Fulton Inv. Co. v. Smith

• Decision Date: 12 April 1915
• Docket Number: 4155
• Citation: 149 P. 444,27 Colo.App. 279
• Parties: FULTON INV. CO. v. SMITH.
• Court: Colorado Court of Appeals

149 P. 444

27 Colo.App. 279

FULTON INV. CO. v. SMITH.

No. 4155

Court of Appeals of Colorado

April 12, 1915

On Petition for Rehearing, June 18, 1915

Error to District Court, Jefferson County; H.S. Class, Judge.

Action by Mary Smith against the Fulton Investment Company. Judgment for plaintiff, and defendant brings error. Reversed and remanded, with directions.

Edwin H. Park, of Denver, for plaintiff in error.

Crump &amp Allen, of Denver, for defendant in error.

KING J.

Action by Mary Smith to have canceled, as fraudulent and void, a certain deed of real property standing in the name of the Fulton Investment Company, plaintiff in error, and to have the title thereto adjudged to be in William A. Trogler, in order to subject it to execution on a judgment in favor of said Smith against said Trogler.

On the 11th day of April, 1912, plaintiff Smith obtained a judgment in the sum of $3,000 against said Trogler on a cause of action for tort said to have been committed on or about August 9, 1910, upon which an execution, directed to the sheriff of Jefferson county, was issued and levied upon 800 acres of land, with water rights, situate in said county, as the property of the judgment debtor Trogler. March 10, 1910 or more than two years before the rendition of this judgment and about five months before the tort upon which it was predicated was committed, the said real estate, alleged in the complaint herein to have been worth $50,000 or more, together with other property, was conveyed by Trogler to the Fulton Investment Company, and at all times since the record title thereto has been in said company. This action to have the deed from Trogler to the investment company canceled is predicated on the allegation that the conveyance in question was purely voluntary, without consideration, and made with the intention to injure, delay, and defraud the grantor's creditors, existing and subsequent, especially one A.J. Ward, alleged to have been an existing creditor at the time of the conveyance; and upon the further allegation that the conveyance was made in trust for the grantor. By the decree of the court, the deed was set aside, and Trogler was adjudged to be the owner of the property levied on.

1. The plaintiff was a subsequent creditor, whether her standing as such be regarded as dating from the rendition of her judgment, or of the commission of the tort (malicious prosecution); therefore, as to plaintiff, the conveyance, even if voluntary and without consideration, and for that reason void as against then existing creditors if attacked by them, is not presumptively fraudulent or void when attacked by her; but plaintiff must show, and the court must find, fraud in fact, and fraudulent intent on the part of the grantor of which the plaintiff may take advantage. Wallace v. Penfield, 106 U.S. 260, 1 S.Ct. 216, 27 L.Ed. 147; Moore v. Page, 111 U.S. 117, 4 S.Ct. 388, 28 L.Ed. 373; Phillips v. Wooster, 36 N.Y. 412; Carpenter v. Carpenter's Ex'rs, 27 N.J.Eq. 503; Washington Nat. Bk. v. Beatty, 77 N.J.Eq. 252, 76 A. 442, 140 Am.St.Rep. 555. But the conveyance was not purely voluntary or without consideration. The property was conveyed to the Fulton Investment Company in consideration of the issuance of its capital stock. A transaction of that kind is sanctioned by statute; such consideration is a valuable consideration. Homestead Mining Co. v. Reynolds, 30 Colo. 330, 335, 70 P. 422. Under the statute, capital stock of a corporation is regarded as money or its equivalent. Robinson v. Canal Co., 2 Colo.App. 17, 27, 29 P. 750. Prima facie, the conveyance was bona fide, and for a valuable and lawful consideration. From the time of the transfer the corporation took, and thereafter maintained, exclusive possession of and dominion over the property. This was conceded by counsel for plaintiff on the trial, who stated that the only contention was as to the validity of the transfer.

