Case Name: Edwin Byles and Edwin J. Phelps, Assignees of Kellogg, Sawyer & Co., v. Florence V. Rowe
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1887-01-27
Citations: 64 Mich. 522
Docket Number: 
Parties: Edwin Byles and Edwin J. Phelps, Assignees of Kellogg, Sawyer & Co., v. Florence V. Rowe.
Judges: 
Reporter: Michigan Reports
Volume: 64
Pages: 522–540

Head Matter:
Edwin Byles and Edwin J. Phelps, Assignees of Kellogg, Sawyer & Co., v. Florence V. Rowe.
[See 54 Mich. 206.]
Assignment for benefit of creditors — Dissolution of attachment— Equity — Bill by assignees to .set aside execution lien.
1. A creditor attached the real estate of an insolvent firm, and three days afterwards the debtors made a general assignment for the benefit of their creditors. The assignees applied for a dissolution of the attachment on the ground of the falsity of the aifidavit therefor, so far as it averred a cause for the issuance of the writ, which application was granted by the circuit judge. The order of dissolution was quashed in the appellate court for want of jurisdiction in the judge to make it in behalf of such assignees. [See Rowe v. Kellogg, 54 Mich. 206.] The suit proceeded to judgment, on which an execution was issued, and levied on the attached property; whereupon the assignees filed a bill to set aside the lien as fraudulently obtained, and also averring the absence of a remedy at law. The circuit court granted the relief prayed for, from which decree the attaching creditor appealed; which decree was affirmed by an equal division of the Court, nothing being decided.
2. Sherwood, J., filed an opinion, holding that the equity court has jurisdiction to declare the attachment lien void by reason of the fraud perpetrated in obtaining it, and remove the cloud from the title of the assignees to the assigned property.
8. Champlin, J., filed an opinion, concurring in affirmance on the ground that, upon the facts ’in the case, the equity court will grant the relief prayed for, to enforce the trust under the assignment, and, by preventing the fraud complained of, secure a ratably equal distribution of the property among the creditors.
4. Campbell, C. J., denies the jurisdiction of equity to interfere, for reasons stated in his opinion.
5. Morse, J., reserves his opinion as to the jurisdiction of the equity court, and holds that the decree below is wrong on the merits.
Appeal irom Kalamazoo. (Mills, J.)
Argued November 17, 1886.
Decided January 27, 1887.
Bill by assignees to remove attachment and execution liens alleged to have been fraudulently obtained. Attaching creditor appeals. Decree granting relief prayed for affirmed by a divided Court. The facts are fully stated in the opinions.
Edwards £ Stewart, for complainants.
[For authorities cited, see opinion of Sherwood, J.— Reporter.]
Howard £ Boos, for defendant and appellant.
[No authorities cited. — Reporter.]

Opinion:
Sherwood, J.
The complainants file their bill, as assignees of Kellogg, Sawyer & Co., to set aside attachment and execution levies upon real estate described in the bill, and for an injunction preventing a sale of the property.
The attachment proceedings were commenced on the sixth day of November, 1883. The suit was prosecuted to judgment, and an execution was issued and levied upon the attached property.
On' the ninth day of November, 1883, Kellogg, Sawyer & Co. made a general assignment of all their property, for the benefit of their creditors, to the complainants. The lands attached were not only those included in the assignment, but also other lands which were not so assigned, but were claimed to be owned by Mrs. Sarah B. Kellogg, and occupied by her and her husband, Joseph E. Kellogg, as a homestead.
In February, 1884, two petitions were filed to dissolve the attachment, — one by the assignees, to remove it from the assigned property, and the other by Joseph E. Kellogg, to have it set aside as to his residence, which belonged to his wife and was occupied by the, family. The only ground for suing out the writ of attachment, stated in the affidavit, was the belief, unsupported by any facts averred, that defendants " are about to assign and dispose of their property with intent to defraud their creditors."
These were heard before the-circuit judge, who found as a fact that there was no showing which justified suing out the writ of attachment, and dissolved the same in both cases.
