Davis v. Nielson
| Decision Date | 05 November 1973 |
| Docket Number | No. 1377--I,1377--I |
| Citation | 515 P.2d 995,9 Wn.App. 864 |
| Parties | Horace H. DAVIS, Respondent, v. Walter J. NIELSON, also known as Walter J. Nielsen, and Ethel Nielson, also known as Ethel Nielsen, Appellants. |
| Court | Washington Court of Appeals |
Siderius, Lonergan & Crowley, C. R. Lonergan, Jr., Seattle, for appellants.
Jon Marvin Jonsson, Davis & Roetcisoender, Horace H. Davis, Seattle, for respondent.
This is an action initiated by a creditor of the grantor to set aside an alleged fraudulent conveyance of real property situated in Island County, Washington. The trial court held the conveyance to be fraudulent, and the parties to the conveyance, Walter J. and Ethel Nielson appeal. On February 12, 1964, the plaintiff and the defendant, Walter J. Nielson, executed as promisors a promissory note, at a time when the two defendants were husband and wife, in the amount of $5,000 payable on May 10, 1964, to the order of the Commercial Bank of Seattle. While the plaintiff signed this note as a principal obligor, the sum obtained therefrom was to enable Walter Nielson to exercise an option to purchase real property in King County, on which he conducted a retail paint store as sole proprietor. Thereafter, Walter Nielson, as purchaser, executed a real estate contract in exercise of this option, the down payment for which was the $5,000 obtained from the Commercial Bank of Seattle.
On February 12, 1964, Walter Nielson executed a promissory note for $5,000 payable on demand to the plaintiff, the consideration for which was the plaintiff's having cosigned this note to the Commercial Bank of Seattle. Demand for payment of this note had been made by plaintiff prior to the present action. Then on July 7, 1965, Walter Nielson executed a deed and purchaser's assignment of the real estate contract to the plaintiff, which document specified on its face:
This assignment is given as security for the payment of a promissory note in the sum of $5,000, payable to Commercial Bank of Seattle, on which note assignee is signed as co-maker, but is actually security, and the proceeds whereof were used by assignor as down payment on the above-described contract.
On April 5, 1966, the defendants were divorced. In the decree, Walter Nielson was awarded the real property, on which he conducted his paint store as his separate property subject only to the $5,000 note obligation owed to plaintiff. Real property in Island County was equally divided by the court with each defendant being awarded one-half as separate property. On April 11, 1968, Walter Nielson conveyed to Ethel Nielson by quitclaim deed his interest in the Island County property for a stated consideration of $10 together with Ethel Nielson's oral promise to assume and pay certain attorney's fees and costs owing by Walter Nielson to the plaintiff. It is this conveyance that was found by the trial court to be fraudulent.
Three days later, the defendants remarried. The trial court found that the remarriage had been planned at the time of the conveyance on April 11, 1968. On August 25, 1969, the defendants were again divorced.
On November 19, 1969, Walter Nielson, without the knowledge of Ethel Nielson, conveyed to Horace Davis, by quitclaim deed his interest and after-acquired title to the King County property on which the retail paint store was located. The following statement appeared on the face of the deed:
This deed is for good and valuable consideration and is neither given nor received with the intention of merging with this instrument that Deed and Assignment of Real Estate Contract dated July 7, 1967, given as security, nor of waiving any of assignee's rights thereunder.
Plaintiff then brought suit against the defendants for the $4,500 balance still owing on the note and on April 1, 1970, obtained a default judgment against the defendants and their marital community.
On April 5, 1971, the present action, to set aside the conveyance of the Island County real estate was filed. On April 30, 1971, the default judgment in the prior suit on the promissory note was affirmed as to Walter Nielson but set aside as to Ethel Nielson and the marital community. Further, the prior cause of action on the promissory note was dismissed with prejudice as to Ethel Nielson and the Nielson marital community. The judgment against Walter Nielson in the prior case (the promissory note action) expressly stated it was entered without prejudice to plaintiff's claim in this case (the fraudulent conveyance action).
On May 4, 1970, the plaintiff sold the paint store property acquired from Walter Nielson netting $7,360.56 on the sale. On November 26, 1971, the trial court set aside the April 11, 1968, conveyance of the Island County property from Walter to Ethel Nielson as fraudulent.
