Buxton v. Pennsylvania Lumber Co.

• Decision Date: 14 July 1914
• Citation: 221 F. 718
• Parties: BUXTON v. PENNSYLVANIA LUMBER CO.
• Court: U.S. Court of Appeals — Ninth Circuit

221 F. 718

BUXTON v. PENNSYLVANIA LUMBER CO.

United States District Court, N.D. California.

July 14, 1914

W. F Williamson, of San Francisco, Cal., for plaintiff.

Garoutte & Goodwin, of San Francisco, for defendant.

Charles A. Shurtleff and Robert B. Gaylord, both of San Francisco Cal., amici curiae.

FARRINGTON District Judge.

This is a suit to quiet title to a tract of land in Lassen county Cal., originally owned by the Associated Colonies, a New York corporation. At a time when its title was undisputed, two deeds, dated June 3, 1898, and April 24, 1899, respectively were executed by that corporation to the plaintiff, A. L. D. Buxton. The deeds contained a description of, and purported to convey, not only the tract in dispute, but all the property and assets of the granting corporation. The deeds were recorded May 16, 1900, and are good, unless set aside or canceled. Defendant contends that this result was accomplished by two judgments rendered in the superior court of Lassen county, Cal., in favor of one Frank P. Cady, and that thereafter the land was purchased at sheriff's sale by one of its predecessors. Plaintiff replies that the two judgments were set aside and canceled in the Circuit Court of the United States for the Northern District of California after the causes had been duly removed to that tribunal, and before defendant received the sheriff's deed.

In the state court Cady brought suit against the Associated Colonies February 5, 1902. Summons was served on the Secretary of State at Sacramento on the 27th day of the same month. The Associated Colonies, having deeded all its property and assets in California to Buxton, had no designated agent in the state upon whom service of summons could be had. April 3, 1902, a default judgment was entered against the Associated Colonies for the sum of $6,945 and costs, assessed at $11. Before the land deeded to Buxton in 1898 and 1899 could be subjected to the lien of this judgment, it was necessary to set aside the conveyances to Buxton. Accordingly, six days later, on April 9, 1902, Cady began a second suit to cancel said deeds, and to have it adjudged that the Associated Colonies owned said land, and that the same was subject to the lien of the judgment obtained April 3d. In the latter suit, Buxton and the Associated Colonies were joined as defendants. April 12, 1902, summons was attempted to be served on the Secretary of State. April 14th personal service was had on Buxton in Lassen county. May 13, 1902, Buxton and the Associated Colonies filed in the second Cady suit a petition for removal to the Circuit Court of the United States for the Northern District of California. The cause was removed. On the same day default of the Associated Colonies was entered in the state court, and on the 30th day of July, 1902, said court, notwithstanding the removal proceedings, adjudged and decreed that both deeds to Buxton be annulled, canceled, and set aside, in so far as they affected certain lands, including the tract here in question, that the Associated Colonies was the owner of the lands, and that the same were subject to the lien of Cady's first judgment for $6,945 and costs. On the next day, July 31, 1902, execution issued on the judgment in the first Cady suit. On the 22d day of the following month the land in question was sold by the sheriff at public auction for $3,500 to W. D. Minckler, who immediately received a certificate of sale, a duplicate of which was recorded by him September 4, 1902.

September 20, 1902, the Associated Colonies appeared specially in the state court in the first Cady suit, and filed a motion to quash the service of summons, and also a petition to remove said cause to the Circuit Court of the United States for the Northern District of California. The 'cause was thereupon removed to said Circuit Court. ' October 11, 1902, W. D. Minckler, who had bought the land in question at sheriff's sale August 22d, assigned his certificate of sale to one D. G. Curtis. October 20, 1902, Cady appeared in the federal court and moved that both Cady suits be remanded. November 7, 1902, the federal court in the first Cady suit 'duly gave, made, and entered its order and judgment therein,' denying Cady's motion to remand, granted defendant's motion to quash service of summons, recalled the execution issued out of the state court, vacated and set aside the default of the defendant entered on the 2d day of April, vacated and set aside the judgment, and finally ordered the action dismissed. The opinion of the federal court on making these orders will be found at page 420, volume 119, of the Federal Reporter.

