Knoop v. Kelsey

102 Mo. 291 | Mo. | 1890

BiAOK, J.

— This is a suit in equity brought by C. H. Knoop against J. B. Kelsey, Charles T. Kelsey, Charles D. Nixon, and Green Huffman. There was a decree for the plaintiff. It is insisted that the second amended petition, upon which the cause was tried, fails to state any cause of action, and this question runs through the whole -case, so that it must be determined at the outset.

The facts stated are these : That on the twentieth of July, 1882, the defendant, J. B. Kelsey, was a banker at Versailles in Morgan county in this state ; that he held himself out to be solvent when, in fact, he was insolvent; that he owned four hundred acres of land in that county, and on the twenty-second of July, 1882, made a deed of trust thereon to secure his note dated the first of August, 1882, for $3,000, payable to the defendant, Charles T. Kelsey, in five years after date, and that defendant Nixon is the trustee in the deed of trust; that on the fifth of August, 1882, plaintiff deposited with J. B. Kelsey $2,782, and at that time the deed of trust had not been recorded; that J. B. Kelsey failed on the twenty-second of said month, and his bank was closed by attachments ; that the deed of trust to Nixon was made for the sole purpose of defrauding the creditors of J. B. Kelsey ; that plaintiff obtained a judgment against J. B. Kelsey at the April term, It 83, for $1,703, being the balance then due upon the deposit, and upon which judgment execution was issued.

The amended petition then goes on to say : “ Plaintiff further states that at the October term, 1883, of the Morgan county circuit court, the interest of J. B. Kelsey (being his equity of redemption in said real estate) was sold by the sheriff of Morgan county on several executions issued on several judgments against J. B. Kelsey, including plaintiff’s execution; that the sheriff, in his advertised notice of sale, gave special notice that he would sell the land subject fo all prior liens and incumbrances, and did also give the same notice to the bidders and bystanders at the sale, and that defendant, Green Huffman, who had been J. B. Kelsey’s tenant and friend, became, for the nominal sum of S2S5, the purchaser of J. B. Kelsey’s equity of redemption, subject to the deed of trust aforesaid, and with full knowledge of the same, it being then on record, and presumed by plaintiff and Huffman and all others to be a good and valid instrument and incumbrance ; that said Huffman immediately entered into the possession of said land, and has ever since remained in possession as owner of J. B. Kelsey’s equity of redemption therein ; that the fact of the said deed of trust having been executed and recorded as aforesaid prevented said lands from selling at the sheriff’s sale for as large a sum of money as they otherwise would have done, and plaintiff was thereby prevented from realizing the amount of his said judgment out of said lands.”

The prayer is that the deed of trust be declared null and void, and that the titles of Nixon and Charles T. Kelsey, as the pretended trustee and beneficiary, be divested out of them, and that the land be subjected to plaintiff’s judgment as the prior lien thereon, and that if said judgment be. not paid and satisfied in such time as the court should direct, that the land be sold by the sheriff to satisfy said judgment and costs, and for general relief. .

The answer of Chas. T. Kelsey and Nixon is a general denial. Huffman in his separate answer says he purchased the land at a sale on various executions, one of which was in favor of the plaintiff ; that he purchased the land subject to prior liens and incumbrances, and is ready to discharge such mortgages and liens as may be found due.

The court by its decree declared the deed of trust fraudulent as against the plaintiff, and substituted the plaintiff to “the rights of the holder of the note” to the extent of plaintiff’s judgment,-and then ordered a sale of the land.

This is certainly a novel proceeding. The substance of the case stated in the petition is this : J. B. Kelsey made a deed oí trust on the four hundred acres of land. Thereafter his creditors, the plaintiff being one of them, obtained judgments against him, and under executions issued thereon advertised and in terms sold his equity of redemption and nothing more.' The plaintiff now seeks to set aside the deed of trust because it was made in fraud of creditors, and to be substituted in the stead of the fraudulent mortgagee.

