Wells v. Schuster-Hax Nat. Bank

• Decision Date: 05 April 1897
• Citation: 48 P. 809,23 Colo. 534
• Parties: WELLS v. SCHUSTER-HAX NAT. BANK.
• Court: Colorado Supreme Court

48 P. 809

23 Colo. 534

WELLS v. SCHUSTER-HAX NAT. BANK.

Supreme Court of Colorado

April 5, 1897

Appeal from district court, Arapahoe county.

Action by the Schuster-Hax National Bank against Eddie Elvira Wells. From a judgment in favor of plaintiff, defendant appeals. Affirmed.

Wells, Taylor & Taylor, for appellant.

Wolcott & Vaile, for appellee.

CAMPBELL J.

The complaint in this action is in the nature of a creditors' bill to set aside an alleged fraudulent conveyance, and subject the property so conveyed to the satisfaction of the judgment. In August, 1891, a judgment was obtained in the district court of Arapahoe county, Colo., by the Schuster-Hax National Bank against Isaac T. Hosea for about $8,000, and the property in controversy here was then impressed with the lien thereof. The present action to subject this property to the satisfaction of that judgment was brought in March, 1892 and the cause of action was based upon the prior judgment in the same court. While the present action was pending, and in July, 1892, suit upon the judgment rendered in 1891 in Colorado was brought in the circuit court of Buchanan county Mo., and a money judgment there obtained against Hosea, upon which payments have been made, leaving, however, a balance due at the time the present action was begun. The obtaining of this second judgment is set up as a defense by a supplemental answer filed by the defendant in September 1893. Upon is sues joined the trial court made findings in favor of the plaintiff, and ordered the property sold and applied upon the judgment. The propositions upon which the appellant here (defendant below) relies for reversal are: First, plaintiff showed no title to assail the conveyance in question; second, the district court erred in sustaining the demurrer to the defendant's supplemental answer; third, the evidence fails to show such a case as entitles the plaintiff to the relief prayed for.

As to the first proposition, before this action was begun, Hosea the judgment debtor, in conformity with the laws of Missouri (in which state both he and plaintiff resided), conveyed all of his estate for the benefit of his creditors. The assignee accepted the trust, and was proceeding therewith. This being true, it is argued that only the assignee could institute this action to assail the conveyance now brought in question, even if the same was impeachable. To this are cited Voorhees v. Carpenter, 127 Ind. 300, 26 N.E. 838; Freem. Ex'ns, § 431, note 5. At the common law an assignee under an assignment for the benefit of creditors took only that interest in the property which the debtor had at the time of the assignment. From this it follows that property previously conveyed, though in fraud of creditors, did not pass, and the creditors, not the assignee, were the ones to sue to set it aside. 1 Am. & Eng. Enc. Law, 854; Heinrichs v. Woods, 7 Mo.App. 236; Roan v. Winn, 93 Mo. 503, 4 S.W. 736. Though this equitable interest may be sold under execution sued out under the first judgment, this does not preclude the creditor from first getting an adjudication as to the debtor's interest therein. O'Connell v. Taney, 16 Colo. 353, 27 P. 888. The appellant, however, contends that by sections 14, 18, pp. 46, 47, Sess. Laws 1885 (1 Mills' Ann. St. §§ 182, 186), in this state the assignee, and not the creditor, has the sole right to demand and sue for the property fraudulently conveyed before the date of the assignment; and we are told that this court, in the absence of proof to the contrary, will presume that the law of Missouri in this particular is the same as our own. In Wolf v. Burke, 18 Colo. 264, 32 P. 427, this court has expressly held to the contrary, and, if presumptions are to govern, they would be that the common law still prevails in Missouri. If it does, the creditor in this case would have the right to institute this action. We are not called upon to determine what the assignee's rights are by the law of this state, for under the decisions of the courts of review of Missouri, supra, as well as the presumption which this court must indulge, the creditor, not the assignee, has the right to bring this action. Kermott v. Ayer, 11 Mich. 181; Ellis v. Maxson, 19 Mich. 186.

