HEDDEN v. WALDECK

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District Court of Appeal, Third District, California.

HEDDEN v. WALDECK et al.†

WRIGHT et al. v. HEDDEN et al.

Civ. 5772.

Decided: February 27, 1937

J. Marion Wright, of Los Angeles, in pro. per. Paul A. Tschirigi, of Los Angeles, for respondent.

The defendant and cross–complainant, J. Marion Wright, has appealed from a judgment quieting title in plaintiff to an undivided three–fourths interest in 920 acres of grazing land in Tulare county.

December 29, 1933, a complaint drawn in the usual form was filed in this action to quiet title. The defendants answered the complaint, denying the allegations thereof. The appellant, J. Marion Wright, and wife, also filed a cross–complaint, which is couched in five separate counts, in which they allege that they are the owners of the property which was conveyed for a valuable consideration by Fred A. Waldeck, May 2, 1928. The plaintiff answered this cross–complaint, admitting that Waldeck was the former owner of the land and that he executed the alleged deed of conveyance to his son–in–law, J. Marion Wright, but affirmatively alleges that the deed was executed without consideration for the purpose of defrauding creditors. The circumstances of the alleged fraud are specifically recited. Upon those issues the cause was tried. The court adopted findings in favor of the plaintiff, determining that the purported deed of conveyance was executed without consideration for the purpose of defrauding the creditors of the grantor and that it was therefore void; that the plaintiff is the owner and entitled to possession of an undivided three–fourths interest in the 920–acre tract of grazing land in Tulare county. It was also determined that Alice M. Wright was the owner and entitled to the remaining one–fourth interest in the ranch. From this judgment the defendant J. Marion Wright, has appealed.

The appellant contends that the findings and judgment are not supported by the evidence in regard to the alleged fraudulent conveyance to defeat creditors; that the court erred in receiving evidence of the fraud, since it was not specifically alleged in the original complaint to quiet title; that the deed to appellant was erroneously set aside, since the transfer of title amounted to a mere preference of creditors; and that the court erred in not quieting title in plaintiff subject to a lien upon the property to secure the indebtedness due to appellant.

The issues regarding the asserted conveyances of title to the property without consideration and for the purpose of defrauding creditors are adequately pleaded. It is true that the complaint is drawn in the usual form of a suit to quiet title. It merely asserts title in the plaintiff and alleges that the defendants claim some interest in the property which is without merit and prays that they be required to disclose the nature of their claims. The answer formally denies the plaintiff's claim of title and asserts that “J. Marion Wright and Alice M. Wright are the owners of all of said property.” A cross–complaint which was filed by Mr. and Mrs. Wright affirmatively sets forth the nature of their claim of title. This cross–complaint affirmatively alleges that for a valuable consideration the property was deeded to them and George Beebe, jointly, by Fred A. Waldeck, May 2, 1928, and that Beebe conveyed his interest in the property to J. Marion Wright, May 19, 1930; that Waldeck, for a valuable consideration, also deeded an undivided one–fourth interest in the 920–acre tract to Benjamin Mead, who subsequently conveyed his interest therein to Alice M. Wright, August 10, 1933; that Alice M. Wright is the owner of an undivided one–fourth interest in the property and that she and her husband own the remaining undivided three–fourths interest in the property; that in addition to their title by deeds, J. Marion Wright acquired title to the remaining three–fourths interest in the property by adverse possession; that the cross–defendants assert some interest in the property and the cross–complaint demands that they be required to disclose the nature of their claims.

To this cross–complaint the plaintiff, Hedden, filed an answer in which he denies the material allegations thereof and affirmatively alleges, in an amendment thereto, that the deeds upon which the appellant relies in support of his asserted title to the property were executed and delivered without consideration and without the intention to thereby convey title to the property, and on the contrary, that the deeds were executed and delivered to J. Marion Wright and his wife, Alice M. Wright, who are respectively the daughter and the son–in–law of the grantor, Fred A. Waldeck, with the intention of defrauding the plaintiff, who was then a creditor of the grantor. It is further alleged in this amended answer to the cross–complaint that the parties to those deeds knew that the grantor possessed no property other than this ranch with which to satisfy an anticipated judgment in a suit in assumpsit which was then pending between this plaintiff and Waldeck, in which suit a judgment was subsequently rendered against him for the sum of $6,000, and that the conveyance was made to thereby defraud the creditor Hedden.

