Helm v. Brewster

42 Colo. 25 | Colo. | 1908

Mr. Justice Gabbert

delivered the opinion of the court:

The statutes of this state provide that: ‘ ‘ Every conveyance * * * of any estate or interest in lands, or in goods, or things in action * * * made with intent to hinder, delay, or defraud creditors of their * * * demands, * * # as against the person so hindered, delayed or defrauded, shall be void.”- — Mills’ Ann. Stats., § 2030.

Many decisions of courts of last resort in actions by creditors of a husband to set aside conveyances of property to his wife are reported, with the result that in this class of cases it has been firmly established that when a conveyance by an insolvent debtor to his wife is attacked by a creditor of the former at the time of such conveyance, the husband and wife are required to clearly establish that the- transaction was honest, and .that there was no intent to thereby hinder and defraud such creditor. — First Nat’l Bank v. Kavanach, 7 Colo. App. 160; Horton v. Dewey, 53 Wis. 410; Livey v. Winton, 30 W. Va. 554; Glass v. Zutavern, 43 Nebr. 334; Burt v. Timmons, 29 W. Va. 441; Seitz v. Mitchell, 94 U. S. 580.

Tbe reason for the rule is, that the relationship of husband and wife affords exceiotional opportunities for the former to defraud his creditors by tíonveying his property to his wife; and, as they are generally the only persons who know all about transactions between themselves, the rule may be even stronger than we have indicated.

In other cases where creditors have brought suits attacking conveyances by their debtors in fraud of their rights, it is also established that a sale- of property, though for a full consideration, made by the owner with intent to hinder, delay or defraud his creditors, is, if the vendee participated in such intent, void as against the creditors of the vendor.— Reithmann v. Godsman, 23 Colo. 202; Clements v. Moore, 6 Wall. 299; Bradley v. Ragsdale, 64 Ala. 558; Crow v. Beardsley, 68 Mo. 435.

And that fraud may be inferred from facts and circumstances. — Grimes v. Hill, 15 Colo. 359; Innis v. Carpenter, 4 Colo. App. 30; Greenleve v. Blum, 69 Texas 124.

There is no real conflict in the testimony bearing on the good faith of' the transactions between the defendants; and, applying the principles above mentioned to the facts logically deducible from such testimony, the judgment should have been for the plaintiff. At the time the husband transferred the property to his wife he was insolvent, or, at least, greatly embarrassed by indebtedness. The wife knew this fact, and was also aware that his remaining property was so heavily incumbered that his equities therein were of little or no value. The indebtedness to the plaintiff was in existénce at the time of these transfers. The only property which the husband had which was not incumbered was the furniture in the house. It was necessary to protect this from creditors or the business of conducting a boarding house in The Aldine conld not be continued. The only business in which the husband was engaged was keeping this boarding house. By transferring The Aldine and the furniture therein, his creditors, except those having liens thereon, would, temporarily, at least, be prevented from reaching that property, and in this way the business could be continued. The only change in the transfer was, that prior thereto the business was conducted in the name of, and managed by, the husband, while thereafter it was conducted in the name of the wife and managed by her. Prior to such transfers the family was supported by the husband from the income derived from operating the boarding house, while thereafter at was supported by the wife from the same source.

If, as contended, the wife, as a part of the consideration of the transfer of the title of The Aldine to her, assumed the payment of the mortgage thereon and taxes then due and unpaid, it is rather strange that in struggling with such a great indebtedness she did not limit her efforts to liquidating it, instead of discharging obligations against her husband to the amount of upwards of three thousand dollars over and above what she had agreed to pay of such indebtedness as part of the consideration of the transfer of the title to her, as he from time to time requested. Or, to use his own language‘ ‘ She was to give me money to pay my bills as I needed it. * * * There was no definite amount named. It was my understanding that she was to furnish money to pay taxes on other property and help me save it, and*anything I needed for unsecured accounts.”

Again, we find from the testimony that the wife kept no account or memorandum of the amounts or dates of the payments she made; that all these payments, except the note and money received from her father, were made with money derived from operating the boarding house, and that there was no definite arrangement between them regarding the amount she was to pay of indebtedness, against her husband, which was not a lien upon the property which he had transferred to her. We further find that money which she says she borrowed from her father to pay her husband for his equity in The Aldine, and which she turned over to him, was immediately applied by him in the discharge of taxes against property which, according to their statements, she had agreed to pay. It is apparent, therefore, that the only change by. the transfers was, as stated in his own language: “She was manager, and I was not”; and that the purpose of the defendants was to place The Aldine and its furnishings beyond the reach of the creditors of the husband, except those having liens thereon; and that, in fact, there was no sale of the property from the husband to the wife, but a mere transfer of title for the purpose indicated.

The evidence clearly establishes that this is another instánce of an insolvent debtor deluding himself with the idea that if he could secure time, he would be able to pay his debts, and, possibly, save a surplus for himself; and, to obtain time, has resorted to the often-tried experiment of conveying his property to his wife, hoping thereby to still retain control thereof, and thus hinder and delay his creditors'in the enforcement of their claims, or defeat them in the end.

