ANDERSON v. ANDERSON (1940)

This is an appeal by plaintiff from a judgment that subjected the 1/212 interest of Julius Anderson in the San Diego Steam Laundry to the lien of a judgment of $532.60 against Albert J. Anderson, such lien to be enforceable after the death of Julius Anderson. The judgment denied all other relief sought by plaintiff.

The complaint contains three causes of action. The first sought to quiet plaintiff's title to the Uptown Locker Club in the city of San Diego. The second sought to set aside an alleged fraudulent conveyance of the Uptown Locker Club from Albert J. Anderson to Julius Anderson. The third sought to set aside an alleged fraudulent conveyance of a 1/212 interest in the San Diego Steam Laundry from Albert J. Anderson to Julius Anderson.

Plaintiff and Albert J. Anderson are husband and wife. Julius Anderson is the father of Albert. The evidence pictures Julius as a patient, kind and generous father, and Albert as a wasteful and prodigal son. Besides providing him with a substantial monthly income, Julius became surety for Albert in considerable amounts. He paid many of his debts. By 1933 Albert's creditors foreclosed on his securities. After those securities were exhausted a balance of more than $8,000 remained which Julius had to pay.

Plaintiff and Albert J. Anderson were married in 1923. There are two children the issue of this marriage. Albert proved to be no better husband than he had been a son. Plaintiff instituted an action for divorce on October 16, 1936, on the grounds of habitual intemperance and cruelty. She secured an interlocutory decree of divorce on June 18, 1937. She was given custody of the two children, $125 per month for their and her support, and certain community property. Other community property was awarded to the parties as tenants in common. The decree also provided for attorney's fees and court costs. No final decree of divorce has been entered.

In 1932, Albert started the Uptown Locker Club. Plaintiff contributed $1,000 of her separate funds to the venture, and Albert a sum not exceeding $750, part of which was community property. The venture was a financial success and, ultimately, about $14,000 was invested in it with all but the original investment being provided out of its profits.

In 1933, plaintiff was openly discussing instituting an action for divorce against Albert. On September 28, 1933, Albert executed a chattel mortgage on the Uptown Locker Club to secure his note for $7,500, payable to his father. It is not questioned that Albert's indebtedness to his father at that time exceeded the amount of the note.

Although Albert's income was ample to permit him to do so, he made no effort to reduce his indebtedness to his father. Under date of April 27, 1934, Albert and Julius entered into a contract giving the latter control over the finances of the Uptown Locker Club. It recited that Albert was then indebted to Julius in an amount of between eight and nine thousand dollars. It provided that all receipts from the club, except a petty cash fund, should be deposited in a bank account in the name of Julius; that operating expenses and debts of the business be paid from this account; that the overplus be paid on the indebtedness Albert owed Julius. It was particularly provided that Albert “shall have no control over said receipts and disbursements until said indebtedness to said Julius Anderson and other creditors of said business have been fully paid”. Plaintiff does not question the fact of this indebtedness nor its amount.

The bank account was opened in the name of Julius but he received nothing on the debt. Albert admitted taking between three hundred twenty-five and three hundred fifty dollars per month in cash from the business cash register. He charged his and his family's bills for living expenses to this business. Plaintiff also charged bills to the club, including clothes for herself and the children. After the repeal of prohibition, they charged liquor for their personal use to the club besides drawing upon its stock. They were improving some acreage near Alpine in San Diego county. The bills for these improvements were also charged to the club. Julius frequently protested these withdrawals from the funds of the business. There was nothing left for him to apply on the indebtedness owed to him by Albert. The Alpine property was awarded to plaintiff in the divorce action and is now her home.

In 1937 Julius foreclosed his chattel mortgage and bought in the club property for $5,000. He has since operated the club and claimed its ownership. The regularity of the foreclosure proceedings and the sale under it are not questioned except that plaintiff now maintains that she owned at least a 1/212 interest in the club as her separate property, which interest did not pass to Julius under the foreclosure sale.

