Case Name: Gilbert, Appellant, vs. Stockman and others, Respondents
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1892-03-22
Citations: 81 Wis. 602
Docket Number: 
Parties: Gilbert, Appellant, vs. Stockman and others, Respondents.
Judges: WiNslow, J., dissents.
Reporter: Wisconsin Reports
Volume: 81
Pages: 602–623

Head Matter:
Gilbert, Appellant, vs. Stockman and others, Respondents.
February 26
March 22, 1892.
Fraudulent conveyance: Action by judgment creditor to set aside: Lien of judgment: Return of execution.
An action by a judgment creditor to set aside a conveyance of land made by the debtor before the docketing of the judgment, and to subject the land to the lien of the judgment, on the ground that such conveyance was made without consideration and with intent to defraud creditors, including the plaintiff, cannot be maintained unless an execution on the judgment has been issued and returned unsatisfied in whole or in part. Winslow, J., and Pinney, J., dissent.
APPEAL from the Circuit Court for St. Groix County.
This is a bill in equity to set aside a deed executed by the defendants H. D. Stockman and wife July 3, 1890, whereby they conveyed to the defendant Campbell Fletcher the forty acres of land described, in St. Croix county, which deed recited a consideration of $500 and was recorded in the register’s office of St. Croix county July 5, 1890, on the ground that said deed was given without consideration and with the intent to hinder, delay, cheat, and defraud the creditors of the said H D. Stockman, including the plaintiff. The complaint alleged the facts mentioned moré in detail, and also that said Fletcher was the father-in-law of said Stockman, and never paid any consideration for said premises, and did not buy the same in good faith, and also alleged; in effect, that November 11, 1890, the plaintiff recovered a judgment against said Stockman for $105.19 in the circuit court for St. Croix county, and which was docketed therein on that day and still remained unpaid and unsatisfied; that November 28, 1890, the plaintiff also caused to be docketed in the circuit court for St. Croix county another judgment, for $107.75, which had been previously recovered in this court; that the debts upon which said respective judgments were recovered accrued long prior to July 3,1890. The prayer was that said deed be set aside and declared null and void, and said judgments be declared superior liens upon said premises, and that the same be sold on execution to satisfy the same, and for general relief.
To that complaint the defendants demurred on the ground that it did not state facts sufficient to constitute a cause of action. From the order sustaining that demurrer the plaintiff appeals.
For the appellant there was a brief signed by Henry Anderson and Spooner & Taylor, attorneys, and a separate brief signed by Armstrong Taylor and Henry Anderson, attorneys, and Richmond <& Smith, of counsel; and the cause was argued orally by J. B. Smith. R. D. Whitford, for the respondents.

Opinion:
Cassoday, J.
Tbe deed from the judgment debtor to bis father-in-law was executed and recorded more than four months prior to the time when either of the plaintiff's judgments was docketed in St. Croix county, in which the land in question is situated. There is no claim that any execution was ever levied upon the land, or even issued upon either of those judgments. Equitable aid is invoked on the ground that the deed was given without consideration by an insolvent debtor, with the intent to hinder, delay, or defraud his creditors, including the plaintiff. The question is whether it can be granted upon such a showing.
There is certainly a great diversity of opinion in the several states as to the question suggested, depending, it is believed, very much upon local statutes. It seems to be conceded as a general rule that whenever the nature of the property or thing in action is such, or the same is held in trust for the insolvent judgment debtor so, that it cannot be reached at law by levy and sale on execution, then the execution must be returned unsatisfied in whole or in part before a bill in equity, or what is usually known as a " creditor's bill,''can be maintained to reach the same. In such case the equitable lien is created, not by the judgment and execution, but by the filing of the bill and the service of process. Dunlevy v. Tallmadge, 32 N. Y. 457. This rule, requiring the return of an execution unsatisfied, is embodied in our statute. Sec. 3029, R. S.
