Stock-Growers' Bank v. Newton

• Decision Date: 11 October 1889
• Parties: STOCK-GROWERS' BANK v. NEWTON.
• Court: Colorado Supreme Court

22 P. 444

13 Colo. 245

STOCK-GROWERS' BANK v. NEWTON.

Supreme Court of Colorado

October 11, 1889

Appeal from district court, Pueblo county.

Syllabus by the Court

1. Under the Colorado Code of Procedure a cause of action for the cancellation of a deed to real property may be united with an action for possession of the same property when both causes of action affect all the parties in the same character capacity, and are directly connected with the subject-matter of litigation.

2. A party claiming a purely legal title to real property, with right of immediate possession in himself, cannot maintain the action provided by the Code for the determination of an adverse claim, estate, or interest therein, unless when he institutes the proceeding he be in possession thereof by himself or tenant. In such case he should bring an action for possession in the nature of ejectment. But if he can assert only an equitable title, he may, though out of posession have his equitable remedy, and may unite with it any appropriate cause of action through which he may secure the full and adequate relief to which he is entitled.

3. In Colorado, every interest in land, legal and equitable, is by statute made expressly subject to levy and sale under execution.

4. A judgment creditor, desiring to set aside a supposed fraudulent deed, may bring his action to test the validity thereof before attempting to subject the premises to execution; or the purchaser, after such sale, may bring his action to remove the cloud from the title by canceling the supposed fraudulent deed, and to recover possession of the premises.

5. When the trial is by the court on depositions, substantially the same as under the equity practice, and the assignments of error question the sufficiency of the evidence to support the judgment, this court must examine and weight the testimony uninfluenced by the findings of the court below upon the facts as well as upon the law.

6. The concealment of matters which the policy of the law requires should be made public, as the withholding of a deed or mortgage from record for a considerable time, is a badge of fraud; and an agreement between the grantor of a trust-deed and the beneficiary that the deed is not to be recorded as provided by law, that it may not affect the financial standing of the grantor, is express evidence of fraudulent intent. When such fraudulent agreement is carried out by concealing the existence of the trust-deed, and also by representing the credit of the grantor as good, when the parties must have known it was at best doubtful, whereby the grantor is enabled to obtain large credit from those who are misled by such representations, the evidence of fraud is conclusive.

7. When a party knowingly misleads another to his injury, as by concealment of a mortgage, or by direct misrepresentation concerning the mortgagor's financial standing, equity will not permit the mortgagee to profit by the instrument through which he has wronged others, either by its direct use or by other instruments secured in exchange therefor under a fraudulent agreement.

8. A failing debtor has a right to give, and his creditor to accept, a preference, provided it be done in good faith, in the ordinary and usual course of such business, without design, purpose, or probable tendency to mislead others to their injury.

Patton & Urmy, for appellant.

G O. Richmond, for appellee.

ELLIOTT J.

The Stock-Growers' National Bank of Pueblo was plaintiff below, and brought its action in the district court against George A. Newton, alleging in the complaint that a certain warranty deed, executed February 2, 1883, by S.E. Todd, Jr to said Newton, and also a certain bill of sale, executed at the same time by said S.E. Todd, Jr., and by Todd & Fairchild, to said Newton, were fraudulent and void as against the plaintiff. Said warranty deed purported to convey to said Newton certain real estate, to-wit, lots 15 and 16, in block 39, city and county of Pueblo, Colo., together with the improvements on lot 14 in said block, and also all the buildings, fences, sheds, machinery, and fixtures on the whole of said premises. The bill of sale purported to convey to said Newton all the personal property of every kind and nature belonging to said firm, and now in their possession at Pueblo, or in that vicinity. The complaint contained specific averments constituting the alleged fraud, and also pertinent allegations showing that plaintiff, as a creditor of Todd & Fairchild, had acquired all their title and interest in and to said property by virtue of a sheriff's deed based upon a valid judgment, execution, levy, and sale thereof, regularly and duly made. The plaintiff prayed for a cancellation of the deed and bill of sale, and for the recovery of the possession of the property therein described. A general demurrer was interposed to the complaint, which being overruled an answer and replication were filed. A referee was thereupon appointed to take all the testimony in the cause and report the same to the court, which being done the action was tried by the court, and a decree rendered dismissing the complaint. Plaintiff appeals to this court.

