Production Credit Ass'n of Mandan v. Olson

280 N.W.2d 920, 1979 N.D. LEXIS 263
CourtNorth Dakota Supreme Court
DecidedJune 18, 1979
DocketCiv. 9577
StatusPublished
Cited by7 cases

This text of 280 N.W.2d 920 (Production Credit Ass'n of Mandan v. Olson) is published on Counsel Stack Legal Research, covering North Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Production Credit Ass'n of Mandan v. Olson, 280 N.W.2d 920, 1979 N.D. LEXIS 263 (N.D. 1979).

Opinion

ERICKSTAD, Chief Justice.

Judith Garlington appeals from a district court judgment dated September 11, 1978, that held the transfer of certain real estate from the defendants, Alvin and Helen Olson, to defendant, Judith Garlington, was a fraudulent transfer of real property pursuant to Sections 13-01-05 and 13-02-04, N.D.C.C. The judgment also provided that title to the property remain in Alvin and Helen Olson, subject to a previous judgment of the plaintiff, Production Credit Association of Mandan (PCA). We affirm.

In 1964, John and Pearl Olson conveyed 560 acres of real estate located in Adams County, North Dakota, which is the subject matter of this lawsuit, to their son, Alvin Olson. They also conveyed 320 acres each to their daughters, Judith Garlington and Joyce Olson. John and Pearl reserved a life estate in each of the conveyances. In 1965, Joyce died. In 1973, John died, and on March 16, 1974, Pearl released her life estate in the property conveyed to Alvin and Judith.

Following the conveyance of the property, Alvin was in farming and cattle feeding business with his wife, Helen, and also owned other real estate. In 1968, Alvin and Helen began to finance their business through PCA. They continued to borrow money from PCA, signing their last promissory note in November, 1974, for an amount in excess of $500,000. These PCA obligations were secured by security agreements covering cattle, machinery, and real estate. PCA did not have a security interest in the real estate involved in this action.

Late in 1974, PCA advised Alvin that it could no longer finance his operation due to his increased debt. Alvin subsequently began to liquidate his operation. By June, 1975, the Olsons had liquidated all of their cattle and machinery and some of their real estate, but were still indebted to PCA in the amount of $237,579.33.

On July 8, 1975, PCA brought suit in Adams County District Court seeking to foreclose on real estate mortgages given by Alvin and Helen on real estate located in Adams County, but not including the 560 acres involved in this action. On February 10, 1976, judgment was entered in favor of PCA for $172,989.94. On May 6, 1976, the real property subject to the judgment was sold and PCA subsequently commenced a deficiency judgment action against Alvin and Helen for the balance. On April 5, 1977, the district court awarded PCA a deficiency judgment of $98,250.92.

Prior to these lawsuits by PCA, Alvin and Helen transferred the 560 acres in question to Alvin’s sister, Judith Garlington. Although the date of this conveyance is disputed, the district court found that the deed, dated December 4, 1974, was signed on April 25, 1975, and recorded on April 29, 1975. On April 26, 1975, Judith transferred the real property back to Helen Olson by quit claim deed. In February, 1977, Alvin obtained the original of the quit claim deed and destroyed it.

PCA instituted this action against Gar-lington and Alvin and Helen Olson by amended summons and complaint dated De *922 cember 9, 1977, alleging that the transfer of the property to Garlington was fraudulent and should be set aside.

The district court made the following conclusions of law, all of which are in essence challenged on this appeal:

“CONCLUSIONS OF LAW
“The transfer of the property described above from the Defendants, Alvin Otos Olson and Helen E. Olson, to the Defendant, Judith P. Garlington, was made with intent to delay and defraud the Plaintiff, Production Credit Association, from collection of a valid debt against the Defendants, Alvin Otos Olson and Helen E. Olson, was part of a scheme and plan by the Defendants, Alvin Otos Olson and Helen E. Olson, to deliberately deprive the Plaintiff of a means of realizing their total indebtedness, and was made without valid, legal or fair consideration and thereby rendered the Defendants, Alvin Otos Olson and Helen E. Olson, insolvent and as to the Plaintiff, Production Credit Association, is a fraudulent transfer within the meaning of Sections 13-01-05 and 13-02-04 of the North Dakota Century Code, is void and is hereby set aside.
“II
“Title to said property remains in the Defendants, Alvin Otos Olson and Helen E. Olson, as their interest appeared prior to the Deed dated December 4, 1974, subject to the Judgment of the Plaintiff, Production Credit Association against said property in the amount of $98,250.92 as of April 5, 1977.
“HI
“As the purported transfer from Alvin Otos Olson and Helen E. Olson to the Defendant, Judith P. Garlington, is void and has hereby been set aside, the purported transfer of said property from the Defendant, Judith P. Garlington, and her husband, to the Defendant, Helen E. Olson, was ineffectual.”

The appellant states the following issues for review in this court:

“(1) Whether a fraudulent transfer was sufficiently pleaded so as to state a claim upon which relief can be granted, despite the failure to allege either insolvency or intent to defraud.
“(2) Whether the elements of insolvency or intent to defraud were sufficiently proven to establish a fraudulent transfer, as a matter of law.
“(3) Whether Helen’s testimony should have been barred under the husband-wife privilege statute in effect at the time of the communication testified to.”

Garlington first argues that PCA failed “to plead the essential elements of the statutory remedies which it is seeking.” Sections 13-01-05 and 13-02-04, N.D.C.C., are the relevant statutes and provide as follows:

“13-01-05. Transfers with intent to defraud or delay creditors are void. — Every transfer of property or charge made thereon, every obligation incurred, and every judicial proceeding taken, with intent to delay or defraud any creditor or other person of his demands, whether or not the same is valid as between the parties thereto, is void as against all creditors of the debtor and their successors in interest and against any persons upon whom the estate of the debtor devolves in trust for the benefit of others than the debtor.”
“13-02-04. Conveyances by insolvent. —Every conveyance made and every obligation incurred by a person who is or thereby will be rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.”

See also Section 13-02-07, N.D.C.C.; H. A. Thompson & Sons, Inc. v. Hahn, 135 N.W.2d 166 (N.D.1965).

Garlington argues that PCA did not properly allege in its complaint in this action that Alvin made the transfer in question with “intent to delay or defraud any creditor”, which is an element of Section 13-01- *923 05, N.D.C.C., and it did not allege that the transferor “is or thereby will be rendered insolvent,” which is required by Section 13-02-04, N.D.C.C.

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Bluebook (online)
280 N.W.2d 920, 1979 N.D. LEXIS 263, Counsel Stack Legal Research, https://law.counselstack.com/opinion/production-credit-assn-of-mandan-v-olson-nd-1979.