213 N.W. 892 | Minn. | 1927
The facts set forth in the complaint in much detail are to the effect that James T. McCleary, by fraudulent misrepresentations, induced plaintiff to purchase 50 shares of worthless corporate stock for the sum of $5,000; that afterwards, by direction of James T. McCleary, his son, defendant Leslie T. McCleary, by falsely representing that he possessed a large amount of property including two farms in Minnesota, induced plaintiff to resell this stock to him Leslie T., and to take his unsecured promissory note for the purchase price; that both James T. and Leslie T. McCleary were insolvent; that James T. owned the farms when he sold the stock to plaintiff; that the McClearys and defendants Bowen entered into a conspiracy to defraud plaintiff by placing the farms beyond his reach; and that to accomplish such fraudulent purpose James T. conveyed the farms to Leslie T. without consideration and Leslie T., shortly before repurchasing the stock from plaintiff, conveyed the farms to defendants Bowen without consideration. *199
Plaintiff brought a prior action upon the same cause of action in which he made James T. McCleary a defendant and in which he set forth the same transactions above mentioned. Defendants Bowen demurred to the complaint in the prior action, and upon appeal to this court the complaint was sustained as alleging sufficient facts to constitute a cause of action against James T. McCleary and to entitle plaintiff to set aside the conveyance of the farms to defendants Bowen as fraudulent as to the creditors of the McClearys. Humphrey v. McCleary,
The decision in the former action is decisive that the complaint states sufficient facts to entitle plaintiff to subject the lands to the payment of his claim, unless the additional facts set forth in the present complaint show that the lands have now passed beyond his reach.
Such additional facts are to the effect that each of the farms was subject to a mortgage of $2,500 placed thereon prior to any of the transactions involved herein; that without plaintiff's knowledge defendant W.J. Morehart purchased and foreclosed these mortgages and bid in the lands; and that no redemption was made from the foreclosure sales and title to the lands has vested in Morehart thereunder. The complaint also contains allegations to the effect that the lands are worth several times the amount of the mortgages; that Morehart acted for and on behalf of defendants Bowen in purchasing and foreclosing the mortgages; that he holds the title for their benefit; and that he had knowledge of all the facts, and purchased and foreclosed these mortgages in execution of a fraudulent arrangement between him and the other defendants to place the lands beyond plaintiff's reach. *200
That the mortgages were valid and prior and paramount to any claim of plaintiff and were duly and regularly foreclosed is unquestioned. But plaintiff contends that he is entitled to subject the lands to the payment of his claim against defendant McCleary for the reason that defendants Bowen failed to redeem and defendant Morehart bid in the property for them and holds the title for their benefit.
In Noblet v. St. John,
"By their foreclosure Kimball Farnsworth acquired a title which was superior to and defeated not only the fraudulent conveyance to the Broadwaters, but also all the rights of plaintiff in respect to the land as creditor of L.G. St. John. That title is in no manner dependent on or affected by the fraudulent conveyance. They could convey it so that it would be held by their grantees just as they held it, unless the grantees were under some duty or obligation to provide for or protect the estate against the mortgage under which it was acquired. Though the title to the equity of redemption in the part of the premises conveyed by L.G. St. John to Joseph Broadwater was, by reason of the fraudulent intent, voidable as to plaintiff, and might, so long as it continued, be subjected to his judgments, it created no duty on the part of Broadwater to preserve it so that plaintiff could reach it, or to prevent it being defeated by the mortgagee. Much less did it create any obligation on his part to protect plaintiff's rights against the mortgage. Neither Joseph Broadwater nor M.C. St. John stood in any such relation to the mortgage as to prevent his taking and holding the title acquired by its foreclosure the same as any one else might." *201
The rule is the same in other jurisdictions and is said to follow from the principle that the holder of a prior valid right in or lien on the land is "entitled to sell to whomsoever will buy." Funkhouser v. Lay,
The original holders of the mortgages involved herein had the legal right to foreclose them, and a purchaser from them has the some right unless under some obligation to satisfy the mortgages or protect the property from them. Foreclosing a mortgage which the holder has the legal right to foreclose does not in itself constitute fraud. Hutchins v. Bassin,
The title of Morehart is not derived through the fraudulent conveyances, but through the mortgages which are prior and paramount to any claim of plaintiff and to which no taint of fraud is attached, and plaintiff cannot subject that title to the payment of his claim.
Order reversed. *202