We think the evidence in this case clearly establishes, without contradiction, 'that the defendants have not only failed to prove that the transactions between them were honest, and that there was no purpose to thereby hinder and defraud the creditors of the husband, but that it establishes a fraudulent intent upon their part, because it is apparent from the testimony as a whole, that the property transferred to the wife was handled, and the proceeds thereof applied, just as they would have been had the husband retained the title and continued the business in his own name. It is immaterial, therefore, whether some of the money which the wife paid her husband was her own, because it appears from all the facts and circumstances fairly deducible from the testimony, that it was the purpose of the defendants by the transfers in question to hinder and delay the creditors of the husband, and hence they are void, as against his creditors. It is, therefore, not necessary to determine whether the profits arising from the baking and sale of cakes belonged to the wife or the husband, or what amount she may have received from other sources which she paid to him on account of such transfers, or whether the consideration she claims to have paid was adequate, for the reason that as she participated in the fraudulent intent which actuated the transfers, she can take nothing thereby. In such eases the validity of the conveyances evidencing sales made in such circumstances is determined not by their consideration, but by the intention with which they were made and accepted. — Bigby v. Warnock, 57 L. R. A. 754. Being a -fraudulent grantee, she cannot set up against the plaintiff’s right of action the amount of money which she may have paid her husband, because the rule in such cases is, that the loss of the amount paid by the fraudulent grantee is the penalty which the law imposes for the fraudulent transaction. To' protect the grantee in such circumstances would be to remove all danger of loss, and destroy the salutary restraint which, the law has huilt up against such transactions. — Ibid.

A husband may secure indebtedness to his wife the same as. to any other creditor. Bona fide transactions between them will be upheld, but when they are not, they will he avoided at the instance of a creditor of the husband, and in circumstances like the case at bar, the husband and wife must show that their transactions were bona fide.

The testimony does not establish, as contended by counsel for defendants, that the husband was running behind in operating the hoarding house, or that by the transfers in question his wife took over what was, under the management of her husband, a losing business, and by her efforts and superior business qualifications, made it pay. True, he was behind with his interest on The Aldine mortgage and was owing his help, but for aught that appears it was because the proceeds from his business were used in discharging other indebtedness than that incurred in operating the boarding house. It is also claimed on behalf of Mrs. Brewster that the testimony established that she has expended something like $2,500 for furniture placed in the property since the purchase. This, however, is immaterial, in view of the fact that it appears the money thus expended was realized from operating the hoarding house, a property and business which, for reasons already given, so far as creditors are concerned, belonged to the husband.

On behalf of the defendants it is urged that the laches of the plaintiff should bar her action. This question does not appear to have been raised in the court below, and a party against whose action laches is suggested as a defense, ought to be allowed to explain it away; and, therefore, it is not regarded with favor on appeal when raised for the first time by the successful party below after the case has been brought to this court for review. — Hagerman v. Bates, 24 Colo. 71. In a recent case — Mortgage Trust Co. v. Elliott, 36 Colo. 238 — it is decided, in ■effect, that where the defense of laches is not presented to, nor passed upon by, the trial court, it will not bé considered on appeal, because the party against whom it is thus first suggested, would be deprived of the opportunity to explain his delay. Plaintiff could not maintain her creditor’s bill until her indebtedness against Mr. Brewster had been reduced to judgment. At the time of the transfers it was not in judgment, but the case at bar was commenced shortly after she reduced her claim to judgment. If there had been any delay on the part of the plaintiff of which defendants might complain, it arises from the fact that she did not reduce her claim to judgment at an earlier date, whereby she would have been enabled to sooner institute her action. Counsel for plaintiff insist that the time° within which she should have commenced her action only began to run from the date she obtained judgment against the defendant Brewster. We do not deem it necessary to pass upon this question. Laches in bringing an action cannot be successfully interposed as a defense unless delay in this respect has injuriously affected the party against whom suit is brought, or his position has been altered to his prejudice thereby. — Morgan, v. King, 27 Colo. 539; Farris v. Wirt, 16 Colo. App. 1; Dubois v. Clark, 12 Colo. App. 220.

As previously stated, in substance, in reviewing the evidence, Mrs. Brewster does not appear to have expended any money of her own in improving the property or discharging indebtedness against it. Whatever she may have expended in either of these ways she obtained from the income derived from operating the property as a boarding house. She has devoted no time to managing the business or in looking after it different from that which she would have done had the title remained in her husband. Prom the date of the transfers down to the time when plaintiff commenced her action, it appears that the income from the property has been devoted to the support of the family and the discharge of indebtedness against Mr. Brewster, precisely the same as though the property had remained in his name, and he had conducted the boarding house himself; consequently, it is apparent that the delay of the plaintiff in obtaining a judgment and commencing her creditor’s suit at an earlier date has not been prejudicial to the rights of the defendants, or either of them.

The judgment of the district court is reversed and the cause remanded, with directions to enter judgment for plaintiff in accordance with the views ¡expressed in .this opinion.

Reversed and remanded.

Chief Justice Steele and Mr. Justice Campbell concur.