Emarine v. Haley, 93CA0675

• Decision Date: 16 June 1994
• Docket Number: No. 93CA0675,93CA0675
• Parties: Vicki EMARINE, Plaintiff-Appellee, v. Richard L. HALEY, Defendant-Appellant. . II
• Court: Colorado Court of Appeals

Page 343

892 P.2d 343

Vicki EMARINE, Plaintiff-Appellee, v. Richard L. HALEY, Defendant-Appellant.

No. 93CA0675.

Colorado Court of Appeals Div. II.

June 16, 1994.

Rehearing Denied Aug. 25, 1994.

Certiorari Denied April 17, 1995.

Clark S. Spalsbury, Jr., Estes Park, for plaintiff-appellee.

Nelson, Reid & Schwartz, Daniel W. Dean, Fort Collins, for defendant-appellant.

Opinion by Judge MARQUEZ.

In this action to determine priority of interests in certain real property, defendant, Richard L. Haley, appeals two summary judgments in favor of plaintiff, Vicki Emarine, the first giving plaintiff priority over defendant with respect to monies held in the registry of the trial court, and the second determining the amount of plaintiff's secured claim. We affirm in part, reverse in part, and remand with directions.

Both plaintiff and defendant are judgment creditors of the same debtor, and both claim they hold an interest superior to the other in real property that may be used to satisfy the debts. Plaintiff and defendant agreed to a sale of the property, and thus, each claims a superior interest in the monies deposited with the court.

PLAINTIFF'S SUITS AGAINST DEBTOR

Plaintiff originally filed suit against debtor and his wife in April 1990. In her complaint, plaintiff claimed, inter alia, that debtor approached her with an offer to cooperate in a joint business venture. Debtor then induced plaintiff to contribute $25,000 to start the joint venture on the false promise that he would contribute $75,000 and pay plaintiff a salary of $3,000 per month. Plaintiff paid debtor $25,000 by check, and subsequently, debtor transferred the funds to his wife. Her complaint stated claims for conversion under § 18-4-405, C.R.S. (1993 Cum.Supp.), for rescission of the agreement to participate in the joint venture, and to set aside the transfer of funds from debtor to his wife pursuant to § 38-10-117, C.R.S. (1982 Repl.Vol. 16A).

Subsequently, when plaintiff discovered that debtor's wife had used the funds to purchase real property in her name, plaintiff drafted a motion to amend or supplement her complaint. On April 16, 1991, plaintiff delivered her motion to the clerk of the court and attached her amended complaint to the motion.

Plaintiff's amended complaint mirrored her original complaint, but added the following allegation pursuant to § 38-10-117, C.R.S. (1982 Repl.Vol. 16A).

Although Plaintiff has thus far been refused discovery, Plaintiff has learned that [debtor] directly or indirectly transferred at least $76,200 for the benefit of [his wife], resulting in the purchase of [real property] for that sum in the name of [debtor's wife].

The amended complaint also modified the request for relief as follows:

Wherefore Plaintiff requests the Court enter judgment in Plaintiff's favor and against [debtor's wife] for the principal sum of $25,000, for an order setting aside the transfer of assets including the [real property] from [debtor] to [his wife], for a constructive trust and/or equitable lien (securing all amounts due as a result of this suit) on [debtor's] assets including [the real property], for interest before and after the judgment at the maximum allowed rate, for costs, and for such other relief deemed just and proper.

Also on April 16, 1991, plaintiff recorded a "Notice of Pending Action" (notice of lis pendens) on the property.

On June 5, 1991, the court granted without comment plaintiff's motion to amend her complaint, granted partial summary judgment for plaintiff against debtor on her conversion claim (debtor had pled guilty to theft in February 1990), and dismissed her claim for rescission of the agreement to participate in a joint venture.

In regard to the latter two decisions, the court stated:

Wherefore the Court enters judgment against [debtor] and in favor of [plaintiff] for the following: $25,000.00 for sums converted by the theft, for additional statutory damages in the amount of $50,000.00 pursuant to C.R.S. § 18-4-405 (as amended), for interest at the legal rate on the sum of $75,000.00 beginning October 24, 1989, and for costs and statutory attorney's fees in an amount to be established by bill of costs. The sum of $20,000.00 in criminal restitution is hereby credited against this judgment effective as of the date received by Plaintiff. Plaintiff's second claim for relief is hereby dismissed. Judgment is hereby made final pursuant to C.R.C.P. 54(b).

This judgment was recorded on June 12, 1991, and a transcript of judgment was recorded on August 1, 1991.

