Buckwalter Stove Co. v. Edmonds

Argued March 23, 1925. In 1894, the defendant, Ella G. Edmonds, was married to R. E. Edmonds, at Buffalo, New York, and four years later removed to Pittsburgh where they have since resided and where Mr. Edmonds has been continuously engaged in business. In 1901 he bought a home on Harriet Street for $10,000, taking title thereto in the name of his wife. He paid $2,500 thereon and they gave a joint bond and mortgage for the balance. Edmonds was then perfectly solvent and not engaged or about to engage in any hazardous business. In April, 1912, Edmonds gave his wife $7,000 to pay on the bond and mortgage, which she did, leaving an unpaid balance of $500, subject to which she then exchanged the Harriet Street property for a house and lot on Rippey Street, the latter being subject to a mortgage of $5,000, and the title thereto being taken in the name of Mrs. Edmonds. Plaintiff is a Pennsylvania corporation located at Norristown and Edmonds is and, since about 1906, has been its sales agent in Pittsburgh. In 1915 Edmonds separated from his wife and children and about the same time two judgments amounting to approximately $10,000 were entered against him, in favor of the plaintiff on notes containing warrants of attorney. By executions issued thereon, the Rippey Street property was seized, in the fall of 1915, and sold by the sheriff to plaintiff, as Edmond's property; thereupon this action of ejectment was brought. Plaintiff averred and offered evidence tending to prove that Edmonds was insolvent in 1912 and that payment of the $7,000 was invalid as tending to hinder and delay creditors, of which it was one, and that as to them, he was the equitable owner of the Rippey Street property. The trial judge directed a verdict for plaintiff for the land at issue; but later the court in banc entered judgment in its favor for seventy ninety-fifths of such land and therefrom defendant has appealed.

The judgment cannot be sustained. Where as here a solvent husband buys land and takes title thereto in the name of his wife it is presumed to be a gift from him to her (Gassner v. Gassner, 280 Pa. 313; Guarantee B. L. Assn. v. Thomas,207 Pa. 513; Earnest's App., 106 Pa. 310; Bowser v. Bowser, 82 Pa. 57; Townsend v. Maynard, 45 Pa. 198; and see Thompson v. Allen,103 Pa. 44; Thompson v. Thompson, 82 Pa. 378; Nippes's App.,75 Pa. 472), and vests in her both the legal and equitable title. In other words, a husband's post-nuptial settlement of property upon his wife is valid except as to existing or contemplated creditors: Best v. Smith, 193 Pa. 89. Furthermore, the case must be judged as it was when the legal title vested: Shaver v. Mowry, 262 Pa. 381; United States v. Mertz, 2 Watts 406. It follows that the title to the Harriet Street property vested in Mrs. Edmonds in 1901 as her own. Had her husband then been insolvent she would have held the title as trustee for his creditors, who could have sold it as his at sheriff's sale and recovered possession by an action of ejectment. But such trust must arise at the inception of the title (Carr v. Fagan et al., 278 Pa. 587; Turney v. McKown,242 Pa. 565; McCloskey v. McCloskey, 205 Pa. 491; Nixon's App.,63 Pa. 279), and for reasons above stated it did not as to the Harriet Street property. A subsequent payment of purchase money will not raise a resulting trust: Musselman v. Myers et al.,240 Pa. 5; Barnet v. Dougherty, 32 Pa. 371. Had Mrs. Edmond's ownership of the Harriet Street property continued and had it been sold by the sheriff in 1915, on the executions above mentioned, it is clear the purchaser thereat would have acquired no title, and by the exchange she acquired a like ownership of the Rippey Street property.

Edmonds was joint maker of the bond and mortgage given for the Harriet Street property and his estate, real and personal, could have been taken to satisfy the bond: Pier v. Siegel,107 Pa. 503, 508. Therefore, when he turned over the $7,000 to apply thereon he was paying a debt for which he was individually liable, and it is familiar law that a debtor in failing circumstances may prefer one creditor to another (Snayberger v. Fahl, 195 Pa. 336; Candee Co.'s App., 191 Pa. 644; Penn Plate Glass Co. v. Jones, 189 Pa. 290; Werner v. Zierfuss, 162 Pa. 360), and may even prefer his wife where her claim is valid: Benson and West v. Maxwell, 105 Pa. 274; Wingerd v. Fallon, 95 Pa. 184; Dalley's Est., 13 Pa. Super. 506. In the exercise of such right he may pay a claim for which he is surety. "His [the debtor's] right to prefer is not limited to claims which could be legally enforced, or on which his liability has become absolute. A contingent liability may be a sufficient basis for a preference. So an indorser of a note is contingently liable to the holder thereof and may secure him by a confession of judgment, and the liability of a surety on an unmatured obligation is a lawful debt, claim or demand which will warrant a preference": 12 R. C. L. p. 576. We do not intimate that Edmonds occupied the position of surety, but treating him as such and as insolvent, his creditors might perhaps have asked for subrogation, or sought relief in equity; but a surety, on paying an obligation given by the principal as part consideration for property bought, does not thereby become part owner of the property. The creditors of an insolvent debtor who, while such, has expended his money in the improvement of his wife's real estate, with her consent, may in a proper case have relief in equity (see Curtis Co. v. Olds, 250 Pa. 320) but cannot sell the land as that of the husband and recover possession in an action of ejectment. The trial court recognized Mrs. Edmonds' equity in the Harriet Street property to the extent of the $2,500 her husband paid thereon in 1901, but erred in concluding that the payment by him of the $7,000 on the bond and mortgage in 1912 vested in his creditors a title to seventy ninety-fifths of the Rippey Street property. The most they could claim from Mrs. Edmonds, or her property, under any possible theory, would be the $7,000 and interest thereon. See Karstorp's Est., 158 Pa. 30; Barto's App., 55 Pa. 386. Otherwise they might recover land on which she had expended large sums of her own money, as appellant suggests is the case here.

Moreover, the title plaintiff acquired at the sheriff's sale, if any, was a legal title and this is a legal, as distinguished from an equitable, ejectment; hence, there cannot be a conditional verdict (Littieri v. Freda, 241 Pa. 21), otherwise it might be suggested that plaintiff could recover a conditional verdict to be released on payment of the $7,000 and interest.

Mr. Edmonds was in 1912 and still is doing a large business and there is nothing to indicate that he or his wife intended any injury to other creditors by the $7,000 transaction, or that either was guilty of any actual fraud or bad faith. The evidence as to his solvency at that time was conflicting, and that question, if controlling, which in our opinion it was not, should have been submitted to the jury. It is not necessary to consider the other assignments of error.

The judgment is reversed and is here entered for the defendant non obstante veredicto.