Caselaw Access Project
Author: {"author": "Williams, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

McCall, Adm’r, v. Pixley et al.
    
      Fraudulent Conveyance — When may be impeached by administrator of grantor — When not.
    
    1. A conveyance made by a debtor with intent to hinder and delay his creditors, cannot be impeached by his personal representative, unless the property so conveyed is actually required for the payment of his debts.
    2. When the personal estate in the hands of an administrator is sufficient to pay the costs of administering the estate, and all the debts of the decedent, except such as are amply secured by mortgage executed by him in his lifetime on lands of which he died seised, an action cannot be maintained by the administrator to subject to sale for the payment of the mortgage indebtedness, other lands which the intestate had conveyed away with intent to hinder, delay and defraud his creditors.
    (Decided May 19, 1891.)
    Error to the Circuit Court of Scioto county.
    Irwin M. Gilruth, and his sister, Alice R. Pixley, inherited from their father, William Gilruth, deceased, each the undivided, one ninth of certain lands situated in Scioto county, including lots Nos. 1 and 4 of the French Grant, containing about four hundred acres. On the 17th day of January, 1880, Irwin M., by deed duty executed, in which his wife, Susan A. Gilruth, joined, conveyed his undivided one ninth of the two lots to his sister Alice, for the nominal consideration of one dollar. Afterwards, on the fourth day of September, 1880, amicable partition was made of the lots referred to, by the heirs of William Gilruth, (nine in number,) by which there was set off in severalty to Alice R. Pixley, as for her full share, a subdivision of lot No. 4, designated as lot No. 2 of French Grant of lot No. 4, containing 95 acres. This included the interest of which she was seised by inheritance, and also that conveyed to her by Irwin M. Gilruth, who, in consequence, did not receive anything under the partition. He had knowledge of the partition, and assented to it, as made.
    On the 25th day of December, 1884, Irwin M. Gilruth died intestate, leaving a widow, Susan A. Gilruth, but leaving no children, or their representatives.
    The widow was appointed administratrix of the estate, on the 31st day of December, 1884, and made settlement of her administration in the probate court, in 1886, when she was discharged from the trust, and Alexander McCall, to whom she had been married, was appointed administrator, de bonis non. •
    
