Rasmussen v. Chambers

On the 3rd day of December, 1901, Harry O. Chambers of Fessenden, Wells county, North Dakota, made and executed his will, by the terms of which he bequeathed to his sister Mrs. Robert M. Smith, the interpleaded defendant in this case known as Estella M. Smith, and to her children, the sum of $10,000.00. The will provided that a part of this sum should be invested in a home for Mrs. Robert M. Smith and her family and after the purchase of such home the balance was to be invested in real estate or other good and secure investments, the interest from which was to be used for the support of Mrs. Robert M. Smith and her family, and that on the death of the said Mrs. Smith the estate should go to her children. All of the balance of his property was willed to his brother H.C. Chambers. H.C. Chambers was appointed in the will, by the testator, as executor without bond. Upon the death of Harry O. Chambers, the will was duly filed in the office of the judge of the county court of Wells County on February 14, 1902, and duly recorded in Book One of the will records of said court. The said H.C. Chambers qualified as executor of the said estate and has been, during all of the time since, and is now, the executor of the said will.

In accordance with the provisions of said will the executor, H.C. Chambers, purchased for Mrs. Estella M. Smith a home in Latrobe, Pennsylvania, for the sum of $1600.00. He invested the balance of the $10,000.00 so devised in real estate, and paid to Mrs. Smith interest amounting to 7% per annum on said balance up to 1914, since which time, on account of the failure of crops, he has not been able to pay Estella M. Smith anything under the terms of the will. Mrs. Smith, according to the testimony, has always lived in Pennsylvania, but in the spring of 1919 she came to North Dakota to look after her interests and while here she and H.C. Chambers, on the 19th day of June, 1919, went to the office of Mr. Funke, and H.C. Chambers, made, executed and delivered to her, in the presence of Mr. Funke and another, a warranty deed for the NW 1/4 of Section 15, the SE 1/4 of Section 9, the SW 1/4 of Section 10, the N 1/2 S.E. 1/4 of Section 21, and the W 1/2 SW 1/4 of Section 22, Township 153 North, Range 82 West, which land was part of the land purchased with the money left by the will.

The testimony of Mr. Chambers, Mr. Funke, and the deposition of Mrs. Estella M. Smith is that this land was deeded to Mrs. Smith by Mr. Chambers on account of his indebtedness to her under, and by virtue of, the terms of the will. In the testimony of Mr. Chambers it appears that there were five other quarters of land deeded to Mrs. Smith at the same time, one of which was thereafter sold and $1000.00 was realized, which went to pay taxes on the other quarters. On this land that was deeded to Mrs. Smith at the time there were mortgages amounting to $24,500.00.

H.C. Chambers also deeded 240 acres of land to Malcolm Smith, son of Estella M. Smith. When he was asked about the consideration he said that it was for money he owed Malcolm Smith for horses that he had sold for him. Malcolm Smith, a young man between 25 and 30, enlisted in the war, and, while the record is not very clear, it appears that when he went to war he left the horses with his uncle to be disposed of. The horses were sold for $700.00 or $800.00 and the land was deeded to Malcolm Smith in payment. There was a mortgage against the land for $4500.00 with interest and taxes.

On the 21st day of October, 1920, Estella M. Smith executed a general power of attorney to the defendant, H.C. Chambers, authorizing him to sell and convey all of her lands, lease, and to do anything and everything that was necessary in leasing or selling or managing the land, and on the 24th day of October, 1922, Estella M. Smith made, executed and delivered to H.C. Chambers a power of attorney specifically authorizing him to sell the N by SE 1/2 of Section 21, and the W by SW of Section 22, Township 153 North, Range 82 West, which power of attorney was executed at her home in Pennsylvania, forwarded and duly recorded in the office of the register of deeds of Ward county on the 26th day of December, 1922. On the 15th day of September, 1922, the defendant Estella M. Smith, by her attorney in fact, H.C. Chambers, made, executed and delivered to Abner L. Simpkins a contract for purchase and sale of the last described land in Ward County. On the 22nd day of December, 1922, Homer C. Chambers and A.L. Simpkins went to the Second National Bank in Minot, North Dakota, and into the private office of R.E. Barron, President, and told Mr. Barron that the said land had been sold to Mr. Simpkins and that the check was to be made payable to the order of Estella M. Smith, for $1341.30, and Mr. R.E. Barron then and at that time wrote the check, dated the 22nd day of December, 1922, "Pay to Estella M. Smith $1341.30" and in the left-hand corner Mr. Barron wrote; "Payment on contract, Albert Simpkins, for N 1/2 S.E. 1/4 Sec. 21 and W 1/2 SW 1/4 Sec. 22-153-82," which check was endorsed "Estella M. Smith by H.C. Chambers" and "H.C. Chambers."