With only her claim to set aside the transfer remaining, on June 18, 1991, plaintiff and debtor's wife agreed to a "Stipulation of Judgment" with respect to that claim. On July 1, 1991, plaintiff filed a "Motion for Entry of Stipulated Judgment." Judgment was entered against debtor's wife pursuant to this stipulation on July 2, 1991, and this judgment was recorded on July 11, 1991.

DEFENDANT'S SUITS AGAINST DEBTOR

Defendant obtained a judgment against debtor in the United States District Court for the District of New Mexico on January 9, 1991. On March 15, 1991, defendant filed a "Notice of Filing of Foreign Judgment" in Colorado. Defendant recorded a transcript of this judgment in Colorado on April 23, 1991.

Also on April 23, 1991, defendant filed a "Complaint (Creditor's Bill)" and recorded a "Notice of Lis Pendens." On September 3, 1991, the court entered a final judgment against debtor in this case.

In the present case, the trial court concluded that: "[Plaintiff's] April 16th lis pendens was the first recorded document that asserted a claim affecting the realty. Since [plaintiff] obtained judgment against [debtor's wife], her April 16th lis pendens operates to make subordinate any subsequently acquired interest."

I.

Defendant argues that plaintiff could not institute a proceeding against debtor to set aside the transfer prior to having a judgment against debtor. We disagree.

The general rule, in the absence of a qualifying statute, is that a creditor's bill may not be maintained, unless the creditor has theretofore reduced his claim to a judgment at law and the execution issued thereon has been returned nulla bona. Shuck v. Quackenbush, 75 Colo. 592, 227 P. 1041 (1924).

Here, plaintiff brought a claim to set aside the transfer of funds and assets pursuant to § 38-10-117. That section provides:

Every conveyance or assignment in writing or otherwise of any estate or interest in lands, goods, or things in action or of any rents and profits issuing thereupon, and every charge upon lands, goods, or things in action or upon the rents and profits thereof made with the intent to hinder, delay, or defraud creditors or other persons of their lawful suits, damages, forfeitures, debts, or demands ... as against the person so hindered, delayed, or defrauded shall be void.

The primary remedy in an action for fraudulent conveyance is to return the property fraudulently conveyed to its prior status of ownership, thereby bringing it within reach of the judgment creditor of the fraudulent transferor. Miller v. Kaiser, 164 Colo. 206, 433 P.2d 772 (1967).

As relief, plaintiff asked, inter alia, "for an order setting aside the transfer of assets including the [property] from [debtor] to [his wife], [and] for a constructive trust and/or equitable lien (securing all amounts due as a result of this suit) on [debtor's] assets including [the property]."

We agree with defendant that plaintiff's claim against debtor's wife was "in the nature of a creditor's bill." Walker v. Staley, 89 Colo. 292, 1 P.2d 924 (1931) (when title to real property claimed to belong to a judgment debtor stands in the name of another, the creditor's suit is the proper proceeding to subject the property to the satisfaction of a judgment); see also 21 Am.Jur.2d Creditors' Bills § 1 (1981) ("the term [creditor's bill] is applied to ... suits instituted to remove obstructions to legal remedies, as by setting aside fraudulent conveyances").

We, however, disagree with defendant's conclusion that plaintiff must first have a judgment against the debtor. In 1941, our supreme court adopted C.R.C.P. 18(b), which provides:

Whenever a claim is one heretofore cognizable only after another claim has been prosecuted to a conclusion, the two claims may be joined in a single action; but the court shall grant relief in that action only in accordance with the relative substantive rights of the parties. In particular, a plaintiff may state a claim for money and a claim to have set aside a conveyance fraudulent as to him, without first having obtained a judgment establishing the claim for money.

See Huntress v. Huntress' Estate, 235 F.2d 205 (7th Cir.1956) (under Fed.R.Civ.P. 18(b), it is no longer necessary in a proceeding to set aside a fraudulent conveyance that the claim of the plaintiff be first reduced to judgment).

Thus, we conclude that plaintiff's claim was proper despite the fact that she had no prior judgment against debtor.

In addition, because there were no special circumstances in this case that would permit a court to hold a fraudulent transferee personally liable for damages resulting from the conveyance, we conclude that there could be no claim for money damage against debtor's wife. See New Crawford Valley, Ltd. v. Benedict, 877 P.2d 1363 (Colo.App.1993).

II.

Defendant next contends that plaintiff's notice of pending action, recorded on April 16, 1991, was not supported by a "filed" pleading and, thus, was ineffective. We disagree.

C.R.C.P. 105(f)(1) provides in pertinent part:

Only after filing any pleading wherein the affirmative relief is claimed affecting the title to real property, a party may record in the office of the clerk and recorder of the county in which the property is situated a notice of lis pendens containing the names of the parties, the nature of the claims, and a legal description of the property in that county affected thereby; such notice shall...