Opinion
No. 29939.
April 11, 1932. Suggestion of Error Sustained in Part and in Part Overruled, May 23, 1932.
1. FRAUDULENT CONVEYANCES.
Debtor's conveyance of substantial portion of property as gift or for nominal consideration is presumptively fraudulent as to existing creditors.
2. FRAUDULENT CONVEYANCES.
Debtor who conveys substantial portion of property as gift has burden to show he retained sufficient property easily accessible to execution to satisfy then existing liabilities.
3. FRAUDULENT CONVEYANCES. Chancellor's finding that conveyances by indorser without consideration were fraudulent as to holder of second mortgage which note secured held justified under evidence.
The evidence disclosed that the amount of property retained by the indorser on the mortgage note, including margin of equity in the property covered by the second mortgage, was less than his existing liabilities. The fact that mortgagee required note to be indorsed indicated that he was not satisfied with the security of the second mortgage, and the chancellor may have found, contrary to opinion of expert, that the security of the second mortgage did not in fact fulfill requirement of being amply sufficient.
4. EVIDENCE.
Expert opinions on value of real estate are not conclusive on trier of facts.
5. APPEAL AND ERROR.
Decree for sale of property conveyed by indorser in fraud of holder of note could not be reversed for holder's failure to exhaust remedies against makers, where there was no showing that makers had any property subject to execution.
6. EVIDENCE.
Presumption is that right and honorable course has been pursued.
APPEAL from chancery court of Le Flore county. HON. R.E. JACKSON, Chancellor.
Pollard Hamner, of Greenwood, for appellants.
It is generally held that if the indebtedness is sufficiently secured, it should not be taken into consideration, and that it is immaterial, where the land conveyed was sufficient to satisfy the debt, that it was afterwards sold by the creditor and bought in by him at a nominal price, so that the grantor was liable for the deficiency.
27 C.J. 498.
This distinction between unsecured and secured creditors has been apparently recognized by this court, for it has said:
"In equity, every person who gives no specific security for the payment of his debts is deemed as holding his property in trust for his creditors, and any conveyance of it by him, without consideration, or mala fide if upon consideration, is void as to his creditors.
Ames v. Dorroh, 76 Miss. 187, 196, 23 So. 768.
Whatever the general rule may be with respect to the burden of proof in actions to set aside conveyance alleged to be in fraud of creditors, it must be kept in mind that this action is by a secured creditor, one who held mortgage security for the payment of his debt. The transfer in no way endangered the mortgage security. The creditor neither alleged nor proved that the mortgaged property was not of sufficient value to pay the debt when the installment payments for the purchase of the land were made and the gift was made. In such a case, to make it necessary for the grantee to prove that the donor was solvent when the transfer was made, it is not sufficient for a secured creditor to merely prove the transfer, the debt, and the subsequent foreclosure and deficiency judgment.
McMillan v. McMillan, 42 Idaho 270, 245 P. 98.
If complainant's claim is at the time of the gift fully secured, the conveyance must be held valid, for the grantor is then in the same condition legally as if he were free from debt.
Polk County National Bank v. Scott, 132 Fed. 897, 66 C.C.A. 51.
If there was ample property bound by the lien of complainant, at the fair cash value, to pay donor's debt at the time the gift was made, that rebuts all presumption of fraud.
Van Wyck v. Seward, 6 Paige 62.
Since the testimony as to the value of this property is unimpeached and uncontradicted, and is supported by all the circumstances, and is not unreasonable it will be taken as true.
Wilson v. Blanton, 130 Miss. 390, 94 So. 214; Crichton v. Halliburton, 154 Miss. 265, 122 So. 200; Stevens v. Stanley, 154 Miss. 627, 122 So. 755.
It is of course immaterial where the land conveyed was sufficient to satisfy the debt, that it was afterwards sold by the creditor and bought in by him at a nominal price, so that the grantor was liable for the deficiency.