The defendant H.C. Chambers says in his testimony that he had the money deposited in his account for convenience in paying taxes, and interest on the mortgages, on the lands of Estella M. Smith. R.E. Barron at said time made out a deposit slip for the amount of the check $1341.30, and then in his own handwriting wrote on the slip, "By A.L. Simpkins, the grantee in the contract of sale." Mr. Chambers testifies that he kept no books; that he filled out no deposit slips, and was very much confused between an account and deposit slips. But in his direct testimony he candidly says that while the money belonged to his sister, he put it in the bank in his name for convenience in checking in payment of taxes and interest on Mrs. Smith's land.

The plaintiff in this action had a judgment against the defendant H.C. Chambers for $2240.90, and on the 29th day of December, 1922, the plaintiff had an execution issued on the judgment, and the account, as deposited in the Second National Bank, was garnisheed. It is the contention of the plaintiff and appellant that the sale of the lands to Mrs. Smith was fraudulent and that the money deposited in the name of H.C. Chambers belonged to him and was subject to garnishment in the bank.

The trial court was very liberal in the latitude allowed to both sides in the introduction of testimony. In fact, he required an answer to practically every question that was asked. At the close of the defendant's case the plaintiff moved for a directed verdict and at the close of the case both sides moved for a directed verdict and the court took it under advisement and thereafter made his findings of fact and conclusions of law in favor of the defendant, specially finding that the account of $1341.30 in the Second National Bank did not and does not belong to, and is not the property of the said H.C. Chambers but is the property of the interpleaded defendant Estella M. Smith, and that the interpleaded defendant was, on the 29th day of December, 1922, the owner of the N 1/2 S.E. 1/4 of Section 21, and the W 1/2 SW 1/4 of Section 22, Township 153 North, Range 82 West, and upon the findings and conclusions judgment was duly entered for the defendant, and plaintiff bases his right to recover upon the alleged fraudulent conveyance of H.C. Chambers to Estella M. Smith on the 19th day of June, 1919, and more than three years before the deposit was made. Section 7223 Comp. Laws 1913 reads as follows: —

"In all cases arising under section 5599 or under the provisions of this chapter the question of fraudulent intent is one of fact and not of law; nor can any transfer or charge be adjudged fraudulent solely on the ground that it was not made for a valuable consideration."

H.E. Byorum, cashier of the said bank, made an affidavit of disclosure stating that they had money belonging to said H.C. Chambers in the sum of $1401.71 upon a general checking account. In support of their claim of fraud they introduce in evidence Exhibit No. 8 which purports to be a statement upon which the claim is made that $2000.00 was loaned. When this exhibit was shown to Mr. Chambers he testified that the signature was his and that Dahlin filled it out after it had been signed. Chambers signed with lead pencil and Dahlin with pen and ink. It is dated the 6th day of December, 1916, more than six years before the deposit was made and three years before the deed of the land from Chambers to Estella M. Smith was executed. In this statement there is 1280 acres of land in Wells county valued at $30.00 per acre, amounting to $38,400.00; 160 acres of land in Kidder county valued at $20.00 per acre, amounting to $3,200.00; in Ward county 1720 acres of land at $30.00 per acre, amounting to $51,600.00; Jamestown property, $1800.00; personal property, $10,000.00; mortgages and notes, $4500.00; Canadian notes, $2000.00; Pennsylvania property, $2,700.00; Incumbrances against the Ward rounty land $14,300.00; against the Wells county land, $5500.00.

The record shows that Mr. Rasmussen is a banker, a director in the Second National Bank of Minot and has been connected with it for many years, and connected with at least one other bank in Ward county. If there was anything false in this statement in regard to values Mr. Rasmussen would know it better than Mr. Chambers.

There is no evidence of fraud unless the transactions themselves are such that fraud can be inferred therefrom by the jury or the trial court. There is nothing in appellant's contention that the consideration was small for these lands were all mortgaged, apparently to the limit. Everything that Mr. H.C. Chambers did was done openly and aboveboard. He apparently did what banking he had to do with the Second National Bank. He knew the plaintiff and had known him for many years. He knew that he was a banker and a director in the Second National Bank in Minot. If he had wanted to perpetrate a fraud he would hardly have gone to the Second National Bank in Minot, knowing that the plaintiff was connected with it. He sent one power of attorney from Estella M. Smith to Mr. Barron, president of the bank, to have it recorded. He could have gone to any other bank; or he could have required Simpkins to get the cash.

