Bridgman & Co. v. McKissick

15 Iowa 260 | Iowa | 1863

Lead Opinion

Lowe, J.

James and Ellen McKissick having fully admitted the facts stated in the bill, may be regarded as withdrawn from the contest, and it then remains to be determined, which of the two creditors has the preferable equity, or is entitled to the prior satisfaction out of the property in question, under the facts disclosed by the pleadings in the case. This is no unimportant question and should receive a solution which shall not only accord with the established rules of equity, but which shall best harmonize with the policy and objects of those provisions of the Revision which seem to have been enacted to meet cases of this description. In the case of Harrison v. Kramer et al., 3 Iowa, 543, it was held that a judgment under the laws of this State was a lien upon the equitable, as well as the legal, interest or title which the debtor at the time had in real estate. It was also substantially held that where such debto%had fraudulently conveyed such property to defeat creditors, that such creditors, áfter judgment, might adopt either one of two courses to remove the obstruction interposed to prevent a legal sale, under execution of the property, namely: to levy upon and sell whatever interest the judgment debtor may have in the premises, and after-wards go into chancery to quiet the title and remove the cloud: or they may in the first instance, after the return of an execution unsatisfied, commence their suit in equity to remove the obstruction and subject the property to the satisfaction of the claim. And this we understand to be the doctrine of the books, as well as the practice of parties litigant under the sanction of the courts. In this case Bone, the elder judgment creditor, pursued the former course, filing his cross-bill, however, as an answer in the plaintiffs’ equity suit, and is, therefore, subsequent in point of time in the commencement of his chancery proceeding. The plaintiffs adopt the latter course, conforming their proceeding as nearly as may be to the requirements of chapter 127 of tjie Revision of 1860, in relation to equitable actions supplemental to execution. And it may here be remarked that the provisions of this chapter have been added to the law of executions in this State since the decision in the case of Harrison v. Kramer et al., supra. And whilst primarily the object of this chapter was to assist and facilitate the creditor in reaching the equities of his debtor in moneys, choses in action, secret trusts and personal property, it does, by the expression, “ or any other property to which the defendant is entitled,” also include his equities in real estate. Still we are willing to admit, that so far as real estate is concerned, the remedy afforded by this chapter is only cumulative, that is to say, the lien created upon the interest or property to be reached by the issuing and levy of the attachment contemplated by §§ 3393 and 3394, in said chapter is as effectually secured by the filing of a bill in chancery for the same purpose, for it has long been the settled doctrine in equity that the filing of such a bill in chancery has the effect of creating a specific equitable lien upon the thing or property sought to be subjected to the execution, for the reason, perhaps, that the commencement of such a suit operates as á Us pendens notice, and stops all successful alienation of the property in question, and keeps it within the control and jurisdiction of the Court.

Now, in this attitude of the case, we are to determine which of these parties is entitled to priority. If, in adjusting their rights in the premises, we limit ourselves to the provisions of chapter 127 of the Code aforesaid, the question must be settled in favor of the plaintiffs, because they first instituted their equitable action agreeably to its requirements, sued out and levied their attachment, and secured their lien; showing thereby superior legal diligence, which entitles them to preference as the reward of their vigilance.

Again, if we decide the question according to the weight and number of authorities in cases involving the same principle or rule of practice, we would have to rule in favor of the plaintiffs, because it has been long and repeatedly laid down, not only that a mere equity or secret hidden trust, like the one at bar, is not available at law by sale on execution, but that the creditor, whether senior or junior, who shall first commence his equitable proceeding to reach and subject the property to execution, obtains thereby, not only a specific lien, which will arrest and control the alienation thereof, but which will give him a superior equity on the same, for the satisfaction of his claim. The following are some of the authorities which will sustain the above rule: Edmeston and Riddle, Exrs., v. Lyde et al., 1 Paige, 637; Corning & Norton v. White, 2 Paige, 567; Burral et al. v. Leslie et al., 6 Id., 445; Gorden v. Lovel, 21 Me., 251; Miers & Coulson v. The Zanesville and Maysville Turnpike Co., 13 Ohio, 197; Eaton v. Patterson, 2 Stew. & Port., 9; Hendricks v. Robinson et al., 2 John. Ch., 283; Brinkerhoof et al. v. Brown et al., 4 Id., 671; McDermutt et al. v. Strong et al., Id., 687; Etgell v. Haywood, 3 Atk. R., 357; 2 Stew., 378. But is said, that when it is conceded that a judgment is a lien upon any interest which the debtor may have in real estate, legal or equitable, that this concession must determine the question of priority in favor of the oldest lien holder, and change the rule as it exists at common law, in the chancery practice, in regard to the rewards of vigilance.

