19. Right of creditor to appropriate property without legal process. The process by which a creditor may lawfully take property fraudulently conveyed to to another out of the possession of the grantee is either an attachment or an execution. He cannot without process interfere and, taking the remedy into his own hands, seize upon such property and hold it as security for his debt."7 A conveyance objectionable merely because it is fraudulent as to creditors is good until avoided by them.18 A conveyance made to defraud creditors, though void as to a creditor who is pursuing legal process to reach the property, is valid as against inactive creditors when collaterally drawn in question." The debtor cannot by a subsequent conveyance to the creditor enable the latter without process to take the property from the grantee in the fraudulent conveyance.20 He cannot substitute his own conveyance for the process of the law and thus indirectly, by his own act, defeat the legal title of the grantee which he could have assailed directly," and a simple contract creditor cannot acquire any ownership or right of possession of the property conveyed by an attempted purchase after the conveyance.22 Inadequacy of the price paid for property purchased in good faith from one in failing circumstances will not authorize a judgment creditor of the vendor to subject the property to the satisfaction of his judgment by tendering, after a levy on the property, the price the claimant paid for the property.23 It has been held, however, 27; French v. Newberry, 124 Mich. 147, 82 N. W. 840. See also Property purchased in name of third person, chap. II, § 5. supra; chap. IV, § 29 supra. See Parris v. Thompson, 46 N. C. 57, personal property received in exchange for real property purchased in the name of another cannot be levied on by creditors. 17. Price v. Heubler, 63 Conn. 310, 28 Atl. 524; Owen v. Dixon, 17 Conn. 492; Tolbert v. Horton, 31 Minn. 518, 15 N. W. 647; Hilzheim v. Drane, 18 Miss. 556. 18. Hill v. Pine River Bank, 45 N. H. 300. 19. Boyd v. Turpin, 94 N. C. 137, 55 Am. Rep. 597. 20. Owen v. Dixon, 17 Conn. 492. 21. Tolbert v. Horton, 31 Minn. 518. 22. Jones v. Rahilly, 16 Minn. 320. 23. Sharp v. Hicks, 94 Ga. 624, 21 S. E. 208. that a creditor is not restricted to the single mode of proceeding on legal process, but may treat the sale as wholly void, where it was made for the purpose of defrauding creditors, and obtain satisfaction of his debt by a subsequent transfer of the property from the debtor in consideration of his claim.24 A creditor may with the consent of the parties to the conveyance appropriate the subject of it to the payment of his claim without resort to legal process,25 as by taking a mortgage to secure his claim from the purchaser of the property conveyed.26 28 27 20. Collateral attack on fraudulent judgment or transfer.A judgment duly confessed or entered in person or by warrant of attorney, though conclusive on the judgment debtor, is open to attack by his other creditors, who may show that it was without consideration or fraudulent as to them, even in a collateral proceeding. But where the grantee has been adjudged to be the owner of the property conveyed in an action at law, a judgment creditor of the grantor cannot subsequently attack the property by garnishment on the ground that the transfer was fraudulent. In garnishment proceedings in aid of execution, the record of successful attack made upon a judgment confessed by the debtor is admissible in favor of the plaintiff, who was not party thereto.30 The method of attacking a prior judgment on the ground that it was suffered by collusion and in fraud of creditors 24. Frost v. Goddard, 25 Me. 414. 