Allen v. Kane

• Decision Date: 27 April 1914
• Docket Number: 11,483.
• Citation: 140 P. 534,79 Wash. 248
• Parties: ALLEN v. KANEet al.
• Court: Washington Supreme Court

140 P. 534

79 Wash. 248

ALLEN v. KANEet al.

No. 11,483.

Supreme Court of Washington

April 27, 1914

Department 1. Appeal from Superior Court, King County; R. B. Albertson Judge.

Action by Laura Allen against Ida M. Kane and others. From a judgment for defendants, plaintiff appeals. Reversed and remanded, with directions.

Jay C Allen, of Seattle, for appellant.

Grover E. Desmond and John E. Ryan, both of Seattle, for respondents.

ELLIS J.

In this action the plaintiff sought to set aside, as in fraud of her rights, a transfer of property from the defendants Kane to the defendant Atwood, and to subject the property to the lien of a judgment against the defendants Kane in favor of the plaintiff. The property conveyed by the Kanes to Atwood is described as lot 6, block 44, Pontius' Second addition to Seattle, lot 4, block 2, McNaught's addition to Seattle and lot 16, block 406, Seattle tidelands. This, it is claimed, was the separate property of Mrs. Kane. On November 5, 1910, the defendants Kane entered into a contract with the plaintiff to sell to her the tideland property. The plaintiff gave her check for $1,000 as earnest money. Shortly after making this contract, the defendants Kane, becoming dissatisfied, sought to be released from the contract. This was refused. The plaintiff's husband, as her attorney, examined the abstract of title to the tidelands, and, finding certain liens against them which the plaintiff had not agreed to assume, wrote the defendants Kane a letter, demanding that these liens be removed. This letter was received by the defendant Mrs. Kane on November 22, 1910. She immediately wrote a letter to the plaintiff, refusing to carry out the coutract, canceled her duplicate of the contract, and placed this letter, the canceled duplicate, and the plaintiff's check, given in earnest, upon the desk of the plaintiff's attorney; he being absent. This was about 3 o'clock in the afternoon. Late that same afternoon the defendants Kane conveyed the tideland property, together with the other property above described, which, as the evidence fairly shows, was all of the property owned by the defendants Kane, to the defendant Atwood. The evidence shows that the consideration for this conveyance was the cancellation of a note held by the defendant Atwood against the defendants Kane upon which there was due about $2,490, the payment of $200 in money, and an agreement on Atwood's part to convey to the defendants Kane six lots in Pettit's University addition to Seattle, and 40 acres of land in Skagit county. The property conveyed by the Kanes to Atwood was valued at the time at about $76,000. It was subject to incumbrances amounting to $56,000. Atwood took the property subject to these. The property which he was to convey to the Kanes was then valued by the parties at $17,500. At the same time, Atwood entered into a contract with the defendants Kane, giving them the exclusive right for one year to sell all of the property which they conveyed to him at a minimum price of $76,000; they to receive any amount realized over that sum as their commission for such sale. Meanwhile the Kanes were to retain the possession and management of the property conveyed to Atwood. The deed from the Kanes to Atwood was recorded early on the morning of November 23d, but neither the contract creating the Kanes exclusive agents to sell the property, nor the agreement of Atwood to convey the six Seattle lost and the Skagit county acreage to the defendants Kane, was ever recorded. The plaintiff placed the contract which she held for the purchase of the tidelands on record also early on the morning of November 23d. On November 25th she brought suit against the Kanes and Atwood for specific performance of this contract. Subsequently she dismissed the action as to the defendant Atwood, recast her complaint to one sounding in damages, and prosecuted the suit against the defendants Kane, recovering a judgment for damages in the sum of $2,130.28 and costs. Thereafter execution was issued upon this judgment, and levied upon all of the property which the Kanes had conveyed to Atwood. In November, 1911, while this first suit was pending, Atwood entered into a modified agreement with the defendants Kane, canceling his agreement to convey to them his Seattle lots and the Skagit county acreage, in consideration of his payment of $2,500. He then paid them $250 in money and gave his nonnegotiable note for $2,250, which note he has since paid, part of it subsequent to the levy of the plaintiff's execution on the land conveyed to Atwood. In May, 1912, the present action was brought to subject that property to the lien of the judgment. A trial was had to the court without a jury. The trial court made no formal findings of fact or conclusions of law, but in his decision on the merits, which is found in the record, he held in substance that the plaintiff was not a creditor of the defendants Kane at the time of the transfer to Atwood; that the evidence was not sufficient to show that Atwood had notice of any fraudulent design on the part of the defendants Kane, if they had such design, nor sufficient to show that Atwood was to hold the property in trust for the Kanes. The court held that Atwood therefore took the property free from any and all claims of the plaintiff. Judgment was entered, dismissing the action with costs. The plaintiff appealed.

