Court Opinion

ID: 9553580
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:32:13.941492+00
Date Added: 2024-06-11T15:31:42.714180
License: Public Domain

On Petition for Rehearing
Don R. Newbury, of Medford, for the petition.
George W. Kellington, George M. Roberts and Edward Branohfield, all of Medford, contra.
Before Brand, Chief Justice, and Hay, Rossman, Latourette and Tooze, Justices.
Petition denied.
ROSSMAN, J.
The defendants-appellants submit a petition for a rehearing which contends that our decision erred in the following particulars:
“1. In failing to find that the conveyance of the homestead-exempt real property in question could not be fraudulent.
“2. In failing to find that there could not be fraud as to any creditor in the conveyance of such homestead-exempt property.
“3. In finding that there was any necessity for showing any or adequate consideration for the conveyance of such homestead-exempt property.
“4. In failing to find that the grantors and grantee had no duty or burden of proving that this conveyance was made for an adequate consideration.
“5. In failing to find that, only a creditor who could be defrauded by such conveyance, has any right to require close relatives to prove an adequate consideration.
“6. In fading to find that as to this homestead-exempt property there were no creditors and there could be none.
“7. In failing to find that no creditor of a *315bankrupt and no representative of such creditor in bankruptcy has any right to set aside a conveyance of homestead-exempt property.
“8. In failing to find that because there can be and are no creditors as to homestead-exempt property, there was no one for the trustee in bankruptcy to represent in this case, and' that he therefore had no standing in court.
“9. In finding that intent to place the said homestead-exempt property beyond the reach of creditors constituted fraud that could render the deed void.
“10. In finding, contrary to the pleadings of the trustee, plaintiff, and to all of the evidence and admissions in the case, that the deed in question was never delivered and was therefore void.
“11. In failing to find in favor of the appellants.”
The petition for a rehearing is accompanied by an opening brief of 46 pages. After the plaintiff-respondent had filed an answering brief, the defendants (appellants) presented a reply brief of 26 pages. The two briefs cite and quote from scores of decisions.
It will be observed that the petition for a rehearing states that, in disregard of the plaintiff’s pleading, we found that “the deed in question was never delivered”. When we wrote our decision we were absorbed in the evidence and failed to recall the following parts of the complaint:
“That, after being indebted to some creditors of the estates of J. W. McCulley and Ferroll Viola McCulley, as aforesaid, and on July 18, 1946, the defendants J. W. McCulley and Ferroll Viola Mc-Culley made, executed and delivered to the defendant Gordon D. Allard, the son of Ferroll Viola McCulley, a warranty deed conveying unto the said G-ordon I). Allard the above described real property, which said deed was recorded by G-. E. Carter, *316Eegistrar of Titles in and for Jackson County, Oregon, as Instrument No. 19259, and relying upon which said instrument, said defendant G. E. Carter, as said Eegistrar of Titles, issued Certificate of Title No. 6378, which names the said Gordon D. Allard as the owner of said property.
“That said warranty deed was executed and delivered by the said J. W. McCulley and Ferroll Viola McCulley without consideration and with intent to hinder, delay and defraud the creditors of the said J. W. McCulley and Ferroll Viola Mc-Culley, and the said defendant Gordon D. Allard accepted and received said warranty deed with knowledge of the fraudulent intent on the part of the said J. W. McCulley and Ferroll Viola McCulley and with intent upon the part of the said Gordon D. Allard to assist the said J. W. McCulley and Ferroll Viola McCulley in their fraudulent purposes, and the said Gordon D. Allard does now hold the title thereto.”
The averments just quoted concede that the deed which the McCulleys signed and which named as grantee Gordon D. Allard, to whom we referred as Gordon, was delivered to the latter. Since the complaint states that the deed was delivered to Gordon, we confess our error. In our further consideration of the case we will deem that the deed was delivered. We explain that before writing our decision we read the evidence with care and found in it no indication that Gordon ever saw or received the deed. During the trial the witnesses described in minute detail the course which was taken with the deed from the hour that it was written to its eventual disposition. While those particulars were being unfolded no one mentioned the fact that the complaint conceded the delivery of the deed.
Although the complaint admitted that the deed *317was delivered to Gordon, it did not concede that the beneficial interest in the property passed to him. To the contrary, the complaint averred that the deed was executed without consideration and alleged that its purpose was to hinder, delay and defraud the Mc-Culley s’ creditors.
