Case Title: Jayhawk Equipment Co. v. Mentzer

Citation: 193 Kan. 505, 394 P.2d 37

Docket Number: 43,780

State: kansas

Court: Kansas Supreme Court

Date: 1964-07-14T00:00:00Z

Document:
193 Kan. 505 (1964)
394 P.2d 37
JAYHAWK EQUIPMENT CO., a Corporation, Appellee,
v.
WILMA A. MENTZER, Appellant.
No. 43,780

Supreme Court of Kansas.
Opinion filed July 14, 1964.
Hal C. Davis, of Topeka, argued the cause and was on the briefs for the appellant.
William R. Stewart, of Topeka, argued the cause and was on the briefs for the appellee.
The opinion of the court was delivered by
HATCHER, C.:
This is an appeal from a judgment rendered in an action in the nature of a judgment creditor's bill to impress an equitable lien upon real property which had been conveyed to a wife in a property settlement and made a part of the judgment in a divorce action.
The petition alleged in effect that the plaintiff was a judgment creditor of Delbert Mentzer, the divorced husband of the defendant, that a property settlement had been made in the divorce action which left Delbert Mentzer without assets to satisfy the judgment, and
*506 The prayer was that the divorce decree approving the property settlement be declared null and void or that the judgment be declared a lien on the real property in controversy.
The answer denied that the property settlement was a scheme to defraud made without consideration.
The facts covering three separate actions may be summarized as they are detailed in Jayhawk Equipment Co. v. Mentzer, 191 Kan. 57, 379 P.2d 342, where this court had this case before it on the question of res judicata.
On December 5, 1958, Delbert and Wilma Mentzer, then husband and wife, purchased as joint tenants a tract of land near 29th and California Streets, described as lot number 20 in Schellcrest Subdivision, an addition to the city of Topeka, Shawnee County, Kansas. A building was constructed on the real estate known as the Lariet Drive-In. Sometime during the spring of 1959, Delbert purchased certain restaurant equipment from the Jayhawk Equipment Company which was installed in the building. Part of the purchase price remained unpaid.
On September 19, 1960, the Jayhawk Equipment Company filed an action against Delbert and Wilma to recover the unpaid purchase price. Wilma was made a defendant in the action on the theory she had ratified and assumed Delbert's purchase agreement.
On November 28, 1960, Wilma filed an action for divorce. The petition alleged in part:
The prayer was for an absolute divorce; that she be awarded the property belonging to the parties, and that she be awarded custody of the three minor children, ages seven, eight and twelve.
On November 30, 1960, Delbert and Wilma entered into a property settlement which provided in part:
"(a) One 1955 Buick Automobile.
On December 2, 1960, Delbert entered his voluntary appearance in the divorce action. On the same day an order of emergency was entered and a divorce granted to Wilma. The decree awarded Wilma the custody of the minor children, support and maintenance of the children in the sum of $100 a month and further provided:
On April 27, 1961, the case of Jayhawk Equipment Company against Wilma and Delbert was tried. The trial court found:
Judgment was entered in favor of Wilma, and against Delbert, in the sum of $3,860.22. Execution issued against Delbert was returned unsatisfied.
On May 3, 1961, the Jayhawk Equipment filed the action now under consideration.
Although not material to the issues now before us, it may be *508 noted that on May 9, 1961, Wilma sold the property in controversy for the sum of $16,000.00, a mortgage lien and costs of sale were paid and the balance in the sum of $4,887.06 was placed in escrow subject to the determination of this controversy.
Following the trial of the issues in the present controversy the trial court found:
Judgment was so entered and defendant has appealed.
The appellant first contends that the trial court erred in finding the allegations of the petition to be true, particularly that the property settlement was a scheme to defraud and without consideration, and further in granting judgment for appellee and adjudging an equitable lien on the real estate.
After a careful consideration of the record and all arguments advanced by the parties in support of their respective positions, we are constrained to agree with appellant's contention.
Appellee argues:
