Court Opinion

ID: 6739930
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:21:08.170046+00
Date Added: 2024-06-11T16:01:55.661225
License: Public Domain

Grace, J.
This is an appeal from an order sustaining a demurrer to the plaintiff’s complaint.
It is not necessary to a clear understanding of the legal questions presented in this case to set out in full the complaint.
The alleged cause of action is one to recover upon a certain promissory note, in the sum of $800, dated July 19, 1914, executed and delivered by W. II. France, to one R. B. Beeson, and thereafter sold and assigned to Louis Deree, and by him, on the 25th day of October, 1915, sold and- assigned to the plaintiff. The date of maturity of the note was November 1st, 1915.
The plaintiff claims to have purchased the note prior to maturity, for valuable consideration, in the regular course of business, and that the same is wholly unpaid.
It is further, in substance, alleged in the complaint, that, at the time of the execution and delivery of the note, W. II. France was the owner and in possession of certain real estate, situate in the village of San-born, North Dakota, described as lot fifteen (15), block ten (10), of the original townsite of Sanborn, and that he was the owner in possession thereof, on the 25th day of October, 1915; that the plaintiff purchased the note, relying upon the ownership by France, of said real estate; that, on the 25th day of October, 1915, France, without receiving valuable consideration, or any consideration, for the purpose of cheating and defrauding his creditors, particularly the plaintiff, and for the purpose of depriving them of the means of collecting their just debts, and for the purpose of removing, from legal process, his property, so that the same would not be subject to the payment of his debts, did wrongfully, fraudulently, and unlawfully transfer the real property above described to Nellie France, his wife, by deed, dated October 25th, 1915, which was recorded in the office of register of deeds, for Barnes county, October 30th, 1915.
*5There is a further allegation in the complaint, to the effect, that said real estate, at the time of such transfer, did not constitute the homestead of the defendants nor of any member of their family.
To the complaint the defendants interposed a demurrer, on the ground that the complaint did not state facts sufficient to constitute a cause of action.
On the 28th day of December 1919, the demurrer was argued before M. J. Englert, one of the district judges of the 5th judicial district, and, on the 2d day of January 1920, the court made an order sustaining the demurrer, and ordered the clerk to enter a judgment in favor of the defendants, for costs, in the sum of $15. The making of such order is assigned as an error of law, and it is the only assignment of error.
It is manifest, that the prime purpose and object of the action Is to set aside the transfer above mentioned, as being one in violation of the provisions of § 7220, Comp. Laws 1913, which is as follows: “Every transfer of property or charge thereon made, every obligation incurred, and every judicial proceeding taken, with intent to delay or defraud any creditor, or other person, of his demands, is void against all creditors of the debtor and their successors in interest, and against any persons upon whom the estate of the debtor devolves in trust, for the benefit of others than the debtor.’,’
It is equally manifest, that the action is prematurely brought, in that the necessary, prerequisite jurisdictional facts are not pleaded, nor otherwise shown to exist. The setting aside of the transfer of property, on the ground that it is fraudulent as to creditors, is- an act which requires the exercise of the equity powers of the court. Before a court of equity can exercise such equitable powers, it must have jurisdiction so to do; i. e., there must be certain facts pleaded, proved, or existing in the case, sufficient to authorize the court to exercise its equitable powers; and, hence, it must appear, that one bringing such action has a vested or specific lien upon the property alleged to have been fraudulently transferred; otherwise, there is nothing to set in motion the equity powers of the court. In such circumstances there is nothing upon which equity could act.
The setting aside of a transfer of property, from one person to another, on the ground that such transfer is fraudulently made, is ac*6complished by the court by the exorcise of its equity power, and for the benefit of one able to show that he has a specific lien against such property so fraudulently transferred; as, for illustration, a judgment upon which an execution has been returned unsatisfied, or a lien acquired by attachment or other lien, to preserve and protect which a court of equity has authority, power, and jurisdiction to exercise its equity powers.
The mere existence of the relation of debtor and creditor does not afford the creditor, under his mere contract right, and in the absence of a judgment, or prior to the time his claim was reduced to a judgment, and an execution thereon issued, and returned unsatisfied, or the securing of a lien, by attachment, or a vested lieu acquired in some other manner, the right to attack a conveyance, on the ground of fraud.
To hold that a simple contract creditor would be permitted to attack a conveyance, on the ground of fraud, would rearder it next to impossible to make or take a conveyance thereof, for a large part of the conveyances are made by those who, at the time of coirveyance, no doubt, have other obligations, or debts, unpaid, and the same is true of those who receive the conveyance.
Again, a conveyance of i*eal property may often be made, where that is the only real property possessed by the one who conveys, yet, he may be indisputably solvent.
We think the proper rule is, that the debtor must be held to have complete dominion over his property, against which there is no valid, subsisting, or vested lien, to dispose of or transfer his property as he shall see fit, and where such transfer is by a creditor attacked, on the ground that it was fraudulently made, in order for a court of equity to afford relief, the creditor must be in the position above stated; i. e., he must have a vested lien, in full force and effect at the time the action is brought to set aside the transfei-, and this fact must be made clearly to appear from the complaint in the action or otherwise.
It must, also, appear from the pleadings or otherwise, that not only the debtor fraudulently transferred his. property, and that he intended to commit fraud when he did so transfer it, but it must also appear that the transferee who received such conveyance, co-operated and acted with the debtor to consummate such fraudulent transfer.
There have been many cases in this court, where the action was *7brought to set aside transfers, on the ground that the same was in fraud of creditors, and all of such actions, so far as we have been able to determine, were based upon a vested lien, of the kind above described, as in the case of Paulson v. Ward, 4 N. D. 100, 58 N. W. 792; Salemonson v. Thompson, 13 N. D. 182, 101 N. W. 320; Dalrymple v. Security Loan & T. Co. 9 N. D. 306, 83 N. W. 245; Stevens v. Meyers, 14 N. D. 398, 104 N. W. 529.
The question presented in the case at bar, is one of first impression in this state. It has, however, been frequently passed upon in other states, among which decisions may be mentioned the case of Griswold v. Sundback, 4 S. D. 441, 57 N. W. 339; O’Day v. Ambaum, 47 Wash. 684, 15 L.R.A.(N.S.) 484, 92 Pac. 421, and the authority and citations therein.
Wo think, the rule, as we have stated it, is a correct one, and that it properly interprets our statute above set forth. Por the foregoing reasons, we are of the opinion that the court properly sustained the demurrer to the complaint, and that its order, in that respect, should be affirmed.
It is affirmed. The respondents are entitled to their statutory costs and disbursements on appeal.
Christianson, Ch. J., and Birdzell, Robinson, and Bronson, JJ., concur.