182 Ky. 166 | Ky. Ct. App. | 1918
Opinion of the Court by
Eeversing.
This is an appeal from a judgment in three consolidated cases brought by creditors to have a deed and mortgage declared void, (1) because made with intent to delay and hinder creditors; (2) because without valuable consideration; (3) because made in contemplation of insolvency and with design to prefer one or more creditors to the exclusion of others.
The trial court adjudged both the deed and mortgage void as executed, (1) without valuable considera
We do not believe that appellees, plaintiffs below, have brought themselves within either of the foregoing sections although they have attempted to do so. That they were and are creditors of Maddox is admitted, but they have not established the fact that the deed or mortgage was made to delay or hinder creditors, or without valuable consideration, or in contemplation of insolvency and with a purpose to prefer certain creditors to the exclusion of others. As frequently held by the courts a debtor may sell or convey his property at will, his creditors to the contrary notwithstanding, if the transaction be fair, free from fraud and not with a design to delay or hinder creditors or prefer one over another. Without going into a detailed statement of all the evidence, suffice to say that every syllable of it proves that old man W. J. Maddox in selling his land to Linn acted in perfectly good faith and without intention of wronging- or defrauding any of his creditors. He was very old, infirm and forgetful. His several creditors were harassing him more or less, and some of them were importuning him to execute mortgages upon his property. Apprehending that he would be unable to again enter into business sufficiently to accumulate enough money to discharge a mortgage or mortgages which he might give, he frankly told his creditors that he desired to sell his farm and obtain-enough money with which to pay them off and thus get out from under all his obligations. The farm was worth,
Green and Stahr, the mortgagees who provided the money with which to pay off a number of claims against Maddox, are honorable business men of Fulton county, according to this record. They also were cautious and careful in these transactions, and evidence of bad faith on their part is lacking.
. The appellees, plaintiffs below, rely upon alleged badges of fraud attendant upon the two transactions, deed and mortgage, (1) transfer from father-in-law to son-in-law and daughter; (2) want of consideration; (3) the heavy indebtedness or insolvency of Maddox; (4) the mortgage to Green and Stahr, they being creditors, was a preference.
Let us consider each of these alleged badges of fraud in the light of the evidence introduced on both sides. While it is true that Maddox is the father-in-law of Linn, and Linn and wife resided in the house with Maddox, there is no evidence of collusion or wrongdoing between them, but on the contrary Maddox attempted to sell the lands to other persons in preference to Linn in order to raise sufficient money to' pay his debts, and only consented to trade with Linn when be found it impossible to sell directly to some one else. The trade was open and public, and the deed placed of record. The consideration was not only fair-but full under all the facts, and there is no evidence adduced which cast suspicion upon the transaction as between the father-in-law and son-in-law. Maddox was not insolvent at the time he made the deed to Linn although he was heavily indebted. Aside from the farm worth $12,000.00 he had a valid mortgage for $3,000.00 upon a tract of land in Tennessee and some other property. True this mortgage was released some weeks after the deed was executed, but with the agreement and understanding on the part of Maddox that money would be provided with which to pay off certain obligations which were pressing. The release of this mortgage, however, some time after the execution of the deed, did not relate back and affect the deed made in
The general doctrine is well stated in 12 R. C. L., sec. 10, where it is said: “The owner of property, though he be greatly indebted or even insolvent, may sell it and give good title to a bona fide purchaser despite his creditors, up to the time when they shall have acquired a lien. The prevailing doctrine in this country is that indebtedness at the time of a voluntary conveyance creates a prima fade presumption of fraud, and no more, and that each case must largely depend on its own circumstances, the amount of the indebtedness, the condition of the grantor’s business affairs, and any other facts bearing upon the question of fraud. ... If a debtor be actually insolvent, he may still dispose of his property for a valuable consideration in good faith, but it seems to be well settled that he will not be permitted to alienate his property and place it in a position where it is not subject to process in behalf of his creditors, unless there has been .received a full and fair consideration for the property transferred, and the same has been made in good faith, and any transfer made in contemplation of insolvency is invalid under the same circumstances as if made by the debtor where actually insolvent. The insolvency of a grantor known to the grantee is not of itself conclusive evidence of the bad faith of the transaction.”
While badges of fraud, such as want of consideration, failure to record a mortgage and the like, cast the burden of proof upon the transferee or beneficiary, they are not conclusive and may be overcome by evidence establishing the bona fides of the transaction. There were several things connected with -the execution of the deed
The trial court erred in adjudging the deed and mortgage void and the lands 'in question subject to the debts of the complaining creditors, and directing a sale therof.
. Several other questions are presented which it is unnecessary to discuss here. On a return of the case the chancellor will enter personal judgment only against Maddox and sureties, enforce the mortgage on personal property, and dismiss the petitions in so- far as they seek to set aside the deed and mortgage.
Judgment reversed.