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(- Or. -, 181 Pac. 1.)
In regard to Harris, JJ., concur.
The reported case (PUFFER V. BADnecessity of
her demand for a
LEY, ante, 1561) is another illustration fendant promptly announced that
of the rule applied in FLORENCE v. DE
BEAUMONT (reported herewith) infra, the transaction was a closed inci
that the knowledge of an attordent, and that he would not rescind.
ney will not be imputed to his client Under such circumstances, further
in certain cases of limited employdetails would have been futile, and
ment. The rule in case of limited emnot required.
ployment is discussed in subd. III. c, of We find no reversible error in the the note, p. 1592, post, upon the genrecord, and the judgment is af eral question of imputing the knowlfirmed.
edge of an attorney to his client.
CHARLES S. FLORENCE, Trustee, etc., of H. C. De Beaumont, Bankrupt,
Washington Supreme Court (Dept. No. 1) - April 24, 1918.
(101 Wash. 356, 172 Pac. 340.) Attorney - knowledge - notice to client.
1. The knowledge by an attorney of the fraudulent character of a transfer of property by an insolvent is not imputed to one lending money on a mortgage of the property to the transferee, merely because, when the attorney who represented the parties to the fraud approached the money lender with the mortgage for execution, the latter consulted him as to the value of the property offered as security for the loan.
[See note on this question beginning on page 1592.] Fraudulent conveyance mortgage bind his principal by his knowledge to secure advance to make crop.
than by his acts in matters outside the 2. A mortgage by a fraudulent transferee of an insolvent to secure an ad
scope of his authority or employment. vance to put in a crop, which is repaid
[See 2 R. C. L. 962; 21 R. C. L. 841.] from the crop, is not fraudulent as to - knowledge of attorney - interest in creditors of the fraudulent trans
5. One of two parties to a loan transEvidence
action, who are represented by the burden of proof - fraud. 3. The burden of proving fraud is
same attorney, is not chargeable with upon him who asserts it.
notice of the facts known to the at[See 10 R. C. L. 898.]
torney through his relation to the other Notice - to agents - binding on prin .
party, which it is to the interest of the cipal.
latter to conceal from him. 4. An agent or attorney can no more [See 2 R. C. L. 965.]
APPEAL by plaintiff from a judgment of the Superior Court for Asotin County (Miller, J.) dismissing as to one of the defendants an action brought to set aside an alleged fraudulent conveyance. Affirmed.
The facts are stated in the opinion of the court.
Messrs. Fred E. Butler and E. J. from Denny the value of a crop of Doyle, for appellant:
grain, at the time of the transacA state of facts more fraudulent and tions in question growing upon the marked with as many badges of fraud land conveyed by De Beaumont and as this case could hardly be imagined. wife to Denny. It was orally stipu20 Cyc. 445, et seq.; Ogden State
lated in this court that F. G. MorriBank v. Barker, 12 Utah, 27, 40 Pac. 769; Morse v. Ryland, 58 Kan. 250, 48
son, after plaintiff took this appeal, Pac. 957; Hadley v. Adsit, 3 Kan. App.
has died, and that Ellen T. Morri122, 42 Pac. 836.
son, the duly appointed executrix of The combining of all the defendants his estate, be substituted as respondtogether to commit a fraud under the ent in this appeal. Bankruptcy Laws of the United States We find it unnecessary to notice constituted a conspiracy, and the acts the pleadings further than to say and declarations of one was and is the
that they sufficiently present the isproper evidence against the others. 8 Cyc. 679; Blain v. State, 33 Tex.
sue of good faith in these transCrim. Rep. 236, 26 S. W. 63; People v.
actions. The cause was tried to the Daniels, 105 Cal. 262, 38 Pac. 720;
court without a jury. The court Hawkins V. Alston, 39 N. C. (4 Ired. found in substance that upon and Eq.) 137.
prior to May 12, 1914, De Beaumont Morrison is liable for the acts of and wife were the owners as their his agent.
community property of 320 acres Alaska S. S. Co. v. Pacific Coast Gyp
of land in Asotin county, Washingsum Co. 78 Wash. 247, 138 Pac. 875;
ton, subject to a mortgage for Eaton, Eq. Jur. p. 132; Hart v. Sandy, 39 W. Va. 644, 20 S, E. 665.
