SHORE v. SHORE

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District Court of Appeal, Fourth District, California.

SHORE v. SHORE (two cases).*

Civ. 4683, 4684.

Decided: April 01, 1954

Siemon & Siemon, Bakersfield, for appellant. Kendall & Howell, Bakersfield, for respondent.

These two actions were tried together and separate judgments were rendered in each case. Defendant appealed. Action No. 4683 was for partition of certain described household personal property then in the possession of the defendant.

Action No. 4684 was brought to cancel a deed and declare a trust in an undivided one-half interest in certain real property held by defendant which one-half interest plaintiff conveyed to defendant under some claimed agreement that it would be held by her and later re-deeded to him after certain unliquidated claims were determined.

Plaintiff Archie B. Shore and defendant Alberta Mae Shore lived together for about 14 years as husband and wife. A short time before the commencement of these actions Mrs. Shore brought an action for annulment against Archie B. Shore upon the ground that there was a void marriage by reason of the fact that Mr. Shore had a former wife living at the time from whom he had not been legally divorced. Mr. Shore filed an answer and cross-complaint and also sought an annulment upon the same ground. Both set up the fact that they had acquired certain real and personal property during the time they cohabited with each other. After the trial Mrs. Shore obtained a decree of annulment and was awarded the custody of their two children, the issue of this relationship. The decree made provision for their support. In the decree the court specifically refused to make any disposition of the property on the grounds that the parties were ‘in pari delicto’ in respect to their purported marriage. The pleadings indicate that plaintiff herein had been previously married and had purportedly obtained a so-called Mexican divorce which proved to be invalid, and then married defendant in Mexico; and that both knew or should have known the Mexican divorce was not valid. After the entry of this decree plaintiff, one month later, brought these actions and defendant pleaded as a defense the former judgment as being res judicata in reference to the property involved and alleged ownership and possession of it.

On appeal from the judgment entered in favor of plaintiff in each case, defendant reaffirms the defense of res judicata and claims that plaintiff was estopped from recovering possession of the property by reason of his own fraudulent transfer of his interest to defendant, citing Tognazzi v. Wilhelm, 6 Cal.2d 123, 125, 56 P.2d 1227; and Anderson v. Nelson, 83 Cal.App. 1, 6, 256 P. 294; that the evidence and findings are insufficient to support the judgment in either case; that under the theory that the plea of res judicata was ignored by the court, and since each party was equally at fault, the law favors the party who is admittedly in possession, and accordingly the parties will be left in the position where they were found; that since the court found the parties were ‘in pari delicto’ it in effect denied either one any relief in regard to their property rights, and accordingly the court may not subsequently, in an independent action between them, make any different disposal of the property in question, citing such cases as Oakley v. Oakley, 82 Cal.App.2d 188, 185 P.2d 848; Baskett v. Crook, 86 Cal.App.2d 355, 359, 195 P.2d 39; Ideal Hardware & Supply Co. v. Department of Employment, 114 Cal.App.2d 443, 250 P.2d 353; Olwell v. Hopkins, 28 Cal.2d 147, 168 P.2d 972; Vallera v. Vallera, 21 Cal.2d 681, 134 P.2d 761; and Taylor v. Taylor, 66 Cal.App.2d 390, 152 P.2d 480.

In this connection it is argued that a judgment is a bar not only to rights asserted but also to rights which might have been asserted, citing Krier v. Krier, 28 Cal.2d 841, 843, 172 P.2d 681; and Section 1910, Code of Civil Procedure.

As to the estoppel alleged, defendant claims the one-half interest in the real property was deeded to her as a gift, as her sole and separate property; and that the testimony of plaintiff that defendant agreed to reconvey it to plaintiff under the circumstances was not sufficient to establish a trust; that in order to justify a court in determining, from oral testimony, that a deed which on its face purports to convey land absolutely in fee simply, was intended to be something different, such testimony must be clear, satisfactory and convincing, citing such cases as Sherman v. Sandell, 106 Cal. 373, 39 P. 797; and Pailhe v. Pailhe, 113 Cal.App.2d 53, 247 P.2d 838.

A similar contention is made as to the personal property, i. e., that the evidence in support of the finding is insufficient to show that plaintiff had a one-half interest therein which was subject to such a decree as here involved.