The eleven charges contained in the petition, it will be noticed, do not claim that we misstated any fact except the one concerning the delivery of the deed. The brief which accompanied the petition, however, declares that we misstated some facts; it says:
“The court in its said opinion entirely ignored the undisputed evidence in the case as to who owned the property and who had debts at the time the property was conveyed to Gordon. This undisputed evidence, most of which was offered by the plaintiff, and much of which is documentary, shows that J. W. McCulley owned % of the property and Viola McCulley % of it, and that Viola McCulley owed no debts whatever, * * * .
“The undisputed evidence in the case (as distinguished from ‘surmise’, ‘Speculation’, and ‘suspicion’), and we wish to underscore the words, ‘undisputed’, and we use the same advisedly, establishes the following: That Mrs. McCulley was the absolute owner of an undivided % interest in this property at the time it was conveyed to her son, Allard, and that Mrs. McCulley owned the other undivided % 5 that Mrs. McCulley never owed any bills whatever and did not owe any at the time of bankruptcy or at the time of the conveyance, * * *
Evidently counsel meant that Mr. McCulley “owned the other undivided
The record shows that November 12, 1935, Prank J. and Emma Schuler signed a deed which described the property in issue and which was the origin of the *318McCulleys’ interest in it. The typewritten name of the grantee was J. W. E. McCulley. After that name was penned these words, “married to Billy McCulley.” The name Billy McCulley appears in no other part of the instrument, and how it happened to be entered after the name of J. W. E. McCulley was left undisclosed by the witnesses. J. W. E. McCulley was seemingly the name that the defendant, J. W. McCulley, employed at that time, and Billy McCulley was an appellation which the defendant, Ferroll Viola Mc-Culley, had acquired sometime around the year 1935. It is clear that Billy McCulley was not the wife of the defendant, J. W. McCulley, when the deed of 1935 was signed, for she herself testified: “I was married in 1945”, that is, to the defendant, J. W. McCulley. In 1935 her name was evidently Allard. It is clear that the deed of 1935 transferred no interest in the property to Mrs. McCulley. In fact, she disavowed any claim to the property at that time. We take the following from her testimony:
“Q. Did you have any interest in it at that time 1 ’ ’
“A. Well — no, sir.”
Thus, in 1935, when the defendant, McCulley, received the aforementioned deed, the defendant, Ferroll Viola McCulley, was unmarried to him and had no interest in the property.
An instrument, signed January 19,1939, by J. W. E. McCulley and Billy McCulley, described the property in issue and named as grantee “Dwight Calvin McCulley, a widower, and Billy McCulley, married to J. W. E. McCulley.” The two signers were the two defendants McCulley. The grantee by the name of Dwight Calvin McCulley was a brother of the defend*319ant, J. W. McCulley. The latter’s uncontradicted and unchallenged testimony indicates that, concurrently with the signing of the deed, he obtained a loan from his brother and delivered the deed as security for the repayment of the loan. His exact words were:
“I didn’t know how to make a mortgage out, and I deeded him an interest in the place. * * *
“Q. Anyway, that deed from you to your brother was really a mortgage?
“A. That’s the same thing.”
To make matters clearer, he added, “I never sold it.” Mrs. McCulley did not claim that the deed was otherwise than as mentioned by the defendant, J. W. Mc-Culley, who later became her husband. The following is taken from her testimony:
“Q. Did you ever pay any money or other consideration for any interest in that home property?
“A. No, sir.”
It is plain that the sole purpose of the conveyance of 1939 was to secure to Dwight Calvin McCulley repayment of the loan which he had made.
May 6, 1944, a deed was signed by Dwight Calvin McCulley and Lamerle McCulley, husband and wife, which described the property in issue and which named as grantees “J. W. E. McCulley and Billy McCulley, husband and wife.” It purported to convey “an undivided one-half interest in and to the following: * * * .” As nearly as can be ascertained from the record, the loan mentioned in the preceding paragraph had been repaid when that deed was executed and the purpose of the latter was to reconvey title. Yet the defendants seize upon that deed in part as support for their contention that the defendant, Ferroll Viola Mc-Culley, owned a three-fourths interest in the property. Since title was conveyed to Dwight Calvin McCulley *320and Billy McCulley only as mortgagees, those two persons could not convey to either of themselves or to anyone else, except possibly to an innocent third party, a greater interest than they possessed. Their interest was solely that of mortgagees and, of course, when the loan had been repaid it was their duty to reconvey. We believe that our opinion is not subject to the criticism under analysis which the defendants offer.