$9,000 to the Holland Bank; that There is no distinction between an
they also owned certain farm maattorney at law and other agent, and chinery, hogs, cattle, sheep, and the principal is bound by the knowledge eight work mules and harness; that possessed by both the attorney or other the mules were subject to a mortagent.
gage of $500 to the Holland Bank: Bierce v. Red Bluff Hotel Co. 31 Cal.
that there was growing upon the 161; Wittenbrock v. Parker, 102 Cal.
premises during the seasons of 93, 24 L.R.A. 197, 41 Am. St. Rep. 172, 36 Pac. 374; Rogers v. Palmer, 102 U.
1914–15 a crop of grain; that the S. 263, 26 L. ed. 164; Brown y, Jef
land and personal property constiferson County Nat. Bank, 19 Blatchf. tuted all of the property owned by 315, 9 Fed. 258; Merchants' Nat. Bank the De Beaumonts at that time from v. Lovitt, 114 Mo. 519, 35 Am. St. Rep. which claims of creditors could be 770, 21 S. W. 825; Wright v. Muxlow, 8 satisfied; that at that time and prior Ben. 52, Fed. Cas. No. 17,629; Allen thereto De Beaumont was insolvent, v. McCalla, 25 Iowa, 464, 96 Am. Dec.
owing debts in the sum of $15,000; 56; Smith v. Ayer, 101 U. S. 320, 25 L. ed. 955.
that on May 12, 1914, De Beaumont Mr. C. H. Baldwin for respondents. conveyed the real estate mentioned
to Denny, and on the same day Ellis, Ch. J., delivered the opinion transferred and delivered to Denny of the court:
all of the above-mentioned personal Plaintiff, trustee of the estate of property and crops on the land; that H. C. De Beaumont, a bankrupt, the deed and bill of sale were filed brought this action against De Beau for record on May 13, 1914, at the mont and wife, T. U. Denny and request of C. H. Baldwin, attorney wife, and F. G. Morrison, to set for De Beaumont and Denny; that aside as in fraud of creditors a deed the deed and bill of sale were withand bill of sale made by De Beau out consideration, and were made mont and wife to Denny and a chat for the purpose of hindering, delay. tel mortgage made by Denny and ing, and defrauding De Beaumont's wife to Morrison, and to recover the creditors; that at the time of this personal property transferred and transaction De Beaumont's attormortgaged by these instruments, or ney, Baldwin, was preparing for its value, and further to recover him a petition in bankruptcy, and
(101 Wash. 356, 172 Pac. 340.) that Denny, when he received the nocent purchaser of said personal deed and bill of sale, knew of De property covered by his said mortBeaumont's insolvency, and took the
gage. same for the purpose of assisting De ‘(28) That the sum secured by Beaumont in defrauding his credi said mortgage was, prior to the trial tors; that for the purpose of secur of this action, repaid to the said F. ing Mrs. De Beaumont's signature G. Morrison by the said T. U. Denny, to the deed and bill of sale Denny and that said mortgage has been paid to her the sum of $950, which satisfied and released. thereby became community proper *(29) That said F. G. Morrison ty of the De Beaumonts; that de- has never received or converted to mand has been made by the trustee his use any property belonging to for the possession of the land and the estate of said H. C. De Beauthe delivery of the personal prop- mont, bankrupt, as aforesaid. erty, upon Denny, who has refused “(30) That the value of the perto deliver the same, and upon Mrs. sonal property transferred by said De Beaumont for the $950, which H. C. De Beaumont to T. U. Denny she also has refused to pay to the as aforesaid was $2,000, and that trustee. Touching the mortgage the landlord's interest in the crops from Denny to Morrison the court
grown on the lands sold by said De specifically found:
Beaumont to said Denny was of the "(23) That on the 12th day of value of $950; that the said T. U. May, 1914, said T. U. Denny made, Denny should be credited in his acexecuted, and delivered to F. G. Mor- counting with the sum of $600 paid rison a chattel mortgage to secure by him to the Holland Bank to rethe payment of $1,500 secured upon lease the mortgage on the mules dethe personal property above men scribed in said bill of sale, and with tioned and described including said the sum of $150 paid as interest on crop of grain.
