Opinion
17475.
ARGUED MAY 14, 1951.
DECIDED JUNE 11, 1951.
Equitable petition. Before Judge Graham. Bleckley Superior Court. February 10, 1951.
J. D. Godfrey and Casey Thigpen, for plaintiff.
Roger H. Lawson and H. McWhorter, for defendants.
1. In equity cases, exceptions of fact to an auditor's report are submitted to a jury when approved by the court. Code, § 10-402. In the case under review, an equitable action praying for an accounting, a special lien against the property of the defendant Mrs. Nixon, and to set aside an alleged fraudulent transfer of such property to a third party, the findings of the auditor on the issues of fact being supported by the evidence, the trial judge did not err in refusing to approve the exceptions of fact, nor in overruling the motion of Mrs. Godfrey to submit the exceptions of fact to a jury. DeLaperriere v. Williams, 175 Ga. 339 ( 165 S.E. 214).
2. In such an action — where an amendment to the petition is offered, alleging in substance that, at the time of the filing of the action, the plaintiff had duly filed and recorded a lis pendens, and that, subsequently to the filing of the suit and lis pendens, the defendant, while insolvent, had transferred and conveyed the real estate against which the plaintiff was seeking a special lien to a third person, not upon a valuable consideration, with intention to delay and defraud the plaintiff as a creditor, and such intention was known to the grantee in the deed, and praying that the deed from the defendant Mrs. Nixon to such third person be set aside as being void — the auditor did not err in allowing such amendment and in making the grantee in the deed a party defendant, over objections that (a) it set up a new and distinct cause of action; (b) no cause was alleged for cancellation; (c) the auditor was without lawful authority in allowing the amendment; (d) the allegations in the amendment were insufficient to show that the grantee took with notice of the grantor's intention; and (e) the allegations were insufficient to show that the lis pendens was filed before the conveyance of the property by the grantor. Code, §§ 37-1005, 81-106, 81-107; Millbank v. Penniman, 73 Ga. 136; Everett v. Tabor, 127 Ga. 103 ( 56 S.E. 123, 119 Am. St. R. 324); Greenwood v. Starr, 174 Ga. 503 ( 163 S.E. 500); Chestnut v. Weekes, 180 Ga. 701 ( 180 S.E. 716).
3. The auditor's finding of fact that the deed from the defendant Nixon to the defendant Godfrey was fraudulent and should be set aside is supported by the evidence, and the court did not err in approving such finding and in entering a decree setting aside such conveyance.
No. 17475. ARGUED MAY 14, 1951 — DECIDED JUNE 11, 1951.
This case is here on a writ of error which assigns error on the overruling of exceptions of law and fact to an auditor's report, and on the entering of a final decree.
The City of Cochran, a municipal corporation, filed its equitable petition against Mrs. Lois B. Nixon, wherein it prayed for an equitable accounting, and that it have an equitable lien on certain real estate described in the petition. It was alleged: that the defendant, while employed as Clerk of the City of Cochran, misappropriated large sums of money to her own use, and that she had failed to account to the plaintiff in the collection of moneys due the plaintiff, in the sum of $8000 or more, and that from the funds alleged to have been converted she had made valuable improvements on real estate described in the petition; and that the plaintiff was entitled to a lien on the premises for sums alleged to have been expended from the funds converted by the defendant on said real estate. Said action was filed on February 7, 1949. On the same day the plaintiff filed its notice that said action operate as lis pendens under the provisions of law (Ga. L. 1939, p. 345), and such notice was entered on the lis pendens docket on February 8, 1949.
Said case was referred to an auditor by the court, with power to hear demurrers, allow amendments, and pass upon all questions of law and fact, and report his findings to the court. While the case was pending before the auditor, the plaintiff filed an amendment, in which it alleged that, subsequently to the filing of the original petition, the defendant, Mrs. Nixon, did on November 28, 1949, execute and deliver to one Mrs. Merle K. Godfrey a deed conveying the real estate which is described in the petition and against which the plaintiff prayed for a special lien. It was alleged in the amendment that, though the deed purported to be upon a consideration of $4000 paid by Mrs. Godfrey; there was in fact no such consideration paid by Mrs. Godfrey; and that, at the time said conveyance was made, Mrs. Nixon was insolvent, and said deed was made for the purpose and with the intention of Mrs. Nixon to hinder, delay, and defraud the plaintiff in the collection of any judgment that it might finally obtain in the case; and that such purpose and intent were known to the grantee at the time of the purported sale and conveyance; but that, if she did not have actual knowledge, she had every reasonable ground to suspect the purpose and intention of Mrs. Nixon to convey the property for the purpose of hindering and delaying the plaintiff in the collection of its claim against her. It was alleged that said deed was fraudulent, null and void, and should be set aside. It was prayed that Mrs. Godfrey be made a party defendant, and that the plaintiff have a decree setting aside said deed as being fraudulent. The trial judge entered an order requiring Mrs. Nixon and Mrs. Godfrey to show cause before the auditor why Mrs. Godfrey should not be made a party, and why the amendment should not be allowed. Mrs. Godfrey filed her objections and demurrers to the allowance of the amendment, and to the prayer that she be made a party defendant. The demurrers were upon the grounds: that the amendment set up a new and distinct cause of action; that no cause of action for cancellation was set out in the amendment; that the auditor was without authority to allow the amendment or to make Mrs. Godfrey a party defendant; that there was no allegation that the lis pendens notice with reference to the real estate was filed with the suit at any time prior to the purchase of the property by Mrs. Godfrey from Mrs. Nixon; and that the allegations were too vague and indefinite to show that Mrs. Godfrey had reason to suspect that Mrs. Nixon was making the conveyance to hinder, delay, and defraud the plaintiff. These demurrers and objections were overruled, and Mrs. Godfrey was made a party defendant to the case.