Formerly it was held in New York that where an insolvent debtor bought and paid for land with his own money, and took the title in the name of his wife or another with the intent to hinder, delay, or defraud his creditors, such land could nevertheless be reached and sold on execution against the debtor. Wait v. Day, 4 Denio, 439. But that case was expressly overruled in Garfield v. Hatmaker, 15 N. Y. 475, in an able opinion by'CoMstocK, J., on the ground that the then recently revised statutes of that state had abolished the uses and trusts in favor of the debtor so paying the consideration which was implied at common law, and hence left in such debtor no legal or equitable estate to which such execution at law could attach. This ruling has become firmly established by repeated adjudications in New York. Wood v. Robinson, 22 N. Y. 564; McCartney v. Bostwick, 32 N. Y. 53; Ocean Nat. Bank v. Olcott, 46 N. Y. 17; Everett v. Everett, 48 N. Y. 223; Estes v. Wilcox, 67 N. Y. 264; Underwood v. Sutcliffe, 77 N. Y. 58. We have the same statutes in these respects, and have followed the same construction. Sec. 2077, R. S.; Hyde v. Chapmam, 33 Wis. 391; Kluender v. Fenske, 53 Wis. 122; Pavey v. Am. Ins. Co. 56 Wis. 224; Week v. Bosworth, 61 Wis. 85; Cerney v. Pawlot, 66 Wis. 262; Skinner v. James, 69 Wis. 611; Campbell v. Campbell, 70 Wis. 311; Watters v. McGuigan, 72 Wis. 155; Gettelmann v. Gitz, 78 Wis. 439. To the same effect are Griffin v. Nitcher, 57 Me. 270; Hartshorn v. Eames, 31 Me. 93.
The difference between an insolvent debtor thus purchasing land in the name of another with the intent to hinder, delay, or defraud his creditors, or the making of a conveyance from himself directly to such third person with the same intent, is, to say the most, very slight, since the pur pose and effect in each case is substantially the same; and yet it is firmly established by the' authorities cited that if such insolvent debtor purchases land in the name of another with the intent to hinder, delay, or defraud his creditors, such land cannot be reached by execution nor in equity until the execution has been issued and returned unsatisfied in whole or in part.
Such return can only be dispensed with where the judgment creditor has first obtained a valid lien at law upon the land. ' What are the essentials of such a lien? Originally, at common law, a judgment was not, strictly speaking, a lien upon real estate. Thus Lord Chancellor Cottenham said: " It is not correct to say that according to the usual acceptation of the term the creditor obtains a lien by virtue of his judgment. . . . What gives a judgment creditor a right against the estate is only the act of Parliament; for independently of that he has none. The act of Parliament gives him, if he pleases, an option by the writ of elegit,— the very name implying that it is an option,— which if he exercises, he is entitled to have a writ directed to the sheriff to put him in possession of a moiety of the lands. The effect of the proceeding under the writ is to give to the creditor a legal title which, if no impediment prevent him, he may enforce at law by ejectment." Then, after indicating that equity would aid in the removal of such impediment, he said: "Suppose he [the judgment creditor] never sues put the writ, and never, therefore, exercises his option. Is this court to give him the benefit of a lien to which he has never chosen to assert his right ? The reasoning would seem very strong that as this court is lending its aid to the legal right the party must have previously armed himself with that which constitutes his legal right, and that which constitutes the legal right is the writ." The act of Parliament thus referred to was 13 Edw. I. ch. 18, which declared, in effect, that upon the recovery of a judgment, "it shall be from henceforth in the election of him that sueth for such debt or damages to have a writ of fieri facias unto the sheriff for to levy the debt of the lands and goods," etc. At common law such writ was to be sued out within a year and a day after the judgment was entered, otherwise it would be deemed satisfied, unless revived. 3 331. Oomm. 421. Such English rule became operative as a part of the common law of this country, except in so far as modified by local statutes. Burton v. Smith, 13 Pet. 479; Spaulding v. C. & N. W. R. Co. 30 Wis. 110. "It is not understood," said Mr.,Justice Story, " that a general lien by judgment on land constitutes per se a property or right in land itself. It only confers a right to levy on the same to the exclusion of other adverse interests subsequent to the judgment; hnd when the levy is actually made on the same the title of the creditor, for this purpose, relates back to the time of his judgment, so as to cut out intermediate incumbrances." Conard v. Atlantic Ins. Co. 1 Pet. 443. Our statute makes a judgment, when docketed as required, a lien for the period of ten years on the real property not exempt which the debtor " may ha/oe at the time of dochetvng thereof in the county in which such real estate is situated, or which he shall acquire at any time thereafter within said period' of ten years." Sec. 2902, R. S.
