Rozan v. Rozan

*707On Rehearing.

DOUGLAS B. HEEN, District Judge.

Upon reargument, a rehearing having been granted, it is vigorously asserted by the plaintiff and the intervenor, respectively, that the California divorce judgment— Rozan v. Rozan, (Cal.App.), 309 P.2d 947, as modified and affirmed in 49 Cal.2d 322, 317 P.2d 11 — is determinative of the respective ownership interests of the North Dakota real properties here in issue.

These Rozan cases, supra, held that Rozan and wife, subsequent to marriage and after establishing California domicile, acquired the purchase moneys for the North Dakota real properties and that under California law such lands were community property, that Court stating,

“ * * * marital interests in movables acquired during coverture are governed by the law of the domicile at the time of their acquisition. * * * Moreover, the interests of the spouses in movables do not change even though the movables are taken into another state or are used to purchase land in another state.” (Emphasis supplied.) 317 P.2d 11,13.

The California Court thereupon proceeded to assign a 65% interest of North Dakota lands to the plaintiff wife and the remaining 35% to the defendant husband. It is claimed that this judicial assignment is res judicata of the rights and equities of the parties to the California divorce case in North Dakota litigation involving real properties in this State.

The original opinion of this Court accorded full faith and credit to the finding of the California Court in the Rozan cases, supra, requisite jurisdiction there existent, that the parties to that divorce action were domiciled in that State at the time of acquisition of the North Dakota lands and that Community funds were used therefor, such finding being res judicata of those issues in this State.

However, the North Dakota real property so acquired did not thereby become imbued with the character of community property, North Dakota not being a community property State. As otherwise stated, use of community funds did not impart the status or character of community property, with all its varied and unique incidents, to the so acquired North Dakota lands. Upon acquistion, using community property funds, each party in this instance acquired a separate yet undivided one-half ownership interest in the North Dakota real property, such being the respective and proportionate contribution at the time of acquisition. This determination does no violence to the general principle that the parties’ identifiable interests in movables— equal, common and undivided ownership of the purchase funds under the instant facts— did not change even though later invested in lands in North Dakota, and is in accord with Depas v. Mayo and Wife, 11 Mo. 314, 49 Am.Dec. 88, which was cited as authority to the contrary.

Rozan and wife being owners in common of the North. Dakota real properties,- what effect then is to be accorded that provision of the California divorce judgment decreeing a 65% interest to the plaintiff wife, and a 35% interest to defendant Rozan, of those North Dakota lands. In this connection, the intervenor takes earnest exception to the following language and conclusion appearing in our original opinion:

“In the case at bar, examination of records, files, transcripts and other evidence reveals that the judgment of the California court, despite personam jurisdiction of Rozan, did not direct or require conveyance of the North Dakota real property to the plaintiff. Under these circumstances, and in view of the above authorities, that portion of the California decree purporting to vest a 65% interest to plaintiff, and a 35% interest to defendant, of North Dakota real properties, and thus directly affect and vest title in these litigants, is a nullity and is not entitled to, nor *708shall it be accorded, full faith and credit by the courts of this State,”

arguing first that as Rozan had divested himself of all title to North Dakota lands, any requirement or direction in the California decree that Rozan convey those properties to the plaintiff wife would be a nullity ; and, secondly, that the California divorce judgment was determinative only of rights and equities of the parties and did not operate to change and vest title to North Dakota lands in the parties. In support of these propositions, reliance is placed upon cited authority appearing in the Rozan cases, supra, wherein the California Court specifically disclaims any intent to directly affect North Dakota land title. These cited authorities have been examined, and it is concluded that such do not support the proposition advanced that a divorce decree which determines rights and equities of the litigants — in absence of a personam requirement to convey in such judgment— will by the sole force of its provisions be given an in rem operational effect upon land title in another State.

It is conceded that the California divorce court had jurisdiction of the parties to that action who were personally before the court. That Court had jurisdiction of the res, the marriage status. The California Court did not have in rem jurisdiction of the North Dakota real property. This it would seem is elementary. The only manner or means that Court could effect North Dakota land title was by its order or requirement that one party to the litigation convey to the other party, in other words by a judicially created obligation. to. convey. At this point, it is important to note that the California Court of divorce concluded at the time of the divorce that Rozan yas possessed of at least some North Dakota land; for in Rozan v. Rozan, 49 Cal.2d 322, 317 P.2d 11, 15, the California Court employed the following language:

“It is significant that since plaintiff began this .action, defendant divested himself of title to all but one parcel of his land in North Dakota * *

Accordingly, it is evident, that despite personal jurisdiction of the litigants, as above noted, and despite Rozan’s recognized title to at least some North Dakota lands, California as a part or portion of its divorce judgment did not by an in personam order direct or require conveyance by Ro-zan of the North Dakota lands to the plaintiff wife, and thus no obligation to convey the North Dakota real property was created.

