Court Opinion

ID: 8038789
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:24:03.540902+00
Date Added: 2024-06-11T16:37:14.716702
License: Public Domain

Carter, J.,
dissenting.
Plaintiff and intervener were sisters. Intervener became financially involved. On August 10, 1939, she was adjudged a bankrupt. Among the assets listed in the bankruptcy proceedings was a two-fifteenths interest in the real estate involved in this suit. Plaintiff filed a secured claim in the form of a mortgage in the amount of $1,550 against the aforesaid two-fifteenths interest. Plaintiff admits that no consideration passed on the date the notes were given. She admitted she had no checks or other records showing that any indebtedness existed. She merely states that her sister had borrowed money from her at various times. Intervener for obvious reasons made no attempt to deny the validity of the notes. While the transaction has every appearance of having been carried out for the purpose of delaying and defrauding creditors, there is no issue tendered on this subject. It may be considered, therefore, as a circumstance only bearing upon the nature of the transaction.
The mortgage in question was executed on June 7, 1939, and recorded on June 8, 1939. The record shows that an action was pending in the district court for Cass County against the intervener when this mortgage was executed upon which a judgment for $1,354.34 was entered on June 12, 1939. On June 17, 1939, plaintiff executed a satisfaction of the mortgage dated June 7, 1939, in which it was stated that said mortgage was “fully paid, satisfied and discharged.” In questioning plaintiff concerning this satisfaction of mortgage she made the following inconsistent *839and incredible replies: “Q. Showing the witness Exhibit 11, a purported release of mortgage, I will ask you if you have ever seen that before? A. I don’t ever remember of seeing it. Q. Was there ever anything said to you about releasing this mortgage, Exhibit 6, being the mortgage with the notes? A. No. Q. Do you recall Jack Hayward going over to Attorney Kile’s office with you? A. I don’t remember of it. Q. Do you recall at Kile’s office, being told that there was a notary over in the Land Bank? A. I don’t remember of it. Q. Do you recall Miss Dougan? Do you recall meeting her? A. No, I can’t ever remember of meeting her. * * * Q. Now, I hand you Exhibit No. 11 and will ask you if that is your signature in the middle of the page ? A. It looks like it. Q. Is that all the answer you care to give? A. That is all you asked me. * * * Q. Isn’t this Exhibit 11 the one that was wiping out that prior transaction because it didn’t go through? A. No, Sir. Q. What were you doing? A. That is what I would like to know. Q. You don’t even know how you happened to give a release ? A. I don’t.” I submit that the foregoing evidence shows beyond the peradventure of doubt that the mortg’age was given to delay and defraud the creditor about to obtain a judgment in Cass County, and, after it failed to deter the entry of judgment, plaintiff executed a satisfaction of the mortgage. The satisfaction of mortgage not having been recorded, plaintiff filed the mortgage and notes in the bankruptcy proceeding as a secured claim for the evident purpose of aiding the intervener as against her creditors. The attorney for the intervener confirms the statement that the mortg’age was not given in good faith when he testifies that it was included in the list of assets and liabilities filed in the bankruptcy estate by mistake. It is noteworthy that the trustee in bankruptcy filed objections to the allowance of the mortgage as a valid claim and that plaintiff, when summoned to testify by deposition concerning its validity, refused to appear and so do.
At this stage of the proceedings intervener’s attorney negotiated a compromise settlement with the trustee in bankruptcy whereby the trustee would sell intervener’s in*840terest for $1,200, provided the withdrawal of the mortgage filed as a secured claim could be secured. Here again it was evident that plaintiff preferred to settle the controversy with the trustee rather than testify concerning the .validity of the mortgage and the purpose for which it was given. In any event, the attorney advised intervener of the offer and she immediately contacted the plaintiff with reference to it. Plaintiff went to her banker, who agreed to loan the $1,200 if the title could be cleared to intervener’s interest in the property by a. quitclaim deed from intervener to plaintiff. The deed was executed, delivered to the banker, never recorded and is alleged to be lost. On the same day the quitclaim deed was executed, a second release of the mortgage dated June 7, 1939, was executed and recorded on December 21, 1940. On September 27, 1940, plaintiff executed a note and mortgage for $1,200 to the bank, secured by the two-fifths interest. This mortgage was never recorded. Plaintiff took the $1,200 and paid it to the trustee in bankruptcy, who in turn executed and delivered a trustee’s deed to plaintiff. On November 1, 1940, a new note and mortgage for $1,200 was executed and delivered to the bank and recorded on December 21, 1940. ' It is clearly apparent that the quitclaim deed and the mortg-age of September 27, 1940, were temporary expedients and never treated as having any permanent effect. The mortgage of November 1; 1940, covering a two-fifths interest in the real estate necessarily covered the two-fifteenths interest the intervener acquired by inheritance from her father and the one-fifteenth interest she subsequently acquired upon the death of her mother after she had received her discharge in bankruptcy. The trustee’s deed covered “All of Stella Mae McLaughlin’s undivided interest” in the property involved. It is evident, therefore, that plaintiff claims the one-fifteenth interest which plaintiff acquired subsequent to the bankruptcy proceeding. While the additional one-fifteenth interest may have been inadvertently included in the mortgage, it is evident that plaintiff claims it as her own and thereby indicates an intent to get all she can from her helpless sister.
