Hatfield v. Cline , 1911 Ky. LEXIS 475 ( 1911 )

Opinion oi? the Court by

Judge Settle

Affirming.

The appellee, J. S. Cline, trustee in bankruptcy of the appellants, Gr. W. Hatfield, and Ira Hatfield, brought these three actions in the court below to set aside certain deeds made by the appellant, G-. W. Hatfield and wife to his three sons, the appellants, Ira, Boyd and A. E. Hatfield; the deed to each conveying fifty acres.

The petition in each case alleged the bankruptcy of Gr. W. Hatfield and Ira Hatfield; the appointment and qualification of appellee as trustee; and that the deeds in question were made by Gr. W. Hatfield when he was insolvent and he and his grantees knew of his insolvency; that the conveyances were without consideration, voluntary, and intended by both grantor and grantees to de fraud the former’s creditors. It was also alleged in the petition that the bankrupts, Gr. W. and Ira Hatfield, had failed as merchants; that the lands conveyed by the former to his sons were liable for his and the firm’s debts; and it was asked that they be subjected to their payment.

The answer in each case denied any fraud in the conveyances and also denied the insolvency of the grantor, but admitted that he was “slightly” indebted when the deeds were made. It was alleged in the answers that the lands conveyed by the grantor, Gf. W. Hatfield to his sons were parts of a tract to which he held the title, but which had been purchased with money belonging to the first wife of the grantor and mother of the grantees, realized from the sale of certain other lands given her by her father, and that the deeds from appellant Gr. W. Hatfield to his sons were executed' by her request made before her death.

It was further averred in the several answers that Gr. "W. Hatfield is a bona fide housekeeper with a family; that he resides on the tract of land from which the parcels conveyed his sons were taken; that as against his creditors he is entitled to a homestead in the entire tract of which the parcels conveyed his sons were parts; that the whole did not exceed $1,000 in value; and that if the court should declare the deeds to his sons fraudulent the whole of the land should be adjudged to him as and for a homestead. In addition to the matters of defense referred to, it was also alleged in the answers that the grantees in the three deeds were bona fide purchasers of the lands conveyed them respectively; that each had made upon the parcel conveyed him valuable and lasting improvements, the character and valne of which, were fully set forth, and it was prayed, in the events the deeds were set aside, that each grantee he allowed the value of his improvements and a lien on the land described in his deed to secure the payment thereof.

Bieplies were filed controverting all affirmative matter of the answers. Upon the completion of the issues the three actions were consolidated, and upon the hearing the circuit court rendered judgment setting aside the several deeds attacked and subjecting the parcels of land thereby conveyed to the payment of the debts of appellants, G-. W. Hatfield and Ira Hatfield. It was also adjudged that the improvements placed by appellant, A. E. Hatfield, upon the land conveyed him increased its vendible value $275, but that he was chargeable with rents to the amount of $200, and for the difference between these sums, $75, he was given a lien on the land; that the appellant, Boyd Hatfield, had, by the improvements he put upon the land conveyed him, increased its vendible value $50 in excess of its rental value while he had it in possesion, and for that amount he was given a lien on the land. The appellant, Ira Hatfield, was allowed nothing for improvements, as it was adjudged that the rental value of the land conveyed him for the time it was in his possession, equalled the increased vendible value given it by the improvements.

Appellants complain of the judgment and ask its reversal.

Their principal contention is that the debts on account of which the appellants, G. W. and Ira Hatfield, were thrown into bankruptcy, were not created until after the deeds from the former to his three sons were executed; and that the deeds, though voluntary, were not fraudulent as to the grantor’s creditors.