The trial court concluded that Ethel Nielson was barred by res judicata from raising the affirmative defense that Horace Davis had purchased the paint store property (which was security for the note) for the inadequate consideration of $500 and then resold the property since that defense could have been raised in the April 1, 1970, action on the note.
The assignments of error challenge the entry of the finding of fact that said:
On April 11, 1968, at the time the defendant
Walter J. Nielson, conveyed his interest in the
Island County real property to the defendant, Ethel
Nielson, the defendant, Walter J. Nielson had the
following liabilities
Instalment note dated June 26, 1953, payable to
the order of Vic Dumas in the amount of $1,500.00
Instalment noted dated October 20,
1953 .................................. $ 4,100.00
Instalment note dated March 28,
1960 .................................. $ 1,000.00
with unpaid balance of principal and interest in the
approximate amount of ..................... $13,000.00
(See Finding of Fact No. IX).
Total liabilities ....................... $13,000.00
The trial court's conclusion that the conveyance made by Walter Nielson to Ethel Nielson on April 11, 1968, was without fair consideration and rendered him insolvent is challenged as is the conclusion that res judicata precluded Ethel Nielson from asserting an affirmative defense that Davis sold the security for the promissory note and realized more than was owing him. Finally, the entry of the judgment setting aside the conveyance of Walter Nielson to Ethel Nielson by the quitclaim dated April 11, 1968, is likewise challenged.
To better understand the factual situation and in order that we may refer to specific findings to achieve clarity, we will set forth certain of the court's findings verbatim or in part:
III
On February 12, 1964, the defendant, Walter J. Nielson, as promissor executed a promissory note in the amount of $5,000.00 payable on demand to the order of the plaintiff, the consideration for which was the plaintiff's having cosigned the aforesaid note to the Commercial Bank of Seattle. Demand for payment of this note had been made by Plaintiff prior to the present action.
V
On April 5, 1966, the defendants were divorced in King County, Washington, in which Decree of Divorce the defendant, Walter J. Nielson, was awarded as his sole and separate property the King County real property on which he conducted his retail paint store subject to the $5,000.00 note obligation payable to Plaintiff and in which Decree the Island County real property was equally divided between the parties.
VI
On April 11, 1968, the defendant, Walter J. Nielson, conveyed to the defendant, Ethel Nielson, by quitclaim deed his interest in the Island County real property for a stated consideration of $10.00 together with an oral promise of the grantee (Ethel Nielson) to assume and pay certain attorney's fees and costs advanced owing by grantor (Walter J. Nielson) to the plaintiff, which said indebtedness was evidenced by a mortgage in the amount of $4,200.69 from Defendant Walter J. Nielson to the plaintiff on said Island County property, dated July 27, 1966, . . .
VII
On April 11, 1968, the interest of Defendant Walter J. Nielson in the Island County real property referred to in Finding No. VI had an evaluation of between $20,000.00 and $30,000.00.
VIII
On April 14, 1968, the defendants, Walter J. Nielson and Ethel Nielson, were remarried, and said parties had planned said remarriage at the time of the conveyance set forth in Finding No. VI.
XI
On November 19, 1969, Defendant Walter J. Nielson conveyed to the plaintiff, Horace H. Davis, by quitclaim deed his interest and after-acquired title to the King County property on which the retail paint store was located with the following statement appearing on the face of said quitclaim deed:
'This deed is for good and valuable consideration and is neither given nor received with the intention of merging with this instrument that deed and assignment of real estate contract dated July 7, 1967, given as security, nor of waiving any of the assignee's rights thereunder.'
While on the face of the said quitclaim deed there is reflected that no sales tax was due the Treasurer of King County, the plaintiff credited the defendant, Walter J. Nielson, $500.00 on the promissory note referred to in Finding of Fact No. III. The defendant, Ethel Nielson, did not join in the execution of this quitclaim deed and had no knowledge of the transaction.
XVI
On or about May 4, 1970, the plaintiff sold on his own behalf without payment of any real estate commission the real property acquired from Defendant Walter J. Nielson as set forth in Finding of Fact No. XI for $21,615.04, from which the plaintiff was paid $7,360.56 net.
XVII
Prior to this sale ( of Fact No. XVI), the plaintiff had paid with respect to said property $480.00 to the contract vendor after the latter had served Notice of Intention to Declare Forfeiture of said contract; $559.79 delinquent real estate taxes to King County Treasurer; and the January, February and March, 1970, contract...
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