It is a general rule that denial of relief for want of jurisdiction is not a judgment on the merits and no question other than the jurisdictional one is concluded by such a judgment. It will not prevent the plaintiff from subsequently prosecuting his action in any court authorized to entertain and determine it. Freeman on Judgments, 5th Ed., Vol. 2, p. 1546; Slaker v. McCormick-Saeltzer Co., 179 Cal. 387, 389, 177 P. 155; Uhl v. Uhl, 52 Cal. 250; Stark v. Coker, 20 Cal.2d 839, 129 P.2d 390.

To determine the character and scope of an adjudication, the entire record of the former action must be examined. Although there is a conflict between counsel as to whether all the property here involved was there involved, an examination of the files in that action, which were received in evidence, indicates that Mrs. Shore there alleged that the property there involved, both real and personal, was her separate property and that there was other community property there set up which was community property of the parties. That property is not here involved. Other and additional property is there alleged to be her separate property. Mr. Shore, in his answer, alleged that the property here involved, both real and personal, was community property and jointly acquired by them. Some additional community property was also alleged. He denied that any of the property alleged by Mrs. Shore to be her separate property was such, and alleged that it was community property.

Whether a court, under certain circumstances in an annulment proceeding, may dispose of property acquired by the husband and wife may be open to question. In Partrick v. Partrick, 112 Cal.App.2d 107, 245 P.2d 704, this court affirmed the lower court in a decree annulling a putative marriage, and dividing the property acquired by the parties where the evidence sustained the finding that both parties in good faith believed the marriage to be valid, and they had agreed to pool their earnings and share equally in all property resulting therefrom. To the same effect is Vallera v. Vallera, 21 Cal.2d 681, 134 P.2d 761, where it is said (quoting from the syllabus):

‘A woman living with a man as his wife but with no genuine belief that she is legally married to him does not acquire by reason of cohabitation alone the rights of a cotenant in his earnings and accumulations during the period of their relationship’.

It also held that lack of good faith would not preclude her from recovering property to which she would otherwise be entitled; that if a man and woman lived together as husband and wife under an agreement to pool their earnings and share equally in their joint accumulations, equity will protect the interest of each in such property, and that even in the absence of an express agreement to that effect, the woman would be entitled to share in the property jointly accumulated, in the proportion that her funds contributed toward its acquisition. See, also, Sanguinetti v. Sanguinetti, 9 Cal.2d 95, 69 P.2d 845, 111 A.L.R. 342, where it is said (quoting from the syllabus):

‘In an action for divorce or for annulment, in the event the marriage sought to be dissolved was not validly contracted, it is sound practice to dispose of the property rights of the parties in the same action, thus avoiding a multiplicity of suits.’

In Uhl v. Uhl, 52 Cal. 250, it was held that the plaintiff cannot, in one complaint, unite a cause of action to annul a marriage by reason of the former marriage of the plaintiff to one who is still alive, with a cause of action to quiet title to her separate property, in which the defendant falsely claims an interest.

In Wetmore v. Wetmore, 40 Or. 332, 67 P. 98, it was held that in an action for divorce plaintiff cannot compel a conveyance from defendant of land alleged to have been purchased with complainant's money, it not being an incident to the action. See, also, Houston v. Timmerman, 17 Or. 499, 21 P. 1037, 4 L.R.A. 716, 11 Am.St.Rep. 848; and Peck v. Peck, 66 Mich. 586, 33 N.W. 893. Here, the court specifically found that since the parties were in pari delicto, it ‘makes no finding concerning the character of the property’ mentioned in the pleadings.

Whether the court had jurisdiction in the annulment proceeding to order a reconveyance and division of the property acquired by the parties under the circumstances related, and what were its reasons therefor, we think, becomes immaterial since it specifically refused to make such disposition in that proceeding by such decree. That decree has become final and it is binding on both parties. There was no issue determined in this respect and accordingly the decree as entered may not be set up as res judicata in a subsequent action.

The subsequent actions involving the rights of the parties in and to the property in question and whether a trust was created in reference to the real property were authorized under the decision of McWhorter v. McWhorter, 99 Cal.App. 293, 278 P. 454, 455, and cases cited, where it is said:

‘The chief contention of the appellant is that the evidence fails to support the findings of the court to the effect that the plaintiff lived and cohabited with the defendant ‘in good faith’ believing that their relationship was equivalent to what has been termed a common-law marriage. * * *

‘We are of the opinion that it is entirely immaterial, so far as the determination of this appeal is concerned, whether they lived together in good faith as husband and wife, or otherwise. * * * The question of the validity of the marriage in no way affects the character of the property of the relative rights of ownership.’

