82 N.J. Eq. 211 | New York Court of Chancery | 1913
The original bill in this case was filed by the above-named complainant in 1902. In it he alleges that on September 16th, 1901, the defendant Daniel L. Eisley was indebted to him in the sum of $2,662.34, and to recover this debt he caused a writ of attachment to be issued out of the circuit court of Capo May county on the following day, by virtue of which the sheriff attached many and large tracts of land in that county, as the prop
The .Risley Real Estate Company answered. A default decree was taken against Risley. After issue was joined the complainant obtained leave to file an amended or supplemental bill. Instead of doing either he filed a bill styled "amended bill” in the name of Annie Estell Bourgeois as trustee for the complainant, in which he repeated the statements, charges and prayers of the original bill, with a single variance, that the lands were sold by the auditor in attachment to the substituted complainant, and that she holds them in trust for the original complainant. Anderson Bourgeois is made a party defendant to the amended bill. Risley and the Risley Real Estate Company answered, not denying the debt, admitting the making of the conveyance, but denying the charge of fraud and asserting that the grantor (Risley) received in payment for the conveyance, $1,000 in cash and two hundred and forty shares of the capital stock of the Risley Real Estate Company. The cause lagged until 1913, when it was brought to trial. At, the conclusion of the testimonj', and the arguments of counsel, it was announced that a decree would be advised in favor of the complainant.
A conveyance of the property of an insolvent debtor to a corporation formed by him for the sole purpose of taking over the property, the consideration of which is the issuance of all of the capital stock of the company, is void as against creditors. Terhune v. Bank, 45 N. J. Eq. (18 Stew.) 344; Montgomery-Webb Company v. Dienelt, 19 Atl. Rep. 428 ; Sullivan v. International Baking Co., 60 N. J. Eq. (15 Dick.) 80; Van Campen v. Ingram, 12 Atl. Rep. 537; First National Bank v. Trebein Company, 52 N. E. Rep. 834; Roberts v. Hughes Company, 83 Atl. Rep. 807; Booth v. Bunce, 88 Am. Dec. 372; 33 N. Y. 139.
The evidence also strongly indicates that the deed made by Eisley to the company, although it bears date September 16th,
The complainant now insists that the deed should be set aside in loto, because of the turpitude involved in its making, and the cloud thereby created removed from the title acquired by the sale in the proceedings at law. The property was estimated to be of the value of $25,000. Indeed it was stated by counsel that the lands at the time they were seized and sold to the complainant, were under contract of sale to the customers of Risley and the Risley Real Estate Company, upon which there was due sums aggregating $60,000. To grant the broad relief asked would yield the complainant tenfold and more the amount of the debt. It would be giving the spoils as well as the fruits of the litigation.
To decree the lands absolute in the complainant would create a situation quite as iniquitous and oppressive and as obnoxious to a court of conscience as that arising out of the fraudulent con
The complainant, by virtue of the conveyance from the auditor in attachment, is undoubtedly vested with the legal title to the lands here involved, the possession of -which he might obtain by pursuing the remedies provided by the law courts—an action in ejectment—in which perhaps equity would not interfere in behalf of the particeps criminis. Mulford v. Peterson, 35 N. J. Law (5 Vr.) 127 Mulford v. Tunis, 35 N. J. Law (6 Vr.) 256. But when a suitor appeals to a court of equity, he must abide its principles and submit himself to its policy and practice before relief will be afforded. “He who seeks equity must do equity” is a cardinal maxim. Professor Pomeroy, in expressing its meaning, quotes an eminent judge thus:
“The court of equity refuses its aid to give to the plaintiff what the law would give him if the courts of common law had jurisdiction to enforce it, without imposing upon him conditions which the court considers he ought to comply with, although the subject of the condition should be one which the court would not otherwise enforce.” Pom. Ex. Jwr. § 885.
And he adds:
“The rule may apply, and under its operation an equitable right may be secured or an equitable relief awarded to the defendant which could not be obtained by him in any other manner—that is, which a court of equity in conformity with its settled methods, either would not, or even could not. have secured or conferred or awarded by its decree in a suit brought for that purpose by him as the plaintiff.” Ihkl. § 386.