27 C.J., page 498.
That to satisfy a judgment for the debt, together with costs and attorney's fees, the property was subsequently sold under foreclosure and bought in by the creditor for a sum less than the judgment, resulting in the deficiency judgment, is of no consequence, if the property retained was, when the payments for the land and its gift was made, sufficient to satisfy the then existing debt. The validity of a transfer does not depend on subsequent events.
McMillan v. McMillan, 42 Idaho 270, 245 P. 98.
A conveyance though voluntary cannot be impeached by a creditor of the grantor if the latter retained at the time of the conveyance property accessible to his creditors and sufficient to pay his debts.
Wilson v. Kolheim, 46 Miss. 346; Stern v. Hampton, 73 Miss. 555, 564, 19 So. 300.
It is the general rule that a transfer with intent to defraud creditors is void as against creditors, but it is well recognized, and is the rule in this state, that a man may, in good faith, convey property to his wife or child or anyone else, if he retains sufficient property to satisfy the legal demands of his creditors.
Wilson v. Kohlheim, 46 Miss. 346.
The right which Mr. Robinson would have to collect a pro rata share of the debt from each of his co-sureties, if he were made liable for the debts in question, should be counted in reduction of his liabilities, or as part of his assets.
In re Bowers, 215 Fed. 617.
The validity of a transfer does not depend on subsequent events.
27 C.J., pp. 498, 502; Van Wyck v. Seward, 6 Paige 62; Ayers v. Harrell, 111 Ga. 864, 36 S.E. 946; Goodrick v. Sheets, 19 Ohio App. 207; McMillan v. McMillan, 42 Idaho 270, 245 P. 98.
The best evidence rule prohibits the establishing of the contents of a writing by a copy, but demands the production of the original, in the absence of a showing that the original is lost or unavailable for some legally sufficient reason.
Baldridge v. Stribling, 101 Miss. 666, 57 So. 658; Lipscomb v. Postell, 38 Miss. 476, 493, 77 Am. Dec. 651; Thomas v. Grand Gulf Bank, 9 S. M. 201.
Likewise oral evidence of its contents is inadmissible.
McLeod Lumber Co. v. Anderson Mercantile Co., 105 Miss. 498, 62 So. 274; Baldridge v. Stribling, 101 Miss. 666, 57 So. 658.
Under a statute like Section 3764, Code of 1930, the facts must come within the language of the statute before a copy will be admissible in evidence.
Currie v. Ulmer, 116 Miss. 187, 76 So. 877; Davis v. Rhodes, 39 Miss. 152.
The copies of papers which when certified under the seal of the department are to be accepted in all matters equally and with like effect as the original are copies of the records of the department — copies of the examinations (Section 3769 et seq.), statements (Section 3778), reports (Section 3779), testimony (Section 3771 and 3772) and other papers of a public and general nature, which properly remain permanently in the office of the banking department. Instruments contractual in nature, affecting private parties in their private characters and binding them merely as private individuals, and sought to be used in litigation between private parties, do not come within the scope of the statute.
50 C.J., p. 225, sec. 365.
Where a judgment has been obtained against both the principal and the surety, the creditor, in the absence of a contrary provision of the statutes, may, at law levy upon the property either of the surety or of the principal but in the chancery the property of the principal should be subjected first to the discharge of the obligation.
50 C.J., p. 225.
A decree in equity should provide for first exhausting the estate of the principal, unless he is utterly insolvent.
Sec. 2963, Code of 1930; 50 C.J. 224.
The purpose of equity in ordering a sale in cases of this nature is that full and complete justice may be done.
27 C.J. 852, sec. 813.
In ordering a sale the rights of all parties should be ascertained and protected.
27 C.J. 852, sec. 814.
If a debtor, and especially if he be largely indebted, convey a substantial portion of his property for a nominal consideration or by way of gift, this is presumptively fraudulent as to existing creditors, and the burden will rest upon the defendant to rebut the presumption by showing that the debtor retained property easily accessible to execution and amply sufficient in the ordinary course of events to satisfy his then existing just liabilities.