the real mortgage held by said Hol"(24) That at the time said mort land Bank, leaving a balance of gage was made said F. G. Morrison $2,200 to be accounted for by the was unable to leave his home on ac said T. U. Denny to the said truscount of physical injury, and said tee." Charles H. Baldwin drew up said Upon these findings and approprimortgage and looked after the in ate conclusions of law the court deterests of said Morrison in taking creed that plaintiff have judgment said mortgage.
against Denny and Mrs. De Beau“(25) That at said time said mont, jointly, for the sum of $950 Charles H. Baldwin was the attor and interest from May 18, 1913, agney of the said H. C. De Beaumont gregating $1,160.58; that plaintiff and knew of his insolvent condi recover from Denny the further tion.
sum of $1,250, with interest from “(26) That said chattel mortgage May 18, 1913, aggregating $1,517.given to said F. G. Morrison by said 08; and that plaintiff recover his T. U. Denny as aforesaid was in costs against the De Beaumonts and consideration of the sum of $1,500 Denny. The court further ordered paid by the said Morrison to the that the action be dismissed as to said Denny.
the defendant Morrison, and that he "(27) That said F. G. Morrison
recover his costs. From this order took said chattel mortgage, without of dismissal as to Morrison, plainknowledge of the insolvent condi tiff appeals. tion of said H. C. De Beaumont, and We have examined the evidence without knowledge of the fraudu as set out in the abstracts of record lent transactions which had taken with frequent recourse to the stateplace between said H. C. De Beau ment of facts. We are satisfied that mont and said T. U. Denny, and was it supports the findings by a fair to the extent of his mortgage an in- preponderance in every particular
Fraudulent conveyance mortgage to secure advance to make crop.
save one. The finding numbered 23 edge of the attorney must be imis in error in that it states that the puted to Morrison so as to make original chattel mortgage from Den
him, in law, a participant in the ny to Morrison for $1,500 covered a covin of De Beaumont and Denny. crop on the land. As a matter of As to what notice or knowledge of fact the mortgage on the crop was an agent or an attorney will impute executed on October 20, 1914, for an
notice to the principal or client, we additional sum of $285, but we find are committed to the rule stated by this fact immaterial inasmuch as Machem as sustained by reason and this money was loaned for the pur authority, as follows: "The law impose and was used for the purpose putes to the principal, and charges of putting in the crop, and was re
him with, all notice or knowledge paid from the crop, so that in any relating to the subject-matter of the
view of the case agency which the agent acquires or
was wholly devoid authority, which he may previously of any fraudulent design or injuri- have acquired, and which he then ous results to De Beaumont's credi had in mind, or which he had actors. It was wholly independent of quired so recently as to reasonably the main transaction, and requires warrant the assumption that he still no further notice. The findings be retained it: Provided, however, ing sustained in other respects by that such notice or knowledge will ample evidence, we shall treat as not be imputed: (1) Where it is established the facts that the trans- such as it is the agent's duty not to fers from De Beaumont to Denny disclose; (2) where the agent's rewere made in fraud of De Beau lations to the subject-matter are so mont's creditors; that Denny was adverse as to practically destroy the an active participant in the covinous relation of agency; and (3) where purpose, but that Morrison had no the person claiming the benefit of actual knowledge thereof, or of De the notice, or those whom he repreBeaumont's insolvency.