It will be recalled from the words which we quoted from the defendants’ brief that the defendants also say:“ This undisputed evidence * * * shows that * * * Yiola McCulley owed no debts whatever.” Our original opinion said:
“We have not overlooked the contention that the McCulleys were not, in fact, insolvent when the deed was signed, and that Mrs. McCulley had no creditors even when she signed her petition in bankruptcy. The schedules in bankruptcy filed by each of the McCulleys, and bearing their signatures on every page, refute the contention now made. When they prepared and signed the schedules they had the service and advice of a responsible member of the bar. We believe that these claims are unmerited and that they reflect adversely upon the veracity of the McCuileys.”
The reply brief which accompanies the petition for a rehearing says:
“Respondent again argues that because Mrs. McCulley signed schedules in bankruptcy identical with those signed by her husband setting forth the same debts and assets, she is bound thereby, in the face of the undisputed evidence submitted by all of the creditors in their proofs and by the testimony in this case, which was undisputed, that she did not owe any of the bills and that they were obligations only of Mr. McCulley.”
*321Mrs. McCulley’s petition in bankruptcy, made under oath, declares:
“Tour petitioner owes debts * * * . The schedule hereto annexed marked Schedule A, and verified by your petitioner’s oath, contains a full and true statement,”
of the debts. Forming a part of the schedule is an oath reading as follows:
“I, Ferroll Viola McCulley, the person who subscribed to the foregoing Schedule, do hereby make solemn oath that the said Schedule is a statement of all my debts * * *
Thus, Mrs. McCulley, at a time when she was intimately conversant with her financial affairs, swore more than once that she owed debts.
The proofs of claims upon which the defendants rely were described by the witness who produced them at the trial as “all of the claims which have to date been filed.”
The answer of the defendants McCulley admitted:
“The defendant, J. W. McCulley and the defendant Ferroll Viola McCulley filed in the District Court of the United States for the District of Oregon their duly verified petitions in bankruptcy, and admit upon information and belief that the plaintiff was appointed the Trustee in Bankruptcy.”
That admission certainly authorizes an inference that the defendant, Mrs. McCulley, was a bankrupt. The answer did not claim that she filed her voluntary petition through error, nor that she has sought to withdraw it; withdrawal is permissible: 8 C.J.S., Bankruptcy, § 68, page 478. The existence of a provable and dischargeable debt or debts is essential to one who files a voluntary petition in bankruptcy: 8 C.J.S., Bankruptcy, § 57, page 470. Manifestly, an in*322ference is warranted that Mrs. McCulley was indebted when she filed her petition to be adjudged a bankrupt. We see from the foregoing that Mrs. McCulley wants the bankruptcy court to believe her sworn statements and, based upon them, grant her a discharge from the debts which she lists in her schedule; but she asks us to deem her a self-confessed falsifier, disregard her sworn bankruptcy schedules and hold that she owed no debts when she signed the challenged deed. Such a Janus-faced proposal condemns its proponent. It is unworthy of submission to a court.
In view of the circumstances of which we have taken notice, we do not believe that a trier of the facts was forced to accept as truthful Mrs. McCulley’s testimony that she did not owe the debts listed in her petition in bankruptcy. Her credibility as a witness was badly impaired during the trial.
We think that our previous decision did not misstate any fact except the one concerning the delivery of the challenged deed.
It will be recalled that the ninth claim of error set forth in the petition for a rehearing declares:
“In finding that intent to place the said homestead-exempt property beyond the reach of creditors constituted fraud that could render the deed void. ’ ’
That statement appears to concede that the purpose of the conveyance attacked in the suit before us was “to place the said homestead-exempt property beyond the reach of creditors”, that is, the creditors of the defendants McCulley. Throughout their briefs defendants-appellants contend that a conveyance of exempt property cannot defraud the creditors of the grantors and furnishes the creditors no ground for complaint. *323They further contend that we misconstrued the Chandler Act of 1938, that is, the amendment of the Bankruptcy Act. Our opinion quotes the pertinent part of it.
The brief of the def endants-appellants says:
“The state and federal courts and the bankruptcy courts find nothing fraudulent in a debtor taking advantage of the exemption statutes that were enacted for his sole benefit, even though the debtor’s intention and purpose is always to place the property beyond the reach of creditors. The state and bankruptcy laws urge him to do this. The fact that our defendants did this very same thing and accomplished this very same purpose before any creditor attempted to levy upon their homestead and before they were adjudged bankrupt, certainly cannot prejudice them in the eyes of the law. The only thing this court could find in this case that savored of fraud, and, indeed, the only thing it was possible for it to find that savored of fraud, was the alleged intent of the defendants to place the property beyond the reach of creditors.”