    On the 21st day of April, 1886, the administrator de bonis non, filed his petition in the Court of Common Pleas of Scioto county, against Alice R. Pixley, and her brothers and sisters, to whom, with Irwin M. Gilruth, the real estate above referred to came by inheritance from their father, William Gilruth, which sets forth the facts above stated, and further alleges, that valid debts of Irwin M. Gilruth, which were presented to, and allowed by the administratrix, to the amount of $3,767.08, remain unpaid. The costs of administration, it is estimated, will amount to the further sum of $500, while the whole available personal estate does not exceed $925. The dates, amounts and consideration of the debts are specifically set forth in the petition, as follows:
    “Note payable to A. J. Trumbo, date December 1, 1883, consideration, money loaned by him to I. M. Gilruth, amount $100, and interest from December 1, 1883, at 8 per cent.
    Subscription to the Guarantee fund of Lawrence County Agricultural Society of Lawrence Co., Ohio., of date 1874, for two years, and in 1876 renewed by promise in writing, without limit as to time, $10.
    James P. Beale’s claim, balance due upon account stated for goods and merchandise sold and delivered to decedent from Jan. 20,1883, to December 20,1884, with interest from Dec. 20, 1884. ,$77.10.
    Newman & Spanner’s lumber bill for lumber sold decedent by them from September 20, 1882, to September 10, 1883, and interest from September 10,1883. $34.48.
    Will T. Cox’s bill for one wagon, Feb. 20, 1883, and one September 3, 1883, each for $90, sold and delivered to decedent, $180,,with interest from September 3, 1883.
    Samuel Nash’s bill for professional services in year 1884, $5.
    M. L. Marshall, balance due upon account stated for goods and merchandise sold decedent in 1884, and payments in money and goods in that year made to the laborers upon decedent’s farm at request of decedent, which decedent promised to pay upon settlement with said Marshall, $24.24, and interest.
    J. L. Anderson’s bill for balance due on professional services for the years 1881, 1882, 1883 and 1884, and expenses rendered to and paid for decedent, in sundry suits in Lawrence county, O., and Gallia county, O., and legal advice during same period, $100 and interest.
    Claim of Wm. Elkins, $3,228.25, with interest from-which is a claim bought by said Elkins from Thomas M. Gilruth, after the death of decedent, and after the maturity of the claim, and which was originally for money loaned said decedent by Thomas M. Gilruth, said amount loaned being $2,750, or thereabouts, and same was loaned on the 12th day of Dec., 1882, and drew four per cent, per annum, interest payable annually, and was and is secured by a mortgage on a certain tract of land other than said land in controversy, herein, of value sufficient to satisfy said claim, same having been executed by decedent.
    Claim of M. L. Williams for two stands of bees, October 20,1883, sold by him to decedent, $8.”
    The petition charges, that the conveyance by Irwin M. Gilruth to Alice R. Pixley, was without consideration, and was made for the purpose of hindering and delaying his then, and future creditors; and, that it was accepted by the grantee with knowledge of the purpose for which it was made, and upon the agreement that she would hold the premises in trust for the grantor, and reconvey to him on request. It is also charged that the assent of Irwin M. Gilruth to the partition, was for a like purpose. The facts, upon which the charge of the fraudulent purpose and character of the conveyance is based, are averred in the petition to be as follows:
    “Said decedent was then part owner of a certain steamboat, Bedford, which was indebted to divers and sundry persons -to a very large amount, and decedent, along with the other owners of said steamboat, was engaged in navigating and running her, carrying freight and passengers between New Orleans and divers points up the Mississippi river, and at other places; which business was, and was then considered by decedent very hazardous, and which business he feared would, and in fact did, increase the indebtedness of said steamboat to a very much larger amount. It was then, and afterwards was increased, and continued to be much more than the receipts of said boat and the boat itself could pay, and said decedent then feared said indebtedness, and his own private debts were and would be more than he could pay, and that all his property would not be sufficient to pay the same, and that he would have to pay same so far as his property would go.”
    The prayer of the petition is, to have the deed to Alice R. Pixley set aside, and to subject the premises thereby conveyed, to sale for the payment of the above mentioned debts and the costs of administration.
    The defendants, for answer, say: “That long after the date of the alleged fraudulent conveyance in the petition complained of, to wit: in December 1882, the said Irwin M. Gilruth purchased of one A. J. Trumbo, administrator, etc., one hundred acres of land known as the Smith farm, situated in Scioto county, Ohio, of great value, and to pay for the same (in part,) borrowed of the defendant, Thomas Gilruth, the sum of $2,730; that said Thomas Gilruth is brother of said Alice R. Pixley, and was of said I. M. Gilruth; that at the time of making said loan, said Thomas Gilruth had full knowledge of said conveyance from said I. M. Gilruth to said Alice R. Pixley, and of the consideration thereof, as expressed in said deed; that he did not know, or have any reason to believe that said deed was executed with intent to defraud any person or creditor, or that said I. M. Gilruth was then financially embarrassed. That said sum of $2,730 was secured by a mortgage duly executed by said I. M. Gilruth upon said Smith farm, which said farm then was, is now, and ever has been ample security for said loan, and the accumulated interest thereon; that after the death of said I. M. Gilruth, and after the maturity of the notes secured by said mortgage, the said Thomas Gilruth sold and assigned the said notes and mortgage to William Elkins, who still owns and holds the same; that-said I. M. Gilruth died seised of said Smith farm, and the same, when sold, will furnish a fund which together with the $925 in the hands of plaintiff as the proceeds of personal property, will be sufficient to pay all the debts of said decedent, the unpaid costs of administration, all future costs incurred in settlement of said estate, and leave a balance for the heir or heirs of said I. M. Gilruth. Wherefore defendants pray that the plaintiff’s petition be dismissed.”
    A demurrer to this answer was overruled; and the plaintiff not desiring to reply, judgment was rendered for the de fendants. That judgment was affirmed by the circuit court, and the plaintiff prosecutes this proceeding to obtain the reversal of the judgments below.
    