There is no evidence that the defendant H.C. Chambers was insolvent at the time he deeded the land to his sister Estella M. Smith. In fact, there is no evidence that he was insolvent at the time of the commencement of this action or at the trial. He was asked on cross-examination, on page 73 of the record, what land he had in Ward County in his own name, and he answered: "I think two quarters." Question: "You have two quarters?" Answer: "I think there is." The record shows that there is a mortgage on the land and that the mortgage is being foreclosed but there is no evidence as to the amount of the mortgage or the extent of Chambers' equity therein. On cross-examination Chambers was asked about the sale of one of the quarters which he deeded to Estella M. Smith, and out of which $1000.00 was realized, and he says: "I did not pay it out for taxes. Zuber done that. That is Zuber of Fessenden. I knew he was paying it out in taxes. She (meaning Estella M. Smith) sent me the notice back and he paid it for her. I sold the land, yes." This testimony is quite significant for it shows that Estella M. Smith was controlling the expenditure of the money in the payment of taxes on the lands deeded to her.

It is conceded that Harry O. Chambers made the will that was introduced in evidence together with records of the county court of Wells County showing its admission to probate; and that $10,000.00 was bequeathed in said will to Estella M. Smith; that $1600.00 of it was invested in the home in Latrobe, Pennsylvania, and the balance invested in farm lands as provided in said will; and that Estella M. Smith received the interest on the money invested in lands at the rate of 7% per annum until the year 1914. It is not denied that when one of the quarters of land deeded to Estella M. Smith was sold and $1000.00 realized from it that she authorized the payment of the $1000.00 on taxes and interest on the other lands, and that she had not received a cent out of the bequest since 1914, all of which is evidence of her good faith. Since there is a bona fide debt, under § 7218 Comp. Laws 1913 Chambers had the right to sell the land to his sister. "Section 7218. A debtor may pay one creditor in preference to another, or may give to one creditor security for the payment of his demand in preference to another." And while dealings between relatives are scrutinized carefully, the fact that they are relatives is not sufficient to justify the conclusion of fraud. Conveyance of land by husband to wife without consideration while deeply in debt is not necessarily fraudulent. First State Bank v. O'Leary, 13 S.D. 204, 83 N.W. 45. That mortgagee is a brother of mortgagor is not evidence of fraudulent intent. Lane v. Starr,1 S.D. 107, 45 N.W. 212. Conveyance with the sole object to secure honest debt not fraud. Paulson v. Ward, 4 N.D. 100, 58 N.W. 792.

In the case of Ruettell v. Greenwich Ins. Co. 16 N.D. 547, 113 N.W. 1029, on the question of the weight that this court gives to the findings of the trial court, the court said: — "The weight to be given to the trial court's findings when that court is clothed with the same functions as a jury in determining questions of fact has often been before this court, and the following rule was laid down in an early case and adopted in later decisions: ``Rather it intended, and such, we think, is the effect of the Wisconsin decisions, that, when a finding of fact made by the trial court was brought into this court for review upon proper exceptions, it should come like a legal conclusion, with all the presumptions in favor of its correctness, and with the burden resting upon the party alleging error, of demonstrating the existence of such error. He must be able to show this court that such finding is against the preponderance of the testimony, and, where the finding is based on parol evidence, it will not be disturbed unless clearly and unquestionably opposed to the preponderance of the testimony.'" Jasper v. Hazen, 4 N.D. 1, 23 L.R.A. 58, 58 N.W. 454; Dowagiac Mfg. Co. v. Hellekson, 13 N.D. 257, 100 N.W. 717; Re Eaton,4 N.D. 517, 62 N.W. 597; Feil v. Northwest German Farmers' Mut. Ins. Co. 28 N.D. 355, 149 N.W. 358.

The trial court heard the evidence. He saw the witnesses upon the stand. He gave to the plaintiff every possible opportunity to prove fraud. He had a better opportunity to judge of the credibility of the witnesses and the parties than has the members of this court and it is our opinion that the evidence in the case sustains the findings of fact and conclusions of law in favor of the defendant.

The decision of the lower court is affirmed.

CHRISTIANSON, Ch. J., and JOHNSON, NUESSLE, and BIRDZELL, JJ., concur.