*841There is further evidence in the record that plaintiff took the title in her own name for the purpose of negotiating a loan to protect her sister’s interest. On January 2, 1941, the property in question was leased to a brother of these two sisters. Intervener was named as one entitled to receive a share of the rents. She signed the leases along with the others having an interest in the property. If plaintiff was, as she now claims, the owner of intervener’s one-fifth interest, why was intervener requested or permitted to sign the leases as one of the lessors ? The answer is self-evident and in line with the intent and purpose of the parties at that time — that plaintiff was holding the title for intervener for the sole purpose of obtaining the . $1,200 which the banker was willing to make to her if she held the title but which he was unwilling to make to the intervener because of her financial' circumstances.
The record shows that when the mother’s estate was probated the intervener received $105.35 as her share of the personal estate. She went to the bank and applied $100 on the $1,200 note. No protest appears in the record on the part of the plaintiff. She now attempts to avoid the unfavorable inference growing out of this act by asserting that it was a repayment of attorney’s fees, costs, and expenses. The difficulty with this statement is that there were no attorney’s fees, costs, or expenses included in the $1,200 note, as both parties well knew. The money was paid in at the bank by the intervener for credit on the note given to obtain the money for the redemption of intervener’s property from the trustee in bankruptcy. In this, plaintiff acquiesced until the necessity for a more favorable explanation became pressing. In any event, plaintiff’s evidence is self-discrediting for another reason. She claims the $100 payment includes mileage, recording costs, and the expense of drawing papers. If plaintiff’s story is true, these are expenses she should have paid herself. The fact that she charges them to intervener indicates the intervener and not the plaintiff was the real purchaser of the interest of the trustee in bankruptcy.
*842Nowhere in this record does plaintiff claim that she owned this property from the date she received this trustee’s deed. Intervener testifies that she talked with plaintiff about reconveying the title and that plaintiff made no claim of title in herself. The record shows that the two sisters went to the bank for the evident purpose of making out a contract showing the true relations of the parties. There the plaintiff changed her mind and said: “I have signed all .the papers I am going to sign.” That the foregoing state,'ment is true is borne out by other.testimony in the record on the part of the plaintiff herself. On cross-examination plaintiff gave the following evidence: “Q. When she came to the house, will you, as nearly as you can reconstruct, tell the Court what she said to you with reference to paying off the indebtedness? A. She came and wanted to buy her share back. Q. What did she say about that? A. She said she could borrow the money to buy her share back and I wanted to know where she could get her money from and she said she wouldn’t tell me, that was all right. Q. What did you say ? A. I wanted to know who was going to be in partnership with me.” At this stage of the proceedings plaintiff was not asserting title in herself but was putting off the intervener on the theory that she did not have to convey the property on repayment of the money due her if it might result in a partner of whom she disapproved. On cross-examination the plaintiff also testified to the following: “Q. After you said you would not do so, or did you tell her you wouldn’t do that at all? A. Do what? Q. Redeed the property back to her if she paid the money you advanced? - A. I just didn’t tell her right out that I would or wouldn’t, as I remember.” I submit that this is not the testimony of an owner claiming title from the time she obtained the deed. She further testified on cross-examination: “Q. At that time did you hear Mrs. McLaughlin say to you as a sister, T want you to be reimbursed for every item of money that you have spent, including- 7 % interest on the amount I borrowed,’ didn’t she tell you that? * * * A. She might have. Q.What was said in response to that ? A. I probably said— *843I just don’t remember the exact words of what I did say.” I submit, also, that this is the faltering testimony of one who was not then claiming title in herself but who has now changed position in that respect.
To me, this is a clear case of fraud, amply demonstrated from the record. The intervener, because of financial'difficulties, went to her sister for aid. The plaintiff was then willing to help her save the inheritance she obtained from her father. After intervener trusted the plaintiff to the extent of conveying title to her for the purpose of raising the money necessary to save it, the plaintiff, seeing an opportunity to take advantage of the position of her sister, seized upon it as a means of acquiring a large profit at the expense of her sister. At the time of the origin of the transaction, the intervener’s interest in the property was worth from $2,700 to $4,800. It actually sold for $8,249 at partition sale. Under the majority opinion the plaintiff obtains two-thirds of this interest for $1,200 and the release of a mortgage for $1,550, which had already been solemnly “paid, satisfied and discharged” by an instrument acknowledged to be such before a notary public. The record shows also that the $1,200 was largely paid off by rentals obtained from the property. The transaction reeks with fraud and imposes a duty upon a court of equity to assert its powers in compelling the plaintiff to remain faithful to her trust by reconveying the property and accounting for the rents. The intervener should likewise be required, as she offers to do, to repay all moneys owing to the plaintiff with interest. Such is my conception of equity when one attempts to disavow a trust relation in response to a selfish urg'e by mulcting the beneficiary who had reposed confidence in the honesty and integrity of the trustee. I submit that the opinion of the majority has the effect of condoning a grievous fraud when its duty requires that it protect a person who finds himself in a precarious position because he trusted one whom subsequent events demonstrate he should not have trusted. .
Simmons, C. J., concurs in this dissent.