Court Opinion

ID: 8018115
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:07:12.712542+00
Date Added: 2024-06-11T16:36:29.299031
License: Public Domain

ON MOTION' FOR REHEARING.
ROY, C.
— In a motion for a rehearing, appellant has asked us to review the question of the liability of the fraudulent grantee fox rents, his contention being that such grantee is liable for all rents after the conveyance to him. We have gone through the authorities and will first state what we find the law to be, and then give our reasons for reaching such results.
*208We can. best understand what are the rights of the creditor against a fraudulent grantee by first ascertaining what his rights are against the debtor in the absence of a fraudulent conveyance, leaving out of consideration questions arising on proceedings by attachment.
In the first place, the creditor must obtain a judgment. Secondly, property subject to execution can only be reached by levy and sale thereunder, and the execution of the sheriff’s deed in case of the sale of land. Prior to such sheriff’s deed, the creditor has no right to call the debtor to account for rents and profits, and after such deed the liability for rents does not go back of such. deed.
On the other hand, the debtor or his estate may have property not subject to execution, but which should be applied to the payment of his debts. The debtor may have assigned his property for the benefit of his creditors, or may have been adjudged a bankrupt, or may have died. In which cases, the rents of his real estate, from the time it passed into the hands of the assignee, or the trustees in bankruptcy or administrator, would be collectible by such' representative for the payment of debts. There are many other. cases where the property of the debtor, for some rea-' son or other, is not subject to execution. In those cases, the creditor may, after obtaining judgment, bring his creditor’s bill, and: is allowed to collect rents and profits from the bringing of such bill. Most of the authorities require that before the creditor can bring such bill there should be an execution returned unsatisfied.
Fraudulent conveyances are not all alike. Some are made with an understanding between the debtor and the fraudulent grantee that the latter shall hold the same for the use and benefit of the debtor. Such an arrangement is known as a “secret trust.” The grantee is, td all intents and purposes the alter ego *209of the debtor. As he has agreed in effect at least with the debtor to account to him for rents and profits, there is no hardship in compelling him to pay to the creditor that which he agreed to pay to the debtor. There is no controversy anywhere over the question of the liability for rents in such case from the time of the fraudulent conveyance.
But in the case of the ordinary plain fraudulent conveyance, where the grantee takes the property without any such “secret trust” and claiming it not only against the creditor but against the debtor, such grantee is liable for rents only from such time as the debtor himself would have been liable had the property remained in his hands. Such is the result of the fact that the conveyance is simply void. The parties are left just where they would have been had no such conveyance been made. If the debtor is still alive and his property has not passed to trustees in bankruptcy or other legal representatives authorized to collect the rents, the creditor must move straight along the statutory road laid out for him and get his sheriff’s deed under execution on his judgment before his right to rents begins.
We will now review the authorities as briefly as possible. It should be stated in the beginning that so far as the results of the cases considered are concerned, there is very little disagreement. The language used is often much broader than the necessities of the case require. The liability of the fraudulent grantee for rents is oftén discussed without any distinction made between a case of secret trust and one where there is no'such trust. The cases holding the grantee who takes without any secret trust liable for rents prior to sale under execution where the property is subject to execution are so few in number and of such a character as to be practically negligible.
*210The Supreme Court of the United States, in Conard v. Atlantic Ins. Co., 1 Pet. l. c. 443, stated the rights of a judgment creditor as follows: “Now it is not understood that a general lien by judgment on land, constitutes, per se, a property, or right, in the land itself. It only confers a right to levy on the same, to the exclusion of other adverse interests, subsequent to the judgment; and 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. But, subject to this, the debtor has full power to sell, or otherwise dispose of the land. His title to it is not divested or transferred by the judgment to the judgment creditor. It may be levied upon by any other creditor, who is' entitled to hold it against every other person except such judgment creditor; and even against him, unless he consummates his title by a levy on the land, under his judgment. In that event, the prior levy is, as to him, void; and the creditor loses all right under it. The case stands, in this respect, precisely upon the same ground as any other defective levy, or sale. The title to the land does not pass under it. In short a judgment creditor has no jus in re, but a mere power to make his general lien effectual, by following up the steps of the law, and consummating his judgment by an execution and levy on the land. If the debtor should sell the estate, he has no right to follow the proceeds of the sale, into the hands of. vendor or vendee; or to claim the purchase money in the hands of the latter. It is not like the case where the goods of a person have been tortiously taken and sold, and he can trace the proceeds, and, waiving the tort, chooses to claim the latter. The only remedy of the judgment creditor is against the thing itself, by making that a specific title which was before a general lien. He can only claim the proceeds of the sale of the land, when it has been *211sold on Ms own execution, and ought to be applied to its satisfaction.”