In Baskett v. Crook, supra, the court found that the parties lived together as husband and wife and had no agreement or arrangement as to their property rights. There the husband had no property. He initiated an action to establish an interest in his wife's real and personal property held in her name. The court held that since there was no agreement concerning their property rights, plaintiff could not recover that property but it did equally divide certain war bonds purchased by the parties in their joint names.

In the instant case plaintiff testified that he purchased the furnishings, a residence, and the 12 units here involved, on April 8, 1950; that the title thereto was taken in his name and that of defendant under a joint tenancy bill of sale and joint tenancy deed; that the apartments were rented at the time of their separation; that Mrs. Shore received the rentals therefor; that he made a demand for the furniture and she refused; that a few days after the property was acquired, he and defendant talked over troubles he and his partner were having with one White who was trying to implicate them as partners or joint venturers with White in a building project; that in fact they were not such partners with White and so he thought the thing to do, under the circumstances, was to put the title to the apartments and all the things he owned ‘in her name’ temporarily and hold it in trust, and ‘when this was over to put them back in my name like they always was'. The evidence indicates that defendant agreed to do this. Mr. Shore was actually sued as such a partner or joint venturer with White but the action was subsequently dismissed as to Shore.

During their separation defendant opened a separate bank account to take care of the receipts and payments on the trust deed on the apartment house, and while the action against them was pending plaintiff executed a grant deed of his interest in the real property to Mrs. Shore under the conditions above set forth, but no bill of sale of the furniture was executed by him. There was a loan of $2500 on the real property. Plaintiff testified that since they bought the real property purely as an investment, he wanted to turn it as soon as possible and did not want any clouds on the title by virtue of the suit.

Mrs. Shore testified plaintiff placed the title to the property in her name as her own separate property, as a gift to her for her protection and that of the children, and that the furniture went with it; that she made the payments on the trust deed and furniture from the income; that she also worked in plaintiff's real estate office on occasions; and that nothing was said about her holding it in trust for him. She admitted receiving $800 paid to her by plaintiff to apply on the trust deed payments but claimed plaintiff owed that to her for money he had borrowed from the rental funds. She produced a neighbor as a witness (grantor of the real property) who appeared quite friendly to defendant but unfriendly to plaintiff. He testified he heard plaintiff remark, at the time he purchased the property, that plaintiff bought the apartments and furniture for defendant and the boys. Another witness testified that after plaintiff and defendant quarreled plaintiff told her he had given defendant the property so she and the boys would be taken care of but that he now wanted it back. Plaintiff denied any such conversation and placed in evidence the escrow instructions signed by both plaintiff and defendant requiring that title be vested in them as joint tenants. He testified he put up the cash down payment required from his business account and they traded in a residence they owned as joint tenants; that they took possession of the property on March 12, and on that same day he executed the deed to his wife; that after the suit was settled he prepared a deed for her to sign returning his interest therein to him, and she said she wanted to see her attorney before she signed it; that he was ‘dumfounded’ when she refused, and she later brought an action for annulment; that he had, up to that time, been assisting her on rentals, and at that time advanced $800 on payment of an overdue trust deed. He then testified that she agreed to transfer it back to him when the litigation was terminated; that she thought it was a good plan and understood it; that they thought of placing the property in his brother's name but did not do so; that he lived in the house with her until he was ‘thrown out’ by an order of court.

Plaintiff's partner testified that trouble arose as to Mr. White and White was endeavoring to implicate them under a building sales agreement on the theory that they were his partners in the transaction, and to make them liable for White's debts; that he and plaintiff and defendant discussed their property and that both plaintiff and his partner agreed, in defendant's presence, that they would do what they did do, put their property in their wives' names in trust, and that no mention was there made about any gift. Defendant then admitted that plaintiff asked her to sign the deed returning his property to him, but claims plaintiff threatened her and she refused to sign it. She then admitted being present when plaintiff and his partner discussed putting their property in their wives' names but claimed it was not because of the suits; that she did not remember the conversation but Mr. shore never asked her to keep it in trust for him.

