Knox v. McFarran

| Colo. | Apr 15, 1879

Elbert, J.

The superior facilities of a court of equity to investigate questions of fraud, its greater power to afford relief, the propriety of investigating questions touching the validity of conveyances of real estate in a direct rather than a collateral proceeding, would have made a resort to its jurisdiction in this case advisable. Courts of law, however, have generally insisted upon a broad concurrent jurisdiction in matters of fraud, and we accept the decisions as we find them. In an action of ejectment it is competent to show that a conveyance relied upon by one of the parties to the action was made with intent to defraud creditors. Jackson, ex dem., etc. v. Myers, 11 Wend. 535 ; Jackson, ex dem., etc. v. Burgett, 10 Johns. 456" court="N.Y. Sup. Ct." date_filed="1813-10-15" href="https://app.midpage.ai/document/jackson-ex-dem-salisbury-v-fish-5473301?utm_source=webapp" opinion_id="5473301">10 Johns. 456; Remmington v. Linthicum, 14 Pet. 361; Rogers v. Brush, 5 Gilm. 580; Jameson v. Beaubien, 3 Scam. 114; Baze v. Asper, 6 Minn. 220" court="Minn." date_filed="1861-12-15" href="https://app.midpage.ai/document/baze-v-arper-6641000?utm_source=webapp" opinion_id="6641000">6 Minn. 220; Crook v. Swan, 5 Conn. 140" court="Conn." date_filed="1823-07-15" href="https://app.midpage.ai/document/cook-v-swan-6573802?utm_source=webapp" opinion_id="6573802">5 Conn. 140; Marcy v. Kinney, 9 id. 397 ; Lillie v. Wilson, 2 Root, 517.

That a like question of fraud might be investigated in an action of forcible detainer was held in the case of Wilcoxen v. Morgan, 2 Col. 473. There is no reason for prescribing a different rule in ejectment. If the assignment by McGovney to Knox, of Ms bond from Rose was with intent to hinder, delay or defraud his creditors, it is immaterial that Rose, the grantor in the subsequent deed to Knox, did not participate in the fraudulent intent. That the deed was made to Knox instead of McGrovney would be in pursuance and the result of the fraudulent assignment, and the deed must stand or fall with the assignment. If the taint of fraud attached to one, it attached to the other. The ends of the law cannot be defeated by indirection. To show that a conveyance was made with intent to hinder, delay or defraud creditors, the declarations of the grantor made before, and at the time of the conveyance are admissible, but not his declarations thereafter. Wilcoxen v. Morgan, 2 Col., supra ; Wheeler v. McCarrislan, 24 Ill. 40; Randeger v. Ehrhardt 51 Ill. 101" court="Ill." date_filed="1869-06-15" href="https://app.midpage.ai/document/randegger-v-ehrhardt-6953506?utm_source=webapp" opinion_id="6953506">51 Ill. 101; Simpkins v. Rogers, 15 Ill. 397" court="Ill." date_filed="1854-06-15" href="https://app.midpage.ai/document/simpkins-v-rogers-6948218?utm_source=webapp" opinion_id="6948218">15 Ill. 397 ; Frear v. Evertson, 20 Johns. 142" court="N.Y. Sup. Ct." date_filed="1822-08-15" href="https://app.midpage.ai/document/frear-v-evertson-5474528?utm_source=webapp" opinion_id="5474528">20 Johns. 142.

The court erred in admitting the declarations of McGrovney, touching the assignment of the bond after the. date of the assignment. In view of a re-trial we notice a few of the other questions made.

If the assignment was fraudulent and void, it was immaterial that Knox did not participate in the fraudulent intent, if he paid nothing. He must have been a purchaser for a valuable consideration and without notice of the fraud. § 20, R. S., p. 340; Wilcoxen v. Morgan, 2 Col. 478. The evidence shows that Knox paid nothing, but claimed to hold the property in trust. If the assignment of his title bond by McGrovney to Knox on the 10th of December was for the purpose of securing an existing indebtedness to the First National Bank of Colorado Springs, there was a good and sufficient consideration to support the assignment. Although there is a conflict of authority on the question, we regard it as the better doctrine, that one who takes property in payment or security of a pre-existing debt, is to be regarded as a purchaser for a valuable consideration. 1 Hilliard on Mortgages, 610; Herman on Mortgages, § 52 ; Babcock v. Jordan, 24 Ind. 14, and cases there cited.

The assignment and deed to Knox are, ón the face, absolute, and objection is made that under the statute a parol trust cannot be shown. § 18, R. S., p. 340. It is a familiar doctrine that resulting trusts are not within the statute, and may be shown by parol. 2 Wash. R. P. 472 et seq. The agreement, however, from which the trust springs must have been a part of the original transaction ; a subsequent agreement cannot raise a trust. Id. If the assignment and deed in this case, to Knox, were in consideration of a credit to be given by the bank to McGfovney,. on an existing indebtedness, or in security for the payment of an existing indebtedness to the bank, there was a resulting trust that, as between the bank and Knox, it was competent to show by parol. 2 Wash. R. P., supra.

In this case there is no dispute about the trust as between the beneficiary and grantee. The bank and Knox both agree that the assignment was intrust to secure McGovney’s indebtedness to the bank. The object of the parol evidence was not, therefore, to charge the grantee, but as between the grantee and the creditor, the plaintiff, and defendant in this suit, to show a valuable consideration. To show this, parol evidence is admissible. 4 Kent’s Com. 465*, and cases cited. There can be no greater objection to the admission of parol evidence for this purpose, than to its admission, in the first instance, to .set aside the conveyance for fraud. At the date of the assignment the defendant had no lien upon the premises. If Knox was a bona fide purchaser for a valuable consideration, notwithstanding the fraudulent intent, McGovney’s equitable interest passed by the assignment, and the defendant took nothing by his levy and sale under his execution.

■The judgment of the court below is reversed and the cause remanded for further proceedings.

Reversed.

L