75 Colo. 592 | Colo. | 1924
PLAINTIFFS Paul and Ralph Quackenbush brought this action in the district court of Larimer county against Samuel Shuck and B. W. Stewart to quiet title to lands situate in that county. As required by our practice in such cases, defendants in their answer set forth their title. The par-ties deraign title from the same grantor, Cora McIninch; the plaintiffs under a warranty deed direct from her, the defendants through a sheriff's deed, in pursuance of an execution sale authorized by decree of the same court in which was begun the present action, which decree in effect determined that the common grantor, Cora McIninch, one of the defendants there, held the property in trust for the use and benefit of her codefendant husband, and ordered a sale of the property to satisfy the creditors' demand.
Some interesting and important questions are involved, the principal ones being: (1) May a suit in the nature of a creditor's bill be maintained in the courts of this state without a previous judgment in the creditor's favor, and then only when the judgment has become a specific lien on the property affected, followed by the issuance of an execution *595
and a return of nulla bona? (2) If so, (a) may a decree therein be rendered upon service by publication, and (b) may a specific lien in the creditor's suit itself be created, and otherwise than by one or more of the three methods pointed out in Robison v. Gumaer,
The following and controlling facts are set forth in the answer and established by the evidence and are virtually admitted. In October, 1916, a personal judgment in favor of Shuck, a defendant here, was rendered in a district court of Nebraska against David P. McIninch, the husband of Cora McIninch. Personal service was had upon him. He had no property in Nebraska out of which this judgment could be satisfied. After it was rendered he was charged with a criminal offense and with his wife left the state. He is a fugitive from justice and their whereabouts are unknown. While he was thus indebted, David bought 40 acres of land in Larimer county, Colorado, and a water right belonging thereto. He paid the entire consideration therefor. For the purpose of defrauding his creditors and especially Shuck, David caused title to this property to be taken in the name of Cora, his wife, and her deed was duly recorded. The record title so continued for about one year and until March 26, 1917, on which day a warranty deed to the two Quackenbushes was executed by David and Cora jointly and placed on record. It purported to be, and apparently was, executed and delivered August 26, 1916, about seven months before the date of its record. The first time the defendants here knew or had reason to believe that these plaintiffs, grantees in the deed, had or claimed any interest in the land was on this day and was the result of the constructive notice of the record of the deed. The only property rights of any kind David ever had in Colorado, *596 and out of which Shuck could satisfy his claim, was this equitable title or resulting trust attaching to the property thus conveyed by David and his wife to the plaintiffs. On January 26, 1917, about two months before the recording of the McIninch deed to the plaintiffs, Shuck, one of the defendants here, began in the district court of Larimer county, Colorado, a suit in the nature of a creditor's bill, docket No. 3621, against McIninch and his wife and other persons who had or claimed some interest in this properly, the chief object of which was to subject the property to the satisfaction of his claim and demand, evidenced by the Nebraska judgment, which property it was alleged in the bill belonged in equity to David. Shuck's debtor. The principal defendants, David and Cora, being nonresidents of Colorado and having absconded and left this state, if they ever were here, could not be personally served with process. All the proper steps were taken to secure service by publication under our statutes relating thereto and such service was perfected as they provided. At the expiration of this substituted service, and when it became complete, David and Cora did not appear and their default was entered. Evidence was taken, the court made findings of fact in favor of the plaintiffs and against David and Cora, and upon the same a decree was entered that David and Cora were indebted to the plaintiff Shuck in the sum of more than $6,000, and the property in question was held by Cora as a resulting trust and was subject to the satisfaction of the debt thus ascertained. Sale of the property was ordered, which was afterwards executed and a certificate of sale was issued to Shuck and duly recorded, and, after the expiration of the period of redemption, the sheriff's deed to him was thereupon made and duly recorded. This decree not only found generally for the plaintiff but also recited specifically full compliance with all of the necessary and statutory steps that justify and authorize service by publication. The decree also specifically recites that on the day of filing the complaint in the creditor's suit, a notice of lis pendens, properly describing the property, was issued *597 and filed by plaintiff with the county recorder, which filing was made about two months before the deed of David and Cora to the Quackenbushes was recorded.
We entertain no doubt, if the district court of Larimer county in cause No. 3621, in which court the instant case also was brought, acquired jurisdiction of the subject matter of the former creditor's bill, as the result of substituted service, that the decree entered in the instant case, quieting title in the plaintiffs, is wrong. The judgment, quieting plaintiffs' title, now before us for review was rendered because, as stated by him, the presiding judge, the same judge who rendered the former decree in the creditor's suit, was of the opinion that the court there did not have jurisdiction of the res, and that the filing of the notice of lis pendens availed nothing and the judgment was void. There was, it is true, an issue tendered in the pleadings here that the plaintiffs in this action were in actual possession of the land at the time the creditor's suit was begun. If they were, the defendants here concede that they would be charged with knowledge of the plaintiffs' rights at the time the creditor's suit was begun, and, therefore, the equities of the plaintiffs here would be superior. But the trial court below did not find that plaintiffs were in possession at that time or that the defendants here had knowledge or notice thereof. If the court had made such finding it was not sustained by the evidence. So that the question of the possession by these plaintiffs of this property at the time of the institution of the creditor's suit is not here involved. Upon the record the decision here depends upon the validity or invalidity of the decree in the creditor's suit, and to the consideration of that question we now address ourselves.