Insofar as the personal property was concerned, the record title still stood in the joint names of plaintiff and defendant under the bill of sale at the time of the commencement of the action in partition. Plaintiff was as much in possession of that property as was defendant until he was ‘thrown out’ of possession by a court order. The action in partition as to the personal property accordingly was authorized. Young v. Hessler, 72 Cal.App.2d 67, 164 P.2d 65; Section 752a, Code Civ.Proc. The judgment awarding a one-half interest in the personal property to plaintiff must be sustained.

Defendant contends that no understanding or agreement was established by the evidence whereby defendant was to hold plaintiff's interest in trust in the real property and agreed to retransfer such title to plaintiff. We are not in accord with this conclusion. There was sufficient evidence in the record to support the court's finding in this respect.

Counsel for defendant recites respected authority such as Tognazzi v. Wilhelm, 6 Cal.2d 123, 56 P.2d 1227, to the effect that a person in an equity proceeding such as this may be estopped from recovering possession of property which he fraudulently transfers to another for the purpose of defrauding creditors or prospective creditors; that the law favors the one who is actually in possession; that he who comes into equity must come with clean hands; and accordingly, when this is not the case, the parties will be left where they are. Whether the court was authorized under the circumstances to decree that defendant held a one-half interest in the real property in trust for the benefit of defendant is the real and most serious question here involved.

As a general rule, where it appears that a conveyance was made with intent to defraud a creditor of the grantor, the agreement to reconvey comes within the maxim “Ex turpi causa non oritur actio,” and cannot be enforced without a clear violation of the principles of equity. Allstead v. Laumeister, 16 Cal.App. 59, 116 P. 296, 297; 12 Cal.Jur. p. 1027, sec. 67. However, this rule is not without its exceptions. The rule is not applicable where the offer was induced by the grantee's actual fraud, undue influence, and a violation of the trust, Donnelly v. Rees, 141 Cal. 56, 74 P. 433; Green v. Frahm, 176 Cal. 259, 168 P. 114, or where the grantee is not in pari delicto with the grantor, Vitoreno v. Corea, 92 Cal. 69, 28 P. 95; Faria v. Faria, 100 Cal.App. 177, 280 P. 187, or where plaintiff has purged himself of his prior fraudulent conduct, as was held in Carman v. Athearn, 77 Cal.App.2d 585, 175 P.2d 926; and Stockwell v. McAlvay, 10 Cal.2d 368, 74 P.2d 504, upon which plaintiff here relies, and where the doctrine of ‘clean hands' was held not to apply. See, also, Restatement of the Law of Trusts, sec. 63, p. 199 et seq., where the claim could not have been enforced against the property so transferred.

The court found ‘that at the time of said transfer * * * unmeritorious claims were being made against plaintiff by attempting to involve plaintiff in a contracting business as a partner and to force plaintiff to pay claims which were not owed by him; * * * that in order to keep title to the hereinabove described real property free from said unmeritorious claims, plaintiff and defendant orally agreed that the interest of plaintiff * * * should be conveyed to defendant, and she should hold title’ thereto ‘so that it could be sold * * * dealt with * * * without interference from said unmeritorious and improper claims.’ (Italics ours.)

From an examination of the evidence and the findings it is apparent that plaintiff has not brought his case within any of the exceptions noted. While the judgment appears to be just, counsel has furnished us with no authority which would justify such a decree in an action in equity. Our independent search has resulted in the conclusion that the general rule, under the evidence and findings of the court, must be applied. Plaintiff claims that he was not in fact a creditor of the plaintiff in the action against him and White, and that the determination of that action so indicated.

Section 3439.01 of the Civil Code defines a creditor to be ‘a person having any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent.’ Section 3439.07 provides that ‘Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.’

In Belling v. Croter, 57 Cal.App.2d 296, 134 P.2d 532, 537, in speaking of the purpose of concealment, it is said that it ‘may be best demonstrated by proof that it resulted in fraud, but the ‘unclean hands' principle is equally applicable to cases of intent to defraud as to those in which the intent ripened into accomplishment’; and that ‘Equity, in administering its remedies, regards not alone the accomplished fact, but also the intent and purpose of the act’, citing cases. Even in a tort action where the liability of the parties to an automobile accident had not been determined, it was held that one having a claim arising therefrom was a creditor, before the commencement of the action as well as afterward, within the meaning of section 3430 of the Civil Code providing that ‘A creditor, within the meaning of this title, is one in whose favor an obligation exists, by reason of which he is, or may become, entitled to the payment of money.’