The cross–complaint constitutes an approved pleading in a suit to quiet title. It not only sets out the nature of the title to the property upon which the defendants and cross–complainants rely, but it alleges new matter and asserts facts upon which they ask for affirmative relief denying plaintiff's claim and quieting title to the property in them. In reply to this new matter the plaintiff and cross–defendant, Hedden, specifically and properly alleges that the deeds in question were executed without consideration for the purpose of defrauding creditors. This raises the direct issue of the validity of the deeds upon which the appellant relies. That issue is adequately pleaded in the answer to the cross–complaint with particularity sufficient to meet the requirements of the law with respect to pleading an alleged conveyance of property with the intention to defraud creditors. Adams v. Bell, 5 Cal.(2d) 697, 700, 56 P. (2d) 208; Rossen v. Villanueva, 175 Cal. 632, 634, 166 P. 1004, 1005. In the authority last cited it is said with respect to the particularity required in pleading the transfer of property to defraud creditors: “It is familiar law that a pleading which merely alleges in general terms that an act was fraudulently done will not be held good. Fraud, for purposes of pleading, is a legal conclusion. But the intent ‘to delay or defraud’ a creditor is a question of fact (Civ.Code, § 3442), and may be pleaded in so many words, without stating the evidence or the specific facts which go to substantiate the charge (20 Cyc. 736; Threlkel v. Scott, 4 Cal.Unrep. 346, 34 P. 851; Anderson v. Bank of Lassen County, 140 Cal. 695, 74 P. 287).”

The cases cited by the appellant in support of his contention that the alleged transfer of title with the intent to defraud creditors is not adequately pleaded may be distinguished from the case at bar for the reason that it appears there were no cross–complaints or other pleadings in those cases which attempted to set up in any form the alleged invalidity of conveyances on the ground that they were executed to defraud creditors. In the present case the cross–complaint is very specific in that regard.

We are of the opinion the judgment and findings of the court to the effect that the deeds of conveyance, upon which the appellant relies, were executed and delivered without consideration and for the purpose of defrauding Fred F. Hedden, a creditor of Waldeck, and that they are therefore void and should be set aside, are sufficiently supported by the evidence. The court found that this respondent recovered judgment for the sum of $6,000 against Fred A. Waldeck in a suit in assumpsit, March 25, 1929, which was not paid; that the parties to the deeds of conveyance which are involved in this appeal all knew they were executed and delivered without consideration for the purpose of defeating that judgment; that the judgment debtor possessed no other property with which to satisfy the judgment, and that upon execution issued and proceedings duly had in the assumpsit suit all of the title of Fred A. Waldeck in and to the 920–acre tract of land in Tulare county was conveyed at sheriff's sale to the respondent June 20, 1931.

The court quieted title to the undivided one–fourth interest in the property in Alice M. Wright, the wife of appellant. That feature of the case is not involved in this appeal.

There is evidence to show that the appellant is the son–in–law of Fred A. Waldeck, the common source of title to the property which is involved in this appeal; that Waldeck was possessed of no other property with which to satisfy his debts; that while a suit in assumpsit was pending between the plaintiff and Waldeck, in which a judgment for $6,000 was subsequently rendered against Waldeck, and in anticipation of that result of the litigation, Waldeck conveyed without consideration all of his interest in the land to the appellant and his wife with the purpose of defeating the judgment; that all of the parties to that transfer of title knew it was conveyed without consideration to defraud creditors; that execution was duly issued in the assumpsit case and the entire interest in the land was regularly transferred by the officer at sheriff's sale to the respondent, Hedden, in satisfaction of the judgment, and that the plaintiff is the owner of an undivided three–fourths interest in the 920–acre tract of land in Tulare county, by virtue of the sheriff's sale of property, and therefore is entitled to the possession thereof.

