93 Wash. 115 | Wash. | 1916
Action to set aside as fraudulent certain deeds and a mortgage of real estate, and to subj ect all of the property to' the lien of a judgment held by plaintiff as assignee of the bank of Lind.
Prior to 1907, It. P. Smith and his son, Warren Smith, with a number of other farmers of Adams county, had become stockholders in the Farmers Warehouse Company of Lind, a cooperative company organized to facilitate the marketing of their grain. In 1907, these two and a number of other stockholders signed a bond guaranteeing the indebtedness of the warehouse company to the bank. On July 23, 1913, the bank brought suit on this bond. Summons was served on that day, and on June 10, 1914, it recovered a joint and several judgment in the sum of $5,474.74 against all of the signers of the bond.
On August 7, 1913, Warren Smith and wife conveyed to his mother, Janette P. Smith, wife of R. P. Smith, the north half of section 6, in township 16 north, range 35, E. W. M., which is called in the record the “Peasley land.” Warren Smith had acquired title to this land in the spring of 1912.
About August 7, 1913, Warren Smith and wife also executed to Janette P. Smith a chattel mortgage on all of their stock, teams and farming implements, purporting to secure a debt of $5,000. This was satisfied by a bill of sale of this property from Warren Smith and wife to Janette P. Smith, executed June 8, 1914, and recorded June 9, 1914. This transaction is not assailed.
In 1907, R. P. Smith and Warren Smith negotiated the purchase of the northeast quarter of section 4, in township 16 north, range 35, E. W. M., and the southeast quarter of section 32, in township 17 north, range 35, E. W. M., known as the “Cartwright land.” Title was taken in the name of Janette P. Smith. The consideration paid was about $12,000. The money was raised, $8,000 at a bank on joint notes of Warren Smith and wife, Janette P. Smith and R. P. Smith, $1,750 by a mortgage given by Warren Smith and wife on their homestead, and $1,750 by a mortgage given by R. P. Smith and Janette P. Smith on their homestead. All of these obligations were paid in 1908. Plaintiff seeks to have this tract declared community property of R. P. and Janette P. Smith and subjected to the lien of its judgment.
In 1897 and prior thereto, Janette P. Smith acquired title to a half section of land known as the “Railroad land,” and another tract of four hundred acres, known as the “Boyles land.” Plaintiff sought to subject these, as community
The court adjudged: (1) that plaintiff’s judgment as against R. P. Smith is a lien on the community property of R. P. and Janette Smith; (2) that an undivided one-half of the “Cartwright land” is community property of R. P. and Janette P. Smith, and as such subject to execution to satisfy the judgment; (3) that the mortgage covering the “Warren Smith land” is a valid mortgage; (4) that the “Peasley land” is the separate property of Janette P. Smith and is not subject to the lien of plaintiff’s judgment.
Both parties having appealed, we shall designate them throughout as plaintiff and defendants. We shall consider each branch of the judgment separately.
I. Both R. P. and Janette P. Smith testified that, during all of their married life, they have conducted their business separately; that, at the time of the marriage, she had a considerable amount of property inherited from her father; that, at or about that time, it was agreed between them that whatever she acquired should be hers and upon her death should go to her children, and that whatever he acquired and his personal earnings should be his and upon his death should go to his two children by a former marriage. Three disinterested witnesses who had known the Smiths for many years and had transacted business with both of them testified that they had always conducted their business separately. Their sons, Warren Smith and Newell Smith, the former thirty-eight years old, the latter twenty-nine, testified that-such had been the case as long as they could remember. This evidence fairly establishes the agreement and shows that, in the main, it had been continuously acted upon. Though this
R. P. Smith testified that he purchased the stock of the warehouse company, ten shares of $10 each par value, with money earned by himself, that his wife was in no manner concerned in the purchase, and that he signed the bond as a stockholder. We are clear that his signing the bond did not create a community obligation. Way v. Lyric Theater Co., 79 Wash. 275, 140 Pac. 320. The court erred in holding the judgment a lien on the community property of R. P. and Janette P. Smith.
