150 P. 372 | Cal. | 1915
Defendants appeal from an order of the superior court denying their motion for a new trial.
During the lifetime of H.S. Sparks he made a deed of trust of certain property to his son J.P. Sparks and later he *533 assigned to his wife, Grace C. Sparks, a number of shares of the capital stock of a corporation. Annie E. Evans, who was a creditor of H.S. Sparks, sued to set aside the assignment and the trust-deed upon the ground that each was made by H.S. Sparks in contemplation of insolvency with intent to hinder, delay, and defraud his creditors and that the trustee and assignee accepted the purported trust and alleged assignment, respectively, with like fraudulent intent.
The court found that H.S. Sparks died on the fifteenth day of May, 1911; that the allowed and approved claims against his estate, including that of Annie E. Evans for something over five thousand dollars, amounted to more than eleven thousand dollars, while the assets were slightly in excess of one thousand dollars; that on the sixth day of August, 1908, H.S. Sparks, in contemplation of insolvency and with intent to delay and defraud his existing and subsequent creditors, including the plaintiff, conveyed to J.P. Sparks certain personal and real property, part of which the latter had sold for prices aggregating more than one thousand dollars; that certain described parcels were still held by the said J.P. Sparks; that the conveyance was accepted by J.P. Sparks with knowledge of the fraudulent intent of H.S. Sparks; that the conveyance was made without consideration; and that it left the said H.S. Sparks insolvent and without sufficient property to pay his then existing creditors. The court also found that although the conveyance purported to transfer the real and personal property for trust purposes this was done as a pretext to aid in the fraud; and that it was not true, as alleged in the answer, that the purpose of the conveyance was to reimburse the children of said Sparks by his first wife for moneys received by him from their mother and invested by him.
The findings with reference to the transaction between H.S. Sparks and his second wife were, in brief, that he had made a purported transfer to her of thirty thousand shares of the capital stock of the Mutual Laundry Company (a corporation) on April 21, 1910, but that such assignment was "not completed, or made in fact, until the 12th day of May, 1911"; that at the time of said transfer the stock had been pledged as security for a loan of nearly three thousand five hundred dollars; that the transfer was made by him and received by his wife with the intent to defraud his creditors; *534 that it was made while he was insolvent and left him without sufficient means to pay his creditors; that subsequently Grace C. Sparks sold the stock for ten thousand dollars, applying three thousand five hundred dollars of such sum to the discharge of a mortgage indebtedness on her separate real property; that the loan secured by said mortgage had been used by H.S. Sparks in his business, but had all been repaid except the said sum of three thousand five hundred dollars prior to his death; that said transfer was made partly for the purpose of reimbursing Grace C. Sparks on account of said loan and for her maintenance and support, but also for the purpose of defrauding creditors.
Appellants contend that the findings are not supported by the evidence in that Sparks was not insolvent when he made the trust-deed to his son and the transfer of stock to his wife, and that the intent on his part to defraud his creditors was not shown by the facts adduced at the trial.
We will first examine the transaction of H.S. Sparks with his son. When he made the trust-deed his nominal assets remaining after its execution were far in excess of his liabilities, but according to respondent's contention, the real assets omitted from the deed were of such a character that the court might well have concluded that Mr. Sparks knew them to be virtually valueless. This fact, coupled with the circumstance that without consideration he created a trust in favor of adult children is sufficient, say respondent's counsel, to sustain the burden of proof which was placed upon their client, to establish fraud affirmatively. It is perfectly true, as appellants insist, that conveyance of property to a kinsman is not, in itself, a badge of fraud (Gray v. Galpin,
Promissory notes representing loans which he had made and against which the statute of limitations had not run amounting to ................................. $11,555.00
The bond of the Metropolitan Surety Company, securing the Brown debt ...................... 11,000.00
The claim against Housel ......................... 2,000.00
The 30 shares of Pasadena Heights Tract valued by J.P. Sparks at ............................ 6,000.00 ---------
Making a total of ............................ $30,555.00
Respondent contends that H.S. Sparks must have known the worthlessness of the notes (none of which has since been collected), of the bond (on which nothing has been since realized), and of the claim against Housel, (which has not been settled), and while she admits that the stock in the Pasadena Heights Tract was subsequently exchanged for the stock that was sold by Grace C. Sparks for ten thousand dollars, her counsel argue that this fact does not show that it was worth anything at the date of the execution of the trust-deed and that the opinion of J.P. Sparks placing the value at six thousand dollars was entitled to no weight. We cannot agree with this contention. It is true that the execution of the trust-deed under the circumstances might and should invoke the court's careful scrutiny, but the other evidence fails utterly to establish the insolvency of H.S. Sparks at that time. If the stock in the Pasadena Heights Tract was worthless, the burden was on the plaintiff to establish that fact and *536
the further circumstance that H.S. Sparks knew it was valueless. The contrary has been shown. While it is true that nothing was realized from the bond of the Metropolitan Surety Company it was not shown that the corporation was insolvent when the trust-deed came into existence nor that H.S. Sparks should have known the worthless character of the security. On the contrary he had the claim pursued to judgment in his behalf, a fact indicating that he believed it to be worth something. Nor does the failure subsequently to collect the small notes or any of them prove their utter worthlessness in July, 1908, and the same may be said of the claim against Housel. Opposed to the circumstance that the deed of trust was made without consideration to a son of the grantor, is the prompt and public recordation of the instrument. In our opinion the respondent failed to establish either insolvency or fraud in the transaction of 1908. It is true that fraud may be shown and may invalidate a deed even when the grantor does not entirely strip himself of assets, where there is other compelling proof of a fraudulent intent (First NationalBank v. Maxwell,
When, on April 21, 1910, H.S. Sparks transferred the thirty thousand shares of stock of the Mutual Laundry Company to his wife his liabilities amounted to a little more than fifteen thousand dollars. But he still had the promissory notes, the claim against Housel and the judgment against the Metropolitan Surety Company for eleven thousand dollars which would have supported a suit against the stockholders of that corporation. He also possessed other assets which were subsequently appraised in his estate at something more than one thousand dollars. Nominally these assets amounted to more than twenty-six thousand dollars. We cannot say that proof of the failure of some of these choses to produce *537 any money subsequently, amounted to a showing of fraudulent intent on the part of H.S. Sparks.
He really was indebted to his wife for money which had been raised by a mortgage on her real property and used by him in his business. We cannot say that an assignment to her of his stock partly to protect her from possible loss in that transaction was something done in fraud of his creditors. On the contrary assignments for the protection of a wife even when based only upon "love and affection" have been upheld unless made with the purpose to defraud creditors (Emmons v. Barton,
For the reasons above set forth the order from which defendants appeal is reversed.
Henshaw, J., and Lorigan, J., concurred. *538