Hopewell v. Wright
Hopewell v. Wright
Opinion of the Court
delivered the opinion of the-Court:
In our opinion the evidence on behalf of the plaintiff shows conclusively that the object of Koblen in offering his property for sale was to avoid payment of the damages, the recovery off which he feared in the pending action. To accomplish this purpose speedily, he offered to sell for $4,500 property worth, according to the weight of the evidence, at least $5,400. And before the recovery of the judgment he succeeded in disposing off all of the real estate that he had, consisting of this and the lot sold to the Liebmans. It is unnecessary to consider whether-sec. 1120 of the D. C. Code [31 Stat. at L. 1368, chap. 854] is more comprehensive in its terms than the statute 13 Eliz..
The defendant Wright, having shown the actual payment of .a valuable consideration for the property, it devolved upon the plaintiff to show that he had knowledge of the fraudulent intent of Koblen in making the sale. Morimura v. Samaha, 25 App. D. C. 187—197. It was said in that case: “Where a sale has been made by the vendor with the intent to defraud creditors, it is not necessary, to constitute bad faith in the purchaser, who -may have paid a valuable consideration, that he either actually participated in the scheme to defraud, or had actual knowledge of the fraudulent intent of his vendor. Bad faith may exist where the facts and circumstances of the transaction are such .as to put him upon inquiry.” The evidence does not show that Wright directly co-operated with Koblen, or actually participated in his fraud. The most that can be said of him is that, with notice of Koblen’s intent, he took advantage of the opportunity presented to purchase the property for a price less than its actual market value. Knowledge of the fraudulent intent -of the vendor is, as we have seen, all that is necessary to avoid .such a sale. That Wright had knowledge of Koblen’s purpose is, we think, fully established by the evidence. Ellis, to whom Koblen applied to secure a purchaser, and to whom he •disclosed his purpose, testified that he had the property “listed” at the price by Brown, a real estate broker, as well as with 'Gladman, who was made Koblen’s direct agent. That he told Brown the reasons given by Koblen for wanting to sell at once, and at the reduced price. That he found some parties willing to buy the four lots separately at a price aggregating $4,450, and took deposits from them. That Wright came to Gladman’s -office later, and offered $4,500 for the entire property. That
A vigorous attack was made upon the credibility of Ellis, on the argument, but, strange to say, Brown, who might have contradicted him if his statement was untrue, was not asked a question by the defendant concerning the alleged statement to him of Koblen’s purpose in reducing the price of the property, or as to his having repeated the same to Wright. Naturally, the plaintiff asked no questions relating to it. The plaintiff’s case, however, does not depend upon the evidence of Ellis alone. Wright had actual knowledge of the contents of the bill in equity filed by Turnburke against Koblens. Having to borrow money from the building association, he was required to have the title passed on by its counsel, who became his representative also for the purpose. It was nearly two months before the title was actually passed and the transaction concluded. Wright admitted that he was told that there was some complication that had to be straightened out. He was also told by the attorney that there was a suit pending against Koblen for damages, and of the equity suit. He said that there was a suit pending; that' there was a complication. That the building association was-the one to be satisfied, not himself. If he could not get the money from them, he could not buy the property.
The following written report on the title was made by the attorney on July 9, 1908:
Equity Cause No. 27,819. Doc. 61.
Louisa M. Turnburke, Plaintiff, v. Samuel Koblen, Defendant.
Bill filed May 23, 1908, to restrain sale of caption until plaintiff can recover judgment in law cause No. 50,229, filed in January, 1908, a suit for $15,000 damages. Demurred to-for want of jurisdiction in court, and demurrer sustained for want of compliance with rules of court.
Opinion.
I have examined the title of Samuel Koblen to caption, and
The attorney for the building association was, under the circumstances, the attorney of Wright also. Independently of any communication by Ellis or Brown, Wright had actual knowledge of the depending action for damages against Koblen. He also knew that the bill had been filed to prevent Koblen from disposing of the property. That the bill alleged the fraudulent purpose of Koblen was known to his attorney, who read it, and. communicated the fact to him. Whether, then, Ellis or Brown had or had not before informed him of Koblen’s purpose in offering the property at the reduced price, he had actual knowledge of the depending damage suit, of the reduction of the price, and of the charges made in the bill. These facts and circumstances were, in our opinion, reasonably sufficient to put a man of ordinary caution upon inquiry, at least. Wright prosecuted no inquiry, but was content, as he said, to rest entirely upon the judgment of the building association’s title expert. The attorney who reported upon the title was clearly right in the opinion that the so-called creditors’ bill, filed by a plaintiff in a depending damage suit, was subject to a demurrer for want of jurisdiction, and could not constitute a lien upon the property. For the same reason it was not constructive notice of the facts alleged in it; consequently, it was immaterial whether it had been dismissed or not at the time of the report upon the title. But when actually read, the facts alleged therein were brought directly to his attention. That he failed to appreciate their importance is immaterial.
For the reasons given, the decree will be reversed, with costs, and the cause remanded with direction to enter a decree in conformity with this opinion. Reversed.
Reference
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- HOPEWELL v. WRIGHT
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- Fraudulent Conveyances; Evidence; Burden of Proof; Fbaud; Notice. 1. The statute of 13 Eliz. chap. 5, relating to fraudulent conveyances, (superseded in this district by sec. 1120, D. C. Code, 31 Stat. at L. 1368, chap. 854), extends its protection not only to technical creditors, but also to those whose claims and demands consist of actions for tort. 2. When the grantee under an alleged fraudulent conveyance has shown the payment of a valuable consideration, the burden is upon the party attacking the' conveyance to show that such grantee had knowledge of the fraudulent intent of his grantor. (Following Morimura v. Samaha, 25 App. D. C. 189.) 3. It is not necessary to constitute bad faith on the part of a purchaser from one who has sold his property to defraud creditors, and who has paid a valuable consideration, that he either actually participated in the scheme to defraud, or had actual knowledge of the fraudulent intent of his vendor. Bad faith may exist where the facts and circumstances of the transaction are such as to put him on inquiry. (Following Morimura v. Samaha, 25 App. D. C. 189.) 4. Where the defendant in an action at law, and in anticipation of a judgment being recovered against him, and after a bill in equity by the plaintiff in such action had been filed against him, to enjoin him from disposing of his real estate to avoid payment of the anticipated judgment, sold his real estate worth $5,400 for $4,500, and a title company employed by the buyer examined the title and reported the filing of the equity suit and advised him that the court was without jurisdiction to grant the relief prayed for therein, and that the title was good in the seller; and the buyer prosecuted no further inquiry, but, resting entirely upon the judgment of the title company, accepted a deed of the property and paid the consideration, it was held in a suit by the plaintiff in the action at law after he had recovered a judgment, to set aside the deed as fraudulent, that the grantee had actual knowledge of the pending action at law, of the reduction in price of the real estate, and of the charges made in the bill, and that these facts and circumstances were such as to put a man of ordinary caution upon inquiry, and that the deed was therefore void as against the judgment creditor.