Thereafter the auditor reported his findings of fact, to the effect that the plaintiff was entitled to a judgment against Mrs. Nixon in the principal sum of $6990.73 and $1110.34 interest, and further that the plaintiff was not entitled to a special lien on the land described in the suit. He found as a matter of fact that the deed from Mrs. Nixon to Mrs. Godfrey was a fraudulent conveyance, and recommended that it be set aside and canceled. It does not appear from the record that Mrs. Nixon filed any exceptions to the auditor's report. Mrs. Godfrey filed her exceptions, wherein she excepted as a matter of law to the order of the auditor overruling her objections and demurrers to the amendment and making her a party defendant to the case, and filed exceptions of fact to the auditor's finding that the deed from Mrs. Nixon to Mrs. Godfrey be set aside as being fraudulent; it being asserted in the exceptions of fact that there was no evidence that the conveyance was fraudulent or made to hinder, delay, and defraud creditors of Mrs. Nixon, and that the evidence was wholly insufficient either to show that the conveyance was made without consideration, or that Mrs. Godfrey had any notice or reason for suspicion that it was made with the intention on the part of Mrs. Nixon to hinder or defraud the plaintiff. Mrs. Godfrey also moved the court that the exceptions of fact be submitted to a jury.
The trial judge entered an order, in which he overruled the exceptions of law, refused to approve the exceptions of fact or submit the same to a jury, and entered a final decree approving the findings of the auditor and a final decree in favor of the City of Cochran setting aside the deed from Mrs. Nixon to Mrs. Godfrey.
Since the issues of fact involved only the question of whether there was sufficient evidence to support the auditor's finding of fact that the deed from Mrs. Nixon to Mrs. Godfrey was fraudulent and should be set aside, and we are of the opinion that the evidence has been fully and fairly summarized by the trial judge in his order, the following contains his summary in this regard:
"The burden was also on the plaintiff to prove the deed was made to hinder or delay it in the collection of its debt. `Fraud may not be presumed, but being itself subtle, slight circumstances may be sufficient to carry conviction of its existence.' Circumstances though slight, the nature of the transaction and the credibility of the parties involved are to be considered. Intention may be manifested by the circumstances connected with the transaction. Intent can rarely be ascertained except from the circumstances. `Take a straw and throw it up in the air, and you may see by that which way the wind is.' As straws in the air point the way of the wind, so do the circumstances of the case point to the intention of the parties. What are the circumstances of the transaction?
"As related by the defendants, here are some of the circumstances: Mrs. Nixon possessed a house in Cochran which was built 20 years ago at a cost of $2300 on lots that cost $400, making the initial cost of the property not exceeding $3000. This was all the property she had. Termites were bad in the place. It needed a lot of repairs which Mrs. Nixon was not able to have done.
"Mrs. Nixon was charged with being indebted to the City of Cochran in a large sum for misappropriating its funds in her hands as its clerk. She was without money, needed medical attention and was indebted to her attorneys in the sum of $1500 secured by a deed to the property.