1. In England and in the state courts of the Union the general rule, in the absence of a qualifying statute, is that a creditor's bill may not be maintained unless the creditor has theretofore reduced his claim to a judgment at law and the execution issued thereon has been returned nulla bona. In Colorado, except in the federal courts which are *598 not so exacting in such proceedings, a mere general creditor may not maintain a suit in the nature of a creditor's bill unless he has, in addition to the foregoing requirements, caused his previously rendered judgment to become a specific lien on the judgment debtor's interest in the real estate sought thereby to be subjected to its payment.Robison v. Gumaer, supra, and cases cited. The court, speaking by Mr. Justice Helm, said such a lien may be procured in at least three ways, viz.: "by levy of an execution thereon in the manner provided by law if, as in this case, the realty can be identified; by filing a transcript of his judgment in the office of the clerk and recorder of the county wherein the property is situate, and thus securing a statutory lien which binds all interest in realty then owned or afterwards acquired by the judgment debtor during the period of six years from entry of the judgment; or by attachment of realty before judgment and omission to merge the attachment lien through levy of execution or filing of the judgment transcript."
The learned judge did not in his opinion say, or intend to say, that the lien might not be procured by some method other than the three there enumerated. Indeed, he was careful to state in two different sentences of his opinion that there were, or might be, other methods. Such precautionary language was doubtless employed because the careful investigation of the law relating to creditor's bills which the opinion exhibits must have revealed to the writer, what the English and American cases from the very beginning expressly declare, that there are exceptions to the general rule which Judge Helm announced governed the case then under consideration. One of these exceptions which excuses a previous judgment and the utilization without avail of process to enforce it, is where it is impossible or impractical to recover in an action at law a personal judgment by the creditor against the debtor; as where the debtor is a nonresident, a fugitive from justice, has absconded and his whereabouts are unknown, or where he is insolvent, or some court has enjoined prosecution of actions *599
against him. In such instances, one or more of which is presented by this record, and other exceptions might be noted, the courts say that as the general rule is based upon the doctrine that resort to equity is not permissible until the one seeking its aid has exhausted his legal remedies, it would be folly and a useless expense to refuse equitable relief because the one seeking it had failed to comply with an impossible or wholly useless condition precedent. We are not cited to any case in this jurisdiction that negatives the right of a plaintiff in a state of facts like those now before us to maintain a creditor's suit without a previous judgment and exhausting unavailingly process thereunder. Following the decided weight of authority, both of the federal and state courts, we hold that, since the debtor McIninch was a fugitive from justice, a nonresident of Colorado, and that only property interest which he possessed was the equitable estate in the lands in controversy which are situate in Larimer county, cause No. 3621, the creditor's bill, was maintainable by the general contract creditor because the undisputed facts bring the case within an exception to the general rule, which exception makes unnecessary a previous recovery at law by the creditor and the unavailing employment of process to enforce it. Among the authorities so holding are: Case v. Beauregard,
If defendant Shuck's former creditor's suit, the decree in which was pleaded in the answer in this case as a bar to plaintiffs' recovery, falls within a recognized exception to the general rule, and, therefore, a previous judgment is not necessary to its maintenance, it would seem logically to follow that the further requirement in this state announced in the Gumaer Case, that the previous judgment must also be made a specific lien upon the property as a condition precedent, may be dispensed with, because there is no judgment in existence that can be made to operate as a specific lien. But as counsel for the creditor here seem to concede that to uphold the decree in the former creditor's suit a specific lien was procured therein, we proceed to show from this record that such lien was acquired and that the lien attached as an incident to, and in pursuance of, that suit,
2. The filing of a bill in chancery and service of the subpoena is one recognized method of procuring a lien on equitable assets of a defendant debtor, whether the debt is evidenced by a simple contract or by a judgment. See cases already cited and King v. Goodwin, 130 III. 102, 22 N. E. 533, 17 Am. St. Rep. 277, where the court says: "The general rule is, that the filing of a creditor's bill, and service of process, creates a lien on the equitable assets of the judgment debtor. It has been aptly termed an `equitable levy'." Roberts v. Railroad, Co., 25 Barb. (N. Y.) 662.