Mrs. Kowe removed the cause into this Court by writ of certiorari. We then held that the learned circuit judge "was entirely correct in his inferences, and the plaintiff's case does not appear to be meritorious," and affirmed the decision of the circuit judge in the case of Joseph E. Kellogg; but, as regards the case of the assignees, Mr. Justice Campbell in his opinion says:
, " It is certainly desirable that those who represent creditors, as these assignees do, should have some expeditious and simple way of getting rid of unjust seizures, but we cannot see how the statutory remedy can be made to reach their equities. So far as they are concerned, we are compelled to hold that the judge had no jurisdiction, as judge out of court, to .give them relief."
The Court quashed the order in that case, but without prejudice to any other mode of redress. We further decided, in the case of the assignees, that the equities were clearly in their favor, and that we should have hesitated allowing the certiorari, and that we were not then prepared to sa.y the circuit court may not have some power to protect the assignees against such seizure. Rowe v. Kellogg, 54 Mich. 206.
The levy under the execution was made on the twenty-•sixth day of May, 1884, and the bill in this case was filed on the fifteenth day of August following.
After setting out the trust capacity in which complainants act for Kellogg, Sawyer & Co., giving a statement of the firm's liabilities and assets, and the fact that the defendant is a creditor of the firm, and that her husband acted as her .agent in the management of her claim, the bill then states the legal proceedings taken to collect her claim, the com mencement of the suit by attachment, and the facts alleged in the affidavit made by the defendant to obtain the writ, and avers that those allegations are false, and were known to be so when the affiant made them, and that by such false statements, and procuring the attachment issued upon such false affidavit upon property not belonging to Kellogg, Sawyer & Co., but upon the property of the individual members of said firm, a fraud was committed upon the rights of complainants, and upon the court.
The complainants further aver in their bill that the attachment lien in favor of the defendant upon said real estate is wholly without equity, and a fraud upon them and the other creditors whom they represent, both joint and individual; that it is the intent of the defendant to enforce said attachment lien against the property levied upon, and thereby collect her claim in full if the same can be realized from a forced sale of the property in the execution levied thereon, and which the defendant caused to be issued and procured to be levied for the purpose of continuing and. enforcing the attachment lien; that, by means of legal process, fraudulently and by imposition obtained from the court, the said defendant is about to cause the property in question to be advertised and sold upon the said execution levy, to the great injury of the complainants and all other creditors; and that the lien obtained under the levies upon the attachment and execution are void, and a cloud upon the title to the property they hold in trust, and which it is their duty as assignees to procure to be removed.
The defendant in her answer admits the legal proceedings taken as charged, but denies any fraud in the institution of the suit, or any intent to defraud in the prosecution of the suit to judgment, or in her efforts to collect said judgment after it was obtained. Defendant admits making the statements contained in the affidavit as charged, and avers she had good reason for making them. She denies that her lien under the attachment is without equity, or a fraud upon complainants' rights, or void, or a cloud upon complainants' title. Defendant further admits that it is her intention to enforce her claim against the lands attached, under the liens she has obtained, and that the levy under the execution is only a continuance of the attachment lien.
Defendant further insists in her defense that any rights which complainants have in the real estate are subsequent to those of defendant, and subject thereto, and that complainants have no right in a court of equity to litigate the matters contained in their bill, and further claims that a court of equity has no jurisdiction to dissolve an attachment levied upon real estate; that the issuing, levy, and dissolution of attachments are all matters resting upon statute, and no authority is given to a court of equity to interfere.
The answer also prays the benefit of a demurrer.
The proofs in the case were taken in open court before Judge Mills, who upon the hearing of the cause rendered a decree, which, after referring to the real estate to be affected thereby, and which was attached, and finding that complainants hold the legal title thereto by virtue of the assignment, proceeds as follows:
" And all of said real estate hereinbefore described having been levied upon by a writ of execution by the sheriff of the county of Kalamazoo, issued at the instance of the plaintiff in said attachment suit, the defendant herein, on the judgment rendered in the said attachment suit, and said complainants, at the time of the filing of their said bill, being in possession of said premises as assignees of said Kellogg, Sawyer & Co.; it is ordered, adjudged, and decreed that the said defendant, Florence V. Rowe, the plaintiff in said attachment suit, had no sufficient reason in law or fact to believe that Kellogg, Sawyer & Co., the defendants in said suit, were about to dispose of their property with intent to defraud their creditors, as stated by said Florence V. Rowe in her affidavit for, and as the ground for, said attachment; and in fact said Kellogg, Sawyer & Co. were not, at the time of the making of said affidavit for said attachment, about to dispose of their property with intent to cheat and defraud theiT creditors, but were about to make an assignment of all their property in trust, for the benefit of all their creditors alike, of which said plaintiff in attachment had notice from said Kellogg, Sawyer & Co.
