Boots v. Null , 59 S.D. 109 ( 1931 )

Plaintiff brings this action for an accounting under a trust agreement hereinafter set out. The agreement is between defendant Null and A.C. Lowrie, and plaintiff claims as assignee of Lowrie. Prior to executing the agreement Lowrie was defendant in an action wherein John F. Hoeck and Harry Gorton were plaintiffs seeking to recover approximately $6,000, and to have the amount adjudged a lien upon the north ten acres of the southwest quarter of the northwest quarter of section 12, township 110, range 62, in Beadle county, S.D., the premises covered by the trust agreement. The trust agreement was executed in settlement of that suit. T.H. Null was one of the attorneys for the plaintiffs. Following is the agreement:

"In consideration of the assignment by the defendant in the above entitled action, of the lease of the real property described in the complaint, the surrender of possession of said property, and defendant's consent that judgment may be entered in favor of the plaintiffs for the amount claimed in the complaint, together with costs and disbursements, such judgment to be decreed to be a lien against all of said property, subject only to the mortgage for $5,500.00 now of record against said property, the undersigned hereby accepts the trust created by this instrument and hereby promises and agrees that he will forthwith take an assignment of such judgment in his own name; that he will forthwith cause execution to issue upon said judgment and cause said property to be sold thereunder; that he will bid in said property in his own name for at least the full amount of said judgment, costs and disbursements and expenses of sale in trust for the parties interested therein; that he will procure a sheriff's deed for said property and hold said property in trust for purpose of carrying out the agreement and understanding of the parties to said action, that he will pay all taxes lawfully assessed and levied against said property before they become delinquent, pay interest on said mortgage when it becomes due, and all necessary expenses of caring for said property; that he will promptly collect all rents and profits arising from said property, and apply the same to the payment of said taxes, interest and expenses; that he will sell such property as soon as a fair and reasonable amount can be obtained therefor; that he will add to the proceeds of said sale, the amount of all rents and profits derived from said property, deduct from the amount so obtained all sums expended by him for taxes, interest, and necessary expenses, including a reasonable allowance as compensation for his services in executing this trust, and pay to the defendant one-third of the amount remaining after making such deduction.

"In the event that any one should redeem from the sale of said property under execution, the undersigned promises and agrees to pay to the defendant the sum of two thousand and no-hundredths dollars ($2,000.00).

"Dated at Huron, South Dakota, this 18th day of October, 1923.

"T.H. Null."

Pursuant to this agreement Lowrie permitted judgment to be taken in the case, assigned the lease, surrendered possession of the property, and performed all things required of him in the settlement. Null took an assignment of the judgment, caused execution to issue, bid in the property, and finally obtained the property by sheriff's deed. He collected the rents and otherwise assumed to act under the agreement. He borrowed $3,000 of the defendant Union Bond Mortgage Company,, and gave a mortgage on the premises. This is probably the reason for making the Union Bond Mortgage Company a defendant, but the rights of this company are not in dispute. The issues are between plaintiff and Null. The first mortgage of $5,500 mentioned in the trust agreement was foreclosed in March, 1924, and sheriff's certificate of sale was issued to the mortgagee. Null afterwards bought the certificate of sale for $6,547.81 and obtained a sheriff's deed on this foreclosure on the 17th of June, 1925. By virtue of this deed Null now claims to be the absolute owner of the property. Judgment for defendants, and plaintiff appeals from the judgment and an order denying a new trial.

[1-5] As one of the assignments of error appellant complains of the finding of the court "that the said A.C. Lowrie accepted said declaration with the fraudulent intent and purpose upon his part of placing his interest in said premises beyond the reach of his creditors; that this intent and purpose of the said A.C. Lowrie was unknown to the defendant, T.H. Null, at the time of making of said declaration." And as the conclusions of law and the judgment seem to depend largely upon this finding, we consider this assignment first. It is difficult to see how a debtor could accept property in fraud of his creditors. It may be the trial court thought that there was a conspiracy to defraud creditors in the settlement of the Hoeck and Gorton case against Lowrie, and that the suit and settlement was fictitious in fact and a mere device for conveying the property to another to be held under a secret trust, but, if this is the idea, there is no evidence of such a transaction. There is nothing in the pleadings, proof, or contentions of the parties to this suit that the Hoeck and Gorton claim against Lowrie was not valid. If their claim was valid, there could be no fraud in Lowrie permitting judgment to be taken against him. If Lowrie could not pay the judgment or redeem from sale of his property, there could be no fraud in procuring some one who could save for him some part of the property that might otherwise be lost by a forced sale. Whatever he saved did not defraud his creditors. The findings and conclusions of law are based almost entirely on the theory that there is want of equity in this suit by reason of Lowrie's fraud. Appellant under the record and admitted facts is plainly entitled to an accounting. Mention is made in the conclusions of law of prior rights of the Security National Bank of Sioux Falls, S.D., but this bank is not a party to this action, and its rights cannot be determined herein. If the trustee has been or may be subjected to the payment of other paramount claims, he can be protected in the accounting. The rights of the Security National Bank are involved in a suit entitled Security National Bank v. Lowrie, 59 S.D. 102, 238 N.W. 304, wherein T.H. Null and J.H. Boots are named as garnishees. That case has been decided and the opinion filed simultaneously with the opinion in this case. Reference to that case may be had for a more detailed statement of facts.

The judgment and order appealed from are reversed.

POLLEY, P.J., and ROBERTS, WARREN, and RUDOLPH, JJ., concur.