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Hurley, Appellant, v. Taylor

Supreme Court of Missouri1883-04
78 Mo. 238

Summary

Holding. The judgment creditor's appeal is denied and the trial court's decree is affirmed. The conveyances from the debtor to his brother and from the brother to the debtor's wife are set aside as fraudulent, but the mortgage to Cox is upheld because Cox provided adequate valuable consideration in good faith without actual knowledge of the prior fraudulent transfers and without reason to doubt the validity of the recorded conveyances.

A judgment creditor purchased property at an execution sale and sued to set aside conveyances the debtor had made before judgment. The debtor had transferred the lots to his brother without actual consideration, and the brother subsequently transferred them to the debtor's wife also without consideration, even though both deeds falsely stated valuable considerations. The debtor's wife and husband later mortgaged the property to a third party, Cox, who loaned $1,000 in good faith reliance on the recorded title and without knowledge of the earlier fraudulent transfers.

The trial court set aside the first two conveyances as fraudulent but upheld Cox's mortgage, finding he had acted in good faith and provided adequate consideration. The trial court gave the judgment creditor the right to redeem the property by paying Cox's loan with interest. The judgment creditor appealed, arguing Cox's mortgage should also be invalidated, but the appellate court rejected this argument.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether conveyances without consideration made before judgment are void as to creditors
  • Whether a mortgage secured by adequate consideration and made in good faith is protected from being set aside as fraudulent despite prior fraudulent transfers in the chain of title
  • Whether a subsequent mortgagee who relies on recorded title showing valuable considerations has a duty to inquire into the actual validity of prior transfers

Procedural posture

The judgment creditor appealed from a trial court decree that set aside the earlier conveyances but upheld the mortgage to Cox and gave the creditor a right of redemption.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Martin, C.

This was a suit in equity commenced on the 23rd day of April, 1879, by a judgment creditor, who had become a purchaser at execution sale of two lots in Holman’s addition to the city of Carthage, as belonging to his debtor. He sought to have certain conveyances set aside, as having been made without consideration and for the purpose of hindering, delaying and defrauding creditors.

It appears from the evidence that the plaintiff, on the 19th day of March, 1878, recovered a judgment against Meredith Taylor in the sum of $702.90 and costs; that in executing this judgment he levied upon the lots in controversy, and on the 26th day of March, 1879, he purchased the same at execution sale as the property of said Meredith Taylor. It is true that these lots belonged to Meredith Taylor prior to the 20th day of February, 1877, but at that date he conveyed the same to John H. Taylor, his brother, for an expressed consideration of $1,000, but in fact for no consideration whatever. On the 16th day of January, 1878, .said John H. Taylor conveyed said lots to Adelia Taylor, wife of said Meredith, for an expressed consideration of .$2,000, but in fact for no consideration at all. This placed the record title in Adelia Taylor. On the 23rd day of May, 1878, she, joining with her husband, conveyed the lots by mortgage deed,-to defendant, Jno. C. Cox, to secure a note of $1,200 described in it, which note was given to secure a loan of $1,000 borrowed from said Cox. It appears from the evidence that said Cox loaned his money upon the faith of Mrs. Taylor’s record title, as disclosed by the abstract of title furnished by the examiner. There is no evidence that he knew anything about the previous conveyances, except as they appeared of record, all reciting valuable considerations paid for them. About $502 of the loan went to pay off an incumbrance on the mortgaged lots, and the balance was expended in building a house in Joplin. There was some evidence showing that Meredith Taylor was in debt at the time of his conveyance to John H. Taylor.

On this evidence the court entered up a decree setting aside the conveyance of Meredith Taylor to John H. Taylor, and the conveyance of John H. Taylor to Adelia Taylor; hut found that defendant Cox had loaned his money and taken the mortgage in good faith; and gave the plaintiff the right to redeem the lots by paying Cox the money loaned by him within six months from the date of the decree, amounting to $1,000 with interest. The decree substantially vested the title of the lots in plaintiff subject to the mortgage of defendant Cox. Erom this decree the plaintiff alone has appealed.

He insists that the mortgage deed held by Cox should also have been set aside as fraudulent. But this position cannot be sustained under the evidence before us. So far as the deeds of Meredith Taylor and John H. Taylor are concerned the decree is supported by the evidence. These deeds being without consideration were void as to existing creditors. And as to subsequent creditors, they were void if made with the actual intent to hinder, delay and defraud them. But the mortgage deed to, Cox rests upon a more .solid foundation. Being made for an adequate valuable -consideration, it is expressly within the protection of the statute against fraudulent conveyances if made bona fide. N. S. 1879, § 2502. The plaintiff has alleged in his petition, that there was no such consideration for the mortgage as it recites. The evidence disproves this allegation. To render such an instrument void it would he necessary to show that it was made and contrived with the actual intent of hindering, delaying and defrauding creditors, as for instance to cover up and conceal the property of the debtor, or to raise funds which were to he kept from the reach of process or payment of debts, and that the grantee participated in this intent. It is needless to say that the record fails to disclose any want of good faith in Mr. Cox, when he parted with his money and accepted this mortgage to secure his debt. Neither was there anything to put him on his inquiry as to the true character of the previous conveyances; they all . recited valuable considerations, thus advising him of their validity. Odle v. Odle, 78 Mo. 289.

The decree is affirmed.

Philips, C., concurs; Wins-LOW, C., not sitting, having been of counsel.