25. Johnson V. Trust Co. of America, 104 Fed. 174, 43 C. C. A. 458. 26. Brown v. Webb, 20 Ohio, 389. 27. Md.-Citizens' Fire, etc., Co. v. Wallis, 23 Md. 173; Thomas v. Mason, 8 Gill. 1. N. J.-Wandling v. Thompson, 41 N. J. L. 309. N. C.-Morrison v. McNeill, 51 N. C. 450. Pa.-In re Dougherty, 9 Watts & S. 189, 42 Am. Dec. 326; Building Assoc. v. O'Connor, 3 Phila. (Pa.) 453. Wis.-Nassauer v. Techner, 65 Wis. 388, 27 N. W. 40. 28. Atlas Nat. Bank v. More, 152 Ill. 528, 38 N. E. 684, 43 Am. St. Rep. 274, aff'g 40 Il. App. 336; and cases cited in preceding note. 29. Schneider v. Lee (Or. 1888), 17 Pac. 269. 30. Bloodgood v. Meisner, 84 Wis. 452, 54 N. W. 722. is governed by the statutory provisions," such a judgment in some instances being declared by statute void as against creditors.32 § 21. Remedy by action for damages. The rule is maintained by the weight of authority that, in the absence of special legislation, a simple contract or general creditor, or a creditor without a lien on the property of his debtor, cannot bring an action for damages against his debtor, or against those combining or colluding with him to make dispositions of his property, although the object of those dispositions be to hinder, delay, and defraud creditors, or based upon participation in the fraudulent transfer of the property of the one to the others, and their purpose to aid in preventing the debtor's property from being appropriated by due process of law to the payment of his debts. But where the creditor has acquired a specific lien upon the property of the debtor which is the subject of a fraudulent conveyance, and such existing lien has been impaired or divested by the act of the debtor or his grantees the rule is otherwise.34 The reasons 31. Stevens v. Newman, 68 Ill. App. 549; Page v. Williamsport Suspender Co., 191 Pa. St. 511, 43 Atl. 345. 32. Bloodgood v. Meisner, supra. 33. Braem V. Merchants' Nat. Bank, 127 N. Y. 508, 28 N. E. 597; Hurwitz v. Hurwitz, 10 Misc. Rep. 353, 31 N. Y. Supp. 25; Murtha v. Curley, 47 N. Y. Super. Ct. 393, rev'd on other grounds in 90 N. Y. 372. Compare Yates v. Joyce, 11 Johns. 136, action for fraudulently removing property from premises of the debtor. U. S.-Adler v. Fenton, 20 How. 407, 16 L. Ed. 696. Conn.-Austin Ind.-Greene v. Kimble, 6 Blackf. 552; Smith v. Wright, 6 Blackf. 550. 33 Me.-Moody v. Burton, 27 Me. 427, 46 Am. Dec. 612. Mass.-Willington V. Small, 57 Mass. 145, 50 Am. Dec. 719; Lamb v. Stone, 28 Mass. 527. Compare Bradley v. Fuller, 118 Mass. 239, right to sue for false representations, inducing a creditor to refrain from suing out an attachment for execution. R. I.-Klous v. Hennessey, 13 R. I. 332. Tex.-LeGierse v. Kellum, 66 Tex. 242, 18 So. 509; Blum v. Goldman, 66 Tex. 621, 1 S. W. 899; Lemp Brewing Co. v. LaRose, 20 Tex. Civ. App. 575, 50 S. W. 460. 34. Quimby v. Strauss, 90 N. Y. 664; Yates v. Joyce, 11 Johns. (N. Y.) 136; Powers v. Wheeler, 63 Ill. 29; Ley v. Madill, 1 U. C. Q. B. 546; Smith v. Tonstall, Carth. 3. for the rule first stated are that before the acquisition of a lien on the property by a creditor he has no legal interest in the property which the judgment debtor injures, even by a fraudulent transfer of the property; that no legal damage could accrue to the creditor, the damages resulting to a general creditor from the wrongful acts being too uncertain, contingent, and remote for legal estimation; and that if one creditor could maintain such an action all other creditors would be entitled to sue and the effect upon the grantees would be to subject them to damages in no degree regulated by the amount