      Geo. O. Newman and Julius L. Anderson, for plaintiff in error.
    I. That a conveyance made to defraud creditors is absolutely void against existing creditors, is settled in Ohio. Westerman v. Westerman, 25 Ohio St. 510; Gomerly et al. v. Potter et al., 29 Ohio St. 599; McVeigh v. Ritenour et al., 40 Ohio St. 107.
    It is equally well settled that a voluntary fraudulent conveyance, directed specifically against subsequent creditors, will be void as against them. Evans v. Lewis, 30 Ohio St. 11; 5th ed., 1 Am. Lead. Cases, 43, note to Wharton v. Sexton, and cases cited. Bump on Fraudulent Conveyances, 331; Clark v. French, 23 Maine 221, 11, 589; Bump on Fraudulent Conveyances, 326, 327; Wait on Fraudulent Conveyances, sec. 97, and notes; 2 Pomeroy’s Equity Jurisprudence, sec. 973, and cases cited; Revised Statutes, sections, 4196, 6136, 6139, 6344.
    II. Under the facts of this case can the administrator set aside such conveyance ?
    Upon this question, I would again refer to Revised Statutes, sec. 6136, which provides that the administrator shall apply to the court for authority to sell the real estate of the deceased as soon as he shall ascertain that the personal estate will be insufficient to pay all the debts of the deceased, with the allowance to the widow and children for their support twelve months, and the charges of administering the estate. Revised Statutes, sec. 6139, provides that the real estate liable to be sold as aforesaid shall include all that the deceased may have conveyed with intent to defraud his creditors, and all other rights and interests in lands, tenements, and hereditaments, etc. Thus it appears that land fraudulently conveyed is as much a legal asset of decedent’s estate for the payment of any and all of decedent’s debts, as any land he did not convey.
    But it was argued by defendant’s counsel in the courts below, that, even admitting that the administrator of a fraudulent grantor can set aside the fraudulent conveyance of real estate to obtain funds to pay the claims of a subsequent creditor, still he should not do so in this case because the sale of the land in controversy will inure to the benefit of the heirs of the decedent, I. M. Gilruth, by relieving other property of the decedent. This argument is fallacious, or at least irrelevant, because it applies with equal force to the case of any conveyance, made to defraud creditors, where the fraudulent grantor has other property left in his name.
    
