201 Ky. 690 | Ky. Ct. App. | 1924
Opinion of the Court by
Sustaining motion for appeals, granting appeals and reversing the judgment in each case.
T. T. Bowling was a country merchant doing business in Leslie county. He became indebted to a number of wholesale merchants in an aggregate amount perhaps equal to or greater than his assets. Some of them on January 7- and 8, 1920, filed suits in the Leslie circuit court and procured attachments against Bowling, their creditor, and had them levied on his stock of goods and his storehouse and a small tract of land upon which it stood, and also on another tract of land in another county. After the levying of those attachments, the sheriff closed the store and locked it. On the 27th day of January, following the levy of those attachments on the storehouse, and lot, Bowling, the creditor, deeded that property to the appellee and defendant below, L- C. Johnson, for the nominal consideration of $675.00, which is recited in the deed to be “cash, in hand paid.” On the 7th day of the following April (1920), appellant, International Shoe Company, filed this equity action in the Leslie circuit court to recover its debt against Bowling amounting to $298.14, and in its petition it attacked the- deed to Johnson of date January 27, 1920, as having been executed in fraud of the creditors of the grantor, Bowling, and that the grantee, Johnson, had knowledge of his grantor’s fraudulent intent and participated therein. There was also an attachment procured which was levied on that and other property of the creditor. On the next day, April 8, the appellant, the Patton Company, filed a similar suit and sought to collect its debt against Bowling amounting to $219.74. The creditor made no defense to either of the actions, but the defendant, Johnson, filed an answer denying the fraudulent transfer of the storehouse
All affirmative allegations of the answer were denied and upon submission the court dismissed the petitions and plaintiffs have filed a transcript of the record in this court and entered motion for an appeal in each case. The only testimony offered by-plaintiffs was that given by the clerk of the Leslie circuit court showing the pendency therein of the various suits against Bowling at the time of the execution of the deed and the levying of the attachments upon his property. Bowling did not testify, but Johnson in his deposition said that he entered into a verbal contract for the purchase of the storehouse and lot somewhere near the first of January, 1920, and, as he states, before the attachments were obtained on January 7 and '8, under which the property was levied on and the storehouse looked by the sheriff; that at the time, he assumed the payment of a $200.00 debt of his vendor, representing the amount of a mortgage upon the property and which he afterwards paid; that he gave a check to Bowling for the balance of the consideration of $475.00, but within a short time thereafter he learned- that Bowling was in trouble with his creditors and that the property had been levied on under the attachments sued out on January 7 and 8, and he thereupon instructed the bank not to cash his check, which instruction it obeyed; that afterwards, and on January 27, he met Bowling and took from him the deed to the property and at the same time paid to him in cash $475.00, although at that time the storehouse was still locked, and it and the lot upon which it stood were levied on under the attachments, supra, all of which facts defendant then knew. There was no testimony upon the issue as to the property being exempt. On the contrary, it appears from the record that the debtor did not reside upon that property, and it is doubtful if that defense could be sustained if that issue had been duly prosecuted, but which was not done. So that, the only question to he determined is, whether the proof was sufficient to authorize the granting of the relief sought by the petitions.
In the case of Willis v. Vallette, 4 Met., bottom page 167, star page 186, the court announced the familiar rule that “Whatever puts a party upon inquiry amounts in judgment of law to notice, provided the inquiry becomes a duty, as in the case of purchasers and creditors, and would lead to the knowledge of the requisite fact by the exercise of ordinary diligence and understanding.” To the same effect is 20 Cyc. 481; Summers v. Taylor, 80 Ky. 429; Lain v. Morton, 23 Ky. L. R. 438; the Carter ca§e, supra, and numbers of other later ones in this court. Under that rule, Johnson, at the time he paid the $475.00 and took his deed, was in possession of facts, which if duly investigated, would have revealed to him the evident intent and purpose of Bowling in making the sale, if indeed he did not already possess that information at the time.
The fact that he claims to be a purchaser for a valuable consideration furnishes no defense to the relief sought in the instant cases, since, as we have found, he paid that consideration after he had notice and knowledge of the fraudulent intent of his vendor. The statute (section 1906) expressly condemns such transactions and stamps them as void as against creditors, purchasers and other interested persons, when the transaction is a voluntary one, or when it is for a valuable consideration, if the fraudulent vendee at the time had notice of the fraudulent intent of his vendor; and this court, in a long list of cases, has held that the conveyances may be attacked and set aside, notwithstanding there was a valuable consideration, if the vendee knew of the fraudulent intention of his vendor at the time of the conveyance or at the time of the payment of the consideration. Some of the cases so holding are: Huffman v. Leslie, 23 Ky. L. R. 1981; Walters v. Akers, 31 Ky. L. R. 259; Interstate Petroleum Co. v. Farris, 159 Ky. 820; McDonough v. McGowan, 165 Ky. 425, and the Summers and Carter cases, supra. The McDonough case also holds that a conveyance by one, wherein there is pending an action for the recovery of money, is a badge of fraud which shifts the burden to the vendee to show the bona fides of the trans
It was stipulated in the case that Johnson might be subrogated to the right of the mortgagor of the attached property to the extent of $200.00, and the judgment to be rendered pursuant to the mandate should direct that amount paid to him. 'Wherefore, the motion for the appeals is granted and the judgment in each case is reversed, with directions to sustain the attachments and to cancel the deed from Bcwling to Johnson of date January 27, 1920, and to enter an order directing the property to be sold in satisfaction of the judgments, but that $200.00 of the proceeds be first paid to Johnson under his subrogated right to the mortgagee of the property, and for further proceedings consistent with this opinion.