FIRST NAT BANK OF SANTA ANA v. KINSLOW (1936)

In an action based upon certain promissory notes the plaintiff, on February 17, 1934, secured a judgment against the defendant, which was later affirmed on appeal. 2 Cal.App.(2d) 456, 38 P.(2d) 163. On August 21, 1933, the defendant had conveyed certain real property to her two sons; the consideration named in the deed being love and affection. On March 27, 1934, an execution was issued upon said judgment and levied upon the property so conveyed. The grantees in the deed referred to filed a third party claim describing the property and demanding that it be released from the execution. Plaintiff filed a petition under section 689 of the Code of Civil Procedure, as amended by St.1933, p. 1887, § 135, praying that the court set a time for hearing and proceed to determine the question of title thus raised by the third parties. The court made an order setting the same for hearing on May 3, 1934, at 9:30 a. m. in department 1 of the superior court of Orange county. Notice of this hearing and copies of the petition and order were served upon the defendant and the third party claimants. These parties filed a demurrer to the petition, and, after the court had sustained an objection to the hearing of said demurrer, filed answers to the petition. The matter came on for hearing, and, in addition to other evidence introduced by the plaintiff, the defendant testified that she had no property; that at the time she deeded this property to her sons it was the only property she owned; that when she deeded it to them she had nothing left; and that she received nothing for the deed.

The court made its findings and conclusions of law in all respects in favor of the plaintiff and entered a judgment decreeing that the transfer of the property from the defendant to the third party claimants was made by the defendant voluntarily, without a valuable consideration and in contemplation of insolvency, and that the same was and is fraudulent and void as to the plaintiff, who was an existing creditor of the defendant at the time the transfer was made. It was then decreed that title to the property is in the defendant and that neither of the third party claimants has any right, title, or interest therein. From this judgment, the defendant and third party claimants have taken this appeal.

Appellants' main contention is that the proceeding to determine title provided by section 689 of the Code of Civil Procedure, as amended in 1933 (St.1933, p. 1887, § 135), is unconstitutional and void as depriving them of their property without due process of law, in violation of the Fourteenth Amendment to the Federal Constitution and section 13 of article 1 of the State Constitution. In this behalf it is urged that the proceeding is of a summary nature; that no pleadings are provided for; that the right of trial by jury is denied; and that the section does not provide or require that the third party claimant be given notice of the time, place, and court where the hearing will be had.

Appellants' claim that section 689 deprives them of due process of law seems to be mainly based upon the contention that the requirement for notice contained in the section is fatally defective. It is argued that the notice required need not specify the time, place, or court in which the hearing will be had, that nothing is required except a statement that the purpose of the hearing is to determine title to the property in question, and that a notice which failed to state the time or place of the hearing and in what court it was to be held would comply with the section. We are unable to accept this narrow interpretation of the statute. The section plainly provides that ten days' notice of such hearing must be given to all parties claiming an interest in the property or to their attorneys. Ten days' notice of such a hearing cannot be given without giving notice of the time and place where the hearing will be held. We think a requirement that notice of the time and place of hearing be given not only follows by necessary implication from the language of the section (Paulsen v. City of Portland, 149 U.S. 30, 13 S.Ct. 750, 37 L.Ed. 637), but that, under the only reasonable interpretation of the language used, the statute directly provides for such a notice.

We are unable to see how this statute violates the due process clause of the Constitution by failing to provide for the same forms of pleading and the same rules of pleading which are provided in certain other forms of action. So far as material here, the only essential requirements of due process of law would be notice of the time and place of hearing and of the matter to be determined. There is no vested right in any certain form of procedure except as this is given by statute, and the Legislature has the power to change the procedure in a particular instance so long as the minimum requirements of the due process clauses of the Constitution are complied with. Under this statute here in question the parties claiming an interest in the property are accorded their day in court upon adequate notice both as to the time and place of the hearing and the matter to be determined. The application or petition for such a hearing, while it may not technically be denominated a pleading, is sufficient to bring the matter before the court and may be considered a pleading for this purpose. Whether or not the third party claimants file an answer, they must be heard in opposition to the claims of the other party with respect to the title of the property. In the instant case the appellants filed an answer and appeared at the hearing, and the issue between the parties was clearly presented.