      R. W. Earnham and McG-illivray $ Rolcomb, for defendants in error.
    
      The questions, as we would state them, are:
    1. Can an administrator of an alleged fraudulent grantor maintain an action to set aside a conveyance as fraudulent, for the purpose of paying a claim, that his decedent, by contract with his creditor, charged upon other land of sufficient value to satisfy it; and 2. Can such administrator maintain an action to set aside a fraudulent conveyance where he has, in his hands, proceeds of personal property sufficient to pay all his decedent’s debts, except such as are amply secured by mortgages upon real estate, executed by the decedent in his lifetime ?
    I. Can this conveyance be considered as a fraudulent conveyance, either as to existing or subsequent creditors? Fraud, say all commentators, is never presumed; and all transactions are presumed to be honest in intent until the contrary is shown. The circumstances from which fraud can be presumed must be so strong that no other, reasonable conclusion can be drawn. Upon general principles, therefore, all that plaintiff has to rely upon is his naked allegation of a fraudulent purpose, while all the facts and circumstances admitted by the entire record and by all parties thereto, raise a legal presumption absolutely the contrary, and establish the fact that as to the present and existing creditors, there never existed either a fraudulent purpose or a fraudulent result. It will not be denied that the administrator in this action is simply the agent of the creditors and stands in no better light before the court than what the creditors would if present in person, and said Irwin Gilruth was still living. What right, therefore, would a creditor have to investigate in a court of equity the propriety of a gift from a brother to a sister made many years before, while holding in his hands ample legal assets, easily available, to satisfy his claim and placed there for that purpose ? What concern is it of his, and how can he say that, by reason thereof, he is hindered and delayed in collecting his claim ? Yet such is the position of this administrator; he refuses to apply the legal assets in his hands to the payment of these debts. Wait on Fraudulent Conveyances, 144, sections 94 and 95 and 96 to 99 inclusive, and cases there cited.
    The power of a court, in ordering a sale of real estate, is limited to “ so much thereof as may be necessary for the payment of the debts,” Revised Statutes, 6147, and in this case no such necessity being claimed, the question whether said conveyance was or was not fraudulent is immaterial. Evans v. Lewis, 30 Ohio St. 11; Creed v. The Bank, 1 Ohio St. 1; Crumbaugh v. Kugler, 2 Ohio St. 374.
    II; But whether creditors could, or could not, maintain an action, the plaintiff cannot, because he has assets in his hands sufficient to satisfy them, proceeds of the sale of personal property, which must be first applied, and no real estate can be sold while that fact is found to exist. This real estate is not needed to pay decedent’s debts, and until that is shown, no order can be made. Wall v. Provident Inst. for Savings, 85 Mass. 96.
    To conclude, we, therefore, claim that, so long as there is legal assets in the hands of the administrator, and by legal assets we mean personal property, and real estate not conveyed in fraud of creditors, he cannot maintain an action to set aside a fraudulent conveyance, for the reason that such action would inure to the benefit of the heir rather than the creditor, whose claims could be more promptly satisfied by subjecting the legal assets; and when, as in this case, it is made apparent that the action is in the interests of the heir, or of one of them, as against the others, and not in the interest of the creditors, who could have been paid long ago, equity will not interfere but will leave each of the heirs to his or her legal rights.
   Williams, C. J.

It is not averred in the petition, that Irwin M. Gilruth was insolvent, either at the time of the conveyance to Mrs. Pixley, or when the partition, by which the property in question was set off to her, was effected. Nor is it averred, that he afterwards became insolvent, or that the property of which he died seised, is insufficient to pay his debts and the costs of administering his estate. The alleged fraudulent character of the conveyance, rests upon the fact, that, on account of the hazard connected with the business in which the grantor was then engaged, he entertained the fear that he might become insolvent, which apprehension, turned out to be not well founded. The answer alleges, that Elkins, the principal creditor, is amply secured by mortgage executed by the grantor in his lifetime, on lands of which he died seised, and which are not embraced in the alleged fraudulent conveyance; and, that the personal estate in the hands of the administrator, is sufficient to pay all the other debts, and the costs of administration. These averments of the answer are admitted to be true. The question in the case, therefore, is, whether the administrator can, in such case, impeach the conveyance of his intestate, and subject the propertjr to sale, for the purpose of raising a fund with which to pay a creditor so secured, who, himself makes no complaint that the collection of his debt is in any way endangered or delayed by the conveyance.

