Court Opinion

ID: 7972371
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:56:21.658677+00
Date Added: 2024-06-11T16:34:48.621829
License: Public Domain

START, C. J.
(dissenting).
I dissent for the reason that the majority opinion in effect overturns, as it seems to me, well-settled principles which have become rules of property.
This action is one at law to recover possession of real estate, and not one in equity for relief on the ground of fraud, or, in other words, it is an action of ejectment, in which the plaintiff stands upon his legal rights. It is true that the complaint unnecessarily alleges evidentiary facts which are the proof of the plaintiff’s title. It appears from such allegations that on December 3, 1888, the plaintiff was a creditor of Austin Knights, who then owned the real estate which is the subject-matter of this action, and who on January 1, 1889, made a fraudulent conveyance thereof to his brother Michael, which was recorded on the same day; that on May 23, 1890, the plaintiff recovered judgment, which was duly docketed on that day, upon his debt against the fraudulent grant- or; that execution was issued thereon, and the land sold thereunder to the plaintiff on April 15, 1893, and was never redeemed; and that the defendant brewing company is in possession of the land through mesne conveyances from the fraudulent grantor, but with full notice of the original fraudulent conveyance. This action was commenced September 25, 1899, and was dismissed by the trial court because the complaint did not state facts constituting *467action was brought within sis years after the discovery of the a cause of action, in that it did not appear therefrom that the fraud.
The allegations of the complaint, for the purposes of this appeal, must be taken as true; hence the defendant is not a bona fide purchaser, but stands in the shoes of the original fraudulent grantee, and we must consider the case as if it were between the creditor, and such grantee. It may be conceded at the outset that the title of a fraudulent grantee is protected by the statute of limitations. But if a party has two remedies, and one is barred, it by no means follows that he may not avail himself of the other. If the creditor avails himself of the equitable remedy which he has of bringing an action to set aside a fraudulent conveyance, the limitation is six years from the time he discovers the fraud; but, as I understand the decisions of this court, if he pursues his other remedy, and stands upon his legal rights, — recovers judgment, and seizes and sells the land on execution, — and never brings any equitable action to cancel the fraudulent conveyance, his action of ejectment to recover possession of the land can only be barred by fifteen years’ adverse possession.
The creditor, although he seizes and sells the land on execution, may, if he so elects, resort to equity to secure a cancellation of the fraudulent transfer, but he is not bound to do so. He may take his chances on being able to prove the conveyance fraudulent whenever his title is challenged. He acquires by the execution sale the legal title to the lands, and in an action at law by him to recover possession thereof, or in an action against him if he be in possession, he may, as against the fraudulent grantee and all persons claiming under him with notice, prove that the conveyance to such grantee was fraudulent. He may prove such fact precisely as he may any other fact which is a necessary link in his chain of title, as a matter of strict legal right, without first appealing to a court of equity to set the fraudulent conveyance aside. See Tupper v. Thompson, 26 Minn. 385, 4 N. W. 621; Furman v. Tenny, 28 Minn. 77, 9 N. W. 172; Cumbey v. Lovett, 76 Minn. 227, 79 N. W. 99. If, however, the pleading of his adversary discloses the source of his alleged title (that is, the fraudulent transfer), the *468creditor must confess and avoid it by alleging in his answer or reply, as the case may be, the fact that the transfer was fraudulent, and prove such fact as a part of his evidence on the trial. Proving on the trial such fact, which is a necessary link in the creditor’s title, must not be confounded with an action to cancel the fraudulent transfer. The conclusion that the legal title passes: by the execution sale necessarily follows from the rule, which is well settled in this state, and in nearly all of thé states of the Union having statutes similar to our own (G. S. 1894, § 4222), that the title of the fraudulent grantee in such cases is, as to the creditor, a nullity, and his judgment a valid lien at law upon the land attempted to be fraudulently conveyed, which may be enforced in the same manner and with precisely the same effect as if there had been no such conveyance.
