76 S.W.2d 368 | Mo. | 1934
Lead Opinion
The plaintiff Mary George recovered a judgment against defendant Louis Leitner on February 16, 1926, for $7,500 in a personal injury action in the Circuit Court of the City of St. *6 Louis. Being unable to collect such judgment on ordinary execution, she brought the present action in July, 1926, in that court for the purpose of subjecting to the payment of her judgment a promissory note for $11,000 secured by a deed of trust on certain improved real estate in St. Louis which had been and which the plaintiff claims was yet in truth and in fact the property of the judgment defendant. This note and deed of trust, dated July 1, 1925, was executed by Esther Fine in favor of defendant Edward Leitner, a son of defendant Louis Leitner, on the property in controversy, which formerly belonged to Louis Leitner, the judgment defendant, and which was conveyed by him without any consideration, pending the personal injury action, to his said son for the purpose of defeating the collection of the anticipated injury judgment. In furtherance of this same purpose, the son, Edward Leitner, conveyed the property to Esther Fine, who on the same date executed the note and deed of trust in question representing the purchase price. The defendant Surkamp is the trustee in this deed of trust, Esther Fine acting as the mere conduit of the legal title which was conveyed to her, and after executing the note and deed of trust conveyed the legal title subject thereto to the defendants Joseph Gordon and wife, who claim to own the equity of redemption.
Going a little more into detail, plaintiff Mary George, a married woman, in May, 1922, suffered severe personal injuries in consequence of the negligence of the defendant Louis Leitner, who then and for some time previous had owned the improved real estate in question. Suspecting that he would be sued for the injuries, Louis Leitner informed Mary George that he was willing to pay her medical expenses but that if she employed a lawyer and brought suit for damages, he would convey all his property to his son, then just of age, and would see to it that she never collected a cent. Some seven months later, in September, 1922, plaintiff Mary George did bring such damage suit and while the same was yet pending and before a trial, Louis Leitner in June, 1924, made good his threat to convey his property to his son and by deed of that date he and his wife conveyed this St. Louis property to his son, Edward Leitner, for the recited consideration of "One Dollar and love and affection." The real property in question was then worth some $19,000 and it is conceded that this conveyance to the son was a deed of gift. Defendant Louis Leitner testified that he did not convey the property to beat the anticipated judgment in the pending $10,000 damage suit but merely to carry out his cherished design to give this property to his son on his reaching manhood. As a sidelight, it may be mentioned that there was also then pending a damage suit by the husband of Mary George growing out of the injury to her, which later resulted in a judgment for $3,000 against defendant Louis Leitner. Immediately on receiving conveyance of this property, the son, Edward *7 Leitner, conveyed the same to Esther Fine, who gave back the note for $11,000 and the deed of trust on this property securing the same. These three conveyances of this property were practically of the same date and were one transaction and, it is claimed, were for the real benefit of defendant Louis Leitner and made to cover up his property against the anticipated judgments. In February, 1926, the damage suit came to trial and resulted in a judgment for this plaintiff for $7,500 against defendant Louis Leitner. Coincident with this judgment, defendant Louis Leitner conveyed to his said son the property he owned as a summer home at Minoqua, Wisconsin, so that when plaintiff's judgment for damages became effective the defendant Louis Leitner had divested himself of all his property and the legal title was vested in his son, Edward Leitner, who held the St. Louis property in controversy by means of the deed of trust and secured note for $11,000. That these conveyances from Louis Leitner to his son, Edward Leitner, were made for the purpose of defeating the collection of the anticipated judgment of plaintiff against him for damages is too plain for argument and the trial court so found.