While each deed recites that $50 was the consideration for the sale of the land therein conveyed, the depositions of father and sons show that the $50 was not paid by any of the grantees, nor was it intended that any amount would be paid by them for the land. It is patent, therefore, that the deeds were without monied consideration, and this being true they were voluntary conveyances in contemplation of law, although the grantor may have been moved to their execution by the affection he bore his sons. As the conveyances were undoubtedly voluntary, they were prima facie fraudulent as to such, debts as the grantor, Gr. W. Hatfield, was then owing. With respect to such conveyances, section 1907, Kentucky Statutes, provides:

“Every gift, conveyance, assignment,' transfer or charge made by a debtor, of or upon any of his estate, without valuable consideration therefor, shall be void as to all his then existing liabilities, but shall not, on that account alone, be void as to the creditors whose debts or demands are thereafter contracted, nor as to purchasers with notice of the voluntary alienation or charge; and though it be adjudged to be void as to a prior, creditor, it shall not, therefore, be deemed to be void as to such subsequent creditors or purchasers.”

In O’Kane v. Vinnedge, et al., 108 Ky., 34, 21 R., 1551, we said:

“If a party be indebted at the time of a voluntary conveyance of his property, such conveyance is presumed to be fraudulent as to those debts, and this presumption as to prior debts does not depend upon the intentions or circumstances of the party conveying, or the amount conveyed. The law will not permit an inquiry into these matters, or give them any weight or influence. As to subsequent debts, the creditor who assails a voluntary conveyance must show, in addition., circumstances justifying the presumption that the intent of the conveyance was fraudulent before the land conveyed could be properly subjected to the payment of such debts. (Hanson v. Buckner, 4 Dana, 251; Enders v. Williams, 1 Met., 346.)

It is the intent and purpose with which the grantor 'acts which renders the conveyance fraudulent, and this must be determined by the facts of each particulai- case.” (Bank Commerce v. Payne, 86 Ky., 446; Beatty v. Dudley, 80 Ky., 381; Slater v. Sherman, 5 Bush, 206; Rose, et al. v. Campbell, 25 R., 885.)

Keeping in view the rule announced in the case, supra, it remains to be determined whether the debts to which -appellee seeks to subject the lands conveyed by the ap.pellant, G\ W. Hatfield, to his sons, were owing'by him when the déeds were lodged for record. It was not alleged or proved by appellants that appellee, or any creditor whom he represents, knew of the execution or existence of the deeds before they were recorded. The deed to Ira Hatfield bears date March 6,' 1904, purports to have been acknowledged by Gr. W. Hatfield and wife September 6, 1904, but tbe certificate of tbe acknowledg- ■ ment is dated September 6, 1905.

Tbe deed was not lodged for record nor tbe tax paid until September 16,1905, and it was recorded September 29, 1905.

Tbe deed to Boyd Hatfield bears date March 16,1904,' purports to have been acknowledged by tbe grantors September 6, 1905, was lodged for record September 16,' 1905, and put to record September 29, 1905. Tbe deed to A. E. Hatfield bears date September 6, 1904, purports to have been acknowledged on tbe same day, was lodged for record September 16, 1905, and recorded September 29, 1905.

Section 496, Kentucky Statutes, provides:

“No deed or deed of trust or mortgage conveying a legal or equitable title to real or personal estate shall be valid against a purchaser for a valuable consideration, without notice thereof; or against creditors, until such deeds shall be acknowledged or proved according to law, and lodged for record.”

According to tbe testimony of Ira Hatfield be did not know of tbe execution of the deeds until they were given him by bis father a day or two after their execution,, which be said was in September, 1904; and they were kept by him in bis trunk until they were lodged for record. As they were not lodged in the office of tbe clerk of tbe Pike County Court for record until September 16, 1905, they must have remained in bis trunk fully a year.

It is apparent from tbe evidence that substantially all of the indebtedness of G-. W. and Ira Hatfield was created prior to tbe date of tbe lodging of tbe deeds for record. They conducted as partners a mercantile business at Matewan, West Virginia; were carying it on there during tbe year tbe deeds were in Ira Hatfield’s trunk, and sold the business soon after tbe deeds were recorded and shortly before tbe insolvency of tbe firm and its members became known. Tbe indebtedness of tbe firm grew out of tbe business at Matewan, and when tbe failure of tbe partners became known it was so hopeless as to give cause for forcing tbe firm and members into bankruptcy.

