Case ID: iowa_94/html/0539-01.html
Source: Caselaw Access Project
Author: {"author": "Granger, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Smith, Lichty & Hillman Company, Appellant, v. Edgar E. Mack.
    Fraudulent Conveyance: evidence does not establish. Defendant’s brother, who was then insolvent, owned certain lots by unrecorded contracts of sale, which were later mortgaged and1 conveyed to defendant, but the conveyances, by inadvertence;, were not recorded until a few days prior to the entry of plaintiff’s judgment against the insolvent, at which time the insolvent transferred to the defendant all his remaining property. Defendant paid indebtedness of the insolvent in excess of the value of the-property received by him. Defendant agreed to turn over to plaintiff the property received, together with an additional sum of money, if plaintiff would undertake the payment of the insolvent’s obligations. Plaintiff, while extending credit, had information to put it on inquiry as to the solvency of its debtor. Held,. ' that an action to set aside the conveyance for fraud was properly dismissed.
    
      Appeal from Buena Vista District Court. — Hon. Loir Thomas, Judge.
    Friday, May 17, 1895.
    Action to subject property to the payment of a judgment. Judgment for defendant, and the plaintiff .appealed.
    
      Affirmed.
    
    
      F. C. Platt and I. W. Bane for appellant.
    
      Mack & De Land for appellee.
   Granger, J.

The plaintiff firm is a judgment cred-. itor of F. P. Mack, who. is a brother to the defendant. The judgment was entered in Buena Vista county,, January 9,1893, on confession for the sum of one thousand nine hundred .dollars-. ' Prior to the entry of the judgment, F. P. Mack had owned' certain real estate In the town of Newell, and was. the owner of some personal property, including a stock of goods. F. P. Mack had been for some years engaged in mercantile business in the town of Newell, and- the plaintiff firm had sold him goods for his trade, and the judgment in its favor is on account for a balance due. on such sales. The real estate and personal property of F. P. Mack were on the sixth day of January,. 1893, and prior thereto, assigned, by deed or bill of sale, to- the defendant, and this action is to set aside such conveyances as fraudulent, and subject the property or its proceeds to the payment of plaintiff’s judgment. The district court dismissed plaintiff’s petition. After a careful review of the record, we readily concur in the conclusion, placing our holding on the merits of the case. The prayer of the petition asked that defendant be required to make a showing of the transactions between himself and F. P. Mack, and the result is, to our minds, conclusive against any fraudulent purpose in the transaction, and we think the case is free from any fraudulent results. It is true that the transactions were between brothers, and they occurred at a time when F. P. Mack was involved, and the last, if not all, of them, when he was insolvent. Neither the evidence nor the facts, to show the case entire, can be presented, and we will •only notice one or. more prominent features of it. Beyond a doubt, the defendant assumed the payment of obligations of F. P. Mack much in excess of the value of all the property conveyed to Mm, and actually paid them. Some of the lots owned by F. P. Mack were held only by contracts of sale, and not by deeds. One of these had been sold to him by the defendant, and there was notMng of record to show the sale. The sale by contract was made in 1880, and F. P. Mack took possession and built a store oh the lot-.that was used in his business. He paid the taxes, and was, ostensibly, the owner. This is known- in the record 'as “lot 9 in block 2.” “Lot 1 in block 2” adjoined lot 9, and this was held by contract from one Holbrook. The two lots are .regarded as the “store property.” About June or July, 1890, by agreement, lot 9 was conveyed to defendant by deed, and lot 1 by assignment of the Holbrook contract. Neither conveyance was recorded until January, 1893, when a deed from Holbrook was obtained^ and the deeds were recorded and possession taken by defendant. At the time of the conveyances in June or July (probably July 1,1890), -two mortgages on said lots were made by F. P. Mack to defendant, aggregating one thousand seven hundred and twenty-five dollars, and the conveyances of that date were taken subject thereto. These papers were not acknowledged until December 13, 1890. One of the mortgages was recorded December 22,1890, and the other January 23,1891. The deed to defendant was not recorded till January 7, 1893. The sixth day of January, 1893, was when all the remaining property of F. P. Mack was assigned to defendant. Appellant attached great importance to the irregularities of the transactions in the way of failures or neglect to record the instruments at or near the time of execution, and especially of the deed of F. P. Mack to the defendant, which was not recorded for mere than two years. This is claimed to have been though inadvertence on his part. The claim is made that the situation of this property, while plaintiff was extending credit, was such as to induce a belief that F. P. Mack was solvent; and ft appears that through inquiries of bankers and others, including commercial reports, plaintiff understood him to be so. We think the keeping of the deed from the record was not with intent to defraud, nor even intentional after December, 1890, when the other papers were recorded. In fact, that transaction is hardly to be regarded as ■completed before that time. After that, with the mortgages of record, we do not see how one could have been misled because of the record, for it was -such as to put one on inquiry. The conveyance from Holbrook, by contract, was never recorded, because of which, when assigned to defendant, it was thought unnecessary to record the assignment; and it appears that this conveyance, as well as that of lot 9, was only as security because of defendant’s signing notes for F. P. Mack. When the entire ..assignment was made, in January, 1893, it clearly •.appears that defendant actually assumed the payment ,of obligations, and paid the same from the proceeds of the property assigned, and from his own, to the amount of more than ten thousand dollars; which was largely in excess of the value of, all the property ■received. Without treating it as a matter of great Importance or weight, it is worthy of note that the defendant offered to plaintiff to turn over all the property received, and give, in addition, two' thousand dollars, if he could be saved harmless from the payments he had assumed as a consideration for the property received. We may further say that there is testimony .showing that, while the credits were being extended by plaintiff, it had such information as to put it on inquiry, from' which fact, with the record condition of the 'title to the real property, it is not in a position to .claim, in the absence of real fraud, that the transactions should be avoided. The judgment seems to be .clearly right, and it is affirmed.