"It is further ordered, adjudged, and decreed that the levy of said attachment, and of the execution issued upon the judgment in said suit, upon said real estate above described, was without authority of law, and without right in said Florence Y. Rowe, this defendant, to proceed in such action, and the levy of said attachment and execution is fraudulent against the rights of the assignors conveying to complainants the real estate in question in trust for their creditors, and fraudulent as against the rights of the complainants as trustees, and the creditors they represent.
" And it is further ordered, adjudged, and decreed that said levy of attachment and execution upon said described lands is a cloud upon the title of the complainants thereto as said trustees, and said lien of attachment and execution in favor of defendant, Florence Y. Rowe, is without equity; and it is hereby decreed that said attachment and execution levy, and lien thereof, be set aside, vacated, and held for naught, and the said lands be, and the same hereby are, free and discharged from the incumbrance thereof."
Mrs. Rowe appeals from the decree, and asks a review of the case in this Court, and her counsel insist that the decree .should be reversed, and complainants' bill dismissed, upon two grounds:
" 1. Because a court of equity has no jurisdiction.
"3. Because, from the evidence in the case, if a court of equity had jurisdiction, there was sufficient reason for holding the attachment good."
Upon the last proposition the record has been carefully inspected, and I have no doubt of the correctness of the finding of the circuit judge. In a case commenced by attachment, the affidavit is necessary to confer jurisdiction; and when it is made, as in this case, upon the ground that the affiant has good reason to believe, and does believe, that the defendants are about to assign their property with intent to defraud their creditors, the law requires it should be made in good faith, and that the affiant should have good and substantial reasons-for the belief expressed. It is an extraordinary remedy that-is resorted to, when the creditor is allowed, through the agency of a court, to reach out and take control of the property of his debtor, and incumber it to its full value, before he has established his claim against the debtor. The court permits the use of its process for this upon the showing made in the affidavit, and upon the good faith of the affiant, and assurance that the creditor can furnish good and substantial reasons for the statements made in the affidavit.
This suit is the second time the defendant has been asked to furnish the reasons for her belief stated in the affidavit, and the evidence of her good faith.
In the first instance neither the circuit judge nor this-Court could find any sufficient reasons for the statements made, nor the necessary facts and circumstances to show good faith.
In the present case the learned circuit judge finds that the defendant "had no sufficient reason in law or fact to believe that Kellogg, Sawyer & Co. were about to dispose of their property with intent to defraud their creditorsbut, on the contrary thereof, he found they "were about to make an assignment of all their property in trust, for the benefit of all their creditors alike, and of which said plaintiff had notice," and that the levy of the attachment, the prosecution of the suit, and the issuing of the execution and levy thereunder, were without authority of law, and without the right of the defendant so to do, and that the levy under both writs was fraudulent against the rights of complainants, and is a cloud upon the title to the property. I think the circuit-judge, as I have said before, is fully sustained by the record, and he might with great propriety have added that the procuring of the writ of attachment, under the circumstances, was a fraud upon the court.
We will now consider the first ground of objection stated'. by the learned counsel for the defendant, viz., that the court has no jurisdiction to relieve against the wrong complained of.
It was expressly decided by this Court in Rowe v. Kellogg, 54 Mich. 206, that complainants had no remedy at law, and were we now to accept the legal conclusion of the counsel for defendant there would be no remedy in equity. This would be to substantially admit that our system of jurisprudence, although it embraces the common-law and the entire field of English chancery jurisdiction, has in the end proved a failure. I am not yet prepared to acquiesce in adecision fraught with such consequences.