As defendant's counsel still insists that the complaint does not state facts sufficient to constitute a cause of action, it becomes necessary to review the ruling of the court upon the demurrer. Counsel contend that this action has a double aspect or purpose: First, to procure the cancellation of the deed under which defendant holds possession of the property in controversy; and, second, for the recovery of such possession by the plaintiff. Conceding that there are two causes of action stated in the complaint, and that either might be maintained separately, it does not follow that the two causes are improperly united, since they affect all parties in the same character and capacity, and are directly connected with the subject-matter of the litigation; besides, the improper union of causes of action is not a ground of general demurrer. In some cases the interest of a judgment debtor in lands fraudulently conveyed by him is said to be a legal, and not an equitable, asset; and that, when such interest is levied upon and sold under execution, ejectment is the appropriate remedy for the purchaser to recover possession. In this case, however, the legal title to the real estate in controversy was never in the judgment debtors, but was held in trust for them by S.E. Todd, Jr., individually. Hence the interest of the firm of Todd & Fairchild would remain an equitable one, even if the conveyance by Todd, Jr., to Newton should be adjudged fraudulent; and so, while an action at law may sometimes be an effective remedy to overcome conveyances made to defraud creditors, a suit in equity is generally a concurrent remedy, and in this case was peculiarly appropriate and necessary to afford adequate and complete relief.

It is further contended by counsel that, under the Code, the plaintiff, not being in possession of the premises, cannot maintain this action. The authorities are somewhat confusing upon this subject. The true rule undoubtedly is that a person claiming a purely legal title to real property, with right of immediate possession in himself,--as a fee-simple absolute,--cannot maintain the action provided by the Code for the determination of an adverse claim, estate, or interest therein, unless when he institutes the proceeding he be in possession thereof by himself or his tenant. The reason is obvious. Being out of possession, under such circumstances he has a complete remedy by an action for possession in the nature of ejectment, and there is no necessity for equitable relief. But where a party can only assert an equitable title to real property, though his interest may be full and complete,--as where there is some trust to be declared, or legal title to be extinguished, some instrument not void on its face to be canceled or corrected, or other obstacle to be removed before his rights can be made manifest,--he may, though out of possession, under a system of procedure like ours, have his equitable remedy, and may unite with it any appropriate cause of action through which he may secure the full and adequate relief to which he may be entitled. Hence, upon principle and authority, it is well established that a person having procured a sheriff's deed to land, based upon valid proceedings, may maintain an action to set aside and cancel a deed given by the judgment debtor before the recovery of the judgment with intent to defraud the judgment creditor; and it is not necessary that such party should be in possession of the premises at the time of instituting such action. A judgment creditor desiring to set aside a supposed fraudulent deed of real estate may bring his action therefor to test the validity of the deed before attempting to subject the premises to execution sale; or the purchaser, after such sale, may bring his action to remove the cloud from the title by canceling the supposed fraudulent deed, and to recover possession of the premises. Pom. Rem. §§ 78, 79; Lattin v. McCarty, 41 N.Y. 107; Henderson v. Dickey, 50 Mo. 167; 1 Story, Eq. Jur. § 700; 3 Pom. Eq. Jur. § 1377; Swift v. Arents, 4 Cal. 390; Harrison v. Kramer, 3 Iowa 543; Hager v. Shindler, 29 Cal. 47; Gormley v. Potter, 29 Ohio St. 597; Frakes v. Brown, 2 Blackf. 295; Gallman v. Perrie, 47 Miss. 140; Allen v. Tritch, 5 Colo. 226; Burdsall v. Waggoner, 4 Colo. 256; Orendorf v. Budlong, 12 F. 24. It is scarcely necessary to add that by section 1883, Gen. St., every interest in land, legal and equitable, is subject to levy and sale under execution in this state. The complaint is sufficient, and there was no error in overruling the demurrer.

Whether the parties,...