of the property received.35 But the contrary rule has been held in Pennsylvania on the ground that as the property sought to be reached was choses in action and this was not the subject of execution the creditor would not have been in any different position with an execution, and that because of the defect of equity jurisdictions a remedy by common law action was indispensable in that jurisdiction.36 And in Massachusetts the court distinguishes those cases in which a conspiracy or an illegal combination is charged." In Maine the statute now allows creditors to maintain an action for damages against the fraudulent grantee. 39 38 22. Action for penalty.-Under the statute in some of the states, as well as under the statute of Elizabeth,40 a right of action is given to the creditor to recover a penalty from the grantee for knowingly aiding the debtor in the fraudulent conveyance or transfer of his property," and such an action may be joined with an action to set aside the conveyance or transfer as fraudulent as to 35. See cases cited in note 33, supra. 36. Penrod v. Morrison, 2 Pen. & W. (Pa.) 126, 8 Serg. & R. (Pa.) 522; Mott v. Danforth, 6 Watts (Pa.), 304, 31 Am. Dec. 468. 37. Lamb V. Stone, 28 Mass. 527. 38. Spaulding v. Fisher, 57 Me. 411. 39. Smith v. Blake, 1 Day (Conn.), 258; Fogg v. Lawry, 71 Me. 215; Spaulding v. Fisher, 57 Me. 411. 40. Millar v. McTaggart, 20 Ont. 617. 41. See also Penalties and actions therefor, chap. XX, § 1, infra. creditors. The right to sue for a penalty may be waived by the creditor.43 § 23. Remedy by suit in equity generally.-Relief against fraudulent transfers and concealment of his property by a debtor, asked for in a bill filed by a creditor, is a substantial ground of equity jurisdiction." The jurisdiction of a court of equity in such a case does not depend upon statute, and statutes which confer such jurisdiction are merely declaratory of the common law." Equity will take jurisdiction where a conspiracy of creditors to defraud the debtor and other creditors," or a conspiracy between the judgment debtor and a fraudulent grantee or mortgagee," is charged and a discovery may be necessary, or where a trust estate is involved.49 An action in the nature of a creditors' bill lies to reach property in the hands of one who purchased it at an execution sale, and holds it for the benefit of the debtor to defraud the creditors of the debtor.50 Where a debtor was in 42. Millar v. McTaggart, 20 Ont. 617. 43. Fogg v. Lawry, 71 Me. 215. 44. N. Y.-Hammond v. Hudson River Iron, etc., Co., 20 Barb. 378. U. 8.-Currie v. Jordan, 6 Fed. Cas. No. 3,491, 4 Biss. 513; Odenheimer v. Hanson, 18 Fed. Cas. No. 10,429, 4 McLean, 437. Ala.-Ladd v. Smith, 107 Ala. 506, 18 So. 195. Cal.-Swift v. Arents, 4 Cal. 390. Me.-Traip v. Gould, 15 Me. 82; Augusta Sav. Bank V. Crossman (1886), 7 Atl. 396. Md. Allein v. Sharp, 7 Gill & J. 96. Mich.-Trask v. Greene, 9 Mich. 358. Mo.-George v. Williamson, 26 Mo. 190, 72 Am. Dec. 203. N. H.-Dodge v. Griswold, 8 N. H. 425. N. J.-Cubberly v. Yager (Ch. 1886), 2 Atl. 814. Ohio.-Mason v. Eichels, 8 Ohio Dec. 436, 8 Wkly. L. Bul. 7. S. C.-Bomar v. Means, 53 S. C. 232, 31 S. E. 234. Tex.-Morris v. House, 32 Tex. 492. Wis.-Kickbusch v. Corwith, 108 Wis. 634, 85 N. W. 148. Can.-Sawyer v. Linton, 23 Grant Ch. (U. C.) 43. 45. McCaffrey v. Hickey, 66 Barb. (N. Y.) 489. 46. Alden v. Gibson, 63 N. H. 12. 47. Gray v. Simon, 1 Phila. (Pa.) 551. 48. Murtha v. Curley, 47 N. Y. Super. Ct. 393, rev'd on other grounds 90 N. Y. 372; Peoples Nat. Bank v. Loeffert, 184 Pa. St. 164, 38 Atl. 996. 49. Lathrop v. McBurney, 71 Ga. 815. 50. Decker v. Decker, 108 N. Y. 128, 15 N. E. 307. |