It is further urged that the section under consideration deprives the appellants of the right to a trial by jury (Const. art. 1, § 7). It is well settled that the constitutional guaranty of the right to trial by jury has no application in cases coming within the equity jurisdiction of the court. Ballou v. Avery, 175 Cal. 641, 166 P. 1003. There is no right to a jury where the gist of the action is the enforcement of some right which is cognizable only in equity. Moore v. Copp, 119 Cal. 429, 51 P. 630. A similar situation prevails where the legal issues are merely incidental to the relief sought which, in the main, is equitable in nature. Schaefer v. United Bank & Trust Co., 104 Cal.App. 635, 286 P. 723. Where a fraud case involves the application of doctrines of equity and the granting of relief which can be granted only in a court of equity, the parties are not entitled to a jury. Fish v. Benson, 71 Cal. 428, 12 P. 454. This is the situation here, where the third party claimants held the legal title to the land in question and where the respondent was attempting to subject their title to the equitable lien of its judgment. It is also well settled that no right to trial by jury exists in cases where the right did not exist at common law, and that a jury may not be demanded in special proceedings unless the right thereto is given by statute. Gregory v. Hecke, 73 Cal.App. 268, 238 P. 787; Hutchison v. Reclamation District No. 1619, 81 Cal.App. 427, 254 P. 606.

We conclude that section 689 is not unconstitutional for any of the reasons here urged.

The appellants next argue that the court erred in sustaining an objection to a hearing on a demurrer filed by them and in overruling an objection to the introduction of any evidence. These points are based on the contention that a number of allegations in the petition are merely conclusions of law and that an intent to convey the property to defraud creditors is not sufficiently alleged. Without deciding whether all of the rules of pleading are applicable in a case of this character, we think the petition was sufficient to raise the desired issue in this proceeding. The appellants did not stand upon their demurrer, and filed an answer which squarely met the issue presented by the respondent. Among other things, the petition or application alleged the entering of the judgment; that execution was issued and levied on this real property; that a third party claim was filed by these claimants, said claim being attached and made a part thereof; that the judgment-debtor is the owner of the property; that the judgment-debtor purported to convey the property to the third party claimants; that this transfer was made and given voluntarily and without a valuable consideration; that the same was made by the judgment-debtor in contemplation of insolvency; that the same was fraudulent and void as against the judgment-debtor; and that the respondent was an existing creditor of the judgment-debtor at the time the conveyance was made. It is urged that an attempt to defraud was not sufficiently alleged in the petition. It was alleged that the transfer was made without a voluntary consideration and in contemplation of insolvency, at a time when the respondent was an existing creditor of the judgment-debtor. Similar allegations were held to be a sufficient allegation of intent in Sewell v. Price, 164 Cal. 265, 128 P. 407. Under section 3442 of the Civil Code, a voluntary transfer of property without a valuable consideration by one who is insolvent or who acts in contemplation of insolvency is void as to existing creditors and no other intent to defraud creditors need be shown. Gray v. Brunold, 140 Cal. 615, 74 P. 303; Lefrooth v. Prentice, 202 Cal. 215, 259 P. 947. Insolvency is in itself conclusive of fraudulent intent (Allee v. Shay, 92 Cal.App. 749, 268 P. 962), and an inference of fraud arises where one transfers property at a time when he knows he has no other property with which to satisfy creditors (Schwartz v. Brandon, 97 Cal.App. 30, 275 P. 448). Under the circumstances here appearing, we see no error in the rulings complained of, and the court found that the conveyance was made in contemplation of insolvency, that the defendant, after making said conveyance, became insolvent by reason of said conveyance, and that the conveyance was therefore fraudulent and void as against the plaintiff.

It is next urged that the court erred in permitting the respondent to introduce in evidence the judgment roll in the original action, since the judgment against Lenora E. Kinslow was not at that time final. This proceeding is similar in nature to a creditor's bill. Gilbank v. Benton (Cal.App.) 50 P.(2d) 815. We think it is sufficiently settled that in such a proceeding as this a judgment may be introduced in evidence for the purpose of showing the right of the judgment-creditor to attack a transfer of property which prevents his enjoyment of the judgment although the same has not yet become final. Sewell v. Price, supra; Rossen v. Villanueva, 175 Cal. 632, 166 P. 1004; Thomas v. Lavery, 125 Cal.App. 666, 14 P.(2d) 158.

Some contention is made that the respondent is estopped from attacking the validity of the transfer here in question. This is based upon certain testimony given by Lenora E. Kinslow to the effect that one of the officers of the respondent advised her to make this deed to her sons and that she made the deed as a result of his suggestion. This testimony was contradicted by the officer in question, and the court has found against the appellants on conflicting evidence.

The judgment is affirmed.

BARNARD, Presiding Justice.

We concur: MARKS, J.; JENNINGS, J.