Court Opinion

ID: 6898213
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:52:09.796171+00
Date Added: 2024-06-11T16:06:04.758743
License: Public Domain

Decided 29 January, 1900.
On the Merits.
[59 Pac. 805.1
For respondent there were briefs over the names of Starr, Thomas & Chamberlain, Edward Mendenhall in pro per., and Pipes & Tifft, with an oral argument by Messrs. Mendenhall, Geo. E. Chamberlain, and Martin L. Pipes.
Mr. Justice Moore
delivered the opinion.
This is a suit to set aside certain deeds of real estate and a chattel mortgage, to cancel the assignment of several promissory notes and mortgages, and to subject the property and securities affected thereby to the satisfaction of plaintiff’s judgments. The facts are that plaintiff, on April 6,1896, obtained a judgment against the defendant Carrie M. Elwert in the Justice’s Court for East Portland District for the sum of $225 and $17.10 costs, and within the time prescribed by law caused the same to be docketed in the judgment docket of the Circuit Court for Multnomah County, and on September 6, 1896, he obtained a judgment against the defendants Mrs. J. B. Elwert and her daughter, the said Carrie M. Elwert, in said circuit court,for the sum of $470 and $15.50 costs. Executions were issued on said judgments, and delivered to the sheriff of said county, who, being unable to find any property of either of said defendants upon which he could levy, returned them wholly unsatisfied. It appears from the transcript that Mrs. Elwert, until March 12, 1894, was the owner in fee of lot 4 and the south five feet of lot 3, in block 218, in the City of Portland, upon which she erected a new building in 1893, and also repaired an old one ; that she loaned money, taking promissory notes payable to her order, secured by real estate mortgages, executed by the persons, on the dates, and for the sums following, to wit: William Morton, November 10,1890, $7,500 ; A. K. Yelton, February 9,1891, $3,500; Mary E. Knott, June 24, 1891, $3,000; R. S. Perkins, July 11, 1892, $27,500; P. A. Marquam, August 6, 1892, $15,000 ; and J. W. Hod-*382son, August 10,1893, $4,000 ; and. also purchased and took an assignment of a note and mortgage executed by Frank Bode to Bachael L. Hawthorne for the sum of $966.66 ; that she caused some of these mortgages to be foreclosed, the premises therein described being purchased by Carrie M. Elwert, who., upon securing the sheriff’s deeds there-for, executed conveyances thereof to her brother, the defendant Charles P. Elwert, to whom Mrs. Elwert assigned the remaining notes and mortgages. She also, on March 12, 1894, for the expressed consideration of $36,000, executed to Charles P. Elwert a deed to lot 4 and the south five feet of lot 3, in said block 218. George Weidler, on December 31, 1890, executed a mortgage securing notes payable to Charles P. and Carrie M. Elwert for the sums of $8,000 and $13,000, respectively, and Carrie M. Elwert assigned to her brother the latter note, and all her interest in said mortgage. She also executed to him a mortgage of her household goods and furniture, purporting to secure the payment of a promissory note for $1,000, and Mrs. Elwert, on September 3,1894, gave him her note for $4,567.77. The value of the property thus conveyed to C. P. Elwert, as evidenced by the consideration recited in the several deeds, notes, and mortgages executed or assigned to him, is $124,034.43.