In order to collect her said damage judgment by following defendant's property into the hands of the fraudulent grantee, Edward Leitner, plaintiff Mary George, some six months later, in July, 1926, brought the present action making Louis Leitner, defendant in the damage suit, Edward Leitner, the fraudulent grantee of his property and holder of the deed of trust and secured note on same, H.B. Surkamp, trustee in said deed of trust, and Joseph Gordon, the holder of the legal title to the St. Louis property subject to such deed of trust, parties defendant, the object being to subject the secured note and the security on the real estate to the payment of plaintiff's judgment. In aid of this suit and to prevent any further transfer of the secured note and deed of trust or of the property securing same into the hands of a possible innocent holder, plaintiff, on bringing the present action in July, 1926, also filed a lispendens in the office of the Recorder of Deeds in St. Louis. As a counter move the defendant Louis Leitner in September, 1926, filed a voluntary petition in bankruptcy in the United States Court of Wisconsin, being at that time a resident there. He stated in his bankruptcy proceeding that he owned no property and named this plaintiff, Mary George, as being his only creditor and her damage judgment as being his only indebtedness. C.M. Whitmore was appointed and qualified as his trustee in bankruptcy. The referee in bankruptcy, on becoming informed as to the transfer of his property by the bankrupt to his son, as we have stated, ordered the trustee in bankruptcy to take any proper steps necessary to recover for the bankrupt estate any property fraudulently conveyed by the bankrupt. Thereupon such trustee in bankruptcy, C.M. Whitmore, applied for and was granted *8 permission to intervene as a party plaintiff in the present action and by leave of court he filed an intervening petition based on much the same allegations as contained in the petition of Mary George and seeking much the same relief. The defendants Louis Leitner and Edward Leitner, while filing an answer and giving evidence in the case, seem to be somewhat indifferent as to the result of the present litigation and they are not represented in this court. The defendants Gordon and wife claim no more than that they own the real estate in controversy in good faith, subject, however, to the deed of trust for $11,000 and unpaid interest thereon, and indicate a willingness to pay same to whomsoever the court may direct.
The real controversy in the present suit was brought about by the action of Dr. Thomas G. Torpy of Minoqua, Wisconsin, the Lafayette South Side Bank Trust Company of St. Louis, and Benj. G. Brinkman, a director of such bank, in asking and being allowed without objection to intervene and become parties defendant in this action as claimants of full ownership or at least a substantial interest in the secured note for $11,000 and the deed of trust on the St. Louis property securing the same. By this intervening petition, or rather answer, it was alleged that in January, 1926, while the damage suit of plaintiff against defendant Louis Leitner was pending, but shortly before plaintiff secured her judgment in damages, Dr. Thomas G. Torpy, for value and in good faith, purchased from Edward Leitner, owner of the same, the said note for $11,000 secured by the deed of trust on the St. Louis property. It was therein alleged that prior to the filing of the present action, "Thomas G. Torpy, one of the interveners herein, purchased the aforesaid principal note and certain of said interest notes and the deed of trust conveyance of said property securing said notes; that he purchased the same before maturity and for the reasonable value thereof, which was paid at the time, and that said Thomas G. Torpy was then wholly ignorant of any fraud or claim of fraud relating to the same or any conveyance affecting said property, and was without notice thereof, and purchased the same in good faith and for value, and that said notes and deed of trust securing the same were then assigned to said Torpy, whereby he became and now is the true and lawful owner of said notes and deed of trust and is a bona fide purchaser thereof for value before maturity and without notice of any fraud, claim of fraud or controversy affecting the same." It is further alleged that "after purchasing said notes and deed of trust said Torpy pledged the same to and with intervener Benj. G. Brinkman to secure a loan for $10,000 then made by him to said Torpy and that thereafter said notes and deed of trust securing same were delivered to and deposited with intervener Lafayette South Side Bank Trust Company of St. Louis to secure a loan of $10,000 made by said bank, whereby intervener Benj. G. Brinkman and thereafter Lafayette *9 South Side Bank Trust Company became lawful and bona fide pledgees of said notes and deed of trust for value before maturity and without notice of any fraud of controversy affecting the same, and that said Lafayette South Side Bank, one of the interveners herein, is now the true and lawful holder thereof as pledgee." The defendant interveners denied, for want of any information or belief on the subject, any fraud in connection with the deed from Louis Leitner to his son, Edward Leitner, or fraud in connection with the deed of trust and secured note taken by such son and afterwards purchased by Dr. Torpy. The trial court sustained the contentions of the defendant interveners and dismissed plaintiffs' petition. Plaintiffs have appealed. Only the intervening defendant Lafayette Bank has appeared in this court to sustain the trial court's action.
[1] It is not seriously controverted here but that the trial court correctly held that "there is no question but that Louis Leitner and wife transferred (indirectly) the deed of trust to their son Edward to avoid payment of the damage suit judgment, and they also transferred all their other holdings in Wisconsin for the same reason" and as a mere gift. Conveyances made for the purpose of defeating an anticipated judgment in a case pending or about to be commenced are in fraud of creditors and void as to such plaintiff. [Snitzer v. Pokres,
This court, however, in Patterson v. Booth,
In Dodd v. Lee,
[5] Moreover, the evidence is that Brinkman had actual knowledge that plaintiff's lis pendens was on record at the time he loaned Dr. Torpy the $6,000 and took the $11,000 secured note as collateral security. He testified that Dr. Torpy first tried to sell him the secured note outright at Minoqua, Wisconsin, but that he decided not to do this till he went to St. Louis and investigated the title of the mortgaged property; that he then learned of the recorded lis pendens and informed Dr. Torpy as to this and decided to do no more than loan Dr. Torpy $6,000 on the note for $11,000 and deed of trust securing same as collateral security. As we have said, Brinkman was at the time a director of the Lafayette Bank and at once pledged this same $11,000 secured note as collateral for a loan by the bank to him of $10,000. Whether his knowledge of the pending suit to subject this secured note to the payment of plaintiff's damage judgment was also knowledge of that bank need not be further discussed since we are holding that such bank is charged with constructive knowledge at least.