Golden v. Goode, 76 Miss. 400, 24 So. 905; Ames v. Dorroh, 76 Miss. 187, 23 So. 768; Griffith's Miss. Chancery Practice, sec. 502, page 538.
However, it has also been held in this state that even if the debtor retain sufficient property to pay all his debts yet if the particular conveyance attacked was made for the confessed, or clearly proved, purpose of preventing the creditor from subjecting the particular property conveyed the bill would be sustained.
Edmunds v. Mister, 58 Miss. 765; Griffith Miss. Chancery Prac., sec. 502, page 538.
These appellants are liable for court costs in the court below only to the extent that such costs accrued in consequence of the taking of this appeal, which is not clear as the judgment is now worded. Appellants of course would be liable for the costs in this court upon the final affirmance of this cause, and they would be liable for costs in the court below incurred by reason of this appeal; but they would not be liable for the costs below generally, because costs were not adjudged against them by the chancellor, as is disclosed by the decree below.
Alfred Stoner, of Greenwood, for appellee.
Until the decision in Young v. White, 25 Miss. 146, all gifts, regardless of the assets remaining in the hands of the donor, were void as to existing creditors.
Bogard v. Gardley, 4 Smedes M. 302; Swayze v. Doe, 13 Smedes M. 317.
The law presumes a voluntary conveyance as to such creditors to be fraudulent and void, and the party claiming under it must, by clear and satisfactory proof, rebut this presumption. It will not be sufficient, merely to show the fair intentions of the grantor, and that by good management the property by him retained was sufficient to pay his debts. The proof must show that by the ordinary course of human transactions, the deed could not operate to hinder delay, or to defraud the claims of prior creditors. It is only out of favor to the party claiming under the deed that it is not held by the courts fraudulent per se; and the rule having been relaxed, merely to let in the parties evidence to explain the transaction, it follows that the evidence must afford a sufficient explanation by showing that the property conveyed was so inconsiderable, when compared with that retained by the grantor, and the amount of debts he then owed, that it could not be supposed to endanger the safety of a debt, or to delay its payment.
Young v. White, 25 Miss. 146; Edmunds v. Mister, 58 Miss. 765; Cook v. Oakley, 50 Miss. 628.
And it is also established in our State that if a debtor, and especially if he be largely indebted, convey a substantial portion of his property for a nominal consideration, or by way of gift this is presumptively fraudulent as to existing creditors, and the burden will rest upon the defendant to rebut the presumption by showing that the debtor retained property easily accessible to execution and amply sufficient in the ordinary course of events to satisfy his then existing just liabilities.
Griffith's Mississippi Chancery Practice, sec. 502.
In equity, every person who gives no specific security for the payment of his debts is deemed as holding his property in trust for his creditors, and any conveyance of it by him, without consideration, or mala fide, if upon consideration, is void as to his creditors, and, as to them he is considered the owner of such property, and all grantees thereof who take as volunteers, or without consideration, or who take the same with notice of the trust, are considered in equity trustee ex maleficio of such property, and may be made to answer to creditors for said property or for its value.
Ames v. Dorroh, 76 Miss. 187, 23 So. 768.
But the retention of ample means such as will validate a voluntary conveyance is not shown by proof merely that the property which the donor retained was sufficient at a fair market valuation to cover the amount of his debts. The value of the property must be such that when subjected to forced sale it will yield a sufficient sum to pay all his existing debts, as well as taxable costs of their collection.
14 Am. E. Ency. of Law (2 Ed.), 307.
A debtor being unable to pay a debt when called upon by the creditor a presumption arises that he could not have done so at any previous time, and an intervening conveyance of property is considered fraudulent and void; and it is incumbent on the party holding such property, and insisting upon such claim, to show that such debtor, at the time of the conveyance, retained other specific property readily accessible, and ample for the discharge of his debts; and this burden has not been met in this case.
Ames v. Dorroh, 76 Miss. 187, 23 So. 768.
The certified copy of the guaranty to the Bank was properly admitted.
Sec. 3764, Code of 1930.