Second. The appellant contends that, when the creditor recovered the judgment in the Missouri court upon the prior Colorado judgment, the latter became merged in the former, and thereafter was extinguished for all purposes whatever. It has been expressly held in Gould v. Hayden, 63 Ind. 443, that a judgment recovered in a court of one state upon a judgment previously rendered in a court of a sister state merges the latter. Freem. Judgm. (4th Ed.) § 216, approves this view, and to the same effect is the text in 15 Am. & Eng. Enc. Law, 336. The contrary doctrine is announced in other authorities, and proceeds upon the theory originally given for the rule that merger takes place only where a security or indebtedness of an inferior passes into one of a superior degree. Weeks v. Pearson, 5 N.H. 324; Mumford v. Stocker, 1 Cow. 178; Bates v. Lyons, 7 Paige, 85; 2 Black, Judgm. § 864; Hogg v. Charlton, 25 Pa. St. 200; McLean v. McLean, 90 N.C. 530; Andrews v. Smith, 9 Wend. 54. It is said, however, that the later authorities predicate this doctrine of merger upon the ground that the allowance of a new suit is superfluous, and a vexatious encouragement to litigation injurious to the defendant, and of no benefit to the plaintiff. Without further pursuing the inquiry, we content ourselves by saying that it seems more in consonance with principle to base the doctrine upon the reason originally given for its establishment; and that, so long as the indebtedness is unsatisfied, successive suits in different states may be prosecuted. But, whatever be the correct general rule, there are numerous exceptions to and qualifications of it, and it has been said that it should not be allowed to prevail to accomplish manifest injustice. Freem. Judgm. § 223 et seq.; Lawton v. Perry, 40 S.C. 255, 274, 18 S.E. 861; 2 Black, Judgm. 677. Neither does the doctrine apply unless the identical cause of action has passed into judgment, and the object is the same in both actions in a suit between the same parties or their privies. Id. 674; 1 Freem. Judgm. § 216. See, also, Barnes v. Beighly, 9 Colo. 475-481, 12 P. 906. In the Missouri case the action was between the judgment creditor and the judgment debtor. The subject-matter was the Colorado judgment. The cause of action was the failure and refusal of the debtor to pay it. The object of the action was to recover a money judgment, apparently that it might prorate with the claims of other creditors under the assignment. In the case at bar the suit is between the judgment creditor and the grantee of the debtor. The subject-matter is the same as in the Missouri case, but the cause of action here is the fraud of the judgment debtor in conveying the property, and the concurring legal fraud of the grantee in withdrawing it from the lien of the judgment. The object of the action is not to recover another money judgment,--indeed, such a general judgment could not be rendered in this character of action,--but merely to subject the property fraudulently conveyed to the satisfaction of the indebtedness represented by the former judgment. Barnes v. Beighly, supra. Under all the authorities, so far as we have examined, and under the facts of this case, the prior Colorado judgment may constitute the evidence and the basis to support the present action. See, further, in support of the conclusions reached upon this branch of the case: Mulock v. Wilson, 19 Colo. 296, 35 P. 532; Arnett v. Coffey, 1 Colo.App. 34, 27 P. 614; Bank v. Brown, 112 Ind. 474, 14 N.E. 358; Bank v. Townsend, 114 Ind. 534, 17 N.E. 116; Jackson v. Shaffer, 11 Johns. * 513; Carter v. Colman, 12 Ired. 274; Nickerson v. Stage Co., 10 Cal. 520; Story, Confl. Laws (Bigelow's 8th Ed.) § 599a.

The last proposition is that the proof was insufficient to make out the alleged fraud. That the conveyance was voluntary, and that Hosea was, at the time, largely indebted to plaintiff are conceded facts. The deed was made during the first part of January, 1891, and was intended as a settlement by the father for his daughter. H...