California Consolidated Mining Co. v. Manley

CourtUnited States State Supreme Court of Idaho
Citation10 Idaho 786,81 P. 50
PartiesCALIFORNIA CONSOLIDATED MINING COMPANY v. MANLEY
Decision Date08 May 1905

FRAUDULENT CONVEYANCE-WANT OF CONSIDERATION-INTENT TO HINDER, DELAY OR DEFRAUD CREDITORS-NOTICE TO CORPORATION-NECESSARY PARTIES DEFENDANT.

1. Where K. takes a deed from McA. to all his interest in a mining claim, which is all the property McA. has in this state, for a consideration of one dollar and "other good and valuable consideration," which latter consideration is not explained, and at the time of such transfer K. has notice that his grantor is heavily indebted in this state and has avoided personal service of process and has allowed a judgment in rem entered against him for over $50,000, and has been trying to buy up such claims at one-fifth their face value, and that he is not meeting his obligations in due course of business, and that he has no other property in the state out of which such indebtedness can be made, and during the meanwhile K. had occupied a close confidential relation with McA.-under such circumstances held, that K. cannot restrain an execution sale of such property to pay creditors on the theory that he is an innocent purchaser for a valuable consideration.

2. The intent with which a transfer in fraud of credtors is made is not established so much by attempting to ascertain the actual intent in the mind of the debtor, but rather by the facts and circumstances under which the transfer was made and from which the law imputes a fraudulent motive.

3. A conveyance made for a mere nominal consideration when attacked as fraudulent will be subjected to the same rules applicable to voluntary transfers.

4. Notice to a person who was the promotor in the organization of a corporation, a principal incorporator and who is manager and resident director is such notice to the corporation that it cannot avail itself of the protection of law to which an innocent purchaser is entitled.

5. Where C. Co. seeks to restrain an execution sale on the grounds that it is an innocent purchaser for a valuable consideration, and K. is brought in as a defendant and files a cross-complaint to set aside the sale to C. Co. as fraudulent, the fraudulent grantors are not necessary parties.

(Syllabus by the court.)

APPEAL from District Court in and for Shoshone County. Honorable Ralph T. Morgan, Judge.

Plaintiff commenced an action against Charles Manley as sheriff of Shoshone county, to restrain him from making a sale of the California Lode Mining Claim on execution. A. G. Kerns receiver of the property of the Coeur d'Alene Bank, an insolvent corporation, was brought in by an order of court and answered and filed a cross-complaint, alleging that the transfer to plaintiff was fraudulent and void, and made to hinder, delay and defraud creditors. The court found for the plaintiff and entered his decree perpetually enjoining the sale. Defendants appealed. Reversed.

Judgment reversed, and the perpetual injunction dissolved and cause remanded, with directions. Costs awarded to appellant.

