McCartney v. . Bostwick

The complaint avers and the demurrer admits that all the parties to this suit are non-residents of this State; that Albion W. Bostwick resides in the county of Winona, in the State of Minnesota, and has no property of any kind in this State, that the plaintiffs recovered judgment against him in the district court of the third judicial district of said State of Minnesota, and that execution thereon has been issued to the county of the debtor's residence, and returned nulla bona.

In Garfield v. Hatmaker (15 N.Y., 475), this court adjudged that under our statute when a grant is made to one person for a valuable consideration paid by another, no interest legal or equitable vests in or results to the person paying the consideration, but that a pure trust in favor of his existingcreditors, which can be enforced in equity only, is imposed by the statute upon the legal title in the hands of the grantee. Under the facts alleged in the complaint there can be no question but that the respondent holds the farm in Cayuga county, subject to this trust in favor of the creditors of Albion W. Bostwick. The court below sustained the demurrer on the ground that the plaintiffs have not exhausted their remedy at law, but must sue over the judgment against the debtor in the courts of this State, and after recovery cause execution to be issued and returned unsatisfied. It may be regarded as the established rule of courts of equity, that before the equitable property or interests of a debtor can be reached by suit in those courts, the creditor must have exhausted his remedy at law; and the evidence that such remedy is exhausted is the recovery of judgment and the return of execution thereon. (2 Johns. Ch., 144; Wiggins v. Armstrong, id., 285, 4 id., 671; 3 Barb. Ch., 46;Crippen v. Hudson, 3 Kern, 161.)

The provision of 2 R.S., 173, §§ 38, 39, apply only to creditor's bills, strictly so called, where the only claim to relief is, that the remedy of the creditor at law is exhausted; and they leave untouched the general powers of the Court of Chancery in reference to fraudulent trusts and conveyances. (Per GARDNER, J., Chautauqua Co. Bank v. White, 2 Seld., 252.) This case is not therefore embarrassed by any statutory restriction because by its terms the statute applies to "property belonging to the debtor, or due to, or held in trust for him, and since Garfield v. Hatmaker," the debtor cannot be regarded as having any interest legal or equitable in the property sought to be reached in this case, nor is there any trust whatever in his favor. The general principles that governed the Court of Chancery in administering trusts of this nature are applicable to this case. The case presented is an anomalous one. There exists concededly, in the farm held by respondent, a "pure trust" in favor of the appellants. But to reach and apply this trust estate, a general rule of equity requires that they should have exhausted their legal remedy.

The rule of course presupposes that they have a legal remedy; but so far as the courts of this State are concerned, they have none. The facts stated by the complaint show that no remedy whatever at law exists in their favor in this State. That no court of law of this State has jurisdiction to entertain a suit to be brought by them against the debtor, either upon the judgment or the original indebtedness, and that it is therefore impossible for them to recover judgment in this State, and have their execution returned. (Code, §§ 131, 227, 2 R.S., 3; 2 id., 5th ed., 1871.) Does equity demand that a legal remedy shall be exhausted, where none exists, before it will enforce a trust created by statute, of which it alone has jurisdiction? The rule fails where the reason for it ceases. "Cessante ratione legiscessat ipse lex," is a maxim as well in equity as at law. Courts of equity "have adopted principles exceedingly broad and comprehensive in the application of their remedial justice, and especially where there is any fraud touching property, they will interfere and administer a wholesome justice, and sometimes even a stern justice in favor of innocent persons who are sufferers by it without any fraud on their side." (2 Story Eq., 1265.) It is their special province to enforce trusts of this nature, and it would be a reproach to their justice if they demanded as an unbending condition, that a creditor shall have exhausted remedies at law, which as between the parties before them have no existence whatever. The only case I have found where a question at all like this has been considered is that of Turbell v.Griggs (3 Paige, 207). In that case the complainant recovered judgment in the Circuit Court of the United States for the Southern District of New York. After the return of his execution unsatisfied, he filed his bill in the Court of Chancery of this State, to reach the equitable assets of the debtor. The chancellor sustained a demurrer to the bill, holding that there was nothing in the judgment of a court of the United States although recovered territorially within our own State, to place it upon any higher ground than the judgments of the courts of a sister State, and that there was "no equitable ground for the interference of this court alleged in the bill except the mere fact, that a judgment has been recovered in that court, and that an execution issued thereon has been returned unsatisfied. This court (he says), upon the principle of comity, has gone so far as to compel a discovery from persons residing within its jurisdiction, in aid of the prosecution or defense of a suit in the court of a sister State. And I am not prepared to say, it might not, upon the same principle of comity, interfere to aid the parties in the collection of a judgment of a court of the United States, or of a sister State upon any sufficient grounds of equity appearing upon the face of the bill, to show that the exercise of such a jurisdiction was necessary to prevent a failure of justice." It seems to be fairly inferable from these remarks of the chancellor, that he would have retained the bill in that case, if it had appeared to have been one where the complainant had no remedy at law in the courts of this State. But if it be essential to jurisdiction in this case, I am prepared to go farther, and hold that the remedy of plaintiffs at law has been exhausted in this case, within the true meaning of the rule. So far as the effect of the judgment is to establish the indebtedness, it has been accomplished by the judgment recovered in Minnesota. That judgment appears to have been recovered upon personal service of process. It is equally as conclusive upon the courts of this State, as to the existence of the debt and its amount, as a like record from one of our own courts would be. (Shumway and others v. Stillman, 6 Wend., 447; Reed v. Pratt, 2 Hill, 64; Const. U.S., art. 4, § 1.) Of course it is no lien upon property here, but a lien is not essential, nor could any judgment against the debtor be a lien upon this trust estate, as Garfield v. Hatmaker (ubi sup.) expressly decides. Since, then, no statute controls it, as in ordinary creditors' bills, and no action or legal proceeding whatever can be brought in this State, either upon the original debt or the judgment, the court must look at the facts stated, to ascertain if all remedy at law has not been exhausted. In this view of the case there was a remedy at law against the debtor; but where? only in the courts of a sister State: and that is shown to have been followed to its ultimate results. Conceding it must also be repeated here in a case where it may be, yet when that is shown to be impossible under our law, it inevitably follows, that the law is exhausted. Our law is not therefore subject to the reproach of creating by statute a trust for foreign creditors in property within our State, yet withholding from them all power of reaching and applying it.

I think the judgments below should be reversed.

Judgment reversed.