"Mrs. Godfrey resided with her husband in Bleckley County. For two or three weeks she had been talking about buying a house in Cochran. She did not like living in the country. But had not discussed with her husband or Mrs. Nixon the buying of the Nixon house. Without any previous discussion as to its purchase, Mrs. Godfrey and her husband on Friday after Thanksgiving in 1949 decided to go to Mrs. Nixon's home in Coweta County where she resided with her husband to see if Mrs. Nixon would sell her home in Cochran. They arrived at Mrs. Nixon's home in Coweta the same day about the middle of the afternoon and found Mrs. Nixon at home. Mrs. Nixon's husband was not in the house — maybe in the field. Mrs. Godfrey offered her $4000 for her place in Cochran. Mrs. Nixon after 30 or 40 minutes thinking it over said she would accept it. No bargaining was had. Mrs. Nixon did not consult her husband who was accessible. She just agreed to sell for the $4000 and Mrs. Godfrey without any examination of the title or inspection of the premises paid her $4000 for the place in money in $100, $50 and $20 bills which she had saved during the years and kept in her trunk in her home. Mrs. Godfrey said she kept this money in her trunk and partly on her person. But she did not know how much she had. She had somewhere between $4000 and $5000 and that was all she had. She could not pay over $4000 for the place. There were no witnesses to the transaction except the defendants and Mrs. Godfrey's husband. Mrs. Nixon's husband came in just after the transaction was closed and commented `We (referring to the Godfreys) were getting it plenty cheap.'
"No receipt for the money or written evidence of the transaction was had. The deed was to be made and delivered later. It was delivered the following Tuesday by mail.
"Neither of the husbands were sworn as witnesses to the transaction. From other parts of the record it appears Mrs. Godfrey's husband was Councilman of the City of Cochran for the years 1947 and 1948. During said time Mrs. Nixon was its clerk, and at the time of making the deed he was on her bond in the case wherein she was charged with misappropriating funds of the city in her hands as clerk and was a witness in the main case therein.
"Mrs. Godfrey denied knowing the suit was pending against Mrs. Nixon in favor of the plaintiff for the money alleged to be due and alleged to have been misappropriated by Mrs. Nixon but she admitted that she knew at the time of the deed transaction that Mrs. Nixon was charged with having misappropriated while its clerk large sums of money entrusted to her by the city that she was being prosecuted for such and that her husband, Mrs. Godfrey, was on Mrs. Nixon's bond in the case. She said she did not know Mrs. Nixon was financially embarrassed until Mrs. Nixon told her when she went to purchase the home that she needed the money for medical treatment for her health.
"Mrs. Godfrey said her husband kept his money in the bank and that she kept hers in a trunk. That she had had 15 years experience as a business woman and that her husband had 20 years experience in the business world.
"Mrs. Godfrey further testified in substance: We did not have the title examined before the purchase to see if it was clear. I knew it was clear before then. Mrs. Nixon told me it was clear; that there was nothing against her property; that there were no mortgages or anything like that against it. Being pressed further on examination she admitted Mrs. Nixon told her there was the $1500 security deed against the property.
"No agreement was had as to how or by whom this $1500 debt would be paid. It does not appear Mr. Godfrey made any suggestion as to that but just let his wife pay $4000 all she was willing to pay for the property without reserving any of the purchase money to discharge the security debt and knowing Mrs. Nixon was financially embarrassed.
"Mrs. Godfrey did not insure the property. Nothing was said about insurance until the next March when Mrs. Nixon went to Sandersville where Mrs. Godfrey had moved instead of to Cochran to see her. It then appeared Mrs. Nixon had $4000 on the property at the time of making the deed which she had retained and she and Mrs. Godfrey then went to Harrison to see about reinsuring the property.
"Mrs. Godfrey did not return the property for the State and county or city taxes for 1950.
"In passing on this case the auditor may have noted there was a conflict in the testimony of Mrs. Godfrey as to some of the circumstances of the deed transaction. For instance, it appears from the report of the evidence Mrs. Godfrey first testified: `Q. And that was the first discussion (referring to the proposal on the day of the transaction to Mrs. Nixon to purchase the property) that there had been about this house? A. Yes, this was the first discussion. Months and months before that I heard her say she was going to sell this property. Q. When did you decide to go over there? A. Well, I had talked about buying a house around here for two or three weeks and I just happened — my husband said "reckon Miss Lois would sell her house?" and I said "Well, she might, let's go see her," and so we went.'
"Then, after a lengthy examination as to the transaction, counsel for the plaintiff asked Mrs. Godfrey this question: `Q. I want you to tell us again, if you will, just how it came about that on the day after Thanksgiving you felt inclined to take four thousand dollars in money in cash and ride over strange country roads miles away in Coweta County from Cochran and approach Mrs. Nixon on that day for the first time about buying her house here in Cochran. Tell us again just why you decided to do that at that time and in that way. A. Well, I had been looking around for a house in Cochran to buy ever since I decided I wasn't going to live on a farm, and it just [happened] to cross my mind that Mrs. Nixon might sell her house, so I made the remark to my husband "Do you reckon Mrs. Nixon will sell her house?" And he said "I don't know. We'll ride up there and see." And I said "All right." So he said "We could see" and I said "Well, let's go up there" and he said "all right." I knew how much money I could pay for it because that and just a few hundred dollars more was all I had, and I was determined to put it in a house, because that was what I had saved it for all those years, and I just took it in my pocketbook and went up there and bought it from her. I went up with the intention that if she would sell it for $4000 I would buy it; otherwise I wouldn't.'
