Senter v. Williams , 61 Ark. 189 ( 1895 )

Hughes, J.,

Rig-ht of creditor to> intervene in creditor’s bill-

(after stating the facts.) Though it is the favorite policy of a court of equity to distribute assets equally among creditors -pari -passu, yet, whenever a judicial preference has been established, by the superior legal diligence of any creditor, that preference is always preserved in the distribution of assets by the court. McDermutt v. Strong, 4 Johns. Ch. 687. Here the appellees, to whom the reward of diligence was granted, filed their bill to set aside the assignment for fraud, and succeeded. The appellants contented themselves with standing by and seeing the appellees carry on the contest at their own labor and expense. This seems to come within the maxim, “ Vigilaniibus, non domientibus, jura subveniunt." “The creditor who first files his bill obtains thereby a priority, and is entitled to be first paid out of the proceeds of the assets, if there are no valid prior liens. Clark v. Figgins, 31 West Va. 157, and cases there cited.

Section 577, Beach, Mod. Bq. Pr., lays down the rule as follows : “A creditor, who delays asking to be •admitted as a complainant until after the case has been finally heard, should be admitted, unless his admission is by consent, only on condition that those who have ■expended their labor and incurred the risk of trying the ■case be first paid.” In the case of Smith v. Craft, 11 Biss. 340, Judge Gresham maintained that, “after the announcement of the finding of the court in favor of the complainants attacking the fraudulent preference, if other creditors come in and ask to be made parties to the suit as co-complainants, this may be done, but their ■claims will be postponed in favor of the original complainants.” “It is clear that creditors filing a bill to ■set aside a fraudulent conveyance acquire a specific lien, and are entitled to priority over other creditors at large.” Wallace v. Treakle, 27 Gratt. 487.

The intervening creditors here obtained judgments on their claims at the April term of the circuit court for 1893, and caused executions to be issued thereon and placed in the hands of the sheriff of the county, and they were held by the sheriff at the time of the final decree in this cause. They thus obtained liens on all the assigned property, subject to be seized on execution, and they thereby obtained priority over Senter & Co., who did not obtain judgment till the October term of court next thereafter.

A fraudulent conveyance, though good between the parties, passes nothing as against creditors. 2 Bump on Fraudulent Conveyances, 465 ; Freeman on Judgments, 350, 394; Stix v. Chaytor, 55 Ark. 116; McNeill v. Carter, 57 Ark. 579.

When the law gives priority, equity will follow it. Codwise v. Gelston, 10 Johns. 522; Wiswall v. Sampson, 14 How. 67; Wormser v. Merchants National Bank, 49 Ark. 117; Wallace v. Treakle, 27 Gratt. 487.

“When a bill is filed by judgment creditors, in behalf of all judgment creditors, to reach property which could not be effectively reached at law, as in suits against an administrator to reach assets fraudulently conveyed by the deceased in his lifetime, and where the statute provides that the assets in the hands' of the administrator shall be held subject to the payment of debts in the order prescribed by statute, * * * * * it is well settled that no preference can be obtained by filing a creditor’s bill first. Upon the death of a person, his estate is at once charged with the payment of all debts, to be paid under the statute, according to class, pro rata." Clark v. Shelton, 16 Ark. 474; Jackson v. McNabb, 39 Ark. 117; 2 Story, Eq. Jur. sec. 890; Thompson v. Brown, 4 Johns, Ch. 620. Several cases of the kind last mentioned are cited by counsel for the appellant, but they are not applicable to the case at bar.

The complaint to set aside the assignment for fraud in this case was brought by the interveuors named therein as plaintiffs, and in behalf of all other creditors of the assignors who might wish to join therein. The appellants did not propose to become parties, or to intervene, until after final decree setting aside the assignment as fraudulent, and ordering the assets distributed to the original complainants in the bill to set aside the assignment. They were therefore properly refused the privilege of sharing pro rata in the distribution of the assets uncovered by the suit of the original intervenors without their assistance. There is no error in the court’s decree on this ground.

We are of opinion that, upon the offer of Senter & Co. to intervene and contest the distribution of the rents of lands, which had been sold by Baird & Caruth before the .assignment, and for which they had made bonds for title, and the purchase money notes for which they had- assigned to Senter & Co., the purchasers of these lands, and Senter & Co. should have been made parties, that their respective equities m.ight be determined by the court. It is apparent that neither Baird & Caruth, nor Ware, the assignee, had interest in these lands, as they were sold by Baird & Caruth before the assignment, and the notes for the purchase money had been assigned by Baird & Caruth, before the assignment, to Senter & Co. After they were sold by Baird & Caruth, they held merely the legal title in trust, to be conveyed to the purchasers when the purchase money should be paid. When the notes for the purchase money were assigned to Senter '& Co., they became thereby entitled to the vendor’s lien for the payment of the notes. It is clear, therefore, that the equities as to those lands were between the purchasers and Senter & Co. It was not equity to distribute these rents to Baird & Caruth’s general creditors. This part of the decree is reversed, with directions that the purchasers of these lands be made parties. OtherWise the decree is affirmed.