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Kincaid v. Brown's Estate

May 8, 1953



STANLEY, Commissioner. Out of suits involving the tangled financial operations of Paul Brown have emerged for our consideration questions of priority of rights of his wife, his co-appellee, Mrs. Lula Walker Brown, and liens of the appellants, Garvice D. Kincaid and Central Bank, to the balance of the proceeds from the sale of two pieces of property, one a certain warehouse and the other a residence in Lexington. The superior net equities adjudged to Mrs. Brown are about $9,600 in the warehouse proceeds and $2,200 in the residence. The effect of the judgment is to leave unsatisfied about $4,800 of a judgment awarded to the appellant Kincaid and nothing to apply on a judgment for a debt previously awarded the Central Bank. We consider separately the claims against the two pieces of property and the special contentions of the respective appellants.

Kincaid pleaded an implied vendor's lien on the warehouse property and an attachment lien as well. He rests his claim to the attachment lien upon the ground that a transfer of a one-half interest in the property to Mrs. Brown was void, being without consideration and made to defraud her husband's creditors, as well as being preferential in contemplation of insolvency. The chancellor adjudged Mrs. Brown to have been the owner of a one-half undivided interest in the warehouse property and that her interest is free from Kincaid's claimed liens. He awarded Kincaid a lien on the one-half interest owned by Brown and that is not questioned.

Brown purchased the warehouse property from the Tipkin Corporation, of which Kincaid was an officer and principal stockholder. Brown dealt only with Kincaid and regarded him as the vendor. He so pleaded and in effect testified. A deed was executed by the corporation, dated February 21, 1947. It was never recorded and was not produced on the trial. Brown testified and has insisted that he and his wife were named as joint grantees. His two brothers testify to having seen the deed in his office desk during the following summer and that Mrs. Brown was a grantee. But their testimony is not wholly consistent with the time Brown testified the deed was first delivered to him. On the other hand, Kincaid testifies very positively that Brown was the sole grantee. He is sustained by Robert C. Stiltz, Executive Vice President of the Bank of Commerce, who saw the deed in the latter part of 1948 or early in 1949 when Brown applied to that bank for assistance in refinancing the venture. A. B. Rouse, Jr., who examined the title, could not recall whether one or both were named as grantees. It was his practice to return deeds to parties from whom obtained, but he was not willing to say definitely he had returned this deed to Brown. He did return an envelope containing papers relating to the property to him and had not been able to find the deed in his office. There are many circumstances tending to corroborate the evidence that Brown alone was named as the grantee. Among these circumstances is Brown's failure to produce or account for a prior written contract of purchase and sale. Also, after being compelled by the court to give her deposition as on cross-examination early in the proceeding, Mrs. Brown testified she had had no part in the transaction and did not know whether or not she had paid any of the consideration. She showed an amazing ignorance of the transaction and refused and evaded answers to pertinent questions. However, later, when testifying directly, she seemed to have known what was going on and testified unequivocally that she had paid $3,000 in currency.

The consideration for the purchase was either $35,000 or $38,000 consisting, as Brown testified, of his check for $2,000 and currency of $3,000 which belonged to his wife (though Kincaid says only the $2,000 was then paid), the assumption of a mortgage of $18,000 held by the Combs Lumber Co., and twelve plain promissory notes aggregating $15,000 executed by Brown alone to Kincaid as payee. Thus, the notes were part of the purchase price. Kincaid explains the failure to retain a lien to secure the notes was that Brown contemplated refinancing the Combs mortgage debt and did not want so large a second lien to appear of record, and that he had promised to give Kincaid a second mortgage when the refinancing had been accomplished. Brown merely says that Kincaid did not want any mortgage. He testified the reason his wife did not sign the notes was simply that Kincaid did not ask her to do so although he was, according to Brown, made aware that she was a joint purchaser.

By the latter part of 1948 Brown had paid $3,000 of the notes. In obtaining a loan from the Bank of Commerce with which to pay the Combs mortgage debt, Brown turned over the first deed to the bank. Its attorney, in checking the title, discovered an error in the description of the property. The attorney suggested that another deed be executed by the Tipkin Corporation with the correct description and asked Kincaid, at the instance of Brown, if he would object to including Mrs. Brown as a cograntee. Kincaid agreed to it upon the promise that when the new loan had been completed they would immediately execute a second mortgage to secure the balance of $12,000 owing on the notes. The new deed was executed on February 17, 1949. It makes no reference to the first deed and states the usual nominal consideration. Not only Kincaid and his wife but Robert Tipton and his wife signed the new deed because Kincaid and Tipton had owned the property before the grantor, the Tipkin Corporation, their company. It appears that their conveyance to the corporation contained the same error in the description. The Combs Lumber Company also signed the deed as one of the parties of the third part.