There is no statute of this state which modifes or is inconsistent with this general rule. Shuck's former suit was in the nature of a creditor's bill. Its object was to enforce a resulting trust or to subject to his demands the equitable assets of his debtor. If not strictly a proceading in rem, it was of that nature. It is attended by the same incidents and enforced by the same remedies. By the filing of his *601
complaint the district court acquired jurisdiction of the res Section 50 of our Code provides that from the filing of the complaint or the service of the summons in a civil action the court shall be deamed to have acquired jurisdiction and to have control of all subsequent proceedings. By filing at the same time notice of lis penoens there was created a lien which attached at the time the notice was filed, the effect of which was to prevent interference by third parties with the property during the pendency of the action and to preserve it to answer any valid judgment the court might thereafter render concerning it. An attachment remains a continuing security for any judgment that may be obtained. Johnson v. Collins,
The only specific failure of the creditor in this respect which the plaintiffs point out, is his neglect in the creditor's suit to sue out a writ of attachment and cause it to be levied on the property. It must be remembered that the legal title of this property was not then, and never had been, in David the debtor, but it stood on the records in the *603
name of his wife Cora. The creditor in his complaint states facts which, if true, gave rise to a resulting trust. By section 115 (2) of our Code a writ of attachment is excepted or levied on real estate or any interest therein belonging to the defendant but which stands on the records in the name of any other person, by leaving with such person or his agent a copy of the writ and a written notice that the described property is attached pursuant to the writ and by filing a copy of the writ and notice with the recorder of the county. We must presume for our present purpose, as the fact undoubtedly is, that this property belonged to the defendant debtor. On the records it stood in the name of Cora, his wife. Both were non-residents, absconders, and he was a fugitive from justice. Neither had an agent in Colorado on whom service or execution of the writ of attachment could be made. Had a writ of attachment been sued out by the creditor, it was impossible to execute it as required by section 115, because all the statutory steps essential to a valid levy must be taken or no valid seizure can be made.Graham v. Reno,
But these plaintiffs further contend, even if none of the objections hereinbefore considered prevented or made impossible the maintenance of the creditor's suit, still the case as made therein is not one where jurisdiction of the parties can be acquired by publication of summons, and, unless such jurisdiction was acquired, the judgment is a nullity. Not so. First we say the proceeding in cause No. 3621 was not based on the Nebraska judgment. Courts differ as to whether a foreign judgment is a basis in the courts of another state for a creditor's bill. It is in Michigan (Earle v. Circuit Judge,
3. Our understanding is that the creditor does not claim that the mere filing of a notice of lis pendens creates a prior lien, but he does say that the facts of filing of the complaint and the notice, considered and construed together and in connection with section 4902, C. L. 1921, of our recording act, have that effect and make the sheriff's deed superior tot he unrecorded deed of plaintiffs. Plaintiffs contend that the lis pendens affords protection only as against transfers made or rights otherwise acquired after, but not before, the institution of the creditor's bill. Cases so hold and, speaking generally, the contention is correct. But the question of priority, as between the holder of a lien, that has merged into a judgment, procured after a deed is delivered but before it is recorded, is not to be determined here by the effect of the filing of the complaint or the notice alone, but the combined effect of such filings in connection with our recording act. This act provides that all deeds and agreements in writing which affect the title to real estate or any interest therein may be recorded in the office of the recorder of the county wherein the real estate is situate "and from and after the filing thereof for record in such office, and not before, * * * shall take effect as to subsequent bona fide purchasers and incumbrancers by mortgage, judgment or otherwise not having notice thereof." Bearing in mind that section 38 of our Code of Procedure specifically makes the filing of *606
notice of lis pendens in a creditor's suit constructive notice from the date of its filing. and that the beginning of the chancery suit in connection with the filing of the notice creates or initiates fromt he time of filing the notice an equitable lien upon the property affected, and that our recording act, as between the holder of an unrecorded deed and the holder of an incumbrance such as an equitable lien, prefers the latter, we are of opinion that the rights of defendants, the holders of an incumbrance before plaintiffs' deed was placed on record, are supeiror. In a recent case, Stetler v. Winegar, et al.,
We conclude, therefore, that the plaintiffs' warranty deed is subject and inferior to the sheriff's deed of the defendants.
4. Our resolution of the foregoing propositions is decisive against the plaintiffs' further contention that they are not bound by the former judgment in the creditor's suit, because they were not parties thereto. Of course, the general rule is that persons not parties to an action are not bound by the judgment. Parties and privies, however, are bound. The plaintiffs here are privies to the defendants in the creditor's suit. The judgment against their grantors, to whom they are privies, binds them, even though not parties to the suit. The plaintiffs also are, as we have said, purchasers pendente lite and are to be treated as such and get nothing by their purchase made in law during the pendency of the suit, because their rights and interests in the *608 property in controversy, if any, attached as against the plaintiffs after the latter had acquired a lien that after-wards ripened into a judgment under which they claim.
Our conclusion on the whole case is that the judgment in this case was wrong and that the learned trial judge rightly made the former decree in the creditor's suit which controls the rights of the parties. The judgment and decree in the instant case, therefore, must be reversed and the cause remanded with instructions to the district court to set aside its decree quieting title in the plaintiffs. Such further proceedings as may be had below must be in accordance with the views expressed in this opinion.
MR. CHIEF JUSTICE TELLER and MR. JUSTICE SHEAFOR concur.
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