Going on, the defendants’ brief shortly returns to the same theme; this time it says:
“Because of their ignorance of the exemption laws, they only did, in their own way, what the exemption laws had already done for them without their knowledge, and they liad done it with exactly the same purpose that underlies the exemption laws. The opinion in our case penalizes the defendants for having such purpose and intention, in spite of the fact that all exemption laws cry out to every debtor to protect his exempt property from the claims of creditors
The words in italics are underscored in the brief.
It may be that, when the statements just quoted were written, the def endants-appellants intended to say nothing more than that, if the fraudulent intent was conceded, the fact would be immaterial. However, it *324will be recalled that the petition for a rehearing does not challenge the portrayal of facts contained in onr opinion, with the single exception concerning the delivery of the deed.
We are convinced that the purposes of the deed were fraudulent. The deed was never intended, according to our belief, to transfer to Gordon any beneficial interest in the property. The McCulleys plotted and designed to reserve to themselves the beneficial interest. They intended that the deed should be an imposture and hoped that it would successfully deceive their creditors into a belief that they (the McCulleys) no longer owned the property. The evidence which so indicated met with no objection from the defendants.
The defendants now claim that the purported homestead character of the property was determinative of the case and that the testimony concerning the fraudulent character of the conveyance was immaterial. In fact, they assert that such has always been their view. The brief accompanying the petition for a rehearing says:
“Our view of the matter, determined before the trial of the case commenced, was that proof of the homestead-exempt character of the property was all that was necessary on our part and would constitute a complete defense.”
We accept the statement, but cannot understand why the defendants presented testimony, which, as transcribed, covers more than 150 typewritten sheets, in an effort to prove that the challenged deed was free from fraud and was accompanied with an adequate consideration.
We again quote from the briefs filed by the def endants-appellants:
“McCulleys have never, in this case, claimed any *325homestead exemption whatever. All the pleadings in the case and all the evidence show that almost a year prior to the time McCulleys filed bankruptcy they had conveyed away this property to Gordon Allard and did not own it at the time of bankruptcy, could not make any claim of exemption therein, and did not make any claim of exemption therein at the time of bankruptcy.”
The concession that the McCulleys never made a claim to an exemption was well justified. The answer of the defendants McCulley made no claim of exemption. It used neither the word “homestead” nor the word “exemption”. The McCulleys’ schedules in bankruptcy likewise made no claim of exemption. Another part of the brief declares:
“McCulleys did not plead, and, indeed, they could not plead, any homestead exemption in this property in this case.”
Our original opinion said that, if the McCulleys had desired to make a gift of the property to Gordon, they probably could have done so. They, however, neither made a gift nor executed a deed for a consideration. The attacked instrument was a deed only in name. It conveyed no beneficial interest in the property. Its purpose was to hinder, delay and deceive the creditors of the McCulleys.
We see from the parts of the brief from which we just quoted that the McCulleys have made no claim of any exemptive rights in the property, and that they do not contend that the property was their homestead when the suit was filed. In truth, they assert the opposite.
The above being our analysis of the record, it follows that when the McCulleys filed their petitions to be adjudged bankrupts, and also when this suit was *326filed, they were the equitable owners of the property in issue. Gordon had no beneficial interest in it whatever. Since the McCulleys made no claim that the property was exempt to them as their homestead, exemption was not an issue in the case.
Since the McCulleys expressly disavow that the property is their homestead and affirmatively assert that (1) they have not plead exemption in this suit, and (2) made no exemption claim in their bankruptcy schedules, they cannot defeat the plaintiff’s right to the property upon any contention that the property is exempt to them. Gordon cannot prevail, even though his answer averred that the property was the “home and homestead of said McCulleys” prior to the execution of the deed which named him grantee because no one ever intended that he should own the property.
Exemptions are personal rights and generally can be claimed only by the person entitled to the exemption: Childers v. Brown, 81 Or. 1, 158 P. 166, and 22 Am. Jur., Exemptions, § 119, page 90, 35 C.J.S., Exemptions, § 120, page 150. Therefore, the averment in Gordon’s answer that the property, prior to the execution of the challenged deed, had been the Mc-Culleys’ homestead cannot be deemed an exemption claim on the part of the McCulleys.
We deem it unnecessary to proceed further with a statement of our reaction to the petition for a rehearing. We gave to the petition careful attention, but found no error in our original decision except the one corrected by us in a preceding paragraph of this opinion.
The petition for a rehearing is denied.