88 Mich. 1 | Mich. | 1891
This is a bill in the nature of a judgment. creditors’ bill to reach assets in the hands of an alleged fraudulent holder.
From the bill of complaint it appears that in December, 1886, three judgments, aggregating $2,300, were recovered in the Newaygo circuit court against the Newaygo Manufacturing Company; that executions were issued thereon, and were returned unsatisfied; that in March, 1890, these judgments were assigned to complainant.
It further appears that the Newaygo Manufacturing Company had been operated as a feeder to a railroad in which defendants Converse and Clay were largely interested, and to whom it was largely indebted; that after the railroad had been enabled to pay off its indebtedness, and declare a large margin of profit, the Newaygo Manufacturing Company was largely indebted to various parties, and especially to Converse; that a large part of
The bill prays that defendant Converse may be decreed to account for the assets of the Newaygo Manufacturing Company, and to pay complainant’s judgment, and for general relief.
Defendants Converse and Fletcher jointly' demur for want of equity. The first point presented is that the defendant Fletcher is improperly made a party, and that as to him the demurrer must be sustained. The pleadings, however, do not raise that question. For a misjoinder of parties defendant those only can demur who are improperly joined. Story, E.q. PI. § 544. A proper or necessary party cannot demur to the joinder of an improper party. The demurrer here is joint, not several; and while it is true that a demurrer may be good as to one defendant, and bad as to others (1 Barb. Ch. Pr, 108; Barstow v. Smith, Walk. Ch. 394), that is so only where defendants sever their pleas or demur specially. The terms of a demurrer should suggest the error, and, where two parties defendant join in a demurrer for want of equity solely, neither can be allowed to raise a question which is not available to both. In Barstow v. Smith, supra, the demurrer, although joint, was special.
A general demurrer for want of equity will not be sustained, unless the court is satisfied that no discovery or proof properly called for by or founded on the allegations in the bill can make the subject-matter of the suit-a proper case for equitable cognizance. When a new cause of demurrer is assigned ore tenus, the cause must be co-extensive with the demurrer. Clark v. Davis, Har. Ch. 227, 235.
But, irrespective of the question of pleadings, Fletcher
It is urged that the bill does not allege that the company conveyed its property to Converse to defraud its creditors, but that Converse had defrauded the company of its property, and that the right to complain of a fraud is not assignable; that it is not alleged that there was any fraud in the decree in the foreclosure proceedings, hence the judgment is conclusive.
While the bill sets forth that Converse defrauded the company, it also alleges that Olay, the owner of 90 per cent, of the stock of the company, and its president and manager, together with the receiver and the other defendants, fraudulently conspired together to enable Converse to get possession of all of the assets of the company for a nominal consideration, and that as a result of such conspiracy Converse succeeded. It was hardly necessary to aver that in consequence there were no assets to apply to the liquidation of the claim in question, or that the conduct of defendants operated as fraud upon other creditors, or that the intent was to defraud creditors.
Acts are constructively fraudulent as to creditors when injurious to their rights, without of necessity involving actual fraud or intent to defraud them. Hinchman v. Town, 10 Mich. 513. If the conduct of a party is such as, in its tendency and result, to operate to defraud others, it will be deemed fraudulent, although no such purpose was intended. Putnam v. Reynolds, 44 Mich. 115. Where there is actual fraud in obtaining the prop
“The fact that a transfer of a debtor’s property with intent to defraud his creditors is accomplished through the agency of a valid judgment, lawfully enforced, does not alter its fraudulent character, or enable it to defy justice. A judgment may often be made an effective agency in accomplishing, beyond its own legitimate purpose, a further result of fraud and dishonesty, and may even be selected as the suitable means by reason of its inherent character. The complaint here is not of the judgment, but of the use that was made of it.” Decker v. Decker, 108 N. Y. 128; Candee v. Lord, 2 Id. 269.
Even a judgment obtained by fraud and collusion,' under which it is sought to absorb a debtor’s property to the exclusion of creditors, may be repudiated; and in Burpee v. Smith, Walk. Ch. 327, it is held that equity will relieve against a judgment at law, where complainant was prevented from making his defense at law by the fraudulent conduct of the defendant.