It must be conceded that Wilma had full knowledge of all the facts heretofore stated at the time the property was conveyed to her in the divorce action. It must also be conceded that she paid no money consideration therefor.
Appellee calls our attention to Security Benefit Ass'n v. Swartz, 146 Kan. 267, 70 P.2d 16, which quotes from the first paragraph of the syllabus in Hardware Co. v. Semke, 105 Kan. 628, 185 Pac. 732, which reads:
The opinion in the Semke case states:
We adhere to the rule announced in the above cases, but suggest that the appellee fails to recognize the distinction between the status of a wife in a divorce action and that of a wife in the normal marriage relationship.
We need not consider the numerous cases cited by the parties which they attempt to use as a basis for argument by analogy. The question has been definitely determined in cases where similar facts were present.
A wife in a divorce action, if not an actual creditor of the husband, is at least such a quasi creditor that she can rely on her husband's obligation to support her and the minor children as consideration for a property settlement approved in a divorce decree. It is not contended that the appellee had any claim on Delbert's real estate, other than that of a general creditor prior to its judgment against Delbert which was obtained after the divorce decree.
Generally a creditor has no concern with a debtor's transfer of real property until the creditor's claim against the debtor is reduced to judgment. A debtor may in good faith prefer one creditor to another and the diligent creditor is entitled to protection if he is in good faith protecting his own claim as against others. (Dillon v. Bryant, 104 Kan. 380, 179 Pac. 318.)
The mere fact that an insolvent debtor pays one creditor in full, and in doing so absorbs all of his assets, is not of itself evidence of an intention to hinder, delay or defraud other creditors. (Kingsbury v. Bank, 71 Kan. 570, 81 Pac. 187; Hasie v. Connor, 53 Kan. 713, 37 Pac. 128; Schram v. Taylor, 51 Kan. 547, 33 Pac. 315.) This *510 is so even though the creditor is the wife (Berkley v. Tootle, 46 Kan. 335, 26 Pac. 730) or the children of the debtor (Peoples State Bank v. Dierking, 143 Kan. 617, 56 P.2d 85).
It is a general rule that a divorce decree approving an agreement transferring a husband's real estate to his wife vests her with an equitable interest superior to the claim of an existing creditor of the husband who subsequently obtains a judgment. The rule is stated in 27B C.J.S., Divorce, § 302, p. 420, as follows:
In Graham v. Pepple, 129 Kan. 735, 284 Pac. 394, this court had a similar situation before it and held:
In the opinion it is stated on page 737:
It will be noted that in the case before us for determination the divorce action was not pending as the decree had been entered before the creditor got judgment against the husband.
It will be understood, however, that a different rule might well be applied if the property conveyed to the wife in the divorce action was unreasonable in amount or in excess of her reasonable requirements under the circumstances. The wife would then be *511 in no better position than a preferred creditor who has received property greatly in excess of the amount of the debt.
In the opinion in the Graham case the court also disposed of the suggestion that the rule would open another easy way to cheat creditors, stating at page 738:
The court did not have to wait long for a case to come before it covering a situation similar to the one suggested in the above quotation. In Rumsey v. Rumsey, 150 Kan. 49, 90 P.2d 1093, an attempt was made to defeat a wife's action for alimony by the husband's conveyance of an interest in land for a nominal consideration. The interest had passed into the hands of a third party who claimed to be an innocent purchaser. It was held:
We are forced to conclude that the property settlement conveying the husband's real estate to the wife and made a part of the divorce decree did not constitute a fraud on the husband's creditors under the facts disclosed by the record, and the property could not be reached by a subsequent judgment creditor.
The conclusion reached renders unnecessary the consideration of the appellant's contention that the trial court erred in impressing the lien on appellant's one-half interest in the real estate.
The judgment is reversed.
APPROVED BY THE COURT.