Ohio Electric Car Co. v. Duffet

This is an appeal from a judgment for the plaintiff for $1,261 and interest in an action to recover from Josephine Buffet, one of the defendants, the net amount which she had received from the sale of certain real property, which had been transferred to her without consideration by her husband, at a time when it is alleged he was indebted to the plaintiff company and at a time when he was insolvent. The plaintiff also asked by the prayer of its supplemental complaint to have its judgment declared a lien upon real property owned by said Josephine Buffet because of the fact that the funds so received by her had .been invested in improvements upon said real property. This order was also included in the judgment.

[1] It appears from the record that George E. E. Buffet, the husband of Josephine Buffet, together with one Le Sage had guaranteed to hold the Ohio Electric Car Company harmless from any loss or damage suffered by it by reason of the nonperformance of the terms of a certain contract by the Washington Street Electric Garage Company. This contract was. for the sale and purchase of automobiles. The Washington Street Electric Garage Company was a fictitious name used by the daughter and son-in-law of George Buffet in the conduct of their business. The persons doing business under this fictitious name failed to meet their obligations under the contract with the plaintiff, and were sued, together with Buffet and Le Sage for the amount due under the contract for goods sold and delivered. Judgment was secured in this action (No. B-42522 in the superior court for the county of Los Angeles) against all of the defendants named therein, including George Buffet. The record in this action was introduced in evidence in the present action to establish the plaintiff’s claim and the indebtedness of George Buffet. The appellants object to this judgment as evidence against Josephine Buffet. The argument advanced is that although the question of whether or not George Buffet was indebted to plaintiff is res adjudicada between him and the

The matters heretofore discussed bring this case within the application of section 3442 of the Civil Code; the transaction was void as to existing creditors, and the plaintiff was such an one. Said code section provides that such transfers shall be void as to existing creditors. [4] It has been held (First Nat. Bank v. Maxwell, 123 Cal. 360 , [ 69 Am. St. Rep. 64 , 55 Pac. 980 ]) that, so far as existing creditors are concerned, the title and ownership of the property conveyed with intent to defraud creditors remains in the fraudulent grantor as fully as though no transfer had been attempted, and the transfer being void as against them, a creditor may seize and sell the property under execution, and the sheriff’s deed thereto transfers the legal title itself, and not a mere equity. Under such circumstances, then, in so far as this creditor was concerned, the property transferred was yet the property of its debtor. [5] The creditor chose in this action to treat Josephine Buffet as a trustee of said property, holding for its debtor for the benefit of his creditors. In doing this it had the plain right to follow the trust property, regardless of the form in which it was found. It is quite immaterial in this equitable action whether the property was in the form of the house originally transferred, or whether it had been converted into improvements upon another house owned by Josephine Buffet. This being an equitable action in which Josephine Buffet is sought to be held as a trustee, equity will follow the trust funds wherever they may be found. The judgment, therefore, decreeing a lien upon the property in which the funds had been invested, to the extent of such investment, was a proper exercise of equitable jurisdiction. (Swinford v. Rogers, 23 Cal. 233 , 236.) In connection with this matter, appellants object to the action of the trial court in permitting the plaintiff to file a supplemental complaint asking that a lien be declared in its favor upon the property of Josephine Buffet for the -amount received from the sale of her husband’s property, and invested in her said property. It is contended that this supplemental complaint states an entirely new cause of action and asks for an entirely different relief. We are of the opinion that the court did not err in permitting the filing

[6] The appellants further object to the creation of this lien upon the property, because Josephine Buffet, on November 26, 1918, while this action was pending, filed a declaration of homestead upon the property sought to be charged with the lien. The answer of defendants to the supplemental complaint also set up the fact that the defendant Josephine Buffet had been adjudicated a bankrupt on January 23, 1919, and that in said bankruptcy proceedings the homestead had been set aside to her as exempt.

As we have stated, under section 3442 of the Civil Code, and under the holding in the case of First Nat. Bank v. Maxwell, supra, and numerous other California cases, the deed conveying this property to Josephine Buffet was void, as to the plaintiff. It was void db initio, and as to plaintiff, Josephine Buffet never acquired any title to this property. By turning the same into money, and by reinvesting this money, she could not improve this condition. She could not make a void title good by changing the form of the property, and she cannot make a void title good by filing a declaration of homestead covering the property. In so far as her home represented the funds received from her husband, under the circumstances in this case, it was not a proper subject for inclusion in her declaration of homestead, and cannot be impressed with this character. In so far as this property is not her property, but is property belonging to another and impressed with a trust, it is beyond the protection of the homestead laws. It is not sufficient that if the property had remained in its original form, as a house belonging to the husband and the family had resided there, this might have been homesteaded. The fact remains that these necessary elements did not exist. This situation was considered in the case of La Point v. Blanchard, 101 Cal.

[7] With reference to the setting aside of the homestead in bankruptcy proceedings, this money is recovered from Josephine Buffet, not from her property, but as and from the property of her husband—property which the record shows he had before his marriage. If the deed from him to Josephine Buffet was void and title never passed, then this property could not be set apart to Josephine Buffet in bankruptcy proceedings dealing with her estate. The property is simply property outside of the scope of such proceedings. The mistake made by appellants is in basing their arguments upon the premise that this action is brought to recover as upon a debt owing from Josephine Buffet. This is merely an action to reach the property of the real debtor, George Buffet, and to brush aside the technical legal obstacles in the form of his conveyance, which interfere with the creditor’s right in this regard. In Sewell v. Price, 164 Cal. 265 , [ 128 Pac. 407 ] it is said: “A bill maintained by a judgment creditor to subject to the payment of his demand property fraudulently transferred by the debtor is not, strictly speaking, an action upon his judgment. It is really an action for equitable relief against the obstruction caused by the transfer, which hinders him in satisfying his claim by the ordinary process of law; that is to say, by an execution. ’ ’

The other matters urged by appellants we consider to be without merit.

The judgment is affirmed.

Nourse, J., and Brittain, J., concurred.

All the Justices concurred.