It is true, proceedings by attachment are statutory, and assignments for the benefit of creditors have been placed under the control of legislative provisions; but I have failed to find anything, in either of these statutes, depriving a court of equity of jurisdiction in cases of fraud committed upon the rights of either party, or upon the court, in taking proceedings under them. The rights of a person to his property, and to the proper remedy for its protection, are as old as the. law itself.
They are secured in the organic law of our State, and I have yet seen no disposition in our legislation to depart from them, when its acts are properly construed.
In this case liens to the amount of the value of the property attached were obtained upon it through the fraud of the defendant. The property, from that day forward, except the use of it, was as completely under the control of the defendant as though she were the sole owner. The complainants could not sell it, nor obtain a loan upon it, nor rent it for a term of years, with any degree of safety. The lien was properly entered of record, and prima facie, after the judgment was obtained, was for that amount. True, the lien was void in fact, but it is prima facie a damaging cloud upon the complainants' title until removed by the action of the court. Why should not equity take jurisdiction of the case, and declare the lien obtained upon the complainants' property void by reason of the fraud perpetrated in obtaining it, and remove the cloud from the title of complainants' property, which so seriously injures its sale?
Fraud is certainly one of the grounds of original equity jurisdiction, and it makes no difference whether it arises under statute or common law; and equity, when properly administered, never fails to relieve a person's land from unjust claims and clouds in disparagement of his title created through fraud. Nowhere in the attachment law, or under the legislation relating to assignments by insolvent debtors, or in any other statute, have I been able to find any provision depriving a court of chancery of its jurisdiction in cases like the present; and in no case where a remedy is of so long standing, and absolutely necessary to furnish the proper redress, will such a change be presumed.
It is claimed by the defendant that the bill is filed merely to obtain the dissolution of an attachment. I do not think this view'takes in the proper scope of the bill; but if this were true, and the attachment levy was obtained by false affidavit, and fraud practiced upon the opposite parties and the court, can there be any doubt that the fraudulent and illegal proceeding would be a proper subject for the consideration of a court of equity, and fall within its jurisdiction? I think it clearly would, and that there is nothing contained in our statutes depriving it of jurisdiction in such a case. In this case, however, the dissolution of the attachment is only one of the consequences which necessarily follow the discovery of the fraud. It was not only the duty of the court in this case to dissolve the attachment on discovering the fraud and imposition practiced upon the parties and court, but also to remove from the records all evidence of any lien created thereby, and to restore to complainants all rights of which they had been deprived by the illegal proceeding. The fraud practiced upon the complainants and their assignors required this; but a fraud upon the court has always been regarded as the most odious of all frauds under forms of law, and should always receive the just condemnation of all legal tribunals wherein it is attempted. Galatian v. Erwin, Hopk. Ch. 54; Mitf. Eq. Pl. 131; Wright v. Hake, 38 Mich. 525; Adair v. Cummin, 48 Id. 375; Edson v. Cumings, 52 Id. 52; 1 Story, Eq. Jur. § 438; State v. Phœnix Bank, 33 N. Y. 26; Loyd v. Mansell, 2 P. Wms. 74.
There is no proceeding in any court procured by fraud and imposition which, as between the parties, will not be set aside upon a sufficient disclosure of the fraud, if injury has been sustained by the party imposed upon thereby. 1 Story, Eq. Jur. § 189-190a, 439; Madd. Ch. Pr. 204; Will. Eq. Jur. 147; Huguenin v. Baseley, 14 Ves. 273; Mortlock v. Buller, 10 Id. 306; Lawley v. Hooper, 3 Atk. 279; Belcher v. Belcher, 10 Verg. 121. See, also, New York Exchange Co. v. De Wolf, 31 N. Y. 273; Kennedy v. Daly, 1 Schoales & L. 355; Dobson v. Pearce, 12 N. Y. 156; Davis v. Tilesion, 6 How. 114; Fenemore v. U. S., 3 Dall. 357.
I have no doubt of the right of the complainants to the relief prayed, and, in my judgment, the decree rendered by the circuit judge should in all things be affirmed, with costs.