Judgment creditors have two remedies against a fraudulent conveyance, be it a deed, or mortgage, or a deed of trust in the nature of a mortgage. They may file their bill to set it aside and subject the land to the payment of their debts ; or they may .sell all the right, title and interest of the debtor, and in that case the purchaser succeeds to all of the rights of the creditors to set aside and avoid the fraudulent conveyance. Lionberger v. Baker, 88 Mo. 452. A conveyance made in fraud of creditors is as to them void, at their option. They may affirm it, if they see fit to do so. As these creditors in terms sold the equity of redemption, the question arises whether they can now turn around and say that the deed of trust is void as to them, and thus in effect say there was no equity of redemption.

In some of the New England states unincumbered lands are not sold at auction, but are appraised and set off by way of extent to the judgment creditor. If incumbered by mortgage, the equity of redemption may be sold at auction. 2 Freeman on Executions, sec. 372. In several of these states it is held that a purchaser who bids for and buys the equity of redemption cannot dispute the validity of the mortgage, subject to which he purchased, and this is true whether the purchaser be a stranger or the creditor himself. In either case he is estopped to deny the validity of the mortgage, and cannot be heard to say that it was fraudulent as to creditors. Lord v. Sill, 23 Conn. 324; Brown v. Snell, 46 Me. 490; Flanders v. Jones, 30 N. H. 154; Russell v. Dudley, 3 Met. 147; Freeland v. Freeland, 102 Mass. 478. The principle is not confined to those states. In Messmore v. Huggard, 46 Mich. 559, a creditor obtained judgment and sold the equity of redemption in the land of the debtor and became 'the purchaser thereof. He then sought to set aside the mortgage because it was made in fraud of creditors. The court denied the relief and said among other things that a purchase under such circumstances must be held to be what it appeared to be at the sale, a purchase subject to the mortgage.

We have no law in this state requiring lands taken on execution to be appraised, and it is not necessary to sell simply the equity of redemption even in those cases where the incumbrance is conceded to be valid. The usual and proper method is to sell all the right, title and interest of the judgment debtor, and as before stated the purchaser succeeds to all of the rights of the creditor. If, instead of selling all of the right, title and interest of the debtor, the creditor will in terms advertise and sell the equity of redemption, he must abide the consequences. By simply selling the' equity of redemption he asserts the validity of the mortgage, for, if fraudulent as to creditors, then as to them there is no equity of redemption to sell. By selling the equity of redemption persons are induced to bid on the supposition that the mortgage is valid, and, as said in' the case last cited, the mortgagee has no occasion to bother himself about the sale. The creditor, having induced purchasers and the mortgagee to act upon the supposition that the validity of the mortgage is conceded, ought not to be permitted to change front and assail the mortgage. The creditor is bound by his election as well as the purchaser at the sale. The principle that, where one has an election between inconsistent courses, he will be confined to the one which he first adopts, has been applied in a variety of cases. McClanahan v. West, 100 Mo. 309. The plaintiff states in his petition that the equity of redemption only was advertised and sold, and he must, abide by his own pleading. Lenox v. Harrison, 88 Mo. 491; Ramsey v. Henderson, 91 Mo. 560.

The matters alleged in the plaintiff’s pleadihg furnish no ground for the decree rendered.' In short the amended petition states no cause of action whatever ; on the contrary it states the plaintiff out of court. This result disposes of this case and it is unnecessary to consider the question whether in fact the deed of trust is fraudulent. •

Thus far we have treated the case as we find, it stated in the amended petition. The proofs indicate that the sale was made in the usual way, and that in point of fact the sheriff sold all of the right, title and interest of the execution defendant in the land. Whether that sale was made under such circumstances that it should be set aside and a new sale ordered, or whether plaintiff has any other remedy on a proper petition we do not undertake to say, but the cause will be remanded with leave to the parties to amend their pleadings. Reversed and remanded.

Barclay, J., absent; the other judges concur.