Plausible as this proposition would seem, it is nevertheless to be received at least with some qualifications. In the first place, the General Assembly of this State has legislated on this subject, and expressly provided for the method of reaching the debtor’s-equities, by an equitable action and attachment, whereby a lien is created in favor of the party instituting such proceedings. The implication is apparent that, in the judgment of the law-giving power, the lien which the creditor obtains by yirtue of his judgment upon some interest or equities other than those which amount to a legal right is not available at law. The facts of this case will vindicate the soundness of their conclusion, as well as illustrate the non-availability at law of such a lien.

McKissick, the judgment debtor, never had the legal title of the land in controversy vested in himself. He bought and paid for the same, and had the title conveyed to his wife. This occurred the year before either of these creditors obtained their judgments. No allegation of fraud is made as to George Roe, the vendor. Indeed, the circumstances attending the transactions repel any probable imputation of the kind. What interest, then, we inquire, had James McKissick in this land ? If anything, it was a secret resulting trust, available to him only at the good pleasure of his wife, not a resulting trust or equity which he could enforce in a court of equity, because it had been fraudulently created; and he could not, therefore, take advantage of his own wrong. Again, he had not the legal title, and never had. Hpon the supposition that the conveyance to McKissick’s wife was void, because fraudulent, the legal title would yet remain with Roe. We would, then, again ask what did Bone get by his levy and purchase? Simply nothing; because the execution debtor had nothing in that land which was tangible at law or vendible upon execution. All that he had done thus far was a barren achievement, productive of no benefit; for it did not have the effect to prevent alienation; it did not invest him with any right that he was not liable to lose at any moment by a sale from Ellen McKissick to an innocent purchaser for a valuable consideration. It is true, he could follow up his proceeding at law by a suit in equity, which, as a lis pendens notice, would have the effect to prevent any fmfla&r-Iona fide transfers of the property; and the chancellor, upon being informed of all the facts in the case, would ratify his purchase at sheriff sale, and give to him the legal title of the property. But his decree to that effect would be founded, not so much upon the previous levy and sale as upon the fraud of the debtor, who had voluntarily but unlawfully placed his means beyond the reach of creditors, and at the secret disposal of his wife; for such au act was adverse to and broke in upon the just rights of creditors, and it is the business of courts of equity, as it is the policy of the law, to protect and conserve their rights, and not to allow even the claims of affection to supplant the superior obligations of justice.

Whilst, then, under the statutes of this State, a judgment at law may be a lien in some sense upon a secret trust, or upon equitable rights,' yet it is not in the sense to charge or affect a subsequent Iona fide purchaser, without notice. It is a lien only effectual in equity; and when a creditor loiters by the way, and neglects to make the same available by a prompt resort to his equitable action, he ought not to complain of hardship if a more diligent creditor gains a preferable equity over him by doing an act which at once stops alienation, saves and brings the property within the control of a court of equity, that it may be subjected to the payment of debts, for non constat, that the delaying creditor, by his laches, would not have lost the property by a legal transfer thereof.

In short, we suppose the statute, in this State, has made no change in the rule which rewards vigilance, but has rather confirmed that rule by the provisions found in chapter 127 of the Revision of 1860, above referred to; and that, while it may be competent for a creditor, even in a case of this description, to resort first to his execution at law, sell and buy, and then to his bill in chancery, yet, that he adopts this course at his peril, first in losing the property in the meantime by a valid sale, second in losing his priority by another creditor, who, having exhausted his remedy at law by the return of an execution unsatisfied, shall be the first to pursue the property in equity, and thereby gain a precedence for the payment of his claim.

In making this disposition of the case before us, we would have it understood that our reasoning upon the principles involved apply, or is intended- to apply, to fraudulent conveyances of real estate to hinder and delay creditors, leaving open the rule to be established where the equitable interest of an honest debtor is sought to be reached either by the equitable or legal process of the court. The judgment below will be

Affirmed.

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Concurrence Opinion

Wright, J.

I concur in the conclusion that this judgment ought to be affirmed, but not in the reasoning used in the foregoing opinion.