The contention is that every conveyance made with the intent to hinder, delay, or defraud creditors is made void, as against the person so hindered, delayed, or defrauded, by sec. 2320, R. S., and hence that the deed in question, although made and recorded long prior to the docketing of either of the plaintiff's judgments, was nevertheless utterly void and of no effect as against creditors, including the plaintiff. But such claim is obviously subject to several qualifications. No one would seriously contend, under the statutes of this state, that the validity of such deed cpuld be questioned by a mere creditor at large, or by a mere foreign judgment creditor, or by a judgment creditor wbose judgment is docketed merely in some other county than the one in which the land is situated, and upon which no execution has been issued, nor even a judgment recovered in the county where the land is situated, unless the same should first be also docketed in that county. In other words, if the plaintiff's judgments are liens upon the land in question it is by virtue of the mere clerical act of docketing the judgments in St. Croix county as required by statute. Secs. 2899-2901, R. S. The mere clerical act of docketing one judgment is the same as docketing any other judgment, and yet the one may be based upon a debt contracted prior to such fraudulent conveyance, and the other upon a debt contracted after such conveyance; and hence the one might by a creditor's bill, or bill in aid of an execution, be successfully enforced against such conveyance, while the other could not,— depending upon facts outside of such docket.
Again, the deed in question was valid between the parties and their personal representatives. Clemens v. Clemens, 28 Wis. 637; Dietrich v. Koch, 35 Wis. 618; Mehlhop v. Pettibone, 54 Wis. 657; Davy v. Kelley, 66 Wis. 452. Py that deed the judgment debtor absolutely parted with any and all right, 'title, and interest in the land, beyond any reclaiming, whether in equity or at law, long before such docketing. And yet we are asked to say that such docketing of the judgments made them liens upon the land at law, notwithstanding the statute only makes a judgment a lien upon the land owned by the judgment debtor at the time of docketing the same or thereafter, and not upon lands in which he then had no interest whatever. Besides, if such docketing made the judgments liens at law, then such lien would be absolute, and the fraudulent grantee could not thereafter convey the same, even to a bona fide purchaser for full value.
The several sections of our statutes referred to are each taken substantially, if not literally, from the corresponding sections of the New York statutes. Under such statutes, the New York courts have frequently held that, to enable a judgment creditor to obtain the aid of a court of equity, it is essential either that an execution be first issued and returned unsatisfied in whole or in part, or that the action be brought in aid of an execution then outstanding. Adsit v. Butler, 87 N. Y. 585; McCullough v. Colby, 5 Bosw. 477; Geery v. Geery, 63 N. Y. 252; Fox v. Moyer, 54 N. Y. 125-129; Dunlevy v. Tallmadge, 32 N. Y. 457; Shaw v. Dwight, 27 N. Y. 244; North Am. F. Ins. Co. v. Graham, 5 Sandf. 197; Lichtenberg v. Herdtfelter, 33 Hun, 57; Hadden v. Spader, 20 Johns. 554. In Adsit v. Butler, 87 N. Y. 585, the facts were substantially the same as in the case at bar. The complaint alleged, in effect, the recovery of two judgments against Rosekrans in 1875; that he had previously conveyed the premises described to one Blackmore, who, by the procurement of Rosekrans, conveyed the same to the defendant's testator, the original defendant; that Rosekrans was insolvent; that such conveyances were without consideration, made, and in pursuance of a scheme to which said testator was a party, to hinder, delay, and defraud the creditors of Rosekrans, who died in 1877. The defendant demurred on the ground that the complaint did not state a cause of action. The court sustained the demurrer, and judgment was entered thereon accordingly. In the court of appeals it was held that " in an action by a judgment creditor to set aside, on the ground of fraud, a conveyance of real estate by the debtor, the complaint must allege the issuing of an execution upon the judgment. The return of an execution unsatisfied is essential to give the court jurisdiction, or the action must be brought in aid of an execution then outstanding." This is on the theory that before a court of equity will lend its aid in such a case the judgment creditor must have " exhausted all the reme dies known to the law to obtain satisfaction on the judgment." In that state an execution becomes a general lien on the debtor's personal property as soon as placed in the hands of the sheriff. Nevertheless, it must either be returned unsatisfied, or levied upon specific personal property, before the aid of equity can be successfully invoked.