The rule that courts will not allow a trust to be proven by a party to a fraud, if the trust was created for a fraudulent purpose, is a time-honored rule and is not subject to many exceptions. Alaniz v. Casenave, 91 Cal. 41, 27 P. 521.

Chamberlain v. Chamberlain, 7 Cal.App. 634, 95 P. 659, is factually similar to the instant case, but there the defendant donee was found to be the one who falsely induced plaintiff to execute the deed.

There is no evidence or finding in the instant case that would support a conclusion that defendant, the grantee, fraudulently induced plaintiff to place the property in her name or that she was guilty of a ‘greater fraud’ than plaintiff.

In Withrow v. National Surety Co., 122 Cal.App. 242, 10 P.2d 83, in sustaining a demurrer to the complaint without leave to amend, the court held that in an action to quiet title to real estate, where it appeared that plaintiff had conveyed the property to plaintiff's sister under an agreement that she should hold title thereto temporarily on account of a threatened lawsuit against plaintiff and pending a settlement thereof, and the conveyance was without consideration and with the intent to defraud a creditor, plaintiff could not obtain any relief in a court of equity. It then held that plaintiff's act in conveying the property to his sister without a consideration, and on account of a threatened lawsuit, was not consistent with a prudential regard for his own interest as well as the utmost good faith toward the claimant, but was a selfish and unfair regard for his own interest and an unconscientious disregard of the lawful rights of others, conceived in fraud and based upon falsity, and it could not be justified; that a creditor, within the meaning of our law relating to fraudulent conveyances, is one in whose favor an obligation exists by reason of which he is or may become entitled to the payment of money; and one having a claim arising from tort is a creditor, as well before as after the commencement of an action; that where plaintiff's conveyance to his sister was conceived in fraud, no enforceable trust arose.

In Allstead v. Laumeister, 16 Cal.App. 59, 116 P. 296, which was an action by a father to enforce a claimed trust agreement by the son, where the father had deeded the property to his son with intent to defraud his creditors and the son, in violation of his trust, subsequently deeded the property to his foster mother, the trial court found for the plaintiff, and the appellate court reversed the judgment and held that he who comes into equity as a plaintiff must come with clean hands; that the plaintiff's conduct in making a deed to his son, with an agreement for a return deed to him, on demand, having been conceived and founded on an intent to defraud his judgment creditor, there was nothing that either the son nor the father might do with the property conveyed that could relieve plaintiff from the consequences of his unconscientious part in the transaction; that the fact that the son and his grantee stood in pari delicto in reference to the concealment of the fraudulent intent of the father is immaterial and cannot relieve the plaintiff in equity; and that courts will not allow a trust to be proven by a party to a fraud if it was created for a fraudulent purpose. See, also, Estate of Xydias, 92 Cal.App.2d 857, 208 P.2d 378; Stone v. Lobsien, 112 Cal.App.2d 750, 247 P.2d 357; and Berniker v. Berniker, 30 Cal.2d 439, 182 P.2d 557.

While it does not appear in the instant case that plaintiff was in fact a debtor in relation to the suit instituted against him, it does affirmatively appear from the evidence and findings that the claimant claimed that plaintiff was a debtor by virtue of a joint venture or partnership and that an actual claim was made against plaintiff for this indebtedness, whether justifiably founded or not, and that plaintiff here believed he might be found liable for such indebtedness, and that to avoid its payment he did transfer his interest in the real property to his alleged wife with the fraudulent intent of defrauding such creditor if a judgment was obtained against him. Under the circumstances and authorities cited this court is bound by the established law, no matter how unjust it may seem, in holding that the transaction comes within the rule of “Ex turpi causa non oritur actio,” and accordingly plaintiff is precluded from recoving the real property involved in this equitable action.

The judgment in favor of plaintiff as to the personal property involved in partition action No. 4683 is affirmed. Judgment in favor of plaintiff as to the real property involved in the trust action No. 4684 is reversed.

GRIFFIN, Justice.

BARNARD, P. J., and MUSSELL, J., concur.