Plaintiff, referring to the amount involved in his respective judgments, alleges “ that at the time of making said deeds, assignments, and transfers, and for a long time prior thereto, said J. B. Elwert and Carrie M. Elwert were indebted to this plaintiff in a large proportion of the sum before mentioned ; all of which the defendant C. P. Elwert knew at the time.” It is also alleged, in substance, in the complaint, that said conveyances and chattel mortgage were executed, and the notes and mortgages assigned, without any consideration therefor, and with the intent to hinder, delay, and defraud the creditors *383of Mrs. J. B. Elwert and lier said daughter. The separate answer of Mrs. Elwert, after denying the material allegations of the complaint, avers that her said son loaned her about $45,000, for which she executed to him her promissory notes, and that of such sum she expended about $36,000 in making the improvements on lot 4 and the south five feet of lot 3 in said block 218, and in furnishing the buildings erected thereon ; that the money loaned by her also belonged to her said son, who, at the time such loans were made, was a practicing physician in the City of New York ; that said notes and mortgages, for the sake of convenience only, were taken in her'name and that of her daughter; and that her said daughter, for the same reason, acted as her son’s trustee in taking in her name the legal title to real property sold under said decrees of foreclosure. She also alleges that, being unable to pay her son the money so borrowed, she executed to him a deed of her property in part payment of the debt. The separate answer of Charles P. Elwert denies the material allegations of the complaint, and avers, in substance, that, being possessed of a large sum of money for which he was seeking investment, he sent it to the First National Bank of Portland, to be loaned, for the reason that a greater rate of interest could be obtained in the State of Oregon than in the City of New York; that this money was loaned in Multnomah County, and notes and mortgages therefor were taken in the name of his sister or his mother, for the purpose of convenience, they having no right or interest therein, and holding the legal title thereto in trust for him. The allegations of new matter in these answers having been denied in the replies, a trial was had, resulting in a decree as prayed for in the complaint, and defendants appeal.
3. The question presented by this appeal is whether the defendants, Mrs. Elwert and her daughter, were in*384debted to Charles P. Elwert to the extent claimed at the time the deeds and the chattel mortgage were executed and the notes and mortgages assigned to him. If truly answered in the affirmative, it follows that the decree must be reversed, for the rule is well settled in this state that a debtor may prefer a creditor, to whom he may transfer all his property in payment of Ms debt: Sabin v. Columbia Fuel Co. 25 Or. 15 (42 Am. St. Rep. 756, 34 Pac. 692). The creditor’s knowledge that the debtor is in failing circumstances, that he has other creditors, or that the satisfaction of his own debt exhausts all of the debtor’s property, will not defeat his right to accept a transfer or mortgage thereof if there be no intent upon the part of the preferred creditor to hinder, delay, or defraud the other creditors of the debtor: Currie v. Bowman, 25 Or. 364 (44 Am. & Eng. Corp. Cas. 662, 35 Pac. 848). It is only when the grantor or mortgagor reserves to himself some benefit which he expects to derive from the execution of a deed or mortgage of his property, that a court of equity will intervene at the suit of a creditor, and set aside such transfers as a fraud upon the latter’s right: Jolly v. Kyle, 27 Or. 95 (39 Pac. 999). The transfer by a debtor of all his property is not an ordinary transaction, and whenever it occurs courts of equity regard it as a badge of fraud: Bump, Fraud. Oonv. 34; Wait, Fraud. Conv. (3 ed.) § 231. So, too, when a debtor conveys his property to a relative, and his creditors sustain any loss in consequence thereof, such relation imposes upon the parties to the conveyance the burden of showing that the transfer was made in good faith and for a valuable consideration: Bump, Fraud. Conv. 54; Jolly v. Kyle, 27 Or. 95 (39 Pac. 999); Flynn v. Baisley, 35 Or. 268 (45 L. R. A. 645, 57 Pac. 908); Aultman v. Obermeyer, 6 Neb. 260; Carson v. Stevens, 40 Neb. 112 (42 Am. St. Rep. 661, 58 N. W. 845); Seitz v. Mitchell, *38594 U. S. 580, 24 L. Ed. 179. Thus, where a debtor conveys the whole of his estate to a brother, ostensibly in satisfaction of his debt to the latter, in a suit by creditors to set aside the deed for fraud it is incumbent upon the grantee to establish by satisfactory proof that there was a valuable and adequate consideration for the premises; and, unless he can give a clear and precise account of the items constituting the alleged debt, a fraudulent intent will be inferred : Marks v. Crow, 14 Or. 382 (13 Pac. 55). In the light of these rules the testimony taken at the trial will be examined.
