Court of Appeals of Kentucky.
MYERS DRY GOODS CO. et al. v. WEBB et al.
June 2, 1944.
ACTION: Judgment affirmed.

Appeal from Circuit Court, Clay County; Sam H. Brown, Special Judge.
Suits by Myers Dry Goods Company and others against Walter Webb and others to have a conveyance set aside as fraudulent and subject the property to payment of plaintiffs' claims, which suits were ordered consolidated.
From a judgment dismissing the petitions except as to named defendant against whom plaintiffs were given a default money judgment, 7 of the 11 plaintiffs appeal.

PERRY, Commissioner.
On October 24, 1938, the appellees, Walter Webb and Dora Webb, his wife, bought a certain farm situated near Hensley, Clay county, Ky., to which a joint deed was executed them in the names of Dora Webb and Dora Webb as committee for Walter Webb, which was thereupon duly put to record.

Thereafter, on March 16, 1940, Webb and his wife, Dora, executed a deed, jointly conveying Webb's half interest in the property to their three infant children, Harold, Zola and Urshley Jane Webb (all infants under ten years of age) and 'any other child born to the parties of the first part' for the consideration recited in the deed of the love and affection grantors had for their children and 'in order to provide a home for them and to insure their maintenance and education by means of income derived from the land hereby conveyed them', the grantors reserving in the deed the right to control said land during the minority of the youngest grantee and further providing that grantees should not have the right to sell, rent or lease the land conveyed during the life of the grantors without their consent in writing. On the day this deed was executed, conveying Webb's half interest in the property to their three infant children, it was duly put to record.

Some two or three months following the execution and recording of this instrument of conveyance, a number of merchant creditors of the appellee, Walter Webb, a country merchant, instituted in the Clay circuit court their several suits in equity, under the provisions of sections 1906 and 1907, against their debtor, Water Webb, his wife, Dora, and their grantees, the above-named three infant children, for the purpose of recovering judgments upon their respective claims; to enforce the satisfaction thereof, by setting aside the conveyance of March 16, 1940, made by Webb and his wife, on the ground that it was fraudulent and have the property subjected to the payment of their claims.

These suits, being all similar in their pleadings and facts, were ordered consolidated and to be tried as one in the name and style of the plaintiff, Myers Dry Goods Co. v. Walter Webb et al.

A joint answer was filed, denying the allegations of the petitions, thus making up the issues.

Upon trial of these consolidated actions, the chancellor refused to set aside the assailed conveyance and adjudged that the petitions be dismissed except as to Walter Webb, the defendant, against whom plaintiffs were given a default money judgment upon their claims, he alone of the defendants having failed to interpose any defense to the petitions.

Seven of the eleven plaintiffs in these consolidated suits, complaining of the judgment dismissing their petitions as erroneous, have prosecuted appeals, seeking a review and reversal of that judgment.

The question presented upon this appeal is whether the assailed transfer made by Webb and his wife on March 16, 1940 of Webb's interest in their jointly owned property, without consideration other than love and affection, to their three infant children is fraudulent and void, as to these appellants, who seek on that ground to have the conveyance set aside and Webb's interest in the property conveyed subjected to the payment of his debts owing them, even though they became his creditors subsequent to the making of the attacked conveyance, with the exception of two small items in one of the accounts, too trivial in amount to be here worth mentioning.

The facts alleged in the petitions and as shown by the evidence are: That some three or four years follows the marriage of the appellees, Water and Dora Webb (in 1934 or 1935), they having at that time accumulated some money, Webb went into the mercantile business at Hensley, Clay county, Kentucky, in the operation of which he was assisted and helped by his wife.

It is further alleged and shown that this mercantile business proved so profitable that they were soon able to and did purchase on October 24, 1938, a certain Clay county farm at a cost of some $4,000, to which a joint deed was taken in the names of the appellees, Dora Webb and Dora Webb as committee for Walter Webb, which deed was thereupon duly recorded. Further it appears that upon their buying this farm a $1,000 cash payment was made upon its purchase price and also that they, as a further payment thereon, assumed the payment of a vendor's lien on the farm owing by their grantors in the amount of some $2,000 and the remainder of the purchase price was paid by a bank loan secured by a further mortgage on the farm. It appears further that the amount of the stated lien debts owing on this farm were never reduced below the sum of some $2,000 and that such amount was owing thereon at the time of Webb's and his wife assailed conveyance of March 16, 1940, subject thereto, of his interest in the property in question to their three infant children, the co- appellees, Harold, Zola and Urshley Jane Webb.