The record presents three questions, the solution of which must determine the case: (1) Was the respondent Ida M. Kane a debtor or the appellant within the meaning of the law relating to fraudulent conveyances? (2) Was the conveyance from the respondents Kane to the respondent Atwood a fraudulent conveyance? (3) Assuming that it was, was the respondent Atwood a participant in that fraud?

1. The respondents contend, and the trial court held, that there was no debt existing from Mrs. Kane to the appellant at the time of the sale from Mrs. Kane to the respondent Atwood, to that, if Atwood held the title for himself and not in trust for the Kanes, he held it free from the judgment against Mrs. Kane rendered upon the appellant's claim. If this position be found sound, it of course ends the discussion. The statute of 13 Eliz. c. 5, which is the prototype of all statutes touching fraudulent conveyances, provides in effect that all conveyances made with the intent to hinder, delay, or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, etc., should be deemed and taken as void and of no effect. This statute is a part of the common law of this state. Wagner v. Law, 3 Wash. 500, 502, 28 P. 1109, 29 P. 927, 15 L. R. A. 784, 28 Am. St. Rep. 56; Bates v. Drake, 28 Wash. 447, 455, 68 P. 961.

According to the decided weight of authority, the term 'creditor,' as used in this connection, embraces others than those who are strictly and technically creditors in the narrow sense of that term. Bump, Fraudulent Conveyances (4th Ed.) § 502. It includes not merely the holder of a fixed and certain present debt, but every one having the right to require the fulfillment of any legal obligation, contract, or guaranty, or a legal right to damages capable of judicial enforcement, whether growing out of contract or tort.

'The character of the claim, if it is just and lawful, is immaterial. It need not be due, for, although the holder cannot maintain an action until it is due, he nevertheless has an interest in the property as a fund out of which the demand ought to be paid. * * * A contingent claim is as fully protected as one that is absolute. A liability as surety is within the statute as much as a liability as principal. The statute embraces all pecuniary damages incurred by reason of the obligation of a contract, whether of an ascertained amount or only sounding in damages, and whether actually asserted or only demandable.' Bump, Fraudulent Conveyances (4th Ed.) § 503.

'In a multitude of cases it has been repeatedly adjudged that a party bound by a contract upon which he may become liable for the payment of money, although his liability be contingent, is a debtor within the meaning of the statute avoiding all grants made to hinder or delay creditors. * * * The date when the agreement or obligation came into existence governs in determining the complaining or attacking creditor's rights. As elsewhere shown, a person whose claim arises from a tort, such as libel or slander, is a creditor. The date the tort or injury was committed governs in determining the creditor's status, where the conveyance was made in pursuance of a fraudulent design to defeat the judgment which might be recovered upon it.' Wait, Fraudulent Conveyances (3d Ed.) § 90.

'The term 'creditors,' as employed by the statute, has been construed liberally, and not in a narrow, strict, or technical sense. Whoever has a right, claim, or demand, founded on contract, whether contingent or absolute, for the performance of a duty, or for the payment of damages if the contract should not be fully performed, has been regarded as a creditor, within the meaning of the statute, against whom a voluntary conveyance will not be supported, though no breach of the contract, furnishing a cause of action, may occur until after the execution of the conveyance. Bibb v. Freeman, 59 Ala. 615; Foote v. Cobb, 18 Ala. 585; Gannard v. Enslava, 20 Ala. 732.' Anderson v. Anderson, 64 Ala. 403, 405. See, also, Thomson v. Crane (C. C.) 73 F. 327; Hatfield v. Merod, 82 Ill. 113; Fearn v. Ward, 80 Ala. 555, 2 So. 114; Sargent v. Salmond, 27 Me. 539; Loughbridge & Bogan v. Bowland, 52 Miss. 546; Keel v. Larkin, 72 Ala. 493.

Some confusion seems to have arisen in counsel's mind because of the fact that, though the law of fraudulent conveyances makes the...