Here it is not the decree that is complained of, but the use that was made of it. It is alleged that Converse, Olay, the president of the company, and the receiver conspired to conceal, and did conceal, the debtor’s property from bidders, and, as to such property, neither the conveyance by the receiver, nor the confirmation of the sale by the court, secured by a fraud upon it, can protect it as against existing creditors.
The cases cited by defendants’ counsel are clearly distinguishable from the present case.
In Brush v. Sweet, 38 Mich. 574, the Court held that such an arrangement as was entered into between the executors of Eobert Hyslop and Barnard was invalid in equity, and dismissed the bill.
In Dickinson v. Seaver, 44 Mich. 624, the claim was 15 years old, and involved nothing that would keep it alive, unless the fraud would do so; hence the assignment was of nothing more than an action for fraud.
Dayton v. Fargo, 45 Mich. 153, was an action on the case for deceit, which the Court held was not assignable. The-Court say:
“The general doctrine, both at law and in equity, has always been that nothing is assignable that does not directly or indirectly involve a right of property. It has been held repeatedly in this State that equity will not enforce the demands of an assignee of a right to sue for fraud when 'the cause of action is confined to that.”
In Lewis v. Rice, 61 Mich. 97, the Court held that, in an action at law, creditors could not undertake to redress wrongs against their own debtor.
In Prosser v. Edmonds, 1 Younge & C. 481, the court expressly distinguish that case from one of “an assignment of a chose in action, as a note not negotiable, or a bond, or a mortgage, or an equity of redemption, when possession of the thing assigned is delivered to the assignee.”
In Pettus v. Smith, 4 Rich. Eq. 203, the court say:
“In one case, and only one, that now occurs to me,*11 has a creditor a right to ask redress in relation to a fraud upon his debtor; and it is where the fraud was perpetrated, not only with the view of injuring the debtor, but also with an intent to affect the creditor himself, i. e., where the creditor was the object of the fraud. In that case, perhaps, as well as in the familiar case where the debtor colludes with a third person to defraud his creditor, the creditor has a right to claim redress. But with regard to frauds intended to light on the debtor alone, and when his creditors were not within the contemplation of the author of the wrong, and are only affected consequently by it, society could not move on upon any principle that would allow them to interfere, forensically, in such cases.'”
In French v. Shotwell, 5 Johns. Ch. 555, a subsequent purchaser sought to set aside a judgment lien on the ground of a fraud upon the judgment debtor, and the court say:
"If a judgment was fraudulent by collusion between the parties to it, on purpose to defraud a subsequent purchaser,- the case would present a very different question. But if the judgment was fraudulent only as between the parties, it is for the injured party alone to apply the remedy.”
Graham v. Railroad Co., 102 U. S. 148, decides simply that a subsequent creditor cannot complain unless the fraud is aimed at him.
These cases discuss two questions, viz.:
1. The right of a creditor to complain of a fraud against his debtor, when such fraud is aimed at the debtor only; and
2. Whether an action for fraud is assignable.
- As already said, a fraud upon an insolvent, which enables the perpetrator to absorb all the debtor’s property, to the exclusion of creditors, operates as a fraud upon creditors, and they have a right to complain whether the debtor sees fit to complain or not. His acquiescence in such case is no more conclusive upon his creditors than
All of the cases cited concede that’ the rule contended for, that a right of action for fraud is not assignable, has no application to an assignment of something which is in itself tangible, capable of delivery, involving a right of property. In such case, the right to whatever remedy the assignor has follows the assignment. Here valid judgments were assigned to complainant. They would have survived to the personal representatives of the assignors. Complainant does not set up a right acquired by assignment from the Newaygo Manufacturing Company. It has nothing to assign but a naked right to bring suit. Complainant may avail himself of any remedy open to his assignors; nor does the fact that he, before these judgments were assigned to him, proved up in the foreclosure proceedings a claim then held by him, which was declared to be secured by said mortgage, affect this right.
The decree of the court below is affirmed, and the demurrer overruled, with costs to complainant. Defendants will have 20 days to make answer to said bill.