There is an entire absence of proof, nor do the appellants claim, that at the time this challenged conveyance was made by the appellee, Webb, that he was indebted to them or any one; nor is there any proof that the assailed conveyance was executed with the purpose or fraudulent intent of thereafter incurring debts with the plaintiffs or any one else which he did not intend to pay and which charge too would appear rebutted by the fact that he saw fit to immediately put to public record this conveyance of his interest in the property, which quite sufficiently freed it from the vice of being of secret character and answered the charge that he then contemplated purchasing merchandise from those from whom he might later fraudulently obtain credit on the faith of their belief in his continuing ownership of an half interest in the farm and its appurtenances.

So far as the record discloses, Webb had no existing creditors, nor owed anything to any one, at the time of making his challenged conveyance of his interest in the farm to his children and, therefore, having no creditors, no one was in a position to complain of injury or of being defrauded by reason of his making the conveyance under such attending circumstances.

The appellants (plaintiffs below), who seek in their consolidated suits to set aside Webb's conveyance of his interest in the property to his children, where same was, simultaneously with the execution of the deed conveying it, duly put to record, cannot be heard to complain that the same was a subterfuge and fraudulent cover scheme, having for its fraudulent object his later effecting credit transactions with them on the faith of his ownership of the property, where they were charged with legal or constructive notice, by reason of the recordation of the deed at the time executed, that Webb was no longer the owner of any interest in the property. If, however, they extended appellee credit on his representations made that he still owned an half interest in or was the sole owner of the farm in question, notwithstanding his conveyance of all interest therein, which was in nowise secret where simultaneously with its execution it became a matter of public record, it was negligent of them to do so, the rule being that even a voluntary conveyance is good as against subsequent creditors, unless executed as a cover for future fraudulent schemes or was executed with the fraudulent intent to hinder and delay those thereafter extending him credit in the collection of his subsequently made debts with them.

It is to be remembered that, as stated supra, these actions, challenging the integrity of the conveyance they seek to set aside and subject the property thereby conveyed to the payment of their subsequent claims, were instituted by the appellants.

'It has long been the settled rule in this state that a conveyance is not void as to subsequent creditors unless made with a fraudulent intent; that the burden of proving fraud is on those who attack the conveyance; and the mere fact that it was voluntary is not a sufficient ground for setting the deed aside.'

Here it may be said, as there, that there is no evidence that the appellee Webb was indebted to any one when the assailed deed was made nor were there any suspicious circumstances or badges of fraud shown attending the conveyance, from which the inference could be drawn, that he made it with the fraudulent intent of defeating any then contemplated future indebtedness or the particular obligations involved which he did not incur until months later.

A reading of the record discloses that none of these named badges of fraud attended upon the appellee Walter Webb's conveyance of his interest in the property in question to his infant children without valuable consideration.

Appellants charge in their petitions that some months after Webb's conveyance of his property interest to his children without consideration, they, at his special instance and request, sold and delivered goods, wares and merchandise to him of the aggregate value of more than $3,000, for which he agreed to pay the respective amounts owing them therefor 'net sixty days', but that he had failed to pay same though various demands had been made upon him. Wherefore they prayed judgment against the defendants, Walter and Dora Webb and their three infant children (their pleadings and the facts shown being very similar to those presented in the Dugan case, supra) for the sum of their respective accounts, with interest, and 'tat the fraudulent deed made or attempted to be made by the appellees on March 16, 1940' be so held and adjudged to be cancelled, and that the land 'therein attempted to be conveyed' be adjudged in lien to plaintiffs for full satisfaction of the judgments sought in said actions and that all necessary orders be made in appointing a guardian ad litem for the three infants and a corresponding attorney for the nonresident infant, Harold Webb.

The learned chancellor, after considering the pleadings and proof, refused to set aside appellee's assailed conveyance of his property to his infant children as made with the fraudulent intent to cheat, hinder or delay Webb's creditors and dismissed the petitions with costs, including in his judgment an allowance, based on proof heard, of $250 for the guardian and litem attorney and the sum of $55 to the same attorney as warning order attorney for the nonresident infant appellee, Harold Webb, and that such costs be ratably charged against the plaintiffs.

The plaintiffs' (here appellants) motion made for a reduction of the $250 fee allowed the guardian ad litem attorney having been overruled, they here ask that the same be reviewed and reduced as excessive.

Our review of the record indicates that the learned chancellor's ordered fee allowance was not improper nor excessive, in view of the volume of work the record shows he was required to perform. Therefore, the motion is overruled and the allowance approved.

Applying the tests and principles announced supra to the determination of the questions before us, we are of the opinion that they were correctly applied by the learned chancellor, from which it follows that his judgment, in dismissing the appellants' petitions, should be and it is affirmed.

181 S.W.2d 56, 297 Ky. 696

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