Court Opinion

ID: 6895241
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:48:55.563166+00
Date Added: 2024-06-11T16:05:57.812095
License: Public Domain

Strahan, J.,
dissenting.—This is a suit prosecuted by the appellant as administrator with the will annexed of Hans Weaver, deceased, to subject certain real property now held in the name of *313the defendant Esther Owens to sale to satisfy a judgment recovered by the plaintiff against the defendant Johnson, as administrator of the estate of W. F. Owens, deceased. It appears from the evidence that on the fourteenth day of February, 1885, W. F. Owens purchased the property in controversy of W. H. Kearnan for the consideration of $800, and caused the same to be conveyed to his infant daughter, Esther Owens; but the deed was never filed for record until the twenty-third day of September, 1886. That Owens entered into the possession of said real property and improved the same, and continued in the possession thereof up to the time of his death. Prior to February 14,1885, Hans Weaver, plaintiff’s intestate, and It. Phipps had become surety for Owens to Humphrey and Flint, bankers at Koseburg, in the sum of $10,000, and said liability, or the greater portion thereof, still existed when the deed in question was made. On the twenty-seventh day of March, 1885, the plaintiff’s intestate, Hans Weaver, and K. Phipps became surety for Owens to said Humphrey and Flint in the sum of $15,000. On the twenty-fourth day of September, 1886, the plaintiff commenced an action against W. F. Owens in the Circuit Court of Douglas County to recover $3,000, and caused the property in, controversy to be attached. On the twenty-fifth day of September, 1886, said Owens died intestate, in Douglas County, Oregon, and the defendant C. W. Johnson was duly appointed his administrator, who was substituted as defendant in said action for Owens, and by order of the court said action was continued against him as such administrator, and so prosecuted that the plaintiff recovered a judgment for the sum of $3,000, and the attached property was ordered to be sold. Some property other than that now in controversy was also attached from the sale, of which $602.71 was realized. The necessary facts are alleged in the complaint to present for our decision the fraudulent intent and purpose of Owens in causing said property to be conveyed to his infant daughter; his inability to pay his debts at the time, and that he was insolvent then, aud so continued up to the time of his death; that Esther paid nothing for said property, and never had any interest therein *314except to hold the legal title thereof for her father’s use and benefit.
The cause was referred and the evidence taken in writing, from which the court found the fact in favor of the plaintiff, and dismissed the suit, from which decree this appeal is taken.
1. There is no conflict in the evidence. W. F. Owens at the time of his death was indebted to various persons, including the plaintiff’s intestate, in the aggregate sum of at least $100,000, and the only assets which he left were some accounts and notes, appraised at $25,598.41, from which the administrator says only from $3,000 to $4,000 can be collected. It does not appear that during any of the time from February 14,1885, to the time of his death Owens owned any property that could have been reached by execution; the witness knew of no such property. It is true he received and paid out large amounts of money during that time; but he was engaged in buying and selling grain, wool, etc., and in the absence of direct proof on that subject, it is to be presumed that he conducted that business in the usual way; that is, he received advances from time to time from persons wishing to purchase, and the seller received the money from Owens, and the only interest that Owens had in the transaction was to act as “middleman” between seller and buyer, and to receive his commission. There is no attempt on the part of the defendants to prove that at or during any of the time from the date of the deed conveying the land in-controversy to Esther and the death of Owens, he sustained any large losses or reverses of any kind in business, or to prove that during any part of said time he had any visible property which could have been reached by creditors or subjected to the payment of their claims. It appears clearly from the evidence that at the time Owens caused the deed to be made to Esther he was utterly insolvent, and so continued to the time of his death; but it also appears that during the same time he continued in business, buying and selling produce and contracting new debts and paying off old ones, and for this purpose he frequently secured loans. It does not appear that during that time he made any gains; what losses he sustained does not clearly appear, although Asher Marks, a very *315intelligent witness on the part of the defendants, and who had considerable knowledge of the Owens’ business, says that his losses continued from the time he commenced business up to his death, which would cover a period of several years. The administrator testifies that about $60,000 of claims have been presented to him and allowed, and that he knows of about $40,000 more which had not been presented.
Mr. Humphrey explains the transaction of Owens, Weaver, and Phipps at the bank. Ho says: “When they gave the new bond, he (Owens), drew on the amount duo on the old bond and took credit due on the old bondIn further explanation of the same matter he says: “As I stated before when we took the new bond, and he drew his check and took credit for the amount due on the old bond, I presume there would be nothing due on the old bond. I suppose that it would wipe that out, or at least we do not hold for anything drawn on the old bond, as it was all brought under the new bond. That is, as I understand this evidence, there was some portion of the $10,000 covered by the first bond which- Owens had not drawn when the new security was given. For that balance he drew his cheek, and it was by mutual consent carried forward as a part of the new credit, which he obtained at the bank by the execution of the new bond of $15,000.” It also appears that Owens at the time of his death owed Humphrey and Flint a considerable sum on account of’ these bonds, in explanation of which Mr. Humphrey testifies that a part of what was drawn by Mr. Owens under the bond which was in force on the fourteenth day of February, 1885, the date of the deed, goes to make up the amount that Owens owed Humphrey and Flint at the time of his death, and those are some of the charges against him. It does not appear when or how the particular indebtedness of $3,000 sued on accrued, but the note bears date September 23, 1886, just two days before Owens’ death, and the same day the deed to Esther was recorded.