II. The giving of the joint notes of the two communities and the two mortgages to raise the original purchase price of the Cartwright land strongly supports the view that an undivided one-half of this land belonged to each of the communities composed of R. P. Smith and Janette P. Smith and Warren Smith and wife. All of these parties, however, testified that the title was taken in the name of Janette P. Smith because the land was purchased for her, and that she paid off all of these obligations from her own funds. But it fairly appears that the money came partly from the crops growing upon the land when it was purchased, partly from money in bank in Warren Smith’s name, and about $2,500 from money inherited from her father by Janette P. Smith. It also appears that Warren Smith for many years had rented his mother’s lands for half the crops after deducting seed and feed, and that when from time to time these crops were disposed of, the proceeds, both of his part and hers, were deposited in the bank to his credit. There was no evidence that
III. For convenience in consecutive discussion, we shall next consider the “Peasley land.” This land was purchased for $12,000 at an administrator’s sale in the spring of 1912. We are satisfied that it was purchased by Warren Smith for Janette P. Smith; that, through mistake, the return of sale was made in his name and that soon afterwards he attempted to have the mistake corrected, but was told that the easiest way to correct it was to deed the land to her, his wife joining. Both he and Janette P. Smith so testified, as did also two attorneys whose advice they took at the time. There is no evidence to the contrary. Warren Smith had been farming Janette P. Smith’s lands during the years 1908 to 1911, inclusive, but had paid her no rent since 1907. He borrowed money at a bank and paid for this land, giving his own check for something over $8,000 of the purchase price and turning over two certificates of deposit aggregating about $1,700, belonging to his mother. So far as can be gathered from the evidence, the balance of the purchase price, consisting of a mortgage assumed on the purchase, was paid partly by crops then growing on the land and partly by Warren from rent money owing by him to her. While the evidence is much confused, we are convinced that Warren paid at least $9,000 of the purchase price of this land in part payment of his debt to his mother. True, she testified to the eifect that at about this time, she does not remember whether before or after the Peasley purchase, she received a draft for $10,000 from a niece in Michigan who has since died; that she cashed»
Defendants assert that this mortgage was a valid preference. It is settled law in this state that a debtor, though insolvent, may prefer one or more of his bona 'fide creditors even if it exhaust his whole property to do so. McAvoy v. Jennings, 44 Wash. 79, 87 Pac. 53; Vietor v. Glover, 17 Wash. 37, 48 Pac. 788, 40 L. R. A. 297. Mere knowledge on the preferred creditor’s part that his preference will hinder or defeat other creditors will not alone render his preference fraudulent. Holt Mfg. Co. v. Bennington, 73 Wash. 467, 132 Pac. 30. But the preferred debt must be
“The law looks with great jealousy upon the manner of giving preferences, and denounces all departures from good faith, and requires that the parties shall not secure any covert advantage to the debtor in prejudice of his creditors.” Bump, Fraudulent Conveyances (4th ed.), § 174.
Though it is usually held that the property transferred must bear a reasonable proportion to the preferred debt (Bump, Fraudulent Conveyances, § 174), excessive security by mortgage raises no conclusive presumption of fraud. It is evidence to be considered with other circumstances in determining fraud. Grand Island Banking Co. v. Costello, 45 Neb. 119, 63 N. W. 376. But there is an obvious and marked distinction between an excessive security and an exaggerated debt. Any security for a sum known to be in excess of what is actually due is presumptively fraudulent. Kellogg v. Clyne, 54 Fed. 696; State ex rel. Redmon v. Durant, 53 Mo. App. 493. This results as a corollary from the universal rule that the preferred debt must be real to furnish the essential element of good faith.
There are some authorities which hold that such a mortgage is only void as to the fictitious part of the ostensible debt, but the better rule is the other way. If a creditor knowingly takes a mortgage for more than his due, the fraud corrupts the whole. Bump, Fraudulent Conveyances (4th ed.), §§ 485, 486, 487; Holt v. Creamer, 34 N. J. Eq. 181; Heintze v. Bentley, 34 N. J. Eq. 562; Whiting v. Johnson, 11 Serg. & Rawle 328, 14 Am. Dec. 633; Hall, Moses & Roberts v. Heydon, 41 Ala. 242; Russell v. Winne, 37 N. Y. 591, 97 Am. Dec. 755. When plaintiff showed by the parties to this mortgage that it must have included this $9,500, and brought out circumstances casting the gravest doubt on the existence of so much of the ostensible debt secured, which
But the trial court overlooked the fact that plaintiff’s assignor had released the lien of this judgment on certain lands of one Offut, another of the judgment debtors, in consideration of an acknowledged payment of $1,250. We can conceive of no reason why this sum, however it was paid, should not be credited on the judgment, and no reason has been suggested.
Cause remanded for modification of the judgment in accordance herewith. Plaintiff may recover its costs on this appeal.
Momas, C. J., Mount, and Bausman, JJ., concur.