2 Freeman on Judgments (4 Ed.), Sec. 338, p. 618, speaking of the rights of the judgment creditor, says: “He has no interest in such land, other than the right to sell it.” The same position is held by 1 Black on Judgments (2 Ed.), Sec. 400. The main cause of all the disagreement on this question is Sec. 626 of Bump on Fraudulent Conveyánces, wMch is as follows: “It certainly is not consonant with the principles of the law that the grantee should derive any advantage from his fraud. Consequently, he may be compelled to account for the profits from the time of the transfer. An account may also be taken of what has been received as compensation for the use of the-property. The grantee should not be charged with the increased rent and profits arising from improvements made by him.”
Then follows a long list of citations, many of wMch are in direct opposition to the text, and a majority of which are cases of “secret trusts,” while others were cases where the property had passed into the hands of administrators, trustees in bankruptcy or other fiduciaries. The leading. case relied on by Bump is Loos v. Wilkinson, 110 N. Y. 95. It must be frankly admitted that the language of the opinion in that case is strongly in favor of the right of the creditor to rents. But an examination of that case shows that the transfer was made under a secret trust for the be'nefit of the debtor. Under the rules above stated by us the grantee was liable because of the fact that he was such trustee. In so far as that opinion declared a grantee who did not take under a secret trust liable for rents, it ought to be regarded as obiter. In that respect it is squarely against the decisions of the New York courts, as hereafter shown.
The cases of Marshall v. Croom, 60 Ala. 121; Robinson v. Stewart, 10 N. Y. 189; Ringgold v. Waggoner, *21214 Ark. 69; Higgins v. York Buildings Co., 2 Atk. 107; Warner v. Blakeman, 4 Abb. App. (N. Y.) 530; United States v. Griswold, 8 Fed. 556, all of which are cited by Bump in support of his text, hold that the grantée is liable for rents only from the date of the sheriff’s deed.
Higgins v. York Buildings Co., supra, is the only English case cited by him, and that case closes with the following paragraph:
“I do not know in the case of fraudulent conveyances, that this court have ever done anything more than remove such fraudulent conveyances out of the way, nor are there any cases that I can find of decreeing profits back, against the original debtor and owner of the estate, received pendente lite in this court, in favor of judgment creditors from the filing of the bill, nor any instance of a decree for a sale; but equity follows the law, and leaves them to their remedy by ele git, without interfering one way or the other. ’ ’
Not one of the cases cited by that work on Fraudulent Conveyances holds the grantee liable for rents where there was no secret trust and where the property was subject to execution.
In Robinson v. Stewart, 10 N. Y. 189, the court said: “But the question then arises, whether the complainant was entitled tó an account of the rents and profits. I think he was not. As before remarked, he had no lien, and the conveyances were valid between the parties. The remedy of the complainant was to procure the land to be sold, and the proceeds to be applied towards the debts. But until such sale, or at least until the conveyance to the receiver, I know of no principle upon which the defendant could be compelled to account for the rents and profits to creditors at large of the defendant’s grantor. If the grantor had lived, and the land had been sold on execution against him, the creditor would have had no right to *213the rents and profits until the conveyance by the sheriff. ’ ’
Collumb v. Read, 24 N. Y. 505 (515), says: “Assuming the assignment to be void, as the court has determined, I do not perceive how the plaintiffs, as judgment creditors, would be entitled to the rent of the land until they had perfected their title to it by a sale on their execution, and had obtained a sheriff’s'deed. They had no title and only a general lien. The debtor has made a fraudulent conveyance. The creditor had a right, if he chose, to sell on his execution, notwithstanding the conveyance.”
