Campbell v. First National Bank of Barbourville

27 S.W.2d 975, 234 Ky. 697, 1930 Ky. LEXIS 158

• Court: Court of Appeals of Kentucky (pre-1976)
• Decided: March 25, 1930
• Status: Published

Opinion

Opinion of the Court by

Judge Logan

Affirming.

J. B. Campbell became indebted to tbe First National Bank of Barbourville in sums aggregating $800 or $900. While be was so indebted, be conveyed a certain bouse and lot to bis wife, Sue Mae Campbell, tbe appellant. An attachment was issued against tbe property in a suit instituted by tbe appellee, and it was sought to cancel tbe deed on tbe ground that it was without consideration and that tbe conveyance was made for tbe purpose of cheating, hindering, and delaying bis creditors. J. B. Campbell filed an answer denying that tbe property was conveyed without consideration or for tbe purpose of cheating, hindering, or delaying bis creditors. It developed that the National Bank of John A. Black, bad certain lien debts against tbe property and it was made a party defendant. It bad a mortgage to secure indebtedness of $900, and, after tbe conveyance was made to appellant, another mortgage was executed to it for $1,500.

Tbe deed from J. B. Campbell to bis wife recites a consideration of $1,600, which was to be paid by her assuming tbe $900 indebtedness to tbe National Bank of John A. Black and a further indebtedness of $700 which J. B. Campbell owed to W. S. Green. She paid nothing, so far as tbe record discloses, on either of these debts.

Appellant filed her answer denying tbe allegations of tbe petition and amended petition and alleging that she was an innocent purchaser of tbe property, and she attempted to deny a part of tbe indebtedness of J. B. Campbell to appellee and set up tbe $1,500 mortgage against tbe property which bad been executed after tbe property was conveyed to her. By appropriate pleadings the National Bank of John A. Blacli asserted its claims against tbe property. Proof was taken as to tbe value of tbe property, and tbe witnesses testified that it was worth $7,000. Tbe chancellor canceled tbe deed, upheld tbe validity of tbe two mortgages to tbe National Bank of John A. Black aggregating $2,400 with interest, and directed that the property be sold subject to the debts of that bank which were not due.

It is first contended by appellant that the deed to her was for sufficient consideration. She paid nothing for the property, but only assumed to pay a mortgage against the property which was the primary obligation of the husband and an indebtedness of the husband amounting to $700. She alleged, in her answer, that she realized her dower interest in certain property, but the deed recites no such consideration, and there is no proof to substantiate that plea.

Appellee plants its case squarely on the ground that the conveyance was not for a valuable consideration-and that the evidence disclosed by the record was sufficient to establish badges of fraud which made it necessary for appellant to show that the conveyance was free from fraud and that it was for a valuable consideration.

It is the general rule in this state that when a transfer is for a valuable consideration creditors cannot attack it because of the fraudulent intent of the grantor where the grantee had no notice of such intent, but if the grantee has notice of any fact, or facts, calculated to put him on inquiry and which would lead to a discovery of such intent, he has notice. Pence v. Shackelford, 142 Ky. 10, 133 S. W. 956.

Transactions between a husband and wife stand on a different footing from transactions between strangers. Slight evidence will shift the burden to the grantee in such a case where the grantor was her husband. It is true that fraud will not be presumed, but it may be inferred from circumstances. Commonwealth v. Filiatreau, 161 Ky. 434, 170 S. W. 1182.

Under section 1906 of the Ky. Stats., if the sale is made with the intent to delay, hinder, or defraud a creditor it is void, regardless of whether the conveyance was for a valuable consideration or otherwise. Under that section the only question is the intent of the grantor in conveying the property, and the knowledge of that intent by the grantee. Allen v. Ligon, 175 Ky. 767, 194 S. W. 1050. In order to protect the purchaser in such cases his good faith must appear, a consideration must pass at the time of the purchase, and it must be a fair equivalent of the thing bought. If either of these essentials is wanting, the sale is fraudulent under the statute. O’Sul livan’s Trustee v. Douglass, 124 Ky. 243, 98 S. W. 990, 30 Ky. Law Rep. 366.

In the ease before us the facts are sufficient to show that the husband of appellant was indebted to other parties, and that he conveyed his property at such a time. There was no consideration which passed from the grantee to the grantor at the time of the purchase and the consideration expressed in the deed was not a fair equivalent of the thing bought.

It was not necessary that appellee prove the insolvency of J. B. Campbell at the time he executed the deed. It was only necessary that it show such facts as would shift the burden to appellant. O’Sullivan’s Trustee v. Douglass, supra; Griggs v. Crane’s Trustee, 179 Ky. 48, 200 S. W. 317.

Want of consideration is one of the evidences of a fraudulent conveyance, and if at the time of the conveyance the debtor is insolvent and there is no consideration, the conveyance is fraudulent. A gift of one’s property is fraudulent as to existing creditors regardless of his intent. White’s Adm’rx v. White et al., 148 Ky. 492, 146 S. W. 1101.

Where badges of fraud are shown, it is a well-settled rule that the burden shifts to the grantee and he must rebut the inferences thereby created and sustain the bona Mes of the transaction. Sweeney v. Farmers’ State Bank, 219 Ky. 471, 293 S. W. 959; McDonough et al. v. McGowan, 165 Ky. 425, 177 S. W. 277; Magic City Coal & Feed Company et al. v. Lewis et al., 164 Ky. 454, 175 S. W. 992.

Inadequacy of consideration is a badge of fraud. A considerable indebtedness of the grantor is a badge of fraud. Where the circumstances under which a transfer of property by a debtor is made are suspicious, a failure of the parties to testify, or produce available explanatory or rebutting evidence, is a badge of fraud. The cases cited support these conclusions.- All of these things existed in this case, and as appellant made no effort to explain or rebut the evidence, the chancellor did not err in holding that the conveyance was fraudident. It requires slight evidence to shift the burden of proof in transfers from a husband to a wife. This question was fully discussed in the case of Stewart v. Wheeler, 220 Ky. 687, 295 S. W. 991, and in Shannon v. Duffield, 218 Ky. 770, 292 S. W. 322.

Some complaint is made about the description in the judgment, it being insisted that it does not accord with the description in the deed from J. B. Campbell to appellant. Such an error would not justify a reversal of the cause, as the judgment could be corrected to conform to the facts. If the judgment does not direct a sale of the property claimed by appellant, she would have no grounds of complaint.

It is insisted that the assumption of the note to W. S. Green was a part of the consideration for the conveyance to appellant. The cancellation of the deeds relieves her of any obligation on the note and there is no claim that she had paid the note. It was the husband’s obligation, and it is still his obligation. She was entitled to no lien against the property to secure the payment of this note.

It is insisted that appellee should have exhausted its legal remedies aganist co-obligors before bringing a suit in equity against a grantee to set aside a deed made by one of the joint debtors, or show facts to excuse the failure to do so. The establishment of badges of fraud were sufficient facts to excuse the failure to do so under the circumstances in this case. Appellee could proceed against any one of those jointly bound on the judgment, and for that rea'son there was no ground on which the special demurrer should have been sustained.

Perceiving no error on the record, the judgment is affirmed.