Barnes v. Spencer

153 P. 47 | Or. | 1915

Mr. Justice Bean

delivered the opinion of the court.

1. The defendant Spencer claims as a purchaser in good faith for a valuable consideration, under the provisions of Section 301, L. O. L., which provides that from the date of the attachment, until it be discharged or the writ executed, the plaintiff, as against third persons, shall be deemed a purchaser in good faith and for a valuable consideration of the property attached, and under Section 233, subdivision 4, L. O. L., which declares that an execution is levied on property in the same manner and with like effect as similar property is attached. Defendant maintains that the property is. not subject to the prior equity of plaintiff. In order for defendant Spencer, as an attaching creditor, to be deemed a purchaser in good faith and for a valuable consideration as against the plaintiff, Grace D. Barnes, who is the owner of an outstanding equity in the property upon which execution was levied, the defendant must .allege and prove all the facts necessary to establish that character of his ownership as against such equity. One of such material facts is that his claim is founded upon a fair valuable consideration: Flegel v. Koss, 47 Or. 366 (83 Pac. 847); Rhodes v. McGarry, 19 Or. 222 (23 Pac. 971); Haines v. Connell, 48 Or. 469 (87 Pac. 265, 88 Pac. 872, 120 Am. St. Rep. 835). An attaching creditor, although placed on an equality with a purchaser, cannot claim any greater privilege than would be granted to such purchaser: Jennings v. Lentz, 50 Or. 483, 487 (93 Pac. 327, 29 L. R. A. (N. S.) 584). The defendant Spencer recognized this principle, and by his amended answer has alleged facts to bring him within the rule laid down in the Rhodes-McGarry Case. The question therefore recurs upon the proof and the equities of the case.

2. It is the contention of counsel for Spencer that plaintiff cannot question the judgment rendered in Spencer v. Barnes. It is said by Mr. Freeman in his work on Judgments (3 ed.), Section 162:

“It is well understood, though not usually stated in express terms, in works upon the subject, that no one is privy to a judgment whose succession to the rights of property thereby affected occurred previously to the institution of the suit.”

The question as to whether or not Mrs. Barnes can compare her equities in the property in controversy with those of Spencer, who has a judgment which is valid and binding as between him and Barnes, the parties thereto, is an important one. Our statute and decisions thereunder place a judgment creditor in practically the same position as a purchaser holding under a deed subsequent to the equities claimed. In Gottlieb v. Thatcher (C. C.), 34 Fed. 435, it was held by Mr. Justice Brewer, that, as against a prior grantee and purchaser at an execution sale under a preceding judgment, a subsequent judgment against the grantor and debtor is not conclusive, either as to the amount of the debt, or as to the circumstances and character of the transaction out of which the indebtedness arose, and where made defendant to a bill by the holder of such judgment to set the conveyance aside as in fraud of creditors, and to subject tbe land, such prior grantee and purchaser may show that the debt for which the judgment was rendered had been more than paid when it was obtained, and that the creditor had taken an unfair advantage of the debtor in the matter of interest. In Ingals v. Brooks, 29 Vt. 399, the facts of the case were as follows: Israel Brooks conveyed all his lands to his son Clark Brooks, and as part consideration therefor Clark agreed to pay the debts of his father. Leafy Brooks, who had become the wife of Ingals, presented a claim against the father, against which the son Clark maintained he had a setoff. They compromised, Clark Brooks released his setoff, and Ingals and wife threw off half the claim. Ingals then went to Israel Brooks and got him to allow judgment to go against him for the other half of the claim, of which proceeding Clark had no notice. Ingals then levied execution under this judgment on the lands held by Clark Brooks, and sold the same, and in course of time got a sheriff’s deed and began his action in ejectment. The court uses the following language:

“The judgment, being altogether inter alios, and in express violation of the understanding of Clark when he surrendered the claim against Leafy, one of the plaintiffs, and paid half the amount of the note in money, in agreed satisfaction of the whole, could have no effect upon the defendant Clark. He is entitled to show that the note was paid before sued, or that the judgment was, for other reasons, fraudulent to him: Atkinson v. Allen, 12 Vt. 619. This compromise of the note by Clark was just as effectual a bar to the claim, in law, and just as effectual a release of his undertaking to pay it at the time of the conveyance, as if he had paid all the money upon it. ’ ’

It is true he did undertake or “promise to pay all the debts of the grantor (his father), but he has in fact paid them all, except the mortgage, which is not in question. And the judgment against Israel (the father), is either a subsequent debt, founded exclusively upon his promise to pay what they did not get of Clark, and which in no sense, under the circumstances, can be regarded as forming any portion of the debts which Clark was to pay, or else the whole proceeding, so far as it is attempted to give it the appearance of a prior claim, is a fraud upon the compromise and settlement made with Clark, and the consequent surrender of the note. And in either case it will not enable the plaintiff to treat the conveyance as void, and levy upon it as the land of Israel Brooks. Judgment reversed. Case remanded. ’ ’

In Boutwell v. McClure, 30 Vt. 676, the court says:

“The judgment upon the plaintiff’s claim in this action, whether rendered before or after the claimant’s appearance, concludes nothing upon the question. In all such cases there is likely to exist the form of a contract of a date early enough to accomplish its purpose, and it is not uncommon that this contract assumes the more solemn form of contracts, such as that of a promissory note, or even a judgment of a court of record. But in either case they are, of course, only conclusive upon the parties to such contracts. Upon any questions arising in regard to the creditor being bona fide such at a particular date, and continuing such to the present time, the contract is but prima facie evidence of the fact. It is always competent to impeach the debt, either as to its bona fide character, its date, or its continuance. For although the debt once existed, and of a date early enough to override the plaintiff’s claim, yet, if it has been extinguished by payment on the part of the debtor, it sinks at once into the common mass of his assets, and cannot be subsequently kept on foot, as the debt of a bona fide creditor.”

In Temple v. Osburn, 55 Or. 506 (106 Pac. 16), plaintiff held title under an unrecorded deed. Defendants, by a conveyance ordered by the court, in a subsequent suit in which plaintiff was not a party, held that plaintiff was not bound by the decree. It was held in Davis v. Davis, 20 Or. 78 (25 Pac. 140), that when the title of a grantee is attacked for fraud by a judgment creditor, the grantee may look behind the judgment and ascertain whether or not there was an actual indebtedness between the parties upon which the judgment is founded.

3. "Where one claims real estate as a purchaser in good faith and for a valuable consideration, as does defendant Spencer in this case, although he may claim by virtue of a judgment of a court of record, as, between such claimant and one having prior equities in the property, the record title to which is in the name of a trustee, the amount of the actual value of the consideration becomes a material question. In order to determine the equities between the parties the court must, of necessity, take cognizance of the value of such consideration by virtue of which the defendant claims and has pleaded and would have weighed against the equities of the plaintiff. All that Spencer claims to have done in the premises was to make the arrangement with Barnes in June, 1907, and forward the data furnished by Parker to Barnes at Los Angeles, which was soon returned at his request. Spencer has not shown that he has parted with a fair and valuable consideration in the premises so as to bring him within the protection of Section 301 of the statute, as a purchaser in good faith for a valuable consideration: Rhodes v. McGarry, 19 Or. 222 (23 Pac. 971), and other authorities, supra.

4. It is an ancient equitable principle that a beneficiary estate follows the consideration and attaches to the party from whom the consideration comes. The doctrine is settled in England, and in a great majority of the American states, that where property is purchased and the conveyance of the legal title is taken in the name of one person, while the purchase price is paid by another, a trust at once results in favor of the party who pays the price, and the holder of the legal title becomes a trustee for him: Pomeroy, Eq. Jur. (3 ed.), § 1037; Berry v. Wiedman, 40 W. Va. 36 (20 S. E. 817, 52 Am. St. Rep. 866); Denny v. Schwabacher, 54 Wash. 689 (104 Pac. 137, 132 Am. St. Rep. 1140); Siling v. Hendrickson, 193 Mo. 365 (92 S. W. 105).

5. As a general rule, trust property is not liable for the trustee’s debts, and cannot be reached by attachment or execution, even though the trustee’s creditors have no knowledge of the existence of the trust; the record title being in the name of the trustee. But any beneficial interest the trustee may have in the estate may be reached by attachment or otherwise: 39 Cyc. 227f; Perry, Trusts (6 ed.), §§ 15, 346; 1 Black, Judgments, § 421; 2 Freeman, Executions (3 ed.), 173; 28 Am. & Eng. Ency. Law, 940, and notes; Meier v. Kelly, 22 Or. 136 (29 Pac. 265); Dimmick v. Rosenfeld, 34 Or. 101 (55 Pac. 100); Smith v. Farmers’ etc. Bank, 57 Or. 82, 87 (110 Pac. 410); Hart v. Bank, 33 Vt. 265; Houghton v. Davenport, 74 Me. 590. A resulting trust is within the operation of the rule noted: School Dist. v. Peterson, 74 Minn. 122 (76 N. W. 1126, 73 Am. St. Rep. 337). Anent this question former Mr. Justice Bean, at page 139 of 22 Or. (at page 267 of 29 Pac.) of the opinion in Meier v. Kelly, 22 Or. 136 (29 Pac. 265), said:

“As a general rule, unless otherwise provided by statute, a judgment lien only attaches to the actual and not the apparent interest of the judgment debtor in land, and is subject to all equities which were held against the land in the hands of the judgment debtor at the time the judgment was rendered, whether known to the judgment creditor or not. When called upon in a proper case, courts of equity are always ready to protect the rights of those who hold such equities as against the judgment lién, and to confine the latter to the actual interest of the judgment debtor. For this purpose they will correct a mutual mistake in the description in a mortgage, and, as corrected, give it priority over a subsequently acquired judgment” (citing-many authorities).

