John Curtis & Co. v. Olds

Opinion by Mr. Justice Potter, . In this case-the defendant, Mary T. Olds, denied the right of the plaintiffs, to file a creditor’s bill to enforce collection from property standing in her name by gift from her husband, of claims contracted for the improvement of the property, on the faith of statements made by the husband, .as to. his ownership, which were false, but [322] were made without intent to defraud. She contends that as plaintiffs had the right to file mechanic’s liens, and had also the right to sue the débtor in assumpsit, they were not without a remedy at law, adequate and complete. The allegations of the bill were found by the court below to be substantially correct, and most of them were admitted by the defendant. " It is averred that F. L. Olds bought a tract of land, paid for it with his own money, and had the deeds made out to his wife. ■ That having represented that he was the owner of the land, he concluded a contract -with. Curtis & Coinpány for the erection of a house to cost $10,134.91, which contract was carried out by them. That he paid the contract price out of his own money, with the exception of a balance of $2,119.39, for'which he gave a note accompanying a letter, in which he refers to the property in question here, ás “my Dorranceton residence.” That Curtis & Company refrained from filing mechanic’s liens under the contract, at the solicitation of Mr. Olds. That he and his family moved into the house when it was completed, and throughout the transaction Mr.. Olds represented himself as owner of the lots and dwelling. That Mr. Olds died insolvent, and the plaintiffs had no knowledge that the title to the property was not in his name,, until after his death. That Mrs. Olds had at first appeared willing to pay the claim, but later refused to do so, and plaintiffs were informed that she was about to sell and dispose of the property, and averring that the transaction constituted a fraud on them, they prayed that the defendant be restrained from disposing of the property, and tha’t she be compelled to make payment of the balance due. In an amendment to the bill subsequently filed it was averred that Mrs. Olds was present while the work was being done, and at no time disavowed the right or authority of her husband to act for her in the erection of the dwelling, and that since the filing of the original bill she had, contrary to an express agreement of counsel, which had prevented the plaintiffs from [323] pressing the prayer for a preliminary injunction, sold the property to J. A. Redington, for a consideration óf $14,500, of which $6,500, was in cash, with a purchásemoney mortgage for the remainder, which mortgage had been assigned in trust for the bénefit of’ defendant. After finding the facts to be substantially as alleged in the bill, the court below reached the conclusion .that while Mr. Olds had been guilty of no intentional fraud, yet in equity his conduct constituted presumptive fraud, and the plaintiffs should, therefore, be permitted to follow the proceeds of the property which had been largely increased in value by their labor and expenditures. The court below held that the plaintiffs were without a full, complete and adequate remedy at law to enforce the collection of their claims against the defendant, in view of the fact that her former husband was dead at the commencement of this action, that he was insolvent at the time of his death, and that the said defendant had since the inception of this suit sold and disposed of the property to John A. Redington, who has since been joined as a defendant in this suit. And as a final conclusion the court held that plaintiffs were entitled to a decree directing the assignment of a sufficient amount of the purchase-money mortgage given by Redington to defendant, to cover the-claims of the plaintiffs. A decree was entered accordingly, and from the confirmance of that decree -by the court in banc, defendant has appealed. That the court has jurisdiction in equity in this case, we have no doubt.1 The rule as stated in Bispham’s Principles of Equity (8th ed.), section 201, is as follows: “As the jurisdiction of equity embraces......fraud of all kinds, it affords relief in many instances in which no ground for redress whatever exists at law1. In such cases, therefore, its jurisdiction is exclusive, and the only remedy which the injured party can have is by bill in chancery. Thus, a great many transactions are presumed to be fraudulent in equity which are not so in law, where the rule .is that fraud must be proved, and cannot be pre [324] sumed. In equity fraud may be inferred from attendant circumstances (Kisterbock’s App., 51 Pa. 483, is directly in point as to this statement); it may be presumed from tbe subject matter of the contract; or from the relation of tbe parties; or it may afford ground for relief when it simply affects third persons not parties to the transaction.” Here the court found that plaintiffs relied on the representation of ownership made by Mr. Olds, and that while he intended no actual fraud, yet his action resulted in a fraud on the rights of the plaintiffs. They were led to refrain from filing mechanic’s liens, as they had the clear right to do. The loss of a remedy at law through the misrepresentation of an adversary is in itself ground for invoking the aid of equity. The effectiveness of the suggested remedy in an action of assumpsit is, to say the least, doubtful. Mr. Olds died insolvent and Mrs. Olds has transferred what is said to be her only visible asset and holds the proceeds in the shape of a purchase-money mortgage. When this bill was filed the court of equity had an undisputed right to entertain jurisdiction over the case to prevent the encumbrance or conveyance of the property, pending litigation. Fowler’s App., 87 Pa. 449 (455). The jurisdiction of equity having attached for this purpose would continue and settle the whole controversy. Allison’s App., 77 Pa. 221; Orr v. Peters, 197 Pa. 606 (614). The jurisdiction of a court of equity to entertain a creditor’s bill in cases of this character was pointed out in the latter case, as it was in Peoples Nat. Bank of Pittsburgh v. Loeffert, 184 Pa. 164; Houseman v. Grossman, 177 Pa. 453, and Barto’s App., 55 Pa. 386. If the husband is in embarrassed circumstances at the time he makes improvements on his wife’s land, the money or materials furnished will be regarded as a gift in fraud of his creditors. Nance v. Nance, 84 Ala. 375; and such a gift is treated in the same manner as any other voluntary conveyance in fraud of creditors. Ware v. Seasongood, Menderson & Co., 92 Ala. 152. It is suggested [325] that the wife did not participate in the fraud in the present case. But a sound and proper rule would require that a voluntary gift be held void, if made to defraud creditors, whether the donee participates in the fraud, or not. A creditor’s bill will lie to reach improvements made by a debtor on the real estate of another: Dietz v. Atwood, 19 Ill. App. 96; Nat. Val. Bank v. Hancock, 100 Va. 101. The record in this case shows evidence amply sufficient to justify all the findings of fact by the court below, and in the conclusions of law drawn therefrom, we find no error. The assignments are overruled, the decree is affirmed, and this appeal is dismissed at the cost of appellant.