Lockren v. Rustan

• Citation: 9 N.D. 43,81 N.W. 60
• Parties: LOCKREN v. RUSTAN et al.
• Decision Date: 06 November 1899
• Court: North Dakota Supreme Court

9 N.D. 43

81 N.W. 60

LOCKREN

v.RUSTAN et al.¹

Supreme Court of North Dakota.

Nov. 6, 1899.

Syllabus by the Court.

1. Where the owner of real estate conveys the same to another party with intent to hinder, delay, or defraud his creditors, and for no consideration except the promise of such party to reconvey to the grantor on request, the transaction creates no trust relation between the parties thereto. Such fraudulent grantee may retain the legal and equitable title to the property as against all the world except the creditors of the grantor.

2. But, under such circumstances, a moral obligation of a high character rests upon the grantee to reconvey upon the request of the grantor, and such moral obligation furnishes a sufficient consideration to support such a reconveyance.

3. Such property, while in the hands of the grantee, would be subject to the claims of his creditors. But where no credit was given on the strength of the apparent ownership of such grantee, and where a reconveyance was made before any claims against the fraudulent grantee attached as liens upon the land, such reconveyance will be upheld as against the creditors of such fraudulent grantee.

4. The fact that the original owner knew that the reconveyance was made by his fraudulent grantee with the intent, upon his part, to hinder, delay, or defraud his creditors, will not taint the transfer, where such original owner requested the same in order to protect and preserve his property.

Appeal from district court, Walsh county; Charles J. Fisk, Judge.

Action by Carrie E. Lockren against Helge O. Rustan and others. Judgment for defendants, and plaintiff appeals. Affirmed.H. A. Libby, for appellant. Cochrane & Corliss and Swiggum & Myers, for respondents.

BARTHOLOMEW, C. J.

This action was brought to set aside deeds to a half section of land lying in Walsh county, and another half section lying in Cavalier county, which deeds were executed by the defendant Helge O. Rustan to the defendant Ole Helgeson Rustan, and also deeds of the same lands executed at the same time by Ole Helgeson Rustan to Finger O. Rustan. The plaintiff is a creditor of Helge O. Rustan, and she claims that the said deeds were given and received in fraud of her rights as such creditor, and in furtherance of a conspiracy on the part of the defendants to hinder, delay, and defraud her in the collection of her said debt. All the allegations of fraud and conspiracy in the complaint were denied by the answer. At the trial the defendants prevailed, and the case comes into this court upon plaintiff's appeal for trial anew.

The difficult questions are questions of law. The testimony is not very voluminous, and there are but few contradictions in it, and these are on minor points. The facts, as admitted by the pleadings or fairly established by the evidence, may be stated as follows: In December, 1895, plaintiff commenced an action against Helge O. Rustan to recover damages for breach of promise of marriage. In June, 1896, the case was tried, and a verdict returned for plaintiff for over $3,000. Immediately upon the coming in of the verdict, and on motion of the defendant in that case, a stay of proceedings for 90 days was entered. At that time, and for some years prior thereto, the record title of all the lands above mentioned was and had been in Helge O. Rustan. During the continuance of the stay, and on August 20, 1896, the transfers above mentioned were made. On October 2, 1896, judgment was entered on the verdict. Very soon thereafter execution issued on the judgment, and was returned nulla bona. An alias execution was issued, and levied upon this land as the land of the judgment debtor, Helge O. Rustan, and thereafter this action was brought in aid of such execution.

The family of the defendant Ole Helgeson Rustan consists of a wife and 11 children, and among the children are the defendants Helge O. and Finger O. Rustan. In 1881, Ole Helgeson Rustan, with his family, removed from the state of Minnesota to Walsh county, in this state, and he acquired the title to the Walsh county lands here in dispute under the government land laws. While resident in Minnesota he contracted quite a large indebtedness, which remained unpaid when he settled in Walsh county. He received a receiver's final receipt for 160 acres of said land on December 20, 1881, and very soon thereafter he and his wife joined in a conveyance of said land by warranty deed to one M. Raumin. Said deed was made without any consideration whatever, but with the understanding that the said Raumin should convey said land to Helge O. Rustan, the son of Ole Helgeson Rustan, and the same was so conveyed a few days thereafter by warranty deed. Helge O. Rustan was at that time a land about 13 years of age. On August 10, 1883, Ole Helgeson Rustan received the final receiver's receipt upon the other quarter section of land in Walsh county, and very soon thereafter he joined with his wife in a conveyance of the same to his brother-in-law, one Mylie. This conveyance was also without consideration, but made with the understanding that the said land should be conveyed to said Helge O. Rustan, and it was so conveyed in 1887. The avowed object of Ole Helgeson Rustan in thus placing the title to the land in his son was, as he expresses it, “to get protection until he could pay his debts.” The law would say, upon this admission, that his object was to hinder, delay, or defraud his creditors, and we will so treat it.