"Mrs. Nixon testified (again quoting from the evidence) `Q. When did you first discuss the sale of this property with Mrs. Godfrey? A. She came to my house on Friday after Thanksgiving day, which was on Thursday and told me that she had heard that I might sell the place, and would I consider selling it to her and we talked about the place and it needed a lot of repairs that I wasn't able to make because termites were bad in it in the porch and I — well there were just a lot of repairs that needed to be done, and I had this trouble with my eyes and needed the money and so she offered me — told me what she would give for it — $4000 — I accepted it.'
"According to Mrs. Godfrey's first version of the matter, she had months before heard Mrs. Nixon say she was going to sell the property, and it just happened on the day of the transaction her husband said `Reckon Miss Lois would sell her house?' And she said well she might. She did not say to her husband I heard Mrs. Nixon say she was going to sell it — Just said she might.
"In her last version of the transaction Mrs. Godfrey said it just happened to cross her mind Mrs. Nixon might want to sell her house and that she remarked to her husband (not him to her as she first told but now her to him) `Do you reckon Mrs. Nixon will sell her house? She is in doubt as to whether Mrs. Nixon would sell, does not say to her husband, `I heard Lois say she was going to sell it.'
"And finally when she gets to Mrs. Nixon with the proposition, she says according to the testimony of Mrs. Nixon `I heard you might sell the place.' She does not say to Mrs. Nixon `A few months ago I heard you say you were going to sell the property' but just said `I heard you might sell the property.'
"Human conduct is judged in the light of human experience. The auditor was authorized to find bona fide transactions just do not occur in the way told here. His finding that the deed in question is invalid as to the debt of the plaintiff is supported by the evidence. Hence I disapprove the exceptions of the defendant, Mrs. Godfrey, and approve the findings of the auditor in her case on both the law and the facts."
1, 2. Headnotes 1 and 2 do not require elaboration.
3. It is strenuously insisted by counsel for the plaintiff in error that the evidence demanded a finding that the conveyance from Mrs. Nixon to Mrs. Godfrey was a bona fide transaction, and that Mrs. Godfrey took the conveyance without notice or ground for reasonable suspicion that Mrs. Nixon made the transfer with the intention to delay or defraud the plaintiff as a creditor.
The auditor found that Mrs. Nixon was indebted to the plaintiff in a sum exceeding $6000, to which finding no exception was filed. The evidence thus shows that, at the time the deed in question was executed, the plaintiff was a creditor of Mrs. Nixon. There is no dispute that, but for the real estate conveyed to Mrs. Godfrey, Mrs. Nixon was insolvent at the time of the conveyance. The sole questions, then, are: was the evidence sufficient (a) to show that Mrs. Nixon made the conveyance with intention to delay and defraud creditors; (b) if with such intent, did Mrs. Godfrey know of the same at the time the conveyance was made; and (c) if the transaction was bona fide upon a valuable consideration, did Mrs. Godfrey have notice or ground for reasonable suspicion of such fraudulent intent.
In cases of this kind, circumstantial evidence is of the highest importance in determining the real intent, or the good or bad faith of the grantor. Eberhardt v. Bennett, 163 Ga. 796 ( 137 S.E. 64). The fact that a suit was pending at the time the deed was executed, in which suit the plaintiff was seeking to follow a misappropriation of trust funds into the house and lot of Mrs. Nixon, and to have a special lien decreed against this property, was a circumstance to show whether the sale was fraudulent as to creditors. McLendon v. Reynolds Grocery Co., 160 Ga. 763 ( 129 S.E. 65). Such a conveyance during the pendency of the suit would be a badge of fraud and a fact which a jury would be at liberty to consider in determining whether Mrs. Godfrey took the property with or without notice. Colquitt v. Thomas, 8 Ga. 258 (7). The unexplained retention of possession by Mrs. Nixon after her conveyance by absolute deed would raise a presumption of fraud ( Perkins, Hopkins White v. Patten, 10 Ga. 241 (2)), and would be a question for a jury to pass upon. Stephens v. Southern Cotton Oil Co., 147 Ga. 410 (3) ( 94 S.E. 245). Notice to the grantee in such a conveyance of the grantor's intent may be shown by circumstantial evidence. Betton v. Avery, 183 Ga. 559 ( 188 S.E. 901).
We have fully set out the evidence in regard to these issues in the statement of the case, and this evidence need not be repeated here. The able trial judge in his order approving the auditor's findings shows that he carefully reviewed the evidence and concluded that it supported the findings of the auditor on these issues of fact. We also have fully reviewed the evidence, and conclude that the trial judge did not err in overruling the exceptions of Mrs. Godfrey and in entering a final decree in favor of the City of Cochran.
Judgment affirmed. All the Justices concur.