Fleming v. Grafton , 54 Miss. 79 ( 1876 )

Simrall, C. J.,

delivered the opinion of the court.

The facts on which the questions that we are to consider arise are these : On Oct. 13, 1866, George Grafton recovered judgment for a large debt against John Grafton, which was duly enrolled. On the 2d of April preceding, John and wife conveyed the lands in controversy to Sojourner. On Jan. 1, 1867, Sojourner mortgaged the property to Fleming & Baldwin, to secure a debt due to them from his grantor, and also for plantation supplies. In January, 1868, Fleming & Baldwin assigned the debt and mortgage to Sarah Richards, as collateral security. In January, 1873, this mortgage was foreclosed, and at the sale Fleming became the purchaser. Executions were issued from time to time on the judgment, without result, until July 16, 1874, when George Grafton brought this bill in chancery, to set aside the conveyance to Sojourner, his mortgage to Fleming & Baldwin, and the purchase by Fleming at the foreclosure sale, on the ground that all these acts and conveyances were collusive, and contrived to defraud the complainant.

It is argued on behalf of Mrs. Richards, the assignee of the debt and mortgage, that she is an innocent purchaser, in no wise connected with the dealings between Grafton, Sojourner, and Fleming & Baldwin, and that, however those transactions may be tainted with fraud, she ought not to suffer or be prejudiced. Mrs. Richards, the creditor of Fleming & Baldwin, doubting their solvency, applied to them for security. To meet her wishes, they turned over to her, as collateral, the debt and mortgage. She became the mere assignee of the evidences of debt, with a right to enforce the mortgage as a security. She did not thereby become the purchaser of the property. Moreover, she is not a bona fide purchaser. Since she paid no money, parted with no valuable thing, incurred no new obligation, extinguished no debt, it would follow that whatever infirmity attached to the debt or the security;, as against her assignor, could be set up against her. It is not pretended that the debts due from Grafton and Sojourner rvere not bona fide liabilities. The mala fides in Fleming & Baldwin begins in an effort to obtain an advantage over George Grafton (who had already brought suit against John), by securing the past indebtedness of John, and enabling him and his son-in-law Sojourner to hold and enjoy the property, so that George could not collect his debt.

It has been urged by counsel that the defendants below could not maintain their plea of the Statute of Limitations, because of the fraud which concealed from the complainant his rights. It is not perceived, precisely, the applicability of the proposition of law to the facts. The conveyance by John Grafton to his son-in-law was recorded. So was the mortgage to Fleming & Baldwin. It was open to the complainant to inquire whether Sojourner had the means to make so large a purchase, and to observe for himself, or make inquiries as to the manner that the property was held, controlled and used after the conveyance to Sojourner. These circumstances were public. If he has lost by failure to act in proper time, it is referable to his own negligence.

Is the remedy of the complainant cut off against the property by the statute fixing a limitation of seven years to the continuance of the judgment lien ? It was held at this term, in the case of Partee v. Mathews, 53 Miss. 140, that a court of equity would decline to aid the creditor, after he had lost his lien by expiration of seven years from the date of the judgment, that being the time that the statute preserves it.

We have been invited, in able arguments, oral and written, to reconsider the doctrine laid down in Partee v. Mathews, and the prior decisions in this court on which that case rests, and to overrule them. The principle announced in those cases is, that a creditor who brings his bill in chancery to set aside a fraudulent conveyance of the debtor’s land must show that he has a lien on the land by judgment, or in some other form. They were all suits by judgment creditors, and the discussions and conclusions of the court were directed exclusively to the rights of such creditors against the property which had been thus conveyed.

These decisions are impugned, because they rest, as argued by counsel, on a misconception of the ground or reason on Which the relief is granted; the mistake being in the assumption, as it is said, that the lien is a necessary constituent of the creditor’s equity. The true and controlling consideration for relief, suggested by counsel, is the original and inherent jurisdiction in the court, because of the fraud of the debtor.