4. It is undisputed that'in 1883 Mrs. Elwert sold a lot in the City of Portland to Henry Failing, receiving therefor the sum of $50,000 ; that, after securing this money, she moved to California, where she remained until about 1891, when she returned to Portland, and began improving her property; that between January 2, 1889, and June 30, 1892, she deposited in her own name with the First National Bank of Portland the sum of $60,847.75 ; that she withdrew this money from said bank, and between May 25, 1892, and July 11, 1893, deposited in her own name with the Portland Savings Bank the sum of $74,247.54. It also appears that between May 25, 1892, and July 19,1893, there was deposited with the latter bank to the credit of Charles P. Elwert the sum of $7,750.56, and to the credit of Carrie M. Elwert the sum of $6,428.40. Charles P. Elwert, as a witness in his own behalf, testified that he did not know that any money had been deposited with the Portland banks in his name, but that the money so deposited in the name of his mother and sister belonged to him, and that his mother borrowed from him about $125,000. In explaining the manner in which he acquired this money, he says, in substance, that, after going to California with his mother, he secured a medal by *386reason of having attained the highest honors of his class in college at Benicia, in that state, and because of his success in this respect, his uncle, Dr. Frederick Ziler, made Mm a present of' $2,000, -which money his cousin profitably invested for Mm, but he does not recollect what sum was realized therefrom ; that, Ms uncle having died, he received as a first payment from his estate, “either some $10,000 or $11,000 or $12,000,” which he invested in electric light stock at $11, selling it at $27 or $28, whereby he made a profit of some $30,000 ; that he bought sixty or seventy lots in Cornell Beach, for which he paid between $40 and $50 per lot, and, after holding them three or four years, sold them for $500, $600, and $700 each, and'for one corner lot he received more than $1,000, making a return of something like $36,000 or $38,000 ; that in one week he made a profit of $7,000 from the purchase and sale of locomotive stock; that he was engaged in mining, bought and sold real property, and operated a drug store, and by these means secured the sum of $125,000, —the greater portion of which was in gold, the remainder in greenbacks, — which he placed in the California Safe Deposit, and in 1890, when he went to New York, he delivered the key of this safe deposit to his sister, instructing her to loan and manage this money according to her best judgment. Speaking of the money loaned to Ms mother, — about $90,000 or $95,000, — for which she gave him her individual notes, he states that he destroyed her letters showing such loans.
Carrie M. Elwert testifies that her brother delivered to her $125,000 which was in the safe deposit, and gave her a key thereto, which she retained about two years, but she cannot remember when he gave it to her, nor can she give the number of the vault in which the money was deposited ; that she loaned her mother about $125,000, but destroyed the account thereof, and also all letters re*387ceived from her brother; that she received from her uncle about $10,000, of which she loaned $7,000 or $8,000 to one Montigne, a stove dealer at Oakland, California, whose given name she cannot remember, — but he failed and she lost this amount; that she lost the remainder of her money speculating in stocks, and that the chattel mortgage executed to her brother was given to secure a valid loan made by him; that the loan of $21,000 made to Weidler was also his money, but by some mistake the note evidencing $13,000 was made payable to her. Mrs. Elwert testifies that with the money received from Failing she purchased six hundred shares of electric light stock at $32, and, after paying an assessment thereon of $2, sold the stock at $7, losing about $20,000 ; that she dealt in mining stock for some time until she lost every dollar she possessed, but she cannot state when this occurred ; that the money deposited in her name with the First National Bank of Portland was borrowed from her son, tó whom she executed her promissory notes bearing six per cent, interest; that the money so borrowed she loaned on real estate securities, taking notes therefor in her own name, and obtained a higher rate of interest than she was paying, which difference she retained as compensation for her service; that she assigned the notes and mortgages to her son, and, on settling their accounts, she owed him nearly $5,000. On cross-examination she was asked: “Have you had any correspondence with your son, — any letters from him?” to which she replied, “Yes, of course. Q. What have you done with those letters? A. Destroyed them. Q,. All destroyed? A. Yes.”