W. W Woods and H. S. Gregory, for Appellants. John P. Gray and J H. Forney, of Counsel.

The contention of the appellants in this case is, that at the time McAulay conveyed the thirteen-sixteenths of the California lode to Keane, he did so for nominal consideration, viz., the consideration of $ 1, and that the conveyance so made was with the intent to hinder, delay and defraud creditors of said McAulay. It is contended by respondent that it is an innocent purchaser and entitled to protection in equity. This proposition we controvert. To constitute one a bona fide purchaser, he must have actually paid the purchase price before he received notice of the facts. (Wood v. Raburn, 18 Or. 3, 22 P. 521.) Whenever the agent, acting in the scope of his duties, for his principal, receives notice in a matter in which he represents the principal, such notice is notice to the principal. The test is whether the information was of a character which it was the duty of the agent to communicate; if so, it binds the principal. (Wharton on Agency, sec. 178; Whitney v. Burr, 115 Ill. 289, 3 N.E. 434.) If the conveyance of the bulk of the personal property necessarily results in delaying creditors, the conveyance is a legal fraud, though no specific intent to defraud exists. ( Wells v. Schuster, 23 Colo. 534, 48 P. 809.) It was urged by respondent in the court below, that Keane and McAulay were necessary parties to appellants' cross-complaint. We insist that neither of them were either necessary or proper parties thereto. (Blanc v. Paymaster M. Co., 95 Cal. 524, 29 Am. St. Rep. 149, 30 P. 765.) The cross-complaint is proper in the action to quiet title when it seeks to enforce an equitable title against the plaintiff as the holder of the legal title. (Winter v. McMillan, 87 Cal. 256, 25 P. 407.) The debtor is not a necessary party where he has parted with the property. ( Samainego v. Stiles (Ariz.), 20 P. 607; Huneke v. Dold, 7 N. Mex. 5, 32 P. 45.) In no event is McAulay or is Keane a necessary party to this suit. A voluntary conveyance is good as between the parties thereto. (Bunn v. Winthrop, 1 Johns. Ch. 329; Jones v. Jones, 6 Conn. 111, 16 Am. Dec. 35.) An absolute deed containing a warranty of title, and purporting to be made for valuable consideration, is valid as between the parties, though made for the purpose of defrauding creditors. (Parrot v. Baker, 82 Ga. 364, 9 S.E. 1068.) A conveyance made without consideration is void as to existing creditors, regardless of intent; as to subsequent creditors, it is void only when made to hinder, delay or defraud them. ( Boatman Sav. Bank v. Overall, 90 Mo. 410, 3 S.W. 64; Lionberger v. Baker, 88 Mo. 447; Millington v. Hill, 47 Ark. 301, 1 S.W. 547; Eigenbrun v. Smith, 89 N.C. 207; Romands v. Maddux, 77 Iowa 203, 41 N.W. 763.) To avoid a sale for valuable consideration, actual notice to the purchaser of the fraudulent intent of the vendor is not necessary. No purchaser has a right to remain willfully ignorant of facts within his reach. (Dyer v. Taylor, 50 Ark. 314, 7 S.W. 258; Gilliland v. Fenn, 90 Ala. 230, 8 So. 15, 9 L. R. A. 413; Tillman v. Heller, 78 Tex. 597, 22 Am. St. Rep. 77, 14 S.W. 700, 11 L. R. A. 628; Hawley v. Smeiding, 3 Kan. App. 159, 42 P. 841; Schnavely v. Bishop, 8 Kan. App. 667, 55 P. 667; Chapman v. Hughes, 134 Cal. 641, 58 P. 298, confirmed on rehearing, 60 P. 974, 66 P. 982; Richard v. Snyder, 11 Or. 501, 6 P. 186; Davis v. Ward, 109 Cal. 186, 50 Am. St. Rep. 29, 41 P. 1010; Jewett v. Palmer, 7 Johns. Ch. 68, 11 Am. Dec. 401.) Lord Hardwick early announced the rule in our equity jurisprudence that even innocent purchasers could only invoke the protection of the court to the extent that they were "hurt," but Mr. Keane, in this case, strenuously refused to state, at any time, the amount to which he was "hurt" over and above $ 1, the consideration placed in the deed, and the only reasonable and intelligent inference to be drawn from all the facts and circumstances, as shown by the record in this case, is that, at all the times mentioned therein, the said Keane was not only the trustee, but the confidential agent of the said McAulay, and held this property as trustee for McAulay, burdened with the payment of the indebtedness of the Coeur d'Alene Bank as represented by the receiver herein. ( Rudy v. Austin, 56 Ark. 76, 35 Am. St. Rep. 85, 19 S.W. 111; Hagerman v. Buchanan, 45 N.J. Eq. 292, 17 A. 946, 14 Am. St. Rep. 739, also extended note to the same; Davis v. Ward, 109 Cal. 186, 50 Am. St. Rep. 29, 41 P. 1010.) Warvelle lays down the following rule in determining the question of fraud: "It is further said that fraud should be so inferred when the facts and circumstances are such as to lead a reasonable man to the conclusion that an attempt has been made to withdraw the property of the debtor from the reach of his creditors with intent to prevent them from recovering their just debts; and that, if prima facie such fraudulent attempt is thus established, it may be regarded as conclusive, unless it is rebutted by facts and circumstances which are proven." (Warvelle on Vendors, secs. 601, 619, 636; Severs v. Dodson, 53 N.J. Eq. 633, 51 Am. St. Rep. 641, 34 A. 7; Kaine v. Weigley, 22 Pa. 179; Clements v. Nicholson, 6 Wall. 299, 18 L.Ed. 786; Jewett v. Palmer, 7 Johns. Ch. 68, 11 Am. Dec. 401; Batavia v. Wallace, 102 F. 243, 42 C. C. A. 310; Zimmer v. Miller, 64 Md. 296, 1 A. 858.) A conveyance by a debtor during the pendency of a suit against him is a badge of fraud. (Venable v. United States, 2 Pet. 112; Callan v. Statham, 23 How. 477, 16 L.Ed. 532; Warvelle on Vendors, secs. 609, 611; Lane v. Starkey, 15 Neb. 285, 18 N.W. 47; Bowyer v. Martin, 27 W.Va. 442; Clements v. Moore, 6 Wall. 299, 18 L.Ed. 786; Thompson v. Baker, 141 U.S. 648, 12 S.Ct. 89, 35 L.Ed. 889; Fuller Electrical Co. v. Lewis, 101 N.Y. 675, 5 N.E. 437; Mobile Sav. Bank v. McDonald, 89 Ala. 434, 18 Am. St. Rep. 137, 8 So. 137, 9 L. R. A. 645; Brady v. Linehan, 5 Idaho 732, 51 P. 761.) A court of equity will not interpose by injunction to prevent a sale of complainant's real estate under execution against another, since the question of title to real estate is ordinarily to be determined at law and a mere trespass will not be enjoined unless the legal remedy is inadequate; nor will the aid of an injunction be extended in behalf of one claiming under fictitious or fraudulent sale from a judgment debtor made with the intent to prevent his creditors from reaching the property to restrain a sale of the property thus transferred under execution against the debtor. (1 High on Injunctions, 120; Wilson v. Hyatt, 4 S.C. 369; Mora v. Avery, 22 La. Ann. 417; Lewis v. Drinkgrave, 24 La. Ann. 489; 2 High on Injunctions, sec. 1550.)

A. H....

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