216 Mo. 24 | Mo. | 1909
On June 25, 1898, the plaintiff commenced its action in the circuit court of Clinton county, against Emanuel S. Fry, to recover $4,746 on notes executed by the latter to the plaintiff. An attachment was sued out in aid of the principal suit, on the ground that said defendant had fraudulently conveyed his property with intent to defraud his creditors. Among other properties the attachment was levied upon a tract of fifty-five acres of land in Clinton county, specifically described in the bill in this case. On the first trial of the plea in abatement there was a verdict and judgment for defendant, from \which an appeal was granted to this court and the judgment was reversed and the cause remanded. [First National Bank v. Fry, 168 Mo. 492.]
After the record was returned to the circuit court, a .change of venue was granted to Buchanan county, and upon a trial anew before Judge A- M. Woodson a verdict was rendered sustaining the attachment and also for the debt and interest.
The fifty-five acres involved in this suit was sold under the judgment and at the sale plaintiff became the purchaser. On the day the attachment was levied and a few hours prior thereto the defendant Emanuel S. Fry conveyed the fifty-five acres to his brother, Louis Fry. After the purchase of this tract the plaintiff brought this suit in equity to set aside the deed
A full history of the debts and property of Emanuel S. Fry and of his disposition of his lands and personal property is set forth in First National Bank v. Fry, 168 Mo. 492, to which reference is made.
It is sufficient-for the purpose of this appeal to state that for many years prior to June, 1898, Emanuel Fry owned about 700 acres of land in Clinton county, on which he resided. He was possessed, also, of some cattle, hogs, com and farm implements, the whole aggregating about $30’,000 in value. At that date he was hopelessly insolvent according to his own evidence, his indebtedness amounting to $60,000, $38,000 of which was due to his children, his wife and brother Louis Fry, his codefendant herein.
It appears that on June 22d and 23d, 1898, he employed Judge Sandusky to prepare conveyances of all his real estate, but his counsel was unable to attend to the matter until the 24th of June, 1898. On this last-named date he went to the residence of Emanuel Fry and spent the evening and next morning in preparing the'conveyances of all the real estate. In the meantime defendant Emanuel disposed of all of his personal estate as follows: To his brother Abraham, he sold his cattle and corn on the 23d of June. Abraham testified: “He [Emanuel] came over to my house. He had twenty-four steers and he wanted to sell them. He said he was obliged to make some arrangements of his property; he was getting in bad shape, he couldn’t borrow money.” Thereupon Abraham bought the steers for $1,405 and the corn for $446. It appears that Emanuel had borrowed $1,300 from the Clay & Funkhouser Bank to buy these cattle, so
On the morning of June 25, 1808, Emanuel sold his hogs to Samuel Thompson for $403, for which Thompson gave his check, which was cashed June 28th. It thus appears that on the morning on which the conveyances of his lands were made by Emanuel Fry, he had checks, cash and due bills in his pocket to the amount of $2,344, out of which he afterwards paid Clay & Funkhouser $1,300. Deeds were then on June 25,1898, executed as follows: A warranty deed to the 55 acres in this suit to his brother Louis. Fry, his co-defendant herein, for $3,025; a deed to Abraham Fry for 105 acres of land, which Abraham immediately conveyed to Mrs. Fry, the wife of Emanuel for the alleged consideration of a debt due her by her husband Emanuel of $5,691.22, incurred in 1883, upon which no payment of principal or interest had been made; a deed of trust to his three children conveying 320 acres of land (subject to a prior deed of trust of $7,500 to the Massachusetts Life Insurance Company) to secure an alleged indebtedness of $6,000, on which $2,400 interest had accrued, which said indebtedness accrued in 1874, and on which neither interest nor any part of the principal had ever been paid; a deed of trust to Luther Finch, trustee for his general creditors, of 190 acres of land to the amount of $19,000 and interest thereon. In addition to these land conveyances, he executed chattel mortgages, one to his daughter for $403 on five cows; one to Thomas and John Fry on
The consideration for tbe fifty-five acres in suit was $3,025, and was paid by Lonis Fry cancelling an alleged indebtedness of $2,400 and by giving Emanuel $300 in currency and a note or due bill for $325. Tbe indebtedness to Louis Fry was represented by notes, some dated as far back as 1887, on which, the interest was compounded at seven and eight per cent from dates, without any credits of either principal or interest. Louis had lived with his brother Emanuel for twelve or fifteen years, and no credit was given for board, though immediately after the deed to Lotiis he rented the land to Emanuel’s wife for his board at $3 per week, and when the rent exceeded the board Louis gave the excess to Mrs. Fry. At the time defendant Louis paid Emanuel, his co-defendant, the $300' in cash and gave him his note or due bill for $325 over and above the amount Emanuel owed him for the fifty-five acres, the circuit court found “that the said Louis S. Fry knew that said Emanuel was in debt and financially embarrassed and that he, said Emanuel S. Fry, was conveying all his property to his creditors, but said Louis bought said fifty-five acres in good faith, paying full value for the same, for the purpose of collecting his debt and with no design to assist his brother, said Emanuel S. Fry, to hinder or defraud his creditors and without knowledge of any fraudulent purpose on the part of said Emanuel in deeding him said fifty-five acres of land.” While the circuit court found that Louis Fry knew at the time he took the fifty-five acres in payment of his debt and paid $300 in cash and gave his note or due bill for $325 over and above the amount of his debt, “that Emanuel was in debt and financially embarrassed,” Louis himself testified that on the 24th day of June, the day previous to his taking his deed for the fifty-five acres, “he had found out that Emanuel was terribly involved.” Indeed, taking his whole evi
Other facts will be stated if necessary in the course of the opinion.