But a court of equity will never interfere to break up a contract, good between the immediate parties, at the suit of a stranger to it, unless he shows that be has some specific right to the property, the subject of the contract, superior to that which passed by the conveyance.’ The mere fact that he is a creditor is not enough. He must also be a creditor with a specific right or equity in the property. That, we propose to show, is and must be the title which he brings into a court of’ equity, when he seeks relief touching property liable to execution.

But there are two classes of cases in which a court of chancery relieves the creditor. The distinction between them is broad and marked, and the facts which make up the equity of the creditor are very different, and so is the reason on which the jurisdiction is based. One class is, where the creditor comes to obtain satisfaction of his judgment out of the property of his debtor,, which cannot be reached by execution at law; that is, where he proposes to appropriate equitable assets to the satisfaction of his judgment. The other is, where he has a right at law, the property being subject to final process, but he seeks the aid of a court of equity to remove some obstruction fraudulently or inequitably interposed to prevent or embarrass a sale under execution.

In the former case, it has been uniformly held by the courts in England and in this country, that the creditor must show, as a condition on which he will be relieved, that he has pursued his remedy at law fruitlessly; that is, that he recovered judgment, and had execution returned nihil. Balch v. Wastall, 1 P. Wms. 445; Cuyler v. Moreland, 6 Paige, 273; Bethell v. Wilson, 1 Dev. & Bat. Eq. 610; Neate v. Duke of Marlborough, 3 Myl. & Cr. 407.

It is because there can be no levy, or right of lien, on the chose in action, or other equitable assets, that a court of equity lays hold of it and applies it to the judgment. The right to exert the jurisdiction attaches on the fact that there is no property that the execution will reach. But the filing of the bill, after a return on the legal process of nihil, gives to the creditor a specific lien, and a preference over all other creditors. Edgell v. Haywood, 3 Atk. 352, 357.

The inquiry which we propose to make is, in what circumstances the court will relieve in the second class of cases; that is, what constitutes the right of the judgment creditor, when he seeks relief against a fraudulent conveyance. On what precise ground does the court exert its jurisdiction ?

In Smith v. Hurst, 10 Hare, 30, 43, it was said by Vice-Chancellor James that the “ rights of judgment creditors are, as I conceive, purely legal rights, and the interposition . . . in their favor rests . . . upon the principle, as I apprehend, of aiding the legal right.” “ The province of this court is to aid, and not to supply or to extend, the legal right.” An effectual mode of aiding the creditor is to put out of the way the covinous conveyance. In the case last quoted, the objection to relief, so far as the “ freehold estates ” were concerned, was sustained because the judgment creditor had not sued out an elegit. The reasoning is, that in any case the creditor must show by his bill that he has proceeded to the extent “ necessary to give him a complete title.” If he is in pursuit of equitable assets, that showing has been made by the judgment and return on execution of nihil; but if the aid of the court is sought to reach freehold estate, the title becomes complete by the issuance of the elegit, “ but it is not necessary to procure return.” The reason why the issuance of the elegit was necessary, was because that writ gave the creditor a specific right which the judgment did not give, and the court would lend its aid to remove the fraudulent obstruction.

In Neate v. Duke of Marlborough, 3 Myl. & Cr. 417, s. c. 14 Eng. Ch. Rep. 418, the Lord Chancellor inquired into the foundation of the jurisdiction.' His reasoning is, that the act of Parliament, 13 Edw. I. c. 18, gives the creditor the elegit, to put him in possession of a moiety of his debtor’s lands. The creditor comes into equity, not to obtain a greater benefit than the law gives him, but to have the same benefit, by the removal of the impediment out of the way. “ Suppose,” says his lordship, “ he never sues out the writ, ... is this court to give him the benefit of a lien to which he has never chosen to assert his right?” “This court is lending its aid to the legal right.”' The right attaches by virtue of the elegit under the act of Parliament, and it would not be correct to say that “ the creditor obtains a lien by, virtue of his judgment.”