If the trial judge had accepted the testimony of plaintiff and Albert as true he might have found that she originally owned a 100/175100175 interest in the club as her separate property. However, this evidence was contradicted, and it was found that plaintiff never owned any interest in the club as her separate property. There is ample evidence to support these findings and they cannot be disturbed here. Out of the considerable evidence supporting these findings we need only to point to the following: On June 24, 1936, plaintiff wrote a letter in which the following appears: “The thousand dollars in question was loaned by me to Albert Anderson to start the Locker Club, and was used for that purpose.” Plaintiff's verified complaint for divorce contained the following: “The said parties have accumulated certain community property, which is described as follows, to-wit: * the lease and all furnishings of that place of business known as Uptown Locker Club, *.”

The trial court found there was no fraud in connection with the execution and foreclosure of the chattel mortgage on the Locker Club; that the mortgage was executed in good faith and for a valuable consideration and was foreclosed because of default in its terms and in the terms of the note it secured, and not in carrying out an intent to defraud plaintiff of any of her property, nor to deprive her or her children of the support and maintenance by Albert J. Anderson to which they were legally entitled. These findings find ample support in the evidence.

Section 172 of the Civil Code provides that a husband is vested with the management and control of community property over which he has “like absolute power of disposition, other than testamentary, as he has of his separate estate”, with certain exceptions not important here. See vol. 3, 10 Year Supp.Cal.Jur. 620. It follows that as the chattel mortgage was given for a valuable consideration and as the transaction was free from fraud, its foreclosure vested title to the Locker Club in Julius Anderson, the purchaser at the foreclosure sale. Johnson v. National Surety Co., 118 Cal.App. 227, 5 P.2d 39. Therefore, the portion of the judgment affecting the Locker Club must be affirmed.

The situation concerning the interest, if any, of Albert J. Anderson in the San Diego Steam Laundry requires separate consideration.

Prior to 1926 Julius Anderson and Elmer L. Aldrich, as copartners, owned and operated the San Diego Steam Laundry, each having a 1/212 interest in it. The partnership owned no real property.

Under date of July 12, 1926, Julius Anderson executed a purported “bill of sale” attempting to convey to Albert all his 1/212 interest in the property and assets of the San Diego Steam Laundry with a life estate reserved to Julius. The instrument recited that it was made “in consideration of love and affection and other valuable considerations”, but as it is not claimed that Albert gave any consideration for it other than love and affection, the transaction was an attempted gift. The instrument contained the following provision: “It being the intention by this instrument that I (Julius) shall retain possession of my interest in said San Diego Steam Laundry until by death, at which time said party of the second part (Albert) is hereby authorized to immediately take possession of the same without further steps or proceedings or notice and without legal proceedings of any kind.”

Albert had been a salaried employee of the laundry prior to July 12, 1926, and continued to serve in that capacity. He was never in actual possession of any part of the laundry. No dividends were paid Albert by the laundry although Julius gave him a portion of the dividends he received. The laundry continued to be operated by Julius Anderson and Aldrich as copartners. Under date of January 4, 1936, Albert, without consideration, reconveyed his interest in the laundry to his father. By that time the marital relations between plaintiff and Albert had become seriously strained. It is this reconveyance which is under attack in the third cause of action.

The brief of respondents argues the question of the interest in the laundry, if any, which the bill of sale of July 12, 1926, transferred from Julius to Albert. Because of the view we take of the case we do not deem it necessary to decide this question at this time. We will assume, without holding, that the bill of sale of July 12, 1926, conveyed to Albert, a 1/212 interest in the property and assets of the laundry, subject to a valid life estate in Julius, which life estate gave Julius possession of all those assets and the right to 1/212 the income from the laundry during the remainder of his life.

The judgment made the amount of Albert's delinquent payments then due plaintiff a lien on the 1/212 interest of Julius in the assets of the laundry, such lien to be enforced only after the death of Julius. It also decreed that Julius was the owner of a 1/212 interest in the laundry and that Albert had no interest in it. The judgment further decreed that plaintiff would not be entitled to any lien on the interest of Julius in the laundry for any amounts which might become due in the future.

Plaintiff maintains that the portion of the judgment suspending the enforcement of the lien during the lifetime of Julius is erroneous, and, further, that future instalments of the support money allowed her should have been made a lien on this interest, enforceable immediately upon any of those instalments becoming due and in default.

We gather from the findings that the theory on which the judgment is based is as follows: That the assignment of July 12, 1926, from Julius to Albert, of an interest in the laundry, was in effect a gift of future interest; that the reconveyance of this interest by Albert to Julius rendered Albert insolvent; that in making this reassignment there was no intent to defraud; that the assignment constituted a constructive fraud on Albert's creditors by reason of its leaving him insolvent; that plaintiff was then a creditor of Albert and because of such constructive fraud on her she could attack the transfer.