It is true that u fraudulent conveyance is voidable, not void, in that it is good as between the parties to it; and, if the fraudulent grantee conveys the land to a bona fide purchaser before the creditor seizes the land on execution, it would destroy the lien of the judgment, and the title of the purchaser would be good. But as Mr. Freeman, in his work on Judgments, aptly says: “As-against the fraudulent transferee, the creditor may seize the property, whether real or personal, as that of the fraudulent vendor, and may proceed to sell it under execution. The title transferred by such sale is not a mere equity, — not the right to control the legal title, and to have the fraudulent transfer vacated by some appropriate proceeding. It is the legal title itself.” 2 Freeman, Judg. § 350. The effect of a fraudulent transfer of land on the rights of a creditor has never been more clearly or tersely stated than it was by Chief Justice GILFILLAN in the opinion of the court in the case of Campbell v. Jones, 25 Minn. 155. He said:
“That a judgment creditor may, notwithstanding a conveyance of his real estate by the judgment debtor, made with intent to-hinder, delay, or defraud creditors, levy upon and sell the real estate, there is no question. As to the creditor, to defraud whom the conveyance is made, it is void (G. S. c. 41, § 18 [G. S. 1894, § 4222]), and is of no effect whatever in the way of passing the title. The title, for the purpose of enabling creditors to enforce their *469debts against the real estate, still remains in the grantor, as though the conveyance had not been made; and it is equally clear that the creditor who has proceeded to enforce his debt against the real estate, or any one claiming through such proceedings, may show the conveyance to be void, as against such proceedings, whenever any one shall claim under such conveyance, and in opposition to the creditor’s proceedings, or the title derived through them.”
The last case cited was approved in Jackson v. Holbrook, 36 Minn. 494, 32 N. W. 852, in which it was directly held that the judgment of a creditor, recovered against his debtor who has made a prior fraudulent conveyance of real estate, which is void as to him, is a valid lien at law thereon, and that the creditor may rest exclusively upon his rights and remedies at law, without invoking the aid of a court of equity. This well-settled rule of this court that a creditor cannot be deprived of his legal right to enforce his judgment against the land of his debtor fraudulently conveyed prior to the entry thereof, that his judgment is a legal lien thereon, that the purchaser at the execution sale thereof acquires the legal title thereto, and that he is not bound to pursue his equitable remedy to have the fraudulent transfer set aside, is sustained by the great weight of judicial authority. The following are some of the leading cases in other states which support the rule: Chautauqua v. Risley, 19 N. Y. 369; Bergen v. Carman, 79 N. Y. 146, 153; Smith v. Reid, 134 N. Y. 568, 31 N. E. 1082; Thomason v. Neeley, 50 Miss. 310.
It has, however, been held by several able courts that the creditor’s judgment is not a legal lien on land of a debtor who has made a prior fraudulent conveyance thereof; hence the legal title thereto does not pass to the purchaser by a sale on execution, but simply an equitable title, which gives him the right to control the legal title, and have the fraudulent transfer set aside by a direct equitable action. The leading case in support of this conclusion is Doster v. Manistee, 67 Ark. 325, 55 S. W. 137. The opinion, which was by a divided court, repudiates the rule that judgments in such cases are valid liens at law, and, after quoting from the opinion in Jackson v. Holbrook, contains this statement: *470“Those states which hold, under statutes similar to ours, that a judgment is a lien .upon property fraudulently conveyed prior to its rendition, may very properly and consistently adopt the first of the above-named remedies, to wit, to sell the debtor’s land upon .execution, and leave the purchaser to contest the validity of the defendant’s title in an action of ejectment,” — and then proceeds to criticise the proposition that the judgment is a lien as an egregious fallacy.
The majority of the court in this case, it seems to me, have fallen into the fundamental error of assuming as their premises that the plaintiff’s judgment was not a legal lien upon the land attempted to be as to him fraudulently conveyed by his debtor, and that, as purchaser at the execution sale, he acquired only an equitable title to the land, the legal title remaining in the fraudulent grantee, which gave him the right to control the legal title by having the transfer set aside by bringing an action to be relieved from the fraud by cancelling the fraudulent transfer and vesting the legal title in him. If the premises are correct, it is plain sailing to the conclusion reached. But unless I have misconceived the decisions of this court, the premises are not correct, for, if the conveyance was fraudulent as against the creditor, the judgment was a lien, and the legal title passed to the plaintiff on the execution sale.
The cases cited in the opinion to support the proposition that the creditor must, by a proper judicial proceeding, effect a- cancellation of the fraudulent transfer before he can acquire the legal title, are not, if I have read them correctly, in point. All of them, save one, were actions in equity to cancel such a transfer, or to charge the fraudulent grantee as a trustee; and it was correctly held that such actions were for relief on the ground of fraud, and must be brought within the time limited after discovering the fraud. The excepted case was an action of ejectment, and it was rightly held that the creditor’s title was barred by adverse possession of the land by the fraudulent grantee. The case of McMillan v. Cheeney, 30 Minn. 519, 16 N. W. 404, cited by defendants’ counsel, is clearly not in point, for that was a case where the legal title to real property was obtained by the alleged fraud of the grantee, *471and the grantor bad no remedy except an action for relief on account of the fraud. Such is not this case. It may be that the rule adopted by the majority of the court is wiser, more logical and just, than the old rule established by this court; but, if a change is to be made, it ought not to be by a retroactive decision which may cloud, if not unsettle, titles to real estate.