Tibbetts v. Terrill
| Decision Date | 06 July 1908 |
| Parties | TIBBETTS v. TERRILL et al. |
| Court | Colorado Supreme Court |
Appeal from District Court, Rio Blanco County; John T. Shumate Judge.
Suit by Walter E. Tibbetts against Louise C. Terrill and others to subject property fraudulently conveyed to a judgment. From a judgment for defendants, plaintiff appeals. Reversed and remanded, with instructions.
Rogers, Cuthbert & Ellis, for appellant.
E. A Martin, for appellees.
In the year 1900 David P. Terrill was indebted to appellant in the sum of $6,378 and had no money with which to pay the indebtedness. He had a claim against the United States government, however, and agreed to pay this indebtedness out of the money obtained from the government as soon as he should receive it. He obtained the money from the government, but, instead of liquidating the indebtedness he purchased a ranch in Rio Blanco county. Appellant, then, upon the 17th of September, 1900, brought suit against him, and recovered a judgment in the sum of $6,378. After this action was brought and before judgment was rendered the defendant David P. Terrill had a conversation with an attorney named John L. Gray, in which defendant stated to Gray that he was not going to defend the action. Gray advised him to defend it, as otherwise judgment would be taken against him. About the time the action was commenced, David P. Terrill had a conversation with W. L. Smith at the Terrill ranch in the presence of Louise C. Terrill, David P. Terrill's wife, in which the matter of his indebtedness to appellant was spoken of, and in this conversation defendant David P. Terrill stated that he was too 'foxy' for Tibbetts, and that he would deed his property to Gray; that he would do this to protect himself. In a later conversation he stated to Smith that he had sold the ranch, and reiterated his previous statement, namely, that he was going to be too 'foxy' for Tibbetts; that he had deeded the ranch to Gray; that Gray had deeded it to Mrs. Terrill, and she had deeded it to defendant Alley. The first of these conversations with Smith took place in November, 1900. On the 5th of January, 1901, the judgment was rendered. Upon the 22d of November, 1900, the defendant David P. Terrill conveyed the property to Gray, together with the household furniture and certain other personal property. There was no money consideration paid for this transfer by the grantee Gray, but he gave his note to Terrill, and upon the 31st day of December, 1900, conveyed the property to defendant Louise C. Terrill upon the request of David P. Terrill, receiving as the sole consideration therefor the promissory note which he had theretofore executed to defendant David P. Terrill; this promissory note being returned to Gray on receipt of the deed by David P. Terrill. At no time did defendant Gray take possession of the ranch, of the household furniture, or of any of the property conveyed to him by David P. Terrill. On the 18th of January, 1901, a transcript of the judgment obtained by appellant against David P. Terrill was filed and recorded in the office of the county clerk of Rio Blanco county. Upon the 30th of April, 1901, an execution which had theretofore been issued upon the judgment was levied upon the ranch property, and thereafter defendant Louise C. Terrill brought an action in the district court of Arapahoe county, alleging that she was the owner of the property, and asking that the sheriff be enjoined from selling it under the execution. An interlocutory order was made in that action, recalling the execution and vacating the levy. This action does not appear to have been prosecuted to final judgment, and no finding was made therein as to who was the real owner of the property. Upon the 5th of September, 1901, Louise C. Terrill caused the word 'homestead' to be entered upon the margin of the record of the deed wherein Gray attempted to convey the property to her. In the action brought by Mrs. Terrill to set aside the levy, the appellant filed a cross-complaint, wherein he alleged the manner in which Mrs. Terrill obtained the deed to the property, and averred that the whole transaction wherein Terrill conveyed the property to Gray and Gray to Mrs. Terrill was fraudulent and void, was without consideration, and was done for the purpose of defrauding the appellant, and hindering and delaying him in the collection of his judgment. Upon the 9th of September a notice of lis pendens was filed with the clerk and recorder of Rio Blanco county by appellant, in which he called attention to the litigation commenced by Mrs. Terrill and his cross-complaint making the averments above set forth. Upon the 3d of October, 1901, Mrs. Terrill sold this property, including the ranch, household furniture, and the hay and other personal property located upon the ranch to defendant Alley. A contract of sale was prepared by E. A. Martin, an attorney at law, who was Mrs. Terrill's attorney in the action, hereinbefore mentioned as having been brought by her. According to the terms of this contract, the defendant Alley had deposited in the bank $1,000, and Mrs. Terrill had deposited the deed from herself to Alley, which were to remain in the bank until the abstract of title could be prepared and examined, and Mrs. Terrill could give good title to the property. The abstract, having been prepared, was examined by Alley and by Martin on his behalf. This abstract contained, among other things, a memoranda of the deeds from Terrill to Gray and from Gray to Mrs. Terrill, the levy of the execution, the vacation of the levy, and the notice of lis pendens. These matters were spoken of between defendant Alley and Martin, the attorney for Mrs. Terrill and for Alley, and defendant was assured by Martin that the title was good and that there was no merit in the contention of appellant. Alley then purchased the property, paying $6,000 therefor.
This action was then instituted, in which it is contended that the conveyances by which Mrs. Terrill obtained the property were fraudulent and void, because they were made for the purpose of defrauding appellant, and hindering and delaying him in the collection of his judgment, and that defendant Alley had notice of the defects in the title. It was asked that the conveyance from Mrs. Terrill to Alley be set aside and held for naught, and that the appellant might again levy his execution upon the property and sell it in satisfaction of his judgment. The Terrills did not answer. Defendant Gray answered, denying the fraud. Defendant Alley answered, denying the fraud, and denying any knowledge upon his part of the fraudulent character of the previous transfers, if they were fraudulent. Judgment was rendered for the defendants, and plaintiff appeals.
There is no conflict in the testimony, and the sole question presented to us is as to whether or not the transfer to Mrs Terrill was fraudulent, and, if so, whether or not the defendant Alley had such notice of its fraudulent character as would prevent him from obtaining good title as against the judgment creditor. It must also be determined as to what effect the entry of the homestead' by Mrs. Terrill had upon the situation. In any view that we take of the matter, the conveyance to Mrs. Terrill was void as against the creditors of Terrill. The utmost fairness is required in dealings between husband and wife so far as they affect the rights of creditors. In the case of dealings between husband and wife 'whose relations are most intimate and confidential, they are ordinarily bound, whenever a transaction between them is impeached or attacked, to show in the clearest and most favorable light an honesty of purpose, and an absence of all intent to hinder or defraud those who may be the creditors of the husband.' First Nat. Bank v. Kavanagh, 7 Colo.App. 160, 43 P. 217. We find in this case that the husband in the presence of his wife boasted that he was too 'foxy' for his creditor, that he intended to convey the property to Gray so that his creditor could never get it; and again boasted that he had already caused the property to the conveyed to Mrs. Terrill, and that the plaintiff would be unable to satisfy his judgment. According to the testimony, the only consideration which Gray received for his conveyance to Mrs. Terrill was the promissory note which he had theretofore given to Terrill for the conveyance to him. This note, being made to Terrill in consideration of the conveyance from Terrill, was Terrill's property, in which his wife had no interest, and, when he delivered the note to Gray in consideration of the conveyance of the property to Mrs. Terrill, then Mrs. Terrill held the property in trust for the creditors of her husband. When one purchases property with the funds of another or holds such property for the use of another, it is a fraud upon the creditors of...
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