2. Owens was in the possession of this land when this note was made, and it is not pretended that there was any change of possession on that day. The deed was recorded on the same day, but it does not appear whether it was before or after the note *316was made, nor as I view the subject, is it material. The fact that he continued in the possession of this property, and never put the deed to his daughter on record until his insolvency was known, I think evinces a fraudulent design and purpose to keep the real state of the title to this property concealed, and to mislead those with whom he had dealings. When the catastrophe overtook him and exposure could not be avoided, when further concealment became dangerous, he then placed the deed on record. Under the facts disclosed by this record, I think this conveyance ought to be held to be fraudulent as to this plaintiff. Taking the most favorable view of the facts for the defendants, all that can be claimed for them is that Owens was insolvent and was endeavoring to save something from the wreck for his daughter, at all events, and without regard to his ability to pay his debts. This would render the transaction constructively fraudulent. But I think the facts justify and require us to draw a stronger inference against the defense, and that is, that at the time Owens caused this deed to be made he was conscious of his insolvent condition, and was desirous of placing this particular piece of property secretly beyond the reach of his creditors. No doubt he had a vague hope that he might be able to meet his liabilities, and would have done so if it had been possible; but he intended if the worst should come to place the deed on record, and let his daughter hold the property if she could. This view of the case renders the transaction fraudulent in fact, and enables any creditor to attack it for that reason. (Code, § 3059.) But counsel for respondent argued that no person other than an existing creditor at the time of the transaction could question it for fraud. I doubt whether or not that rule ought to be applied to this case' under any possible aspect of the facts. Here the transaction is conceded by the defendants’ counsel to have been fraudulent as to existing creditors. But where a party is insolvent and continues in business, and is constantly contracting new debts and paying off old ones, and makes a voluntary disposition of his property, such new creditors are not to be deemed subsequent creditors within the meaning of the rule invoked by counsel.
*317In Savage v. Murphy, 34 N. Y. 508; 90 Am. Dec. 733, this principle was involved, and the court said: “ The indebtedness then existing was merely transferred, not paid, and the fraud is as palpable as it wóuld be if the debts now unpaid were owing to the same creditors who held them at the time of the transfers.” A like principle is announced in Paulk v. Cooke, 39 Conn. 566. The court said : “But it is said that the debts which existed at the time that conveyance was made have since, with one exception, been paid; and that a voluntary conveyance can be impeached only by those who were creditors at the time, not by subsequent creditors. This principle clearly has no application, where there has been a continued, unbroken indebtedness. The debts are owed, though they may be due to new creditors. It is the most unsubstantial mode of paying a debt to contract another of equal amount. It is the merest fallacy to call such an act getting out of debt. From the time of this conveyance, Mr. Cooke continued to be in debt, and at the time of this assignment that indebtedness had largely increased. ITis means of payment had even more largely diminished.” And the court ordered the property conveyed to be applied to the payment of the subsequent debt. And in Savage v. Murphy, 8 Bosw. 75, Hoffman, J., reviewed the earlier decisions by which subsequent purchasers and creditors were permitted to question conveyances as being fraudulent, and then laid down this proposition: “ When a deed is made to defraud creditors by one at the time in debt, and who subsequently continued to be indebted, it is fraudulent and void as to all such subsequent, as well as existing creditors.” And a late writer sums up the doctrine thus: “ The embarrassment of the debtor when the transfer w'as made calls into being the claims of, and obligations to the creditors; the deficit then existed, and the liability has been merely transferred to new parties, while the debtor’s embarrassed estate has been further crippled or rendered hopelessly insolvent by the voluntary alienation. It seems to follow that the safer and more prudent rule would be to hold that- no voluntary conveyance by an embarrassed debtor should be upheld against creditors whether their claims accrued prior or subsequent to the transfer.” *318(Wait’s Fraudulent Conveyances, § 99.) Other authorities sustain the same proposition, (Iley v. Niswanger, 1 McCord Ch. 519; Beach v. White, Walk. Ch. 496; Herschfeldt v. George, 6 Mich. 456; Hurdt v. Courtenay, 4 Met. [Ky.] 139; Lowry v. Fisher, 2 Bush, 70; Ridgeway v. Underwood, 4 Wash. C. C. 129.)
In Ridgeway v. Underwood, supra, Judge Washington cites numerous authorities on this subject, and concludes that “if the grantor, at the time the deed was made, was indebted to the extent of insolvency, or perhaps of great embarrassment, so as to create a reasonable presumption of-fraudulent design, the deed may be impeached by a subsequent creditor, unless the presumption is repelled by shoving that such prior debts were secured by mortgage or by a provision in their favor in the deed itself.” To the like effect is 1 Am. Lead. Cases, pp. 43, 44; McElwee v. Sutton, 2 Bail. 128; Madden v. Day, 2 Bail. 575; Smith v. Lowell, 6 N. H. 67; Parkman v. Welch, 19 Pick. 231. The" Statute of 13 Elizabeth, chapter 5, protects creditors and. others. This provision is incorporated in the Code (§ 3059), and it has always received a liberal construction in allowing to persons who are, or might be, injured by a fraudulent conveyance the character of creditors. (1 Am. Lead. Cases, 45.)
For the reasons here given I am unable to concur in the conclusions reached by my brethren. I think the plaintiff, both upon the facts and the law, is entitled to the relief prayed for.