It was held in Bryer v. Foerster, 14 N. Y. App. 315, and in Harris v. Buchner, 55 N. Y. Supp. 172, and in Bank v. Brewster, 53 N. Y. Supp. 867, that in a creditor’s suit to set aside as fraudulent conveyances of real property, the judgment should not, ordinarily, provide for the appointment of a receiver, but should merely set the conveyance aside, so far as they obstruct the creditor’s judgment, and leave him to his remedy by execution and a sale of the property thereunder.
Ringgold v. Waggoner, 14 Ark. 69 was cited by Bump, but it holds the grantee liable for rent only from the date of the sale under execution. United States v. Griswold, 8 Fed. l. c. 572, also cited by that author, says:
“As to the defendant Bush there is no equity in the bill. Admitting all that the plaintiff claims, it was not entitled to the rents and profits before the filing of the bill and the appointment of the receiver. The judgment and lien of the plaintiff only gave it the right to sell the property free from any subsequent encumbrances, and to apply the proceeds on its debt. Ordinarily, the rents and profits prior to the sale on a judgment do not belong to the judgment creditor, nor are they in any way affected by the lien of it.”
*214In Marshall v. Croom, 60 Ala. l. c. 132, cited by Bnmp, the court said:
“Conveyances, deemed fraudulent in law, are sometimes made in secret trust for the benefit of the grantor. In such case, the grantee is intended to be the mere holder of the naked title, while the use and benefit are the grantor’s. There is a fitness in holding such fraudulent grantee accountable to creditors for all income and profits held by him; for it is the property of the insolvent debtor. This case is not shown to be of that class. We do not doubt that the title and beneficial use were intended to vest in James B. Marshall. The creditors, complainants in this suit, had and have no title to the property, and no such lien as draws to it a right to the possession, or to the income and profits. They have but a mere equitable lien, in the nature of an execution lien at law; and it exists only by virtue of their bill filed. Its extent is, that creditors, thus instituting suit, thereby acquire a right to have the property sold in payment of their demands sued on, paramount to all after-accruing rights and liens. ’ ’
We have not overlooked the fact that in Kitchell v. Jackson, 71 Ala. 557, the case of Marshall v. Croom was overruled. The principal reason given for the change of position was the opinion of Chief Justice Marshall in Backhouse v. Jett, 1 Brock. 500. We have examined that case. It is long, and the questions involved therein are complicated, but we are certain that it furnishes no ground for such a change on the part of the Alabama court. The second reason given for the change was that the cases were almost unanimous in favor of the last conclusion, as shown by citations in Bump on Fraudulent Conveyances. If that court had noted the fact that the case which they were in the act of overruling was cited among the “unanimous” decisions, it would have been led to a close scrutiny of that long list of cases. In order to see how *215that overruling case is supported by the cases there cited, we will examine them in the order in which they are cited: Jones v. McLeod, 61 Ga. 602 was a case where the debtor was dead and an administration of his estate was pending and it was claimed that there was no property subject to execution. In Sands v. Codwise, 4 Johns. (N. Y.) 536, it was held that where the debtor became bankrupt, the grantee is liable for the rents subsequent to the bankruptcy. [Brown v. McDonald, 1 Hill Ch. (S. C.) 29.] Strike’s case, 1 Bland (Md.) 57, was a case of secret trust. Ringgold v. Waggoner, 14 Ark. 69, held that the grantee was liable for rents from the execution sale. In Kipp v. Hanna, 2 Bland (Md.) 26, the plaintiffs were trustees of the debtor under the insolvency laws, and it was held that they could recover rents from the time the property vested in them under the insolvency laws.
We come now to the consideration of the cases decided by this court. In Allen v. Berry, 50 Mo. 90, the sheriff’s sale occurred in 1860. The rents were charged for the time from 1860 to 1864, four years. In Jacobs v. Smith, 89 Mo. 673, the fraudulent conveyance was made under secret trust, and was “voluntary and without consideration” (l. c. 680). Moreover the debtor, Sharp, was dead. Execution would not run against the property. There was still another element in that case that distinguished it from this. The title to the land had never been in the debtor. It was conveyed by a third party to the debtor’s daughter for a consideration originally furnished by the debtor. Such being the case, execution in favor of the creditor against the debtor would not reach it, and the remedy would be by creditor’s bill.
