Court Opinion

ID: 6474435
Source: CourtListenerOpinion
Date Created: 2022-06-26 22:33:45.413803+00
Date Added: 2024-06-11T15:53:55.528977
License: Public Domain

CUNNINGHAM, J.
(Dissenting). — The sufficiency of the complaint to state facts constituting a cause of action against Mary McDonough in either her individual capacity or in her representative capacity is the general inquiry with which we are concerned on this appeal.
The facts presented by the complaint, except formal, matters, are that on December 6, 1911, the defendants, E. F. Pfister, Geo. E. Shute, and one J. N. McDonough, made, executed, and delivered to the plaintiff bank their joint and several promissory note, whereby they jointly and severally promised to pay on demand at Globe, Arizona, the sum of $500, with interest at a rate specified, and attorneys’ fees on condition. The note is set forth in full in the complaint, and appears to have been executed by said three parties.
Plaintiff set forth that J. N. McDonough, one of the makers of said note, died testate on the eighteenth day of April, 1914; that said will was admitted to probate, and in accordance with the terms of the will, Mary McDonough was made the *231sole legatee and devisee, and was appointed executrix thereof, and duly qualified and became such executrix; that the value of the property of the estate of said decedent does not exceed the sum of $1,500, and its appraised value is the sum of $417.50, and consists of community property, and the entire value of the property of said estate is said appraised sum of $417.50; that the said note is not secured by any lien, mortgage, or any other security on any of the said inventoried assets belonging to said estate; that the plaintiff filed its claim for the note sued upon with the said Mary McDonough, executrix, on or about the thirteenth day of October, 1914; that said claim was verified, and a copy of said note was attached to said claim; that said claim was rejected October 15, 1914; that the assets of the estate are insufficient in amount to pay the preferred claims arising from the last sickness and funeral of the decedent, and expenses of administration of the estate; that the said Mary McDonough is the surviving widow of said decedent; that Mary McDonough does not dispute the validity of said note, but she fraudulently refuses to pay the same, or allow the same as a debt against the estate for no legal valid reason; that on the eighth day of April, 1914, the said J. N. McDonough, in consideration of love and affection, conveyed to said Mary McDonough certain described real, personal, and mixed property of value exceeding $10,000; that said property was community property; that said conveyance was made by said J. N. McDonough during his last sickness and in immediate expectation of death; that he died ten days thereafter; that said conveyance included the bulk of his entire property; that at the time of said conveyance the said J. N. McDonough owed debts; that said conveyance rendered J. N. McDonough insolvent and unable to pay his debts; that the said note was held by plaintiff as a creditor; that said conveyance was made for the purpose of evading his debts, to save the expenses of administering the estate, and for the purpose of hindering and delaying his creditors, and to evade the inheritance tax; that Mary McDonough knew the purposes for which said conveyance was made and intended to effect, and that she participated therein; that all of the property so conveyed and described in such conveyance is now owned and in the possession of Mary McDonough, with slight exceptions ; that the administration of said estate is now in progress and unfinished.
*232The relief demanded is a judgment on the note against “E. F. Pfister, Geo. E. Shute, and Mary McDonough” for the face of the note, with interest and attorneys’ fees and costs, “and each of them”; that the conveyance to “Mary McDonough be set aside and declared null and void,” and the said property affected applied to the satisfaction of the judgment; that said property, or so much thereof as may be necessary, be sold for that purpose; and that Mary McDonough be required to account for such portion of such property as she may have sold, and for general relief.
The defendant Mary McDonough demurs to the complaint upon a number of grounds, two of which are worthy of notice, viz., the absence of facts to state a cause of action, and the statutes of limitation. The court sustained the said defendant’s demurrers, not designating in the order the grounds upon which the court acted.
The conveyance of the eighth day of April, 1914, by J. N. McDonough to Mary McDonough in consideration of love and affection, and for the purpose of evading, hindering, and delaying creditors, as set forth in the complaint, is a fraudulent transaction and void as to the rights of creditors existing at the date of said transaction. Paragraph 3273, Civil Code Ariz. 1913. Such creditors have an equitable right to subject such property to the satisfaction of their claim. Mary Mc-Donough had knowledge of the purpose for which the conveyance was made. The conveyance, being void as to the rights of existing creditors, was nevertheless valid as to Mary Mc-Donough and the estate of J. N. McDonough until brought into question by said estate. In other words, the estate of J. N. McDonough has not questioned the right of Mary Mc-Donough in the property so conveyed. Existing creditors here question her title. Evidently, existing creditors could pursue the property equitably applicable to their claims in one of two manners: First, by setting aside the conveyance and recovering the property to the estate for administration by the executrix — such remedy if pursued would require that the estate be a moving party represented by some one authorized by law to prosecute such action — and, second, by an action against the property involved, charging the property in the hands of the fraudulent transferee with the burden of paying the debts of the grantor. In the first instance the conveyance is treated as void because fraudulent, and the *233•property is recovered to the estate as equitable assets of the estate. In the second instance the conveyance is treated as effective as between the transacting parties; but, owing to the fraud practiced by such parties on the creditors, a trust resulted to the creditors against the property in the possession of the fraudulent transferee. Such action is the familiar action in equity against the thing rather than against the person, and is in the nature of an equitable action in rem to establish a trust in property conveyed in fraud of the equitable rights of others, declaring the holder of the property a trustee and the property held as held for the use and benefit of the persons equitably entitled to it. Such is the nature of this action in so far as it affects Mary McDonough individually, and the property involved sought to be affected by the plaintiff’s action.
The appellee contends that before a court of equity is authorized to entertain an action of a creditor to reach equitable assets, the fact must be made to appear that such creditor has already exhausted all of his legal remedies; that is, that he has reduced his claim to judgment, and thereafter, by invoking legal process afforded him by law has failed to satisfy such judgment, relying upon the well-established general rule applicable to actions known as “creditors’ bills.” See rule stated in 12 Cyc. 9.
The matter the court is called upon in this ease to determine is a matter of trust. Equity has invariably assumed jurisdiction over trust matters. The plaintiff being a creditor at the time the debtor J. N. McDonough transferred the property in question to Mary McDonough, was by such transfer deprived of the means of satisfying his debt, unless he may follow the property so transferred into the hands of Mary McDonough. The complaint alleges that Mary McDonough participated in the fraudulent transaction, consequently, she may not take advantage of her own wrong, but must be deemed as having accepted the property charged with the payment of the grantor’s debts, and by holding the property, in equity and good conscience, she holds the same in trust for the use and benefit of all such creditors without respect to the inquiry whether they are judgment creditors or otherwise. The general rule applicable to creditors ’ bills does not apply in this action.
Appellee’s contention that the action is barred by paragraph 887 of the Civil Code of Arizona of 1913, is untenable *234for the reason this action is not one against the estate of J. N. McDonough, deceased, and a recovery would in no manner obligate said estate to satisfy the same by the recovery of equitable assets.
The trial court erred in sustaining the demurrer for the reasons stated. The judgment should be reversed, and the cause remanded, with instructions to overrule the demurrer, and proceed according to law.