This theory is based on a mistake of fact that is carried into the findings. It is there found that the assignment from Albert to Julius was “in the year 1937”. The assignment in the record is dated January 4, 1936. In the absence of evidence to the contrary we must presume that the bill of sale was properly dated (sec. 1963, subd. 23, Code Civ.Proc.) and that it was delivered on the date it bears (Secs. 1053, 1055, Civ.Code). Therefore, we must conclude that this bill of sale was executed more than nine months before the divorce action was instituted. The first order allowing plaintiff support and suit money was dated November 10, 1936. A further allowance was contained in the interlocutory decree of divorce which was dated June 18, 1937.

It is clear that plaintiff was not a creditor of Albert J. Anderson on January 4, 1936, the date of the conveyance of the interest in the laundry by Albert to Julius. The finding that the conveyance of an interest in the laundry by Albert to Julius was in 1937 is contrary to the evidence.

The finding that this transfer rendered Albert insolvent has questionable evidentiary support. In fact little attention seems to have been given to Albert's financial condition on or about January 4, 1936. At that time he had the Alpine property, with a claimed value of about $10,000, which was encumbranced in the sum of $3,700, beside other property.

Thus, one very important factor necessary to support the theory of the findings and judgment is lacking from the evidence—that plaintiff was a creditor of Albert at the time of the assignment. The evidence supporting a second important factor is of questionable sufficiency; that the assignment rendered Albert insolvent. These are important because the trial court found against actual fraud and based its judgment on the finding of constructive fraud founded on the purported insolvency of Albert caused by the conveyance of the interest in the laundry and on the mistaken assumption that plaintiff was Albert's creditor on January 4, 1936.

Whatever interest Albert had in the laundry was his separate property. In the absence of actual fraud, he could give this interest away, and only his then existing creditors could attack the conveyance if it caused his insolvency. Haller v. Haller, 102 Cal.App. 370, 283 P. 94. As was said in McAlvay v. Consumers' Salt Co., 112 Cal.App. 383, 297 P. 135, 140:

“It is the general rule that the only creditors who can complain are those who were creditors at the time of the alleged fraudulent transfer, or those subsequent thereto who were intended to be defrauded; but to make a voluntary conveyance void as to subsequent creditors it must be made with the intent of fraudulently preventing them from enforcing their claims. Bush & Mallett Co. v. Helbing, 134 Cal. 676, 66 P. 967; Franck v. Moran, 36 Cal.App. 32, 171 P. 841. Otherwise subsequent creditors cannot complain. Kane v. Desmond, 63 Cal. 464; Scales v. Holje, 41 Cal.App. 733, 183 P. 308.”

An intent to defraud a particular creditor may exist where there is actual fraud. It does not exist as to a future creditor where there is no actual fraud but only constructive fraud inferred because a transfer of property renders the transferor insolvent. Because there was no finding of an intent to defraud plaintiff by the bill of sale of January 4, 1936, and because she was not then a creditor of Albert, she could not successfully attack the bill of sale. This lack of intent to defraud a future creditor distinguishes this case from such cases as Murray v. Murray, 115 Cal. 266, 47 P. 37, 37 L.R.A. 626, 56 Am.St.Rep. 97, and Adams v. Bell, 5 Cal.2d 697, 56 P.2d 208.

Findings necessary to support the judgment rendered under the third cause of action are contrary to the evidence. That portion of the judgment is not free from apparent inconsistencies. It follows that the portion of the judgment which affects the interests of Julius, Delia and Albert J. Anderson in the San Diego Steam Laundry must be reversed.

It is ordered:

(1) That the portion of the judgment under the first and second causes of action determining the interests of the parties in the Uptown Locker Club is affirmed.

(2) That portion of the judgment which is under the third cause of action determining the interests of the parties in the San Diego Steam Laundry, and giving plaintiff a lien on the interest of Julius Anderson therein, is reversed, and the cause is remanded for a new trial solely on the issues presented by the third cause of action in the complaint and the answer thereto. None of the parties will recover costs on appeal.

MARKS, Justice.

We concur: BARNARD, P.J.; GRIFFIN, J.