There is not a scintilla of evidence, direct or circumstantial, nor anything from which a legitimate inference can be drawn, except the mere fact of the conveyance, that the deed was made for the purpose of hindering, delaying, or defrauding the plaintiff herein, or any other person who might subsequently become a creditor of the grantor, nor that any creditor of, or other person having claims, debts, or damages against, the said grantor, plaintiff included, was in fact hindered, delayed, or defrauded by reason of such conveyance. So far as disclosed by the record, Trogler was not, at the time of said conveyance, indebted to any person with the exception of certain incumbrances on the said property which could not be affected by the conveyance. Nor were there any suits or claims against him, except the claims of said Ward. At the time of said conveyance, two suits were, and for two years had been, pending in the district court of Jefferson county, in which A.J. Ward was plaintiff and William A. Trogler was defendant, based upon allegations of tort, and demanding damages in the sum of $15,000. In each of those cases, answer was filed, denying liability and all material allegations of the complaint, and in one of them Trogler filed cross-complaint or counterclaim for fraud alleged to have been practiced upon him by said Ward. The pendency of those two suits was the basis of the present action, so far as concerned the existence of creditors who could have been hindered, delayed, or defrauded by the conveyance from Trogler to the Fulton Investment Company. In one of said suits, for the largest demand, David E. Trogler and John C. Trogler, sons of William A. Trogler, were codefendants. The evidence shows that on or about the 1st day of April, 1912, the two suits were settled in full by David E. Trogler, by payment of $500, which settlement and payment was made while William A. Trogler was absent from the state, and without his knowledge or consent. There was no other proof of the verity or legality of the claim of said Ward against Trogler, and no proof that the tort was committed as therein alleged. It is settled law that, whenever the rights of an alleged creditor depend upon the existence of prior debts or demands, he must show that there are or were such debts or lawful demands. Homestead Mining Co. v. Reynolds, 30 Colo. 336, 70 P. 422, and cases there cited; Washington Nat. Bk. v. Beatty, supra; Bump, Fraudulent Conv. § 297, and cases there cited. In Washington Nat. Bk. v. Beatty, supra, under circumstances strikingly similar to those at bar, the court held that a subsequent creditor who attacks a conveyance as made in fraud of a person, who at the time of the conveyance was claiming damages based on the tort of the grantor, must make legal proof of the verity and legality of said claim, citing Baker v. Gilman, 52 Barb. (N.Y.) 26. With such ruling we are in entire accord. In Homestead Mining Co. v. Reynolds, supra, the court ruled that, as against the mining company to which Wall and Pursel had conveyed real estate, the plaintiff Reynolds, who attacked the deed as fraudulent, must prove the existence of the indebtedness at the time of the conveyance, although such indebtedness had been merged into a judgment in favor of plaintiff and against said Wall and Pursel. We think there is no question that it was incumbent on plaintiff herein, by competent evidence, to prove the existence of a lawful and valid claim on the part of Ward against Trogler, and, failing so to do, the judgment cannot be sustained. The fact that David E. Trogler made settlement of the two suits is not sufficient. Either he or his father had a right to purchase his peace from such litigation, and the mere fact that either of them did so, of itself, raises no legal presumption that the claim was just or lawful. Nor can a settlement by the son be tortured into an admission by the father that the claim was meritorious or lawful as against him. Moreover, keeping in mind the fact, established by the proof and not disputed, that the land was paid for by stock, and the stock assigned so that David E. and John C. Trogler received and held at least $10,000 of the same in amount and value, and that those two sons were codefendants in the larger of the Ward suits, the assertion that the father, with intent to prevent the collection of a judgment if one should be obtained, would transfer his property to his sons and codefendants, in whose hands it would be none the less subject to execution than in his, is manifestly too absurd to be credible or worthy of consideration.

2. Although the findings of the court were general, and to the effect that all allegations of the complaint were sustained we cannot assume that the court found that the deed to the real estate was made in trust for the grantor, for there is no evidence to support such finding. There was no such reservation in the deed--no evidence of a secret agreement or understanding as to the real estate. The only evidence suggesting a trust agreement or understanding had reference entirely to the manipulation of the capital stock. After the capital stock had been issued to Trogler in payment for the deed to the land mentioned in the complaint, and other property, real and personal, but long prior to the alleged tort, he assigned to his wife and children all but one share of said stock. Upon receiving her stock, the wife made an indorsement thereof in blank, and delivered it to her son David E. and left it, with other stock so assigned, in a safety deposit box of which he had all the keys, but which bore the name of himself and father. The father, however, never exercised control over the box or the...