The case of State ex rel. v. McBride, 81 Mo. 349, and again reported in 105 Mo. 265, was a secret trust. [See 81 Mo. l. c. 352.] That case did not involve rents, but simply held that the creditor, instead of selling the land, could sell the minerals dug from the land. *216Barnard v. Keithley, 230 Mo. l. c. 235, is cited by appellant, bnt the question of fraudulent conveyance was not involved therein.
In this case the fraudulent conveyance from Dixon to Vemeuil (Tate’s straw man), was made Nov. 9', 1905. The judgment in favor of Sanders et al. against Dixon was rendered June 6, 1906. The purchase by Sanders under the execution was made Nov. 11, 1908. There were more than two years during which Sanders could have acquired the right to future rents by selling under the execution. There is no reason why this court should now, contrary to law, give him what he could have obtained by sale in accordance with the law.
II. Complaint is made that we did not, in our original opinion, consider the Dixon-Vemeuil deed as to its effects on Sanders’s rights. That question is divided into two branches, the Tate branch and the Deacon & Lambert deed of trust. In the latter part of the fourth division of the opinion we held the deed of trust valid as against all the other parties to this suit. In division five we held the Dixon-Vemeuil deed void as between Tate and Sanders. Appellant contends that the Dixon-Verneuil deed being held not good as a deed1 but’ good as an estoppel, that we ought to explain how it is good as an estoppel in favor of Deacon & Lambert as against Sanders. The explanation is this: whenever the title passes from the debtor to an innocent purchaser prior to the lien of the creditor’s judgment, it defeats the title acquired under execution on that judgment, provided that the purchaser under the execution knows at the time of his purchase that such title has passed.
In Mann v. Best, 62 Mo. l. c. 496, it is said: “But the question is, what did) he buy? It is well settléd as a general proposition, that a purchaser under execution is not a purchaser that comes within the protec*217tion of this well established equitable rule, because he buys only such interest as the judgment debtor has; and, if the interest is subject to equities, although to-, tally unknown to the buyer, the title is still subject to the same equities. [Hart, Leslie & Co. v. F. & M. Bank, 33 Vt. 252; Whitford v. Guager, 3 Hare, 416.] This proposition, however, is very much modified by our recording acts. [See Hill v. Paul, 8 Mo. 479; Davis v. Ownsby, 14 Mo. 175; Valentine v. Havener, 20 Mo. 134.]”
A deed antedating a judgment is good against that judgment if recorded before execution sale under it. [Valentine v. Havener, supra; Wilson v. Beckwith, 140 Mo. l. c. 381; Simpson v. Stoddard County, 173 Mo. l. c. 451.]
Where an execution creditor ■ purchases land under the execution knowing of outstanding equities in the land, he takes subject to such equities. [Rhodes v. Outcalt, 48 Mo. 367.] In Stuart v. Ramsey, 196 Mo. 404, it was held that the purchaser under an execution sale for taxes bought subject to an unrecorded deed existing prior to the judgment of which the purchaser had notice. At the time of Sander’s purchase under his execution, he had notice that Deacon & Lambert held a deed of trust executed by Verneuil prior to the date of the judgment. Pie knew of the rights of Deacon & Lambert under the deed from Dixon to Verneuil, whether that instrument be considered as a conveyance or as a mere estoppel. Sanders knew that Deacon & Lambert had furnished the $12,500' on the faith of the validity of the deed from Dixon to Verneuil, and that Dixon was estopped to deny the validity of such deed. Appellant contends that as the Dixon-Verneuil deed is held void as a deed it cannot be good1 as an estoppel. We have never held that the estoppel in this case is one “by deed.” The so-called “DixonVerneuil deed” was not and is not a deed. But the facts of which it is the center constitute an estoppel. *218Dixon cannot break it down as against Deacon & Lambert, and Sanders, who bought with notice of Deacon- & Lambert’s rights, cannot destroy it as against those rights.
We have been cited to cases where deeds held void on account of lack of power to convey or to acquire real estate have been held not to constitute estoppel. On general principles where a party has no power to convey or acquire land by deed, there is no power to convey or acquire it by estoppel. It is also true that there may be void deeds out of which no estoppel arises, but one does exist in this case.
The motion for rehearing' is overruled.
Blair, C., concurs.
PER CURIAM.
— The foregoing opinion of Rot, C., is adopted as the opinion of the court.
All the judges concur.