There are adjudications in other states to the same effect as in New York. Thus in Maine it has been held that where a bill in equity alleges that the plaintiff's judgment debtor had conveyed his real and personal estate to others in fraud of his creditors, and seeks relief for that cause, if the bill does not also allege that the plaintiff has made a levy upon the land, or an attempt to seize and sell the goods, or that an officer has returned the execution without being able to' obtain satisfaction, or such facts as to show the plaintiff has exhausted his remedy at law, the bill will be dismissed on demurrer thereto for want of jurisdiction. Webster v. Clark, 25 Me. 313; Dana v. Haskell, 41 Me. 25. So in Vermont it has. been held that " a court of chancery will not ordinarily interpose to aid a creditor in reaching the real estate of his debtor, unless he has perfected his claim so far as he can at law by obtaining judgment and levying upon the estate." Rice v. Barnard, 20 Vt. 479. So, in a case from Nebraska, it was held in Jones v. Green, 1 Wall. 330, that " a bill in equity will not lie on behalf of judgment creditors to subject real property of their debtor, held by a third party upon a secret trust for him, to the satisfaction of the judgment, until an attempt has been made for their collection at law by the issue of execution thereon." The opinion in that case is by Mr. Justice Field, and is based upon earlier New York cases.
There are undoubtedly decisions in some states which sustain the contention of the learned counsel for the plaintiff. In fact, some of them go to the extent of sustaining a creditor's bill by a mere creditor at large. But the de cisions in this state, so far as they have gone, are believed to be in harmony with the rules thus maintained in New York, from which state we borrowed our statutes on the subject. In some of these cases the execution had been issued and returned unsatisfied, and thereupon a regular creditor's bill was filed to set aside a prior conveyance; and hence the question here presented did not arise. Gates v. Boomer, 17 Wis. 455; Winslow v. Dousman, 18 Wis. 456; Meissner v. Meissner, 68 Wis. 343; Williams v. Sexton, 19 Wis. 42; Daskam v. Neff, 79 Wis. 161. In Eastman v. Schettler, 13 Wis. 324, the debtor conveyed the land with the intent to hinder, delay, and defraud his creditors, pending a suit against him. Upon the recovery and docketing of the judgment in the action thus pending against him, an execution was issued thereon, and the land so conveyed levied upon and sold to the plaintiff, who, upon receiving the sheriff's deed upon such sale, brought an action at law to recover the land. On the trial the court excluded all evidence of title in the judgment debtor, and the judgment roll in the action against him; and such ruling was held to be error. It must be conceded that had the judgment creditor, prior to such sale, brought an action in equity in aid of such execution and levy, the court would, upon the principles of that decision, necessai'ily have held such action maintainable. But that case goes to the extreme limit of any adjudication in this court, as will be observed by a careful examination of the cases cited. Cornell v. Radway, 22 Wis. 260; Smith v. Weeks, 60 Wis. 104; Mason v. Pierron, 63 Wis. 246; Galloway v. Hamilton, 68 Wis. 651; Evans v. Laughton, 69 Wis. 138; Ahlhauser v. Doud, 74 Wis. 400; Woodward v. Hall, 75 Wis. 406. In Cornell v. Radway, supra, the judgment 'debtor had title and possession of the land before and at the time of the docketing of the judgment against him, and never parted with the same; and besides, an execution had been issued thereon and levied upon the •land, and the suit was in aid of sucb execution and levy. Galloway v. Hamilton, supra, was to the same effect. In the case at bar, no execution was ever issued, much less levied upon the land in question or returned unsatisfied. Such being the fact, the demurrer was properly sustained.
By the Court.— The order of the circuit court is affirmed.
WiNslow, J., dissents.