It is the settled law in Missouri that a debtor has a clear and undisputed right to prefer one creditor to another and apply his property to the payment of one set of creditors to the exclusion of other creditors, and when this is done in payment of bona-fide debts the transaction will be upheld, although in doing so the act of the debtor had the effect and it was his inten-. tion to defer or hinder another creditor. [Sheeley v. Boothe, 73 Mo. 74; Forrester v. Moore, 77 Mo. 651.] On the other hand, it is equally well settled that if a creditor knows of his debtor’s insolvency and takes more than reasonably enough to pay or secure his debt and pays cash for the excess, the transaction is fraudulent in law and the purchaser is a participant in the fraud. [McVeagh v. Baxter, 82 Mo. 518.] The distinction is drawn in a number of well considered cases in this State between the right of a creditor and a mere purchaser from an insolvent debtor. In Sexton v. Anderson, 95 Mo. 1. c. 379, Judge Black, speaking for this court, stated the rule as follows: “Generally, a sale of property with the intent on the part of the seller to thereby hinder, delay or defraud his creditors, and knowledge of such intent on the part of the purchaser, renders the sale void, though the purchaser pay a valuable consideration for the property, because the purchase of the property under such circumstances amounts to a participation in the intended fraud. [Dougherty v. Cooper, 77 Mo. 529; Frederick v. Allgaier, 88 Mo. 601.] But a debtor, though unable to pay all his creditors, may pay one or more to the exclusion of the others, either in money or the transfer of property; and the favored creditor or creditors may accept such preference. If the preferred creditor, in
That Louis Fry did not stop> at taking simply enough property to liquidate the indebtedness of his brother Emanuel to him goes without saying in view of the evidence of Louis himself. His debt according to his own evidence only amounted to $2,400 and yet he took a deed to fifty-five acres upon the agreed price of $3,025, an excess of $625 worth of property. He testifies himself that he had arranged with Emanuel to take forty acres of the fifty-five at $55 per acre for his debt, and then at the instance of Emanuel agreed to take fifteen acres more and pay Emanuel $300 in cash and give him his due bill for $325, so that we think it is clear that as to this agreement to buy the fifty-five acres for $3,025, Louis Fry could not justify the transaction on the ground that he was a creditor simply taking property for the sole purpose, of saving his debt, and will not be protected under the rule that a mere knowledge of the intent of his brother Emanuel to defraud or delay his other creditors would not make him (Louis) a participant in the fraud. In Kuykendall v. McDonald, 15 Mo. 1. c. 420, Judge Scott, speaking for this court, said: ‘ ‘ The law will not suffer the creditor, although he may have a just demand against his debtor, to use that debt as a screen to protect the debtor’s estate from his other creditors, when that estate much exceeds in value the amount of the debt. When a creditor, by fraud, will attempt to defeat the claims of other creditors, there is no hardship in postponing his demand, although a just one, to those which
In Simon, Gregory & Co. v. Simcox, 75 Mo. App. 143, the interpleader bought from his debtor a stock of merchandise and in payment therefor he cancelled the indebtedness due of $3,349‘ and assumed the.payment of other debts aggregating $1,200 and gave the debtor his negotiable promissory note for $1,100 due two years after date for the surplus. The debtor was insolvent and known to be insolvent by the interpleader at the time of the transaction, and the court refused an instruction which declared that: “If the court finds