In Doughty v. Doughty, 10 N. J. Eq. (2 Stock.) 347, Chancellor Williamson, in applying this doctrine, says:
“One acknowledged principle on which courts of equity give relief is to prevent an advantage gained at law from' being used against conscience.”
A conveyance made in fraud of creditors was at the common law, and is by statute, absolutely void as against creditors. But it is void only as against those creditors who attack it, and then only to the extent of their debts. 20 Cyc. 819, 821; Tudor v. Tudor, 80 Vt. 220.
When the execution creditor is the purchaser he will not be permitted to retain advantage of a sale at law when to do so would be inequitable. Payne v. Burks, supra.
In Smith v. Vreeland, 16 N. J. Eq. (1 C. E. Gr.) 198, Chancellor Green, in dealing with a situation somewhat similar to the one sub judice, says:
“lie (the complainant) now asks this court, by its decree, to declare the previous conveyances fraudulent, and thus confirm his title. The balance due on his judgments at the time of the sale amounted to about three hundred dollars. The value of the property, according to the testimony of his witnesses, was $3,-000, exceeding by about thirteen hundred dollars, the amount of the encumbrances tipon it. * * * All that the complainant can ask in equity is that his debt shall be paid. If his legal rights are more extensive, they must be enforced at law without the aid of this court. Though he has acquired a legal advantage over the prior judgment of the defendant, there is no reason why he should be permitted to speculate upon that advantage at the expense of the defendant.”
In Kinmonth v. White, 61 N. J. Eq. (16 Dick.) 358, Vice-Chancellor Pitney, in marshaling assets in a contest as between judgment creditors, says:
“It was at the option of the judgment creditors either to proceed at law and sell the land and test the validity of the conveyances by an action of ejectment, or to first file their bills in this court to procure a declaration that the conveyances were void, and then to sell the lands for the payment of the debts. * * * And if, in such case, after purchasing at sheriff’s sale, without resorting to ejectment, he came into this court, as he might do, to have the title derived under the sheriff’s deed declared valid, this court granted relief only upon condition that he should give credit on his judgment for the fair value of the land.”
In Campbell v. Weber, 80 N. J. Eq. (10 Buch.) 553, the court of errors and appeals plainly intimated its views of the status of
This is to be regarded as a declaration that the fraudulent creditor’s status is not to be disturbed more than is necessary to make the creditor whole.
In Miller v. Jamison, 26 N. J. Eq. (11 C. E. Gr.) 404 (reversed on the facts, 27 N. J. Eq. (12 C. E. Gr.) 586), Chancellor Eunyon set aside absolutely a fraudulent conveyance at the instance of a creditor—purchaser at an auditor’s, sale. The ■opinion does not disclose that the question of the defendant’s equities was raised.
In Hildreth v. Sands, 2 Johns. Ch. 35, Chancellor Kent set aside a similar deed, saying:
“There can be no doubt but that the plaintiff, as a purchaser under Whitney’s judgment, is entitled to all of the relief that the creditor himself would have been entitled to, for he stands in his place, and is armed with his rights; and though he be a purchaser at a very low price, yet it was a fair purchase in the regular course of law, and it was owing to the unwarrantable act of the debtor himself in throwing a cloud over the title that bis property was thus sacrificed. It does not become the parties to the fraudulent deed to complain of the plaintiff’s cheap purchase. However it may be regretted that the property has yielded but a very small compensation to the creditors, this fact cannot interfere with the question of right. The auction price was an accidental thing, growing out of the peculiar circumstances of this case, and affects only the parties concerned; but whether such a fraudulent conveyance shall stand or fall is a question deeply interesting to the whole community.”
It seems to me that the complainant must be content with the grant of that prayer for relief which asks that "the defendants pay the debt.”
The complainant is entitled to a decree setting aside as void the deed from Risley to the Risley Real Estate Company, with costs. If the defendants shall pay to the complainant, and the applying creditors in attachment, their debts pursuant to the decree, the complainant will be ordered to surrender his title. The defendant will be entitled to credit upon the debts to the amount of money realized from the sale in the attachment proceedings of-lands other than those embraced in the fraudulent deed.
Application may be made for counsel fees.