Parrott v. Crawford

RaymoND, C. J. No lawsuit presented at this- term so emphasizes the importance to lawyers and litigants of careful and well-considered pleading as the one under consideration. The pleading filed by respondents first admits certain allegations of the bill, then contains a denial of others, and then charges a fraudulent transfer by complainant’s grantor, and asks relief. No cross-bill is filed, unless the mere prayer to have complainant’s deed from defendants’ judgment debtor canceled may be ’taken as equivalent to the filing of a cross-bill or complaint. “Where a defendant in an action on the equity docket seeks affirmative relief, he should' file a cross-bill.” Estee’s Code Pleading, vol. 3, § 4551; Marr vs Lewis, 31 Ark. 203, 25 Am. Rep. 553. Mr. Phillips, in his work on Code Pleading, in discussing the subject as to how cross-demands should be pleaded, — 108 — says