Kerns v. Washington Water Power Co.

• Decision Date: 10 September 1913
• Citation: 24 Idaho 525,135 P. 70
• Parties: A. G. KERNS, Appellant, v. WASHINGTON WATER POWER COMPANY, Respondent, and WALTER S. GASKILL and ELLA MAUD GASKILL, Defendants
• Court: Idaho Supreme Court

135 P. 70

24 Idaho 525

A. G. KERNS, Appellant, v. WASHINGTON WATER POWER COMPANY, Respondent, and WALTER S. GASKILL and ELLA MAUD GASKILL, Defendants

Supreme Court of Idaho

September 10, 1913

FRAUDULENT CONVEYANCE-SETTING ASIDE DEED-PURPOSE AND INTENT OF PARTIES-CONSIDERATION-JUDGMENT-SATISFACTION - COMPROMISE-LIEN OF ATTORNEY.

1. Where a judgment in an action does not run in favor of the attorney in the action, but in favor of the attorney's client, the plaintiff, and the judgment is allowed for the purpose of compensating the client in the amount it is necessary for him to pay his attorney for prosecuting his action, the presumption is that the client has paid the attorney or is liable to pay him. The judgment entered belongs to the judgment creditor, and may be paid to him, and he may satisfy the same; he may compromise the judgment, or if he sees fit to do so, he may give it to the judgment debtor.

This however, does not release the client from the obligation to pay the attorney any fee that he may owe him for the service. The obligation and liability of the client to the attorney if not otherwise secured, is merely a personal liability of the client to the attorney.

2. Prior to the enactment of the act approved March 7, 1911 Sess. Laws 1911-12, p. 563, there was no law of this state which provided for a lien for attorneys' fees. The latter act, however, provides that from the commencement of an action or the service of an answer containing a counterclaim the attorney who appears for a party has a lien upon his client's cause of action or counterclaim which attaches to a verdict, report, decision or judgment in his client's favor, and cannot be affected by any settlement between the parties before or after judgment.

3. In an action to set aside a deed of real property, where it is alleged, and evidence is offered to prove the allegation, that said deed was made and accepted for the purpose of hindering, delaying and defrauding the plaintiff, the rule of law which especially applies to such case is, that fraud is not presumed, but must be established by clear and convincing evidence, and this is especially true where a party assails the integrity of a written instrument.

4. The rule of law that governs a transaction and affects the validity of a deed of conveyance of real property, where the complaint alleges that the deed was made and accepted for the purpose of hindering, delaying and defrauding the plaintiff, and the evidence shows that there was no fraud and that a valuable consideration has been paid for the property, is, that the sale cannot be set aside at the instance of a creditor unless it is averred and shown that the purchaser knew of and participated in the fraudulent intent of the seller.

APPEAL from the District Court of the Eighth Judicial District for Kootenai County. Hon. R. N. Dunn, Judge.

An action to cancel and set aside a deed on the ground of fraud. Judgment affirmed.

Judgment affirmed. Costs awarded to respondent.

Black & Wernette, for Appellant.

"A judgment creditor issuing execution and levying upon and selling land which his judgment debtor has previously conveyed by a deed voidable as to him because of fraud renders the conveyance absolutely void, and vests the legal title in the purchaser at the execution sale." ( Wagner v. Law, 3 Wash. 500, 28 Am. St. 56, 28 P. 1109, 29 P. 927, 15 L. R. A. 784.)

"A transferee of property from an insolvent debtor holds subject to creditors' rights where at or before the transfer he has notice of such facts and circumstances as would arouse the suspicion of an ordinarily prudent man and cause him to make such inquiry as to the purpose of the transfer as would disclose the fraudulent intent of the maker, although he has no actual notice of such intent." (Kansas Moline Plow Co. v. Sherman, 3 Okla. 204, 41 P. 623, 32 L. R. A. 33; Spear v. Joyce, 27 Ill.App. 456; Ferguson v. May, 4 Ky. Law Rep. 989; Burgert v. Borchert, 59 Mo. 80.)

"A purchaser from a debtor selling to defraud his creditors is bound by such knowledge as would put a prudent man upon inquiry." (Brittain v. Crowther, 54 F. 295, 4 C. C. A. 341.)

"Constructive notice is all that is necessary." (Singer Baer & Co. v. Jacobs, 11 F. 559, 3 McCrary, 638; Dyer v. Taylor, 50 Ark. 314, 7 S.W. 258.)

It is enough if it be shown that the purchaser had knowledge of such facts as should charge him with notice of the fraudulent intent of the seller. (Lyons v. Hamilton, 69 Iowa 47, 28 N.W. 429.)

"Participation in the fraud is not necessary." (Bedford v. Penny, 58 Mich. 424, 25 N.W. 381.)

"Courts of equity do not permit a party to claim any benefit from his own ignorance of facts which he could have learned by exercise of ordinary prudence and diligence." ( Balfour v. Parkinson, 84 F. 855; Reddin v. Dunn, 2 Colo. App. 518, 31 P. 947.)