November 26, 1902, the Associated Colonies filed a motion in the superior court of Lassen county in the second Cady suit, to quash service of summons, to vacate the default entered May 12, 1902, and also the judgment entered July 30, 1902. January 20, 1903, said Circuit Court 'duly gave and made its order and decree in said cause, denying said motion of Cady to remand said cause to said superior court, * * * granting said defendant Associated Colonies' motion to withdraw said appearance in said superior court of Lassen county, and to quash said service of summons, and to vacate and set aside said default and judgment. ' Final decree of dismissal in the second Cady suit was not entered in the federal court until July 7, 1905. March 16, 1903, the said D. G. Curtis assigned to the Pennsylvania Lumber Company, defendant in the present suit, his certificate of sale. October 15, 1903, the federal court made an order dismissing the second Cady suit. December 16, 1903, the sheriff of Lassen county, Cal., executed and delivered to the said Pennsylvania Lumber Company his deed to said land. July 17, 1905, the federal court entered its final decree of dismissal in the second Cady suit. No further proceedings have been had in either suit, either in the state or federal court, and no appeal has been taken from any order, judgment, or decree in either cause in either court.

It is alleged by defendant that the two deeds to Buxton were signed and acknowledged by the president and secretary of the Associated Colonies, and delivered to Buxton, without authority from the stockholders or board of directors, and without consideration, for the purpose of hindering, delaying, and defrauding the creditors of that corporation. It appears, however, from the agreed statement of fact, that the holders of more than two-thirds of the capital stock of the Associated Colonies, prior to the date of the earlier Buxton deed, had consented in writing to the execution and delivery of both deeds; but such consent was never filed or recorded in the office of the clerk of the county wherein the corporation then had its principal place of business. Such a filing is not indispensable to the validity of the deeds, nor does the statute visit the failure to file with such a penalty as the court is here asked to impose. 'The consent of stockholders is the * * * essential thing. The filing is formal and subsidiary. ' This has been so decided by the courts of New York. Rochester Savings Bank v. Averell, 96 N.Y. 467, 475.

Furthermore, it has been held by the courts of that state that stockholders only can take advantage of the failure to comply with the statute requiring their consent to be filed. The provision was made for their protection, not for the protection of creditors. In re New York Economical Printing Co., 110 F. 514, 519, 49 C.C.A. 133; Market & Fulton Natl. Bank v. Jones, 7 Misc.Rep. 207, 27 N.Y.Supp. 677; Westerlund v. Black Bear Mfg. Co., 203 F. 599, 613, 121 C.C.A. 627.

There is little evidence in support of the allegation that the Buxton deeds were executed to defraud creditors. Buxton testifies that in accepting the deeds from the Associated Colonies he had no purpose of hindering, delaying, or defrauding its creditors; that he did not at any time know that the corporation had any creditors; that he paid $4,500 for the land here in question; the remaining land described in the deeds was conveyed to him with the understanding that it should be reconveyed to such parties as the corporation might name, and that this has been done. This testimony is not contradicted. Furthermore, there is no testimony that the corporation was indebted to Cady or any one else when the Buxton deeds were executed. This disposes of the issue of fraudulent conveyance, unless fraud is established, and is res adjudicata by virtue of the judgment in the second Cady suit, entered in the superior court of Lassen county. If that judgment is void, it cannot be regarded in any sense as evidence that the Buxton deeds were fraudulent.

Conceding that the judgment and execution in the first Cady suit were regular on their face, the fact still remains that on the records of the county recorder of Lassen county the land stood in the name of Buxton, and for more than two years prior to judgment the judgment debtor had no title to the property which the sheriff offered for sale. Buxton was not a party to the first action. The sheriff had no authority to take his property in satisfaction of a judgment against the Associated Colonies. The purchaser at a sheriff's sale takes no more than the judgment debtor's right and estate at the time of the sale.

'If the judgment debtor has a good title, the purchaser gets it; if a partial title, he gets that; or if no title, he gets nothing. ' He assumes the risk of defects in the debtor's title; and this is true, whether he purchases with or without notice. Frink v. Roe, 70 Cal. 296, 11 P. 820, 822; Jones v. Herrick, 35 Wash. 434, 77 P. 798; Pratt v.

Phillips 1 Sneed (Tenn.) 543, 60 Am.Dec. 162; Sanborn v. Kittredge, 20 Vt. 632, 50 Am.Dec. 58, 65; 3 Devlin on Deeds, Sec. 1436; 17 Cyc....