The Rustan family continued to reside upon said land. Ole Helgeson Rustan, the father, treated the land in all respects as if it were his own. He paid all expenses incurred in improving and cultivating the same, and received all the produce therefrom. Helge O. Rustan did not know that the title to the land was in his name until about 1890, as the testimony shows. He had executed mortgages upon some of the land, but had signed the papers at the direction of his father, without understanding what they were. But about 1890 the matter was talked over and explained, and the father told him that the land must be deeded back whenever he (the father) desired it, to which the son fully assented. In 1892 the father purchased the land in Cavalier county, paying the full purchase price himself, but had the title transferred to his son Helge, for the same fraudulent purpose that induced him to have the title to the Walsh county land placed in his son. This the son well understood at the time, and promised to convey it to the father whenever by him so requested. Such was the condition of the title and the relative rights of the parties on August 20, 1896, when the son,-he says at the request of his father,-without any money consideration whatever, conveyed all the land to his father. It should be stated that prior to this time, and prior to the bringing of the breach of promise action, Ole Helgeson Rustan had settled all his old debts, and owed nothing except what was secured. Under this state of facts, was the conveyance from son to father in fraud of the rights of the plaintiff?

It must be conceded that no such conveyance could have been enforced. There was no trust relation between these parties, either by contract or as a resulting trust or ex maleficio. Where a trust exists, it can be enforced in equity. The son held the full legal title, and he held the equitable title, as against all the world except the creditors of the father. They, so far as we know, never at any time sought to disturb the title of the son. The land in the hands of the son was subject to his debts. Had a creditor of his obtained judgment against him while the title stood in his name, the judgment would have been a lien upon the land, and no transfer to the father could have affected the lien. To that extent the grantee, in a conveyance made to hinder, delay, or defraud creditors, is the owner of the land. But, as to strangers to the conveyance, the property rights of the fraudulent grantor in the subject of the grant are superior to the property rights of the fraudulent grantee. In other words, in a contest between the creditors of the grantor and the creditors of the grantee, the former will succeed. Bank v. Lyle, 7 Lea, 431;Clark v. Rucker, 7 B. Mon. 583. This shows that the property rights of the vendor have not been extinguished. But the law, for reasons of public policy and to discourage fraudulent conveyances, will not permit him to assert them. If, then, these property rights exist; if the grantor purchased and paid for the property, and has never received anything therefor from the grantee; if the only right or equity that the grantee has in the property is his right to claim the protection of a technical rule of law that will not permit him to be attacked, not by reason of any rights in him, but solely on the ground of public policy,-it must follow that, in good conscience and morals, the grantee ought to reconvey to the grantor, if the latter so request. In Wait, Fraud. Conv. § 398, it is said: “Though a reconveyance cannot be enforced, the fraudulent vendee is said, in some of the cases, to be under a high moral and equitable obligation to restore the property. The law is not so unjust as to deny to men the right, while it is in their power to do so, to recognize and fulfill their obligations of honor and good faith; and, until the creditors of the vendee acquire actual liens upon the property, they have no legal or equitable claims in respect to it higher than or superior to those of the grantor.” See, also, Biccochi v. Casey-Swasey Co. (Tex. Sup.) 42 S. W. 963;Davis v. Graves, 29 Barb. 480;Dunn v. Whalen (Sup.) 21 N. Y. Supp. 869;Moore v. Livingston, 14 How. Prac. 1;Starr v. Wright, 20 Ohio St. 107;White v. Brocaw, 14 Ohio St. 341;Bank v. Brady, 96 Ind. 509;Sabin v. Anderson (Or.) 49 Pac. 872. There being, then, a moral obligation of the highest type resting upon the son to convey to the father, the discharge of that obligation...