"It is generally impossible to ascertain the actual intent that was in the mind of the debtor when he transferred his property. It is rather the inference of intent which the law draws from the acts of the debtor viewed in the light of circumstances and conditions under which he acted, and the result accomplished by those acts." (California M. Co. v. Manley, 10 Idaho 786, 81 P. 50.)

John P. Gray, F. T. Post and Chas. L. Heitman, for Respondent.

A person indebted to other creditors has a perfect right to sell and dispose of his property, and no action can be maintained against the grantee by creditors unless the conveyance was made with the intent of both the grantee and grantor to prevent his application of the proceeds of the sale to the payment of the grantor's indebtedness.

Litigants have a perfect right to settle the cause of action, or to take a conveyance from the other upon paying a valuable consideration, without notifying the attorneys that they intend to do so or have completed such negotiations. ( Dahlstrom v. Featherstone, 18 Idaho 179, 110 P. 243; Pippin v. Tapia, 148 Ala. 353, 42 So. 545; Valdosta Mercantile Co. v. White, 52 Fla. 453, 42 So. 633; Williams v. Finlayson, 49 Fla. 264, 39 So. 50; Meyers v. Martinez, 162 Ala. 562, 50 So. 351; Shumaker v. Davidson, 116 Iowa 569, 87 N.W. 441; Vance Shoe Co. v. Haught, 41 W.Va. 275, 23 S.E. 553; Atlantic Refining Co. v. Stokes, 77 N.J. Eq. 119, 75 A. 445; Calvert v. Alvey, 152 N.C. 610, 136 Am. St. 847, 68 S.E. 153; Ellet-Kendall Shoe Co. v. Ross et al., 28 Okla. 697, 115 P. 893.)

The facts upon which fraud is predicated must be specifically pleaded. A mere general averment of fraud is nothing but the averment of a conclusion, and will not suffice. It presents no issue for trial and is bad on demurrer. (Leavengood v. McGee, 50 Ore. 233, 91 P. 453; Little v. Sterne, 125 Ala. 609, 27 So. 972; Virginia Timber & Lumber Co. v. Glenwood Co., 5 Cal.App. 256, 90 P. 48; Pehrson v. Hewett, 79 Cal. 594, 21 P. 950; Wilson v. Boone, 136 Ind. 142, 35 N.E. 1096; Coal City Coal & Coke Co. v. Hazard Powder Co., 108 Ala. 218, 19 So. 392; Vickers v. Buck Stove & Range Co., 60 Kan. 598, 57 P. 517.)

It is not stated in the amended complaint whether there was an encumbrance against the property, whether there were taxes due thereon, or other liens against the same, and in the absence of such allegations the court will not say but what the consideration in this case was a full consideration for the rights transferred. (Day v. Cole, 44 Iowa 452; Mullins v. Hands, 17 Ky. Law Rep. 612, 31 S.W. 726; Martin v. White, 115 Ga. 866, 42 S.E. 279; Jones v. Dunbar, 52 Neb. 151, 71 N.W. 976; Brown v. Case, 41 Ore. 221, 69 P. 43; Albertoli v. Branham, 80 Cal. 631, 13 Am. St. 200, 22 P. 404; Roberts v. Burr, 135 Cal. 156, 67 P. 46; Levy v. Scott, 115 Cal. 39, 46 P. 892; Motz v. Sheets, 144 Iowa 243, 122 N.W. 904; Wolf v. Arthur, 118 N.C. 890; 24 S.E. 671; Wachovia Loan & Trust Co. v. Forbes, 120 N.C. 355, 27 S.E. 43.)

STEWART, J. Ailshie, C. J., and Sullivan, J., concur.

OPINION

STEWART, J.

This is an appeal from a judgment of dismissal entered by the district court of Kootenai county after the court had entered an order sustaining the demurrer to the amended complaint and the plaintiff refused to amend. The Washington Water Power Company, respondent, was the only defendant named in the complaint that appeared in the case, and it was this company that filed the demurrer.

The material allegations of the complaint are as follows:

1. That the defendant, the Washington Water Power Company, is now, and at all the times named was a corporation, duly organized and existing under the laws of the state of Washington for the purpose of manufacturing and selling electricity and purchasing such real estate as was necessary for that purpose, and that during the said period of time the said defendant was doing business in Kootenai county, Idaho.

3. That the plaintiff is an attorney at law admitted to practice in all the courts of Idaho.

4. That on May 1, 1908, the plaintiff, as such attorney and as attorney for the defendant Walter S. Gaskill, filed a complaint in writing in the district court in the name of the defendant Gaskill against the company (the Washington Water Power Company will hereafter be referred to as the company) wherein and whereby Gaskill sought to recover from the company damages for injury to certain real property in Kootenai county, containing 120 acres, by overflow thereof with water by the company by means of a dam in the Spokane river at Post Falls, and an injunction against the continuance of said damages, and that the defendant appeared and claimed that it had a lawful right to take and appropriate to its own use about 34 1/2 acres of said land under an elevation of 2,128 feet above sea level; and such proceedings were thereafter had in said cause that on August 3, 1908, the court made an order...