The instant action is not one for specific performance of an obligation, judicially created or otherwise, to convey real property, and the issue of whether a judicially created obligation by California to convey lands situate in North Dakota, or in any other State, shall be given effect in the Courts of North Dakota as a res judicata declaration of the rights and equities of the parties is not presented. This is precisely the holding of Higgins v. Higgins, 60 S.D. 576, 245 N.W. 397. Clearly, since plaintiff is not seeking specific performance of an adjudicated obligation to convey, she of necessity is relying solely, despite disclaimer in this respect by the California Courts, upon a direct in rem operational effect of the California decree- — the in rem thrust of its provisions — to alter, transfer and vest title to lands in North Dakota. Adhering to our original holding, and supported by authorities therein cited, that portion of the California divorce judgment purporting to change and fix real property title to North Dakota land, from an ownership in common to some other proportion, is not entitled to, nor shall it be accorded, full faith and credit by the Courts of this Stated

This Court is- fully agreed, upon reexamination of issues, evidence and authorities pertinent thereto, that the principle of estoppel was erroneously applied in our original decision — as estoppel was there held to have application to the issue of whether the plaintiff wife, under the cir*709cumstances present, could deny the validity of the conveyances in question, and the further question of whether under the disclosed circumstances she was a creditor or such other person entitled to maintain the specific cause of action to set aside the conveyance as fraudulent. In this respect the original decision of this Court must be modified.

In this instance, estoppel being inapplicable, the plaintiff wife may maintain an action to set aside conveyances and transfers executed by the defendant husband which she alleges was fraudulent to her. 27B C.J.S. Divorce § 273, page 165 et seq.; for an extended compilation of authorities, see 49 A.L.R.2d 521.

The defense has been raised that there is no evidence that the grantees under Ro-zan’s deeds, such transferees being, Rollins, Rosen and McCormick, participated in any alleged fraud under the facts of this case and argue, citing Bank of Sanborn v. France, 49 N.D. 1, 177 N.W. 375, and Baird v. Meyer, 55 N.D. 930, 215 N.W. 542, 56 A.L.R. 175, that before the conveyances may be declared fraudulent, the plaintiff and intervenor must satisfactorily establish that each party in the chain of title participated in the fraud. It is claimed there is no evidence of such participation and that the plaintiff and intervenor accordingly have failed in proof of their case.

It is sufficient proof of participation if it be proved that the grantor fraudulently transferred real property and that the grantee knew at the time of transfer that the grantor’s intent in the making of such transfer was to hinder, delay or defraud the grantor’s creditors. Actual knowledge by the transferee of suspicious facts and circumstances as should put a prudent person on inquiry is equivalent to knowledge of all facts which would be developed by reasonable inquiry. Fluegel v. Henschel, 7 N.D. 276, 74 N.W. 996; Wannemacher v. Merrill, 22 N.D. 46, 132 N.W. 412.

An extended analysis of the evidence pertaining to the existence of fraud in the transfers and conveyances in question would serve little purpose. However, comijient properly should be made on certain, disputed evidentiary rulings by the trial Court.

Defendant Rosen was absent during trial of this action. Such absence, unexplained, and consequent failure to testify, gives rise to an inference unfavorable to the contention of the absent party. Scherbenske v. Maier, N.D., 71 N.W.2d 770. While not conclusive, such inference is to be considered with all evidence of the case in determination of ultimate issues. 20 Am.Jur., Evidence, Section 193, page 195.

In connection with the California divorce action, an attempt was made in Maryland to obtain defendant Rosen’s testimony by deposition, Rosen there refusing to answer propounded questions on constitutional grounds of self incrimination. Such deposition was offered during this trial for the purpose of showing knowledge by Rosen of the pending divorce case in California. This evidence was correctly ruled inadmissible by the trial Court. All instruments of transfer here in issue were filed for record prior in point of time to the date of the deposition, and hence such deposition was, for any purpose in connection with this action, immaterial and irrelevant.'