The syllabus in Dimmick v. Rosenfeld, 34 Or. 101 (55 Pac. 100), is as follows:

“After-acquired property. — Lands purchased through an agent who took the title in his own name, without the principal’s knowledge or consent, and then conveyed to her, are not thereafter subject to execution on a prior judgment against the agent, since he had only the bare legal title without any interest in the property itself. ’ ’

At page 104 of 34 Or. (at page 101 of 55 Pac.) of the opinion we find this quotation from Snyder v. Martin, 17 W. Va. 276 (41 Am. Rep. 670):

“Independent of any statute law, the lien of a judgment is a charge upon the precise interest which the judgment debtor has, and upon no other. The apparent interest of the debtor can neither extend nor restrict the operation of the lien so that it shall encumber any greater or less interest than the debtor in fact possesses. The judgment creditor has a charge on the interests of the defendant in the land, just as they stood at the moment the lien attached; therefore, though he seems to have an interest, yet, if he have none in fact, no lien can attach. The rights of the judgment lien owner cannot exceed those which he might acquire by a purchase from the defendant, with full notice of all existing legal or equitable rights belonging to third persons. ’ ’

6. We find that the evidence in the case under consideration clearly shows that the Salem Hotel property was purchased of Mr. Joseph Meyers, and that $19,250 was paid therefor, with Mrs. Barnes’ money, which was obtained by the sale of real estate in California; that the Hofer property was bought and paid for with $5,000, the money of Mrs. Barnes, which was raised upon a mortgage given on her real estate in Los Angeles; that the Barber property was purchased with money belonging to Mrs. Barnes for $2,500, raised by hypothecating her Masonic Temple bonds. The decree as to these three parcels of property is affirmed. As to the Burrows property, it was bought for $4,000. It is described as follows in the complaint:

“Also beginning at a stake at the intersection of Division and Liberty Streets, in the City of Salem, Marion County, Oregon, and bearing north from the northwest corner of block No. 26 in said city and 99 feet distant, and running north along the east line of said Liberty Street, 165 feet to a stake; thence east 165 feet to a stake; thence south 165 feet to a stake; thence west 165 feet to the place of beginning, and situate in Marion County, Oregon.

“Also the following described premises to wit: Commencing at a stake on the east line of Liberty Street in the City of Salem, one hundred and sixty-five (165) feet north from the point where the east line of Liberty Street intersects the north line of Division Street, as shown by the recorded plat of the City of Salem; thence northerly along the east line of Liberty Street, twenty-five (25) feet; thence easterly, at a right angle to said Liberty Street, one hundred and sixty-five (165) feet; thence southerly parallel with said Liberty Street, twenty-five (25) feet; thence westerly one hundred and sixty-five (165) feet to the place of beginning, being and lying in lot No. seven of the unnumbered block lying immediately north of block No. 26 in the said City of Salem, Marion County, Oregon.”

Practically all the testimony in regard to the funds with which this property was bought is that of Mr. Barnes, to the effect that his wife bought the same from her sister for her mother; that he ‘ ‘ put the money up ”; that it was some he received, for wages; that he paid $4,000 for it, and obtained the money “from a bank account of my own in Los Angeles.” The evidence fails to show that this piece of realty was purchased with Mrs. Barnes’ money. Moreover, Mrs. Barnes alleges in her complaint that she advanced the sum of $26,750 to her husband for the purpose of buying the lands described in the complaint. The Salem Hotel property at $19,250, the Hofer property at $5,000, and the Barber property at $2,500 totals that amount, $26,750, leaving none of her funds for application on the Burrows property.

7. To establish a resulting trust in property by parol testimony the evidence must be full, clear and convincing. If it is attended by doubt and uncertainty, the writing must remain the highest and best evidence: Snider v. Johnson, 25 Or. 328, 332 (35 Pac. 846); Barger v. Barger, 30 Or. 268 (47 Pac. 702); Oregon Lumber Co. v. Jones, 36 Or. 80, 85 (58 Pac. 769). It is not enough that Barnes may have intended to transfer the Burrows property to his wife, or that he had promised to do so, or that he justly owed her an amount of money equal to the price thereof. That is not plaintiff’s claim as asserted in her complaint. The decree of the lower court as to the Burrows property is modified so as to exclude the same from the injunction.

8. It is contended by defendant Spencer that the plaintiff cannot question the fairness of the Spencer judgment, for the reason that the complaint alleges that such judgment was duly rendered. That pleading, however, refers to this judgment as a pretended one. Defendant’s answer pleaded “that the consideration of the said judgment of the defendant A. B. Spencer against the defendant Legene S. Barnes is a balance of $69,339, found due said Spencer from said Barnes by tbe Superior Court in and for tbe county of Los Angeles, State of California, upon an enforced accounting against said Barnes of a partnership business con-' ducted by said parties from August 28, 1907, until tbe autumn of tbe year 1909, for tbe sale of certain iron mining claims in tbe State of California.”

In reply thereto, tbe plaintiff properly states that Spencer was never a partner of defendant L. S. Barnes, and assails tbe equities of tbe judgment by an appropriate reply concerning tbe consideration of tbe judgment.

With tbe modification above mentioned, tbe decree of tbe lower court is affirmed; neither party to recover costs herein. Modified. Rehearing Denied.

Mr. Justice Eakin did not sit.