sents, colluded with the agent to It is elementary that the burden cheat or defraud the principal.” 2
of proving fraud is Mechem, Agency, 2d ed. & 1813, p. Evidence
upon the party who 1397. . proof-fraud.
asserts it. There See also Gaskill v. Northern Aswas no evidence whatever that Mor
sur. Co. 73 Wash, 668, 132 Pac. 643. rison actually knew of De Beau Though this rule is a wholesome mont's insolvency, or of his purpose one and well sustained by authority, in making the transfers to Denny. “the courts show a plain determinaIn fact the evidence does not show tion not to extend it, but to keep it that he was advised, when he made confined within narrow and necesthe loan of $1,500, that Denny was sary limits.” 2 Pom. Eq. Jur. 2d ed. purchasing the chattels from De
§ 672, p. 1169. An agent or atBeaumont. Were it not for the fact
torney can no more bind his princithat the court found, on ample evi
pal by his knowledge than by his dence, that the attorney who rep
acts in matters outside the scope of resented all parties in this transac- his authority or employment. The tion knew of De Beaumont's in
knowledge of the solvent condition at the time, and
agent, to be notice agents-binding was preparing papers for his vol
to the principal,
on principal. untary bankruptcy, the discussion
must be that of an agent who has would end here. But that fact
authority to deal for the principal makes it necessary to consider the in reference to the specific matter question of law as to whether, in the which the knowledge affects. As light of all the evidence, the knowl said by an eminent jurist, in a well
(101 Wash. 356, 172 Pac. $40.) reasoned and leading case on this admitted that Baldwin was his agent subject: “The rule which imputes to that extent, it is clear that to the principal the knowledge pos- throughout the whole transaction sessed by the agent applies only to Baldwin was really the attorney and cases where the knowledge is pos- agent for De Beaumont and Denny, sessed by an agent within the scope and was serving them in his visit to of whose authority the subject-mat- Morrison. Denny's title to the chatter lies; in other words, the knowl tels or his right to mortgage the edge or notice must come to an agent same was a matter concerning which who has authority to deal in refer there is no evidence whatever that ence to those matters which the Morrison ever sought or received knowledge or notice affects. The advice from Baldwin. That matter facts of which the agent had notice was wholly outside the scope of must be within the scope of the Baldwin's agency for Morrison, so agency, so that it becomes his duty far as any such agency was estabto act upon them or communicate lished by the evidence. The fact them to his principal. As it is the that Baldwin drew the chattel mortrule that whether the principal is gage we regard as immaterial. He bound by contracts entered into by received no fee from Morrison for the agent depends upon the nature doing so, nor in fact for any other and extent of the agency, so does services in the premises. He re
the effect upon the principal of no ceived his compensation for all of his 54 )
tice to the agent depend upon the services from Denny or De Beau-
of De Beaumont, knowledge,
But there is another reason poThe evidence before us makes it tent in equity why Morrison cannot plain that the agency of Baldwin for be affected with notice of Baldwin's Morrison was extremely limited in knowledge of the covinous nature of its subject-matter. So far as the the transaction as between De Beaurecord shows, it extended no further mont and Denny, whatever may than to advise Morrison of the ex have been the scope of Baldwin's istence and physical value of the agency for Morrison. Baldwin was chattels on which he was lending agent and attorney for both Denny his money.
Before he talked with and De Beaumont on the one hand, Baldwin he had practically agreed and for Morrison on the other. If to lend the money to Denny, whom Morrison told the truth, Baldwin he had known for some years. He never advised him that De Beauhad been injured in an accident, and mont was insolvent and was about was confined to his home when Bald to go into voluntary bankruptcy, or win came to him with the chattel that the transfers of his property to mortgage, and because of his injury Denny were such as to be in fraud
he then told Baldwin, who had in of De Beaumont's creditors, or that a prior years been attorney for him in such was the purpose of De Beau
other matters, in substance, that he mont and Denny. Obviously this
would take his estimate of the prop- knowledge was withheld from Morherty and make the loan. While he rison with the consent, or at least
4 A L.R.–99
notice to client.