It is true that a conveyance is not necessarily fraudulent when it is made in good faith, even though it constitutes a preference of creditors. But the fraudulent intention may be established by the circumstances surrounding the transaction. One may be deemed to be a creditor entitled to challenge a conveyance of property on the ground that the deed was executed to defeat creditors, even though the suit to establish his claim may be pending at the time of the transfer and that a judgment therein had not yet been rendered. A creditor is one in whose favor an obligation exists, by reason of which he is, or may become, entitled to the payment of money. Section 3430, Civ.Code; Withrow v. National Surety Co., 122 Cal.App. 242, 10 P.(2d) 83. The circumstances in the present case which support the finding that the property was conveyed without consideration for the purpose of defrauding creditors include the facts that Waldeck conveyed 920 acres of land worth approximately $10,000 to his son–in–law, while a suit was pending in which a judgment was subsequently rendered against him for the sum of $6,000 in favor of Hedden. The son–in–law was also an attorney. It is claimed that the land was conveyed to him in payment of attorney's fees for representing Waldeck in certain litigation. The record shows that the appellant received over $2,900 from Waldeck during that litigation, some of which it is claimed was for costs of suit. The court found, in effect, that the fees of appellant's attorney had been paid, for it specifically found that the property was conveyed without consideration. From evidence of the services performed, the court was authorized to determine the value of his legal services. City of Los Angeles v. Los Angeles Inyo Farms Co., 134 Cal.App. 268, 274, 25 P.(2d) 224. There is evidence that the three–fourths interest in the land which is involved in this appeal was worth $7,500. From these, and other facts disclosed by the record, the court was justified in finding that the property was conveyed without consideration for the purpose of defrauding creditors.

Assuming, without so deciding, that the grantor of the real property was indebted to the appellant for counsel fees at the time the conveyance was executed, that fact is not conclusive of the validity of the transfer. A conveyance of property is rendered void when it appears that it was executed with intent to defraud creditors, even though it may have been accompanied with a valuable and adequate consideration. Rossen v. Villanueva, 175 Cal. 632, 635, 166 P. 1004; Swinford v. Rogers, 23 Cal. 233, 235; 27 C.J. 519, § 197. In the text last cited it is said in that regard: “A conveyance or transfer, whether founded on a valuable and adequate consideration or not, if entered into by the parties thereto with the intent to hinder, delay, or defraud creditors, is void as to them.”

In the Swinford Case, supra, it is likewise said: “The law is well settled, that a conveyance made with intent to defraud creditors is void though there may have been a full and valuable consideration paid therefor. The fraud taints and vitiates it. (1 Story's Eq., § 369.)”

The court did not err in quieting title to the undivided three–fourths interest in the real property in plaintiff, without providing in the judgment for an equitable lien thereon to secure an indebtedness claimed to be due the appellant. No right, legal or equitable, may be supported by a void conveyance of property which is executed between the parties with the intent to defraud creditors. Butler v. San Francisco Gas & Electric Co., 168 Cal. 32, 39, 141 P. 818; Burke v. Koch, 75 Cal. 356, 17 P. 228.

It is not reversible error that the court failed to specifically find that the appellant did not acquire title to the undivided three–fourths interest in the real property by adverse possession. It is true the appellant did allege in his cross–complaint that he acquired title to the land by adverse possession. The court did find that he had no interest in the property. On the contrary, the court further found that the plaintiff was the owner of the undivided three–fourths interest in the land and entitled to the possession thereof. In accordance with the last–mentioned findings and the judgment it is apparent that a specific finding on the subject of adverse possession would be bound to be adverse to the appellant. The undisputed evidence is that the appellant received his deed under which he claimed title, May 2, 1928. We are directed to no evidence that he ever occupied or exercised acts of ownership over it prior to that date. The land was sold to the respondent at sheriff's sale under execution June 20, 1931. There is no evidence that the appellant conformed to the provisions of section 325 of the Code of Civil Procedure so as to make it possible for him to have acquired title by adverse possession. The findings which were adopted are therefore tantamount to an adverse finding on that subject, and it is not reversible error to have failed to specifically find that the appellant did not acquire title by adverse possession. Eastman v. Piper, 68 Cal.App. 554, 569, 229 P. 1002.

The judgment is affirmed.

Mr. Justice THOMPSON delivered the opinion of the court.

We concur: PULLEN, P. J.; PLUMMER, J.