It appears from the record that tbe unsecured indebtedness of tbe firm and members amounted to $4,037.96, and that tbe secured- indebtedness was $1,600. •The greater part of this indebtedness was shown by tbe schedule sworn to and filed by the partners in the bank-rapt court; and the statement or schedule of debts filed by the creditors in the consolidated actions, giving the dates of all items of indebtedness, demonstrate beyond doubt that practically every item of the- indebtedness was incurred before and existed at the time the .three deeds from G-. W. Hatfield to his sons were lodged for record. • In view of the foregoing facts it is manifest that there is no merit in the contention of appellant’s counsel that the circuit court erred in its conclusion that these debts were contracted before the conveyances from Gr. W. Hatfield to his son took effect.

It is equally apparent from the record that the conveyances could not have been upheld by the court below on the ground that they were made in pursuance of a trust. It is true that appellants, or some of them, testified that the tract of land, of which the parcels conveyed by the appellant, Gr. W. Hatfield, to his three sons were parts, had been purchased with money which their mother had realized from other land deeded to her by her father; and that she, before her death, requested that the lands now claimed by her sons be deeded them by their father; but this oral testimony can not- be accepted as establishing the alleged trust, in view of the opposing-facts shown by the record. The deed through which Gr. W. Hatfield obtained title to the land now claimed to have been purchased with the money of his wife does not' in words, or by implication, manifest a trust, but in the usual form and in unambiguous language conveys the title to Gr. W. Hatfield absolutely, reciting that the consideration was naid by him. Moreover, the deed was made and recorded in 1895, his wife lived several years thereafter, and his ownership and control of the land seem to have been altogether free of any claim on her part to the land, or that he held the title in trust for her or her sons.

The answers do not aver,nor was there any proof conducing to show, the alleged trust, or that Gr. W. Hatfield wrongfully took the title to the land to himself when it should have been conveyed the wife, or that there was any fraud or mistake in the execution of the deed. So, in such a state of case, even if it were admitted that the land was paid for with the wife’s money, no trust resulted from the conveyance of the land to the husband. In other words, the creation of a trust under such cir-ewnstances is forbidden by section 2353, Kentucky Statutes, which provides:

“When a deed-shall be.made to one person, and the consideration shall be paid by another, no use or trust shall result in favor of the latter, but this shall not extend to any case in. which the grantee shall have taken a deed in his own name without the consent of the person paying the consideration, or where the grantee, in violation of some trust, shall have purchased the lands deeded with the effects of another person.”

We are also of opinion that the circuit court did not err in refusing the appellant, G. W. Hatfield, a homestead in the lands conveyed his sons. It appears from the evidence that after making the deeds to his sons there remained of the tract, from which the parcels of fifty acres each conveyed them were taken, at least one hundred acres upon which was situated a large two-story, commodious family residence, barn and other outbuildings. The appellant, G. W. Hatfield yet holds the title to and resides upon this 100 acres. According to the evidence, it is worth at the lowest estimate, $1,000, and in the bankruptcy proceedings it was claimed by him as a homestead, appraised at $1,000, and set apart to him as a homestead. ’ As he was entitled to but one homestead and it was set apart to him, he can not complain that he was refused more land. Having accepted the homestead thus set apart to him, as of the value of $1,000, he was estopped to claim in these cases that it was worth less than that amount or to demand other lands by way of increasing its value to $1,000.

As it does not appear that appellee has taken a cross-appeal from that part of the judgment giving the appellants Boyd and A. E. Hatfield a lien each for the value of the improvements, we can not review the ruling of the circuit court on these matters.

Being of the opinion that the deeds made by appellant, G. W. Hatfield, to his sons were voluntary and fraudulent as to his creditors, and that the lands thereby attempted to be conveyed were properly adjudged liable for his debts, the judgment is affirmed.