The powers of administrators with respect to the real estate of the decedent, are derived, in this state, from statutory enactment. They have none by the common law. The administrator cannot, therefore, impeach the fraudulent conveyance of his intestate, except when authorized by statute. Benjamin v. Le Baron, 15 Ohio, 518. Our legislation on the subject, so far as .it is material to the question in hand, is contained in sections 6136, 6139, 6141, 6147 and 6171, of the Revised Statutes, which provide, in substance, that when the administrator shall ascertain that the personal estate is insufficient to pay the debts of the deceased, with the allowance for the year’s support for the widow and minor children, and the costs of administration, he shall apply to the proper court for authority to sell the real estate of the deceased. The petition in such cases must state the amount of the debts, and charges of administration, as nearly as they can be ascertained, and the value of the personal effects, and contain a description of the real estate which it is sought to sell. The real estate liable to be sold, includes that conveyed by the deceased with intent to defraud his creditors, provided, that lands so conveyed, shall not be taken from a bona fide purchaser, and no claim can be made to any lands so conveyed, unless it is made within four years after the decease of the grantor.

When the lands, the sale of which is sought, are encumbered, the lien holders must be made parties. Process must be served upon them, and upon the widow and heirs of the deceased. If, upon the hearing, the court is satisfied that it is necessary to sell real estate of the deceased to pay his debts, it shall order so much thereof as may be necessary for that purpose, to be sold by the administrator; and, if it be represented in the petition, and shall appear to the court, that by the sale of a part, the residue of the estate, or some specific part or piece thereof would be greatly injured, the court may order a sale of the whole, or such part as the court shall think necessary, and most for the interest of all concerned.

The duty of the administrator is, to first apply the personal assets to the payment of the debts; and, if they prove sufficient, when the debts are paid, and the surplus, if any, is distributed as required by law, his duties are at an end. It is only when the personal assets are insufficient, that he is authorized to subject the real estate to sale; and then, only so much of it as may be necessary to pay the debts, can be sold, except, when the property is so situated that a .partial sale would be injurious to the residue. The surplus of the proceeds of the sale, remaining in the administrator’s bands on the final settlement of his accounts, is to be treated and disposed of, as realty.

It is well settled, that a conveyance made in fraud of creditors, is good between the parties. The title passes by the conveyance, subject only to the rights of the creditors. The law will not permit a party to establish his title by proof of his own fraudulent act. Nor, will the heir be heard to aver the fraud of his ancestor. Hence such conveyance cannot be avoided by the grantor, or his heirs, either at law or in equity. The statute which permits the sale, by an administrator, of lands which his intestate had conveyed in fraud of his creditors, was not designed for the benefit of the heirs, or distributees of the estate. It was enacted solely in the interest of the creditors, whose remedy it advances, by enabling the administrator to accomplish in a single proceed ing, what formerly might require many actions, thus avoiding multiplicity of suits, and accumulation of costs, which, where the creditors are numerous, is a matter of importance.

The remedy afforded by the statute can properly be resorted to, only when necessary for the protection of the creditors; and therefore, a conveyance made by a debtor with intent to hinder and delay his creditors, cannot be impeached by his personal representative, unless the property so conveyed is actually required for the payment of his debts. The owner’s power of disposition over his property, cannot be questioned so long as adequate provision is made for his creditors. They, cannot complain of any disposition which neither hinders nor delays them in the collection of their debts, or otherwise injures them. The mere intention in making the disposition, avails nothing, if no wrongful or injurious results flow from it. Hence, we hold, that when the personal estate in the hands of an administrator is sufficient to pay the costs of administering the estate, and all the debts of the decedent, except such as are amply secured by mortgage executed by him in his lifetime, on lands, of which he died seised, an action cannot be maintained by the administrator to subject to sale, for the payment of the mortgage indebtedness, other lands, which the intestate had conveyed away with intent to hinder, delay and defraud his creditors. This conclusion is not, we think, at variance with Westerman v. Westerman, 25 Ohio St. 500, or Gormley v. Potter, 29 Ohio St. 597. In the former of these cases, the plaintiff was entitled, by subrogation, to enforce a vendor’s lien on the lands involved; and in the latter, the plaintiff had obtained a lien by levy of an execution. In both, the creditor was himself attacking the fraudulent conveyance, and had a specific lien on the property. The question in the last case was one of pleading simply.

Judgment affirmed.