The record further shows that the secured note for $11,000, of which intervener defendants claim to be innocent purchasers for value before maturity, bore interest at six per cent, payable annually, evidenced by coupon notes for $330 each attached thereto. When plaintiff's lis pendens was filed for record the owners of the mortgaged land stopped paying interest. At least two coupon interest notes were past due and unpaid at the time Dr. Torpy pledged the secured note to Brinkman as collateral security and Brinkman in turn pledged same to the Lafayette Bank and these unpaid interest notes were part of the collateral security. Brinkman testified that he received and knew of these unpaid interest notes being in default and that when he pledged the same to the Lafayette Bank *14
he instructed that bank to at once collect the defaulted interest notes. The law is settled that one who purchases a negotiable note, knowing at the time that default has been made in the payment of interest thereon which remains past due and unpaid, cannot claim the protection afforded an innocent purchaser purchasing before maturity. [Chouteau v. Allen,
[6] It is only left for us to decide whether or not Dr. T.J. Torpy, who lived at Minoqua, Wisconsin, was a bona fide purchaser for value of the secured note in question from Edward Leitner, the son of and fraudulent grantee of defendant Louis Leitner. We recognize, of course, that if Dr. Torpy was a purchaser of this negotiable note in good faith and for value, then as such purchase was before its maturity and before plaintiff's lispendens was filed or the present action commenced giving constructive notice of the fraud, the intervening defendants will be protected because of their holding under an innocent purchaser. [8 C.J. 466; Secs. 2686 and 2687, R.S. 1929; McMurray v. McMurray,
It is the law that when it was shown that the title of Edward Leitner to this secured note was defective and acquired in fraud, and it was so defective when he acquired it under such circumstances as amounted to fraud (Sec. 2683, R.S. 1929), then the burden of *15
evidence was on Dr. Torpy and those claiming under him to show that his purchase of the note was in good faith and for value and without any notice of the fraudulent character of Edward Leitner's acquisition and holding of the note. [Sec. 2687, R.S. 1929; Downs v. Horton,
Dr. Torpy could give no satisfactory explanation of how he paid back the money he borrowed from these friends on this occasion except he said that he paid it back in cash in a short time, but his bank account in no way reflected any such transaction. Dr. Torpy held the secured note some eighteen months after he purchased it and says he told nobody, not even his wife, that he owned it, though he had used some of her money in purchasing it. He never collected any interest on it except what young Leitner collected and he admitted that no interest was paid after plaintiff's lis pendens was filed. About September 1, 1927, he testified that he needed some money and tried to sell the note with at least two interest payments then past due to Mr. Brinkman, who was a summer visitor at Minoqua. Brinkman *17 refused to buy the note outright but with little or no knowledge of the property or title agreed to and did loan Dr. Torpy $6,000 on this secured note as collateral security. Brinkman says he did this because he had confidence in Dr. Torpy personally. Plaintiff's lis pendens was then on file. Neither Brinkman nor the Lafayette Bank, from whom he borrowed $10,000 on this collateral security, ever collected any interest on the secured note. Although Dr. Torpy testified that he borrowed the $6,000 because he was in need of money and received a check for the $6,000, yet when asked what he did with the money he thus borrowed, he replied that "I spent it in my own business;" that he did not deposit it in any bank but "paid honest debts with it." His attorney, Mr. Omelia, who represented all the defendants, except possibly the Lafayette Bank, in the taking of depositions, the bankruptcy proceedings, etc., then asked him this suggestive question: "When you got this check of $6,000 you mailed it to me from Minoqua with your indorsement and told me that you would like to have me keep the money until further notice and to possibly invest it if that could be done to advantage." To this suggestion the witness readily assented. Other pertinent facts bearing on this issue might be mentioned.
We, therefore, hold that the trial court erred in holding that Dr. Torpy was a purchaser of this secured note and deed of trust in good faith and for value and in dismissing plaintiff's bill. The judgment is, therefore, reversed and the cause remanded to be proceeded with in accordance with this opinion. Ferguson andHyde, CC., concur.
Addendum
The foregoing opinion by STURGIS, C., is adopted as the opinion of the court. All the judges concur.