Taylor v. Russell

California Court of Appeal Jun 26, 1935 No. Civ. 9267Published

Before: Houser

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Holding. The court held that a conveyance of property made in fraud of creditors remains valid and binding between the parties to the conveyance, and a decree setting aside such a transfer as to creditors does not restore title to the debtor. Consequently, the plaintiff lacked standing to recover the proceeds from the execution sale of the property.

Issues

Whether a decree setting aside a fraudulent conveyance as to creditors restores title to the original grantor.
Whether a grantor of a fraudulent conveyance has standing to recover proceeds from an execution sale of that property.

Disposition. affirmed

Quotations verified verbatim against the opinion

“A decree avoiding a deed as to creditors of the grantor leaves the deed operative inter partes.”

“The legal effect of a judgment declaring a conveyance void as against a judgment creditor is not to restore the title to the debtor, but to make the property subject in the hands of the grantee to the judgment lien”

HOUSER, J.

As far as are material to this appeal, in substance the facts appear to be as follows: Prior to the date when the instant action was commenced in the lower court, in another action theretofore instituted the defendants in the instant action had recovered a judgment for approximately $43,000 against the assignors of plaintiff herein;—from which judgment an appeal was taken, with the result that said judgment was reduced to the sum of $3,500.

(Russell

Stillwell,

106 Cal. App. 88 [288 Pac. 785].) In the meantime, in a third action, as the result of a cross-complaint that' was filed therein by the defendants herein, it was decreed that a certain sale of real property made by the assignors of plaintiff herein was void as to creditors of said assignors. Thereupon the plaintiffs in the first action (defendants herein) levied upon and sold under execution sale all the right, title and interest of the defendants in said first action in and to said property (which right consisted of an equity over a prior trust deed) for the sum of $25,000,—the said plaintiffs being the purchasers at said sale of said property, and thereafter causing the original judgment of $43,000 in said first action, to be credited with said sum of $25,000. Thereafter the assignee of the defendants in said first action commenced the instant action against the plaintiffs in the first action (defendants herein) to recover a judgment against them for the difference between the ultimate judgment of $3,500 recovered by plaintiffs in the first action against the defendants therein (plaintiff’s assignors herein) and the sum of $25,000, for which the said property of the said defendants in said first action had been sold on execution sale. On the trial thereof a judgment of nonsuit was rendered, and it is from said judgment that the instant appeal is taken.

It is contended by respondents that “a deed in fraud of creditors, even when set aside as fraudulent by the creditors, is valid as between the parties thereto ’ ’.

In 14 American & English Encyclopedia of Law, page 273, the rule (supported by numerous authorities) is thus stated:

[63]

Taylor v. Russell

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HOUSER, J.

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