In the well-considered case of Webster v. Clark, 25 Maine, 313, 315, the inquiry was, under what circumstances the court would assist the judgment creditor to displace a fraudulent conveyance. After referring to the doctrine as settled in England, especially 9 Simon, 60, that where freehold estate was in question there must be an elegit issued, the court applies that principle to the laws of Maine, and with this result: “ But in this State, where the judgment does not create a lien upon the real estate of the debtor, the principle established in all these cases would require that the creditor should make a levy upon the real estate of his debtor, if he would have the assistance of a court of equity,” to set aside a fraudulent conveyance. A court of equity does not pursue an original and independent course of its own, but affords auxiliary aid to give efficiency to the legal remedy. -

In Wisconsin, the statute, like ours, makes the judgment a lien. In Cornell v. Radway, 22 Wis. 260, 263-265, the court considered the point made by the defendant, that the fraudulent conveyance could not be assailed, because the creditor had not exhausted his remedy by an issuance of execution and return of nulla bona, and, after stating that such is the well-settled rule where the creditor resorts to chancery to subject equitable assets, declares that this bill was not brought for that purpose. But, inasmuch as the judgment by statute was a lien upon the land, it followed that, without the issuance and return of execution, the creditor could attack the conveyance, as a fraudulent obstruction to an adequate remedy at law. To the same effect is Gates v. Boomer, 17 Wis. 455.

In Illinois, in Stone v. Manning, 2 Scam. 530, 534, the same doctrine is explicitly recognized. If the lien arises from the issuance of execution, then the bill must aver that it was issued; otherwise, no title is shown to the assistance of the court to get rid of the fraudulent conveyance. So, in principle, is Eppes v. Randolph, 2 Call, 153.

The Supreme Court of the United States, in Jones v. Green, 1 Wall. 330, 332, states that the ground of the jurisdiction rests on the fact that the creditor has acquired a specific lien on the property (in that case by the levy of the execution), but that the fraudulent conveyance presented a hindrance which prevented a sale at a fair price. The relief is in aid of the law, by displacing the obstruction, to enable the creditor to obtain a full price for the property.

We have thus seen that the authorities outside of this State agree, that, before the creditor can obtain satisfaction in equity out of equitable assets, he must have pursued to the end his legal remedy, by recovery of judgment, and return of nihil on his execution. In our boohs are Farned v. Harris, 11 S. & M. 366 ; Brown v. Bank of Mississippi, 31 Miss. 454, 458.

But where the property has been fraudulently conveyed, the court of equity will intervene in aid of the legal right, without issue and return of execution, when the lien of the judgment subsists. The cases in our reports are Hilzheim v. Deane, 10 S. & M. 556 ; Berryman v. Sullivan, 13 S. & M. 65 ; Fowler v. McCartney, 27 Miss. 509; Snodgrass v. Andrews, 30 Miss. 472; and Vasser v. Henderson, 40 Miss. 519, 520, where the former cases are collected and the rule distinctly announced.

Waiving the former adjudications of this court, as not concluding us by authority, if we were at liberty to consider the question as res nova, we should be constrained to hold that the judgment creditor must show a specific right, that is, a lien on the land, before he has established a title to relief in equity to displace the fraudulent conveyance. The adjudications of this court are in harmony with the authorities elsewhere. We therefore reaffirm the doctrine of the case of Partee v. Mathews, 53 Miss. 140.

Courts of equity are not ordinarily tribunals for the collection of debts: some special reason must be offered by the creditor, before they will extend aid to him. If he is a judgment creditor, he must show that he has a lien, — either by judgment, if the statute gives such lien; if it arises from the execution, he must show that one has been issued; or if it arises from a levy of the writ, that must have been made.

The complainant, at the time he filed his bill, had no lien, for that which pertained to the judgment had expired; and although he had the right to issue execution, the writ in the officer’s hands did not revive the lien which was gone.

The decree will be reversed, and judgment may be entered here dismissing the bill.