Also offered and ruled inadmissible was the testimony of Rozan, the defendant husband, as given in the earlier California divorce action. Under the circumstances here present and the state of the evidence, such testimony was properly admissible. O. S. Paulson Merchantile Co. v. Seaver, 8 N.D. 215, 77 N.W. 1001.

Briefly summarizing the evidence, the plaintiff wife instituted divorce proceedings on June 2, 1953, the parties having separated on April 8,1953. Immediately upon such separation, and thereafter, the defendant husband by deeds and transfers, some bearing forged signatures, began a designed *710divestment of North. Dakota real properties through gift to the son and by purported sale to defendants Rosen and McCormick. The relationships and collusive dealings by and between defendants Rozan, Rosen and McCormick, and combinations thereof, including purchase and re-sale arrangements, modes of negotiation, and considerations involved, clearly, satisfactorily and convincingly establish that Rozan’s transfers of the lands in question were a fraud upon the plaintiff wife, and that defendant transferees Rosen and McCormick, not only had actual knowledge of suspicious facts and circumstances sufficient to place a prudent person on duty to make inquiry which would have developed the facts of the scheme, but did possess knowledge that Rozan’s intent in the making of the conveyance was to hinder, delay and defraud the plaintiff wife of her property interests and anticipated alimony and other marital allowances.

As the facts developed earlier in this opinion demonstrate, Rollins held title to the “Kvam” property, such having been deeded him by defendant Rozan, this holding arrangement being known to the plaintiff wife. In this respect, Rollins was merely a “medium” or “strawman”, holding title for the benefit of Rozan, Rollins being responsive to the instructions of this defendant in disposal of the property. Such being the case, and Rollins not having possession of the land, he is not an indispen-sible or a necessary party to the action, nor is it necessary to prove his participation in the fraud. 24 Am.Jr., Fraudulent Conveyances, Section 20S (Supplement), and authorities therein cited; 24 A.L.R.2d 395, 419.

It is concluded that the deeds and transfers of the lands, and interests therein, as fully described in the complaints, are fraudulent as to defendant Alice F. Rozan, the transferees thereunder not being purchasers in good faith and for value, and that such described conveyances and transfers are held void and cancelled of record.

Comment must be made that the California money judgments, one basis of the cause of action of plaintiff and inter-venor, bear interest at the California legal rate of seven per cent until the original entry of judgment in this State, and from and after this latter date these judgments will bear the legal North Dakota interest rate. Cf., Travitzky v. Knutson (N.D.), 84 N.W.2d 579.

Next the Intervenor contends finally that such share of North Dakota property which may be awarded to the plaintiff wife is liable by execution for satisfaction of Intervenor’s judgment based upon the separate tort of defendant husband. It has heretofore been held that the plaintiff wife is entitled to and shall receive a one-half interest in such real property as her separate property. Under the laws of this State the separate property of the wife is not liable for the debts of her husband, 14-07-08, NDCC; and the plaintiff wife takes the property free from such burden of liability for the separate tort of the defendant husband.

In accordance with the above and foregoing opinion, it is the conclusion of this Court as follows:

(1) That the District Court should be and is affirmed in awarding money judgments in favor of the plaintiff, and the in-tervenor, respectively, and against defendant Rozan, and that the California judgments bear interest at the rate of seven per cent, until the date of entry of the North Dakota judgments, thereafter such interest on the North Dakota judgments to be computed at the legal interest rate of this State;

(2) That one-half of the real properties described in the complaint are held under implied trust for the benefit of plaintiff Alice F. Rozan and title thereto is quieted in her to such extent, modifying the judgment of the District Court;

(3) That the conveyances and transfers, including that certain declaration of trust *711in favor of the minor son of the litigants, as such conveyances and transfers purportedly affect North Dakota lands and interests therein are held void and cancelled of record, modifying the judgment of the District Court;

(4) That plaintiff Alice F. Rozan and defendant M. M. Rozan, respectively, possess a one-half ownership interest to accrued oil royalties.

The District Court is directed to enter judgment conformable hereto.

MORRIS, C. J., and TEIGEN, BURKE and ERICKSTAD, JJ., concur. STRUTZ, J., deeming himself disqualified did not participate, Honorable DOUGLAS B. HEEN, District Judge, sitting in his stead.