Upon Brown's refusal to execute the second mortgage, Kincaid filed suit upon the notes, obtained an attachment, which was levied on the warehouse property, and recorded a lis pendens notice. Three days after the suit was filed, a mortgage of the property by Brown to Mrs. Brown to secure a debt he owed her of $25,000 was placed of record. This bore the same date as the second deed, February 17, 1949. Upon a trial of the issues raised by Brown's answer, counterclaim and set-off, a verdict was returned for Kincaid on his notes. Judgment was entered accordingly and the attachment sustained. The $25,000 mortgage to Mrs. Brown was also declared void during the course of the litigation. No appeals from these judgments were prosecuted.

Whether or not Mrs. Brown was a joint purchaser or named as cograntee in the original deed, Kincaid had an equitable vendor's lien on the entire property.

An equitable vendor's lien is based on the principle that one who gets the estate of another ought not in good conscience be allowed to keep it without paying the consideration. It is good as between the parties (no bona fide creditors being concerned here) although the deed to the property is silent in that regard. Jackson v. Engle, 230 Ky. 558, 20 S.W.2d 460; Ford v. Ford's Ex'r, 233 Ky. 673, 26 S.W.2d 551; Pace v. Berry, 176 Ky. 61, 195 S.W. 131. While ordinarily such lien is restricted to the grantor, it may arise in favor of a third person who, though not nominally the vendor, was virtually and to all practical purposes as much a vendor as if he had signed the deed. Thornton v. Knox's Ex'r, 45 Ky. 74, 6 B.Mon. 74, 76; Honore's Ex'r v. Bakewell, 45 Ky. 67, 6 B.Mon. 67, 43 Am.Dec. 147. Taking a note of the vendee as part of the consideration is no waiver of the purchase money lien. The rule goes further. It is competent for the vendor and vendee of land to agree that the grantee shall pay the purchase price or a part of it to a third person. The vendor's right inures to the benefit of such person, who may enforce the lien as if it had been retained for the specific benefit of the grantor and subsequently assigned to the third person. Campbell v. Salyer, 290 Ky. 493, 161 S.W.2d 596; 55 Am.Jur., Vendor and Purchaser, Sec. 482.

Even if we accept the contentions of the appellees that both of them were purchasers of the property, then the vendor's lien covered the complete estate. Ford v. Ford's Ex'r, supra, 233 Ky. 673, 26 S.W.2d 551. The fact that Mrs. Brown was not personally liable on the notes makes no difference. Gray v. Grimm, 157 Ky. 603, 163 S.W. 762.

The appellees argue that the appellant Kincaid may not avail himself of the lien because he was a volunteer in accepting the notes; also, that he comes into court with unclean hands. We find as a matter of fact there is no merit in these arguments. A recitation of the claim of unclean hands would be only to encumber the opinion with a statement of evidence wholly insufficient.

Our conclusion is that Kincaid had a vendor's lien on the property, which follows the proceeds, and that such lien is superior to the attachment lien of the Central Bank.

Appellant Kincaid attacks the transaction on the ground of absence of consideration and as a fraudulent conveyance or transfer to cheat and hinder Brown's creditors, particularly himself. We think Kincaid is estopped to attack the inclusion of Mrs. Brown as cograntee in the second deed. With full knowledge of the facts, he assented and joined as a party to the instrument. He agreed, as he testified, that it was in consideration of Brown's promise that he and his wife would thereafter execute a mortgage on the property to secure Brown's indebtedness. Bull v. Harris, 57 Ky. 195, 18 B.Mon. 195; 37 C.J.S., Fraudulent Conveyances, ยง 78; 24 Am.Jur., Fraudulent Conveyances, Sec. 1147.

We now consider the judgment denying attachment liens to the Central Bank upon the warehouse property and also upon the residence property. The bank had obtained a judgment for $24,833 with interest against Paul Brown as comaker with his corporate firm on a note dated November 10, 1948. Upon return of an execution nulla bona, the bank instituted suit against Paul Brown and his wife and had a general order of attachment levied upon several pieces of real estate, including both the warehouse and the residence property, and sought to subject them to the satisfaction of its judgment debt.

We are of opinion that the weight of the evidence that Mrs. Brown was not an original joint purchaser and was not named a cograntee is so great as to require a decision different ...

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