Court Opinion

ID: 6546148
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:19:43.092944+00
Date Added: 2024-06-11T15:55:58.327891
License: Public Domain

Riddick, J. (after stating the facts.) There are only one or two points that need to be considered on this appeal. The first question is whether a creditor who has recovered judgment against his debtor and has levied upon and sold land •fraudulently conveyed by the debtor previous to the judgment can recover possession of the land in an action of ejectment based on the deed acquired at the execution sale, without first going into a court of equity to set aside the fraudulent conveyance? We are of the opinion that this question must be answered in the affirmative. It is the language of our statute, and it has been often said by this and other courts that a conveyance made for the purpose of defrauding a creditor is void as to the creditor. Chancellor Kent said that “a fradulent conveyance is no conveyance against the interest intended to be defrauded.” Sands v. Codwise, 4 Johns. Ch. (N. Y.), 536, 4 Am. Dec. 305. Such expressions are found in numerous cases. Ringgold v. Waggoner, 14 Ark. 69; Rudy v. Austin, 56 Ark. 73-80; May v. State National Bank, 59 Ark. 614; Johnston v. Harvey, 21 Am. Dec. 426. But in the recent case of Doster v. Manistee National Bank, 67 Ark. 325, is was pointed out that, although such conveyances were often spoken of as void as to creditors, they were in fact only voidable, and will stand unless some legal steps are taken to avoid them. In other words, “where it is said that a fraudulent conveyance is void as to the creditors of the grantor; what is meant is that it is ineffectual against legal process instituted by the creditor against the property of the debtor and exercised through regular and valid proceedings.” 14 Am. & Eng. Encr Daw (2 Ed.), 310. In the Doster case the court held that a judgment was npt a lien upon land which the judgment debtor has previously conveyed to defraud his creditors. ' I did not concur in that decision for the reason that it seemed to me to be in conflict with former decisions of this court. Ringgold v. Waggoner 14 Ark. 69; Hershy v. Latham, 46 Ark. 542; Stix v. Chaytor, 55 Ark. 116. But the case was carefully considered, and we have no inclination to overrule it. One reason for holding that a judgment was not a lien in such cases is that where a creditor has obtained judgment, but taken no steps to attack the fraudulent conveyance or to subject the property conveyed to his judgment, innocent parties might be misled into dealing with such property as the property of the fraudulent grantee, and might be exposed to injury if a judgment was held to be an absolute lien in such cases. But that reason does not apply where the creditor not only recovers a judgment but levies an execution upon the property and sells it as the property of the fraudulent grantor. For that conclusively shows that the creditor has elected to treat the convejrance as void, and to subject the property to his debt. For this reason we see nothing in the decision in the Doster case that conflicts with our conclusion in this case. While the- usual practice for the creditor seeking to reach property fraudulently conveyed by the debtor is to go into court of equity, and while this court in the Doster as well as other cases has said that the better practice was to do so, still the creditor has the right to - choose his remedy, for fraud may be shown at. law as well as in equity. Although, as said in the Dosier case, a fraudulent deed is not strictly speaking void until attacked by one having the right to do so, yet it is of no effect against the process of a creditor seeking to subject the property to his debt. While such a deed is good between the parties, a creditor may elect to treat it as a nullity; and when he recovers judgment against the fraudulent grantor, he may levy his execution on the property, and subject it to sale for the satisfaction of his debt. The purchaser at such sale can recover possession from the fraudulent grantee by an action of ejectment, upon showing the nature of the conveyance, and we are of the opinion that the circuit court erred in holding to the contrary. Ringgold v. Waggoner, 14 Ark. 69; Apperson v. Ford, 23 Ark. 746; Hershy v. Latham, 46 Ark. 542; Scott v. Scott, 85 Ky. 385; Pratt v. Wheeler, 6 Gray (Mass.), 520; Sherman v. Davis, 137 Mass. 132; Smith v. Reid, 134 N. Y. 568; 14 Am. & Eng. Enc. Law, (2 Ed.) 310, 312, 20 Cyc. 655, 656, and cases cited. In this case the plaintiff did not ask for any equitable relief. She asked judgment for the possession of land held by defendant; and as the circuit court had jurisdiction to try and determine the case, the court did not err in overruling the motion of plaintiff to transfer to the chancery court. The paragraph of the complaint alleging the fraudulent nature of the conveyance under which defendant holds was stricken out on motion of defendant. Plaintiff did not except to this ruling of the court, and that is not before us for review. But the answer of the defendant set out the deed from his brother, the debtor, to him, and expressly denied that it was made to hinder and delay creditors. The plaintiff thereupon filed exceptions to this deed on the ground that it was made to defraud the plaintiff of her debt. Strictly speaking, this was not a proper exception to the deed, for the deed was good on its face, and an exception goes only to defects apparent on the face of the deed; .but if a reply was necessary to raise the issue as to whether this deed was fraudulent or not, this exception may be treated as a reply, for it set out the facts fully, and gave notice to the defendant of the grounds on which his deed would be attacked. But the corjrt refused to permit plaintiff to introduce evidence to sustain the allegation of fraud. This ruling, as we have said, was in our opinion erroneous. Judgment reversed, and cause remanded for a new trial.'