It is true that the lower court did not decree that the two appellants pay any costs of the lower court, although it would not have been erroneous to have decreed such liability. The question is not, what were the appellants liable for at the time of taking the appeal, but the question is, what did they and their sureties obligate themselves to do when they took the appeal. We call the attention of this court to the difference in the provisions of section 28, Code of 1930, which provides for appeals with partial supersedeas, and the said section 33 which provides for appeals with supersedeas. The said section 28 provides that the appellant and sureties bind themselves to pay all the costs of appeal, whereas, section 33 provides that the appellant and sureties obligate themselves to pay all the costs and damages.
4 C.J. 1294.
Argued orally by R.V. Pollard, for appellants, and by Alfred Stoner, for appellee.
On the 10th day of April, 1924, A. Robinson, Sr., was the president of the First Savings Bank of Itta Bena. An examination of the bank by the state banking department had disclosed that the said bank was carrying as assets a number of notes aggregating the sum of approximately forty-two thousand dollars, which, in the judgment of the banking department, were worthless as banking assets. This aggregate exceeded the capital stock of the bank, and the banking department demanded that these notes should be paid or adequately secured or else that the said bank should be liquidated. Thereupon, and on the date first mentioned, the said Robinson and the other directors executed a written guaranty to the said First Savings Bank, obligating themselves jointly and severally for the full payment of said notes and to the full aggregate amount thereof as above stated. This guaranty was substantially similar in legal effect to the obligation which was upheld by this court in Love v. Dampeer, 159 Miss. 430, 132 So. 439. And we are of opinion that the contents of that written guaranty could be proved by a certified copy thereof under section 3764, Code 1930, as was done in this case.
On June 16, 1924, the said A. Robinson, Sr., became the indorser of a series of notes, executed by Polk and Williamson, and payable to appellee's decedent in the aggregate sum of approximately sixteen thousand dollars; these notes being secured by a second mortgage on a plantation in Humphreys county. There was a first mortgage on this plantation in favor of the Federal Land Bank for the security of a loan of approximately twenty-seven thousand dollars. The appraiser for the land bank testified that the first mortgage loan represented about fifty per cent. of the appraised value of the plantation at the date last aforesaid, that is to say, on June 16, 1924, and that the estimated value of the plantation did not suffer any material change during the remainder of the year 1924. In other words, that there was an appraised value in said plantation of about twenty-six thousand dollars in excess of the federal farm loan, and which in consequence would give an estimated value in excess of the combined amounts of the said first and second mortgages of about ten thousand dollars.
On December 5, 1924, A. Robinson, Sr., found it necessary to undergo a dangerous surgical operation, from which he anticipated that he would probably not recover, owing to his advanced age. He owned two valuable delta plantations, and on the date aforesaid he conveyed to his son, A. Robinson, Jr., one of these plantations, and to his son, Wm. S. Robinson, the other plantation, by deeds of gift. These two plantations comprised all the real estate owned by A. Robinson, Sr., except an exempt homestead and some small lots in the state of Oklahoma valued at fifteen hundred dollars. However, Mr. Robinson at the time owned and retained certain personal property in the form of corporation stock, notes, cotton, and cash, in the aggregate of about twenty-nine thousand dollars, which, added to the Oklahoma real estate, made a total of approximately thirty thousand, five hundred dollars.
Subsequently, the said sixteen thousand dollars secured by the second mortgage not having been paid, and interest and taxes having gone into default, the said second mortgage was foreclosed, subject to the first mortgage. At the foreclosure sale, the property brought only one hundred dollars, and this suit was brought in the chancery court to recover the deficiency, and to set aside the deeds to said plantations by Mr. Robinson to his sons as being in fraud of his creditors, and particularly of the debt held by appellee's decedent. There was a decree sustaining the bill, and the case has been brought here for review.