James N. Davis, an attorney, appearing as a witness for plaintiff, testifies that on March 12, 1894, he prepared and took Mrs. Elwert’s acknowledgment to a deed to her son of her property, and at that time Carrie, speaking of the reason for making it, said that people were taking *388advantage of her mother, and trying to get her property away from her, and she was making this deed for her protection. William Harris, a real estate dealer, being called as a witness for plaintiff, testified that in the summer of 1894 Mrs. Elwert desired him to sell her property for $35,000, but in 1895 offered it for $25,000; that he had known Charles P. Elwert from boyhood, and in 1895 saw him with his sister, Carrie, in Portland, and he asked the witness if he was going to sell his mother’s property, to which he replied that property was low, and could not then be sold. Witness says he met him again shortly afterwards on Third Street, and asked him who owned this property, to which he replied, “I don’t own it exactly, but my mother owns it;” and in further conversation he said he had a deed to the property, and owned it, but that it was “for a certain purpose,” which he did not explain; that the Weidler mortgage of $8,000 was all the interest he had in Portland, and that he was sorry he had that, and did not want any more. Plaintiff, appearing as a witness in his own behalf, testified that Charles P. Elwert told him he never paid a cent for his mother’s property, and had no interest whatever in it. G-. E. Hays says that he was introduced to Charles P. Elwert, and heard him say, referring to his mother’s property, that the title was in him, but his mother was the real owner. John Mann testified that Mrs. Elwert and her daughter told him that they were so much embarrassed that they were going to transfer their property. Mrs. Elwert and her son and daughter deny the statements imputed to them, Charles P. Elwert saying that he never saw the plaintiff prior to the day he appeared as a witness. The trial court, upon this conflicting testimony, having found that Charles P. Elwert was the owner of the $8,000 Weidler note only, it is contended by defendants’ counsel that their clients, by disclosing the sources from which *389the money so loaned was derived, afforded plaintiff an opportunity of examining the records of the Safe-Deposit Company in San Francisco, the public records relating to the transfer of real property at Cornell Beach, and the corporate records of the several companies the purchase and sale of whose stock contributed to the wealth of Charles P. Elwert, while it dissipated that of his mother ; but that, plaintiff having failed to take advantage thereof, or to controvert in any manner the testimony of. the defendants in this respect, the court erred in rendering a decree for plaintiff.
5. Whatever the rule may be in regard to the burden of proof in suits to set aside for fraud conveyances executed by a grantor who is not related to the grantee, the point insisted upon can have no application to the case at bar, in which the onus probandi, by reason of such relation, is cast upon the defendants to show the bona fides of the several transactions, and to supplement their testimony by the evidence which was more particularly within their knowledge and power to produce : Shmit v. Day, 27 Or. 110 (39 Pac. 870). The fact that each defendant testified that all evidence tending to establish Charles Elwert’s ownership of the money was destroyed is a circumstance from which it may be inferred that their testimony in respect to his ownership is untrue, for it is not reasonable to suppose that, with relatives even, the evidence of the loan and management of such a sum of money would be wholly destroyed. Charles Elwert’s failure to remember what sum was realized from the investment made by his cousin of the money received as a present from his uncle is remarkable. He was then young, and, being in college, his mind was free from business cares, and, as this was the first sum of money of any magnitude that'he ever possessed, it is unreasonable to suppose that he could not remember how it was invested, or what *390sum was realized therefrom ; and hence his lack of memory is a circumstance tending to cast discredit upon his testimony. He was in the prime of life when appearing as a witness, and hence his memory must have been retentive ; and if it be true, as he claims, that he amassed the sum of money in question, while he might forget the details of the later investments, and the sums realized therefrom, the memory of his first financial venture must necessarily have been vivid. Mrs. Elwert took with her to California $50,000, and, as she claims, lost every dollar of it in speculation, yet she cannot remember when the sum was exhausted. It seems improbable that, possessing, as she did, such a sum of money, she would not remember, if it were a fact, when, from a state of affluence, she was reduced by speculation to a condition of almost penury. These circumstances induce the conclusion that the trial court committed no error in its findings, and hence it follows that the decree is affirmed.
Aeeirmed.