Tompkins v. Sprout

California Supreme Court Jul 1, 1880 No. No. 6,706Published

Before: Ross

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Holding. When a conveyance is only constructively fraudulent, a court of equity should set aside the deed only upon terms, such as requiring the plaintiff to reimburse the defendant for the discharge of a valid pre-existing mortgage lien on the property.

Issues

Whether a finding of fact regarding a mortgage lien was within the issues raised by the pleadings.
Whether a court of equity may require a plaintiff to reimburse a defendant for a mortgage lien as a condition to setting aside a constructively fraudulent conveyance.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“A Court of Equity, in setting aside a deed of a purchaser upon grounds other than positive fraud on his part, sets it aside upon terms, and requires a return of the purchase-money, or that the conveyance stand as a security for its payment.”

“In such case, a Court of Equity will protect the purchaser as well as the creditor, where, as here, both can be protected without injury to either.”

Synopsis

Pleading—Complaint — Joinder of Actions — Demurrer.—Held, that the complaint in this case, being a combination of several independent and distinct causes of action, could not have been sustained had a demurrer been interposed.

Fraud as to Creditors—Fraudulent Conveyance—Equity—Pleading— Demurrer—Action to Quiet Title—Equity.—In an action by a purchaser at an execution sale, to quiet title and to compel a conveyance against one who had purchased land from a fraudulent grantee of the execution debtor, by a deed made with intent to defraud creditors, the complaint alleged that the defendant claimed some estate or interest in the land adverse to the plaintiff, but that his claim was without right, and that he had no right, title, or interest therein; and the answer admitted the former and denied tiie latter allegation; and the Court found that the defendant had purchased with constructive but without actual notice of the fraud, and that he had paid off a mortgage on the land which was prior to the plaintiff’s claim. Held, 1st, that the pleadings raised a material issue, and that, though the answer should have set out the nature of the defendant’s claim, yet, as no demurrer or objection to the evidence was interposed, it could not be objected that the finding was not within the issue; and 2ndly, that the plaintiff was entitled to the relief prayed for, only upon the terms of paying to the defendant the amount paid by him in satisfaction of the mortgage.

Id.—Id.—Id.—In an action to set aside a deed which is only constructively fraudulent, a Court of Equity will protect the purchaser as well as the creditor, where both can be protected without injury to either.

Id.—Id.—Id.—Where the fact of fraud is established in a suit at law, the buyer loses the property; but where the proceeding is in equity, the Court will deal with the subject according to the equities of the case; the cardinal principle, in all such cases, being that the property of the debtor shall not be diverted from the payment of his debts, to the injury of the creditor, by means of the fraud.

Ross, J.: The complaint in this case is a combination of several independent and distinct causes of action, and could not have been sustained had a demurrer been interposed. The main purpose of the action seems to have been to have declared null and void two certain deeds to a block of land situated in Santa Barbara; but, in addition to the averments respecting that cause of action, the complaint contains the usual allegations found in a complaint to quiet title, and also in one of ejectment. The prayer is, that the adverse claims of the defendant to the premises be determined by the Court; that it be adjudged that the defendant had no title to or interest in the block, and that he be forever debarred from asserting any claim thereto adverse to the plaintiff; that plaintiff recover possession of the premises from the defendant, and that the deeds be decreed to be null and void, and defendant be compelled to execute a conveyance of the premises to plaintiff. The complaint was not verified, and the answer was a general denial of all of the allegations of the complaint, except the allegation “ that the defendant claims [34]some estate or interest in said premises, in the complaint named, adverse to the plaintiff.”

The facts upon which the plaintiff sought to have the deeds alluded to annulled, and upon which the Court below did annul them, are substantially as follows: On the 2nd of April, 1877, one Charles Peterson was, and for some time prior thereto had been, the owner of the premises. On that day, in an action then pending in the District Court of Santa Barbara County, a decision was rendered in favor of the plaintiff, Tompkins, and against the said Charles Peterson and one Johnson, upon a money demand, upon which final judgment was entered April 7th, 1877. On the said 2nd day of April, and after the rendition of the said decision, Charles Peterson, for the purpose of defrauding the plaintiff, executed to his brother, Gustav Peterson, a deed to various pieces of property, including the block in question. Gustav received the conveyance with knowledge of the fraudulent intent of Charles, and colluded with him to defraud the plaintiff. On the 24th of April, 1879, the plaintiff caused execution to issue for the enforcement of the judgment recovered by him. The execution was duly levied by the Sheriff on all the right, title, and interest of Charles Peterson, in and to the said block, describing the same as standing on the records of the county in the name of Gustav. Under this execution the property was sold for the amount of the judgment, with interest, cost, and accruing costs, the plaintiff being the purchaser. The Sheriff thereupon issued to the plaintiff a certificate of sale in due form, the duplicate of which was duly recorded on the 31st of May, 1879. No redemption having been effected, the Sheriff, on the 21st of March following, executed to plaintiff a deed to the premises. Intermediate the delivery and recording of the certificate of sale and the execution of the Sheriff’s deed— that is to say, on the 28th of September, 1879—the defendant purchased the block of land in controversy from Gustav Peterson, and received a deed therefor from him. The defendant paid full value for the land, and “ did not have actual knowledge . of the fact that the conveyance from Charles to Gustav was fraudulent, but did have full knowledge, both actual and constructive, that said block had been levied upon and sold as the property of Charles Peterson as aforesaid; and that plaintiff

Tompkins v. Sprout

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