The applicable law is well settled in this state, and a succinct statement of it is that, if a debtor, and especially if he be largely indebted, convey a substantial portion of his property for a nominal consideration or by way of gift, this is presumptively fraudulent as to existing creditors, and the burden will rest upon the defendant to rebut the presumption by showing that the debtor retained property easily accessible to execution and amply sufficient in the ordinary course of events to satisfy his then existing legal liabilities. Golden v. Goode, 76 Miss. 400, 24 So. 905; Ames v. Dorroh, 76 Miss. 187, 197, 23 So. 768, 71 Am. St. Rep. 522.
The amount of property retained, counting the personal property mentioned, was thirty thousand, five hundred dollars; and, even if we add the twenty-six thousand dollars appraised margin in the property covered by the second deed of trust on the Humphreys county plantation, this would make a total of fifty-six thousand, five hundred dollars; whereas the existing legal liabilities amounted to fifty-eight thousand dollars; from which it at once appears that the voluntary grantees have not brought themselves within the general rule which would save them.
The argument is urged upon us, however, that the sixteen thousand dollars of notes upon which Mr. Robinson was indorser and which form the basis of this suit should not in the case at bar be included in the computation to which we have just referred, for the reason that appellee has the right to complain only of a voluntary transfer which, at the time made and according to the ordinary course of events, then operated to his injury; and that, since the particular sixteen thousand dollars held by appellee was then amply secured by a margin of twenty-six thousand dollars in appraised value under the said second mortgage, the said appellee, so far as he is concerned, had property expressly retained to his benefit, easily accessible and amply sufficient.
For the sake of the argument, we may concede that, where a debt is amply, or well, or abundantly secured by real property, and where the creditor rested satisfied with the security, the creditor holding such security cannot complain of a voluntary conveyance of other property by the debtor, Polk County Bank v. Scott (C.C.A.), 132 F. 897; but here the creditor, McShane, was not satisfied with the security of the second mortgage, because he required the notes to be indorsed by Robinson; and, in the second place, we cannot say from this entire record that the chancellor was manifestly in error in his holding, the legal effect of which is that the security of said second mortgage did not in fact fulfill the requirement of being amply sufficient. It is true, as already mentioned, that, according to the witness who appraised the Humphreys county plantation, there was a margin above the first mortgage, and that the margin aforesaid amounted, in his opinion, at that time, to about twenty-six thousand dollars. But opinions on the subject of the value of real estate, and the like, are at last only opinions in the nature of guides, and are not assertions of actual fact; whence they are not conclusive on the trier of the facts, although uncontroverted by other opinions of other witnesses. The trier of the facts may take into consideration all the other facts and circumstances shown in the entire testimony and apply to the case general common knowledge, and thus test out the issue upon the basis of reason and experience, in the doing of which opinion evidence of values is advisory and not absolutely binding. See numerous cases cited footnotes, 22 C.J., pp. 729 et seq.; 13 Ency. Ev. 481.
Touching the contention that the decree is erroneous in that it did not expressly direct that execution should first be directed against Polk and Williamson, the primary obligors, and that the plantations of the Robinson sons should be sold only after exhausting all proper process against said Polk and Williamson, it may be conceded, but without deciding to that effect, that the decree is technically erroneous in the respect mentioned; nevertheless, it could not for that reason be reversed on this record, since there is no showing in the record that either Polk or Williamson has any property subject to execution. Consequently, the record fails to disclose that the error mentioned, if error, is one of any harm to appellants. It cannot be assumed, in the absence of proof, that Polk and Williamson have any such property, but rather the assumption would be that they have not, else appellee would have proceeded against it. This would have been the right and honorable course for appellee to have pursued, and, when there is no proof to the contrary, the presumption is that a right and honorable course has been pursued. The record indicates that the point dealt with in this paragraph was not raised in the trial court; and if in fact Polk and Williamson have any property which can be reached, there are at least three remedies open to those secondarily liable in this transaction by which to obtain justice and to enforce the application of that property first to the payment of this particular debt.
Affirmed.
On Suggestion of Error.
The suggestion of error is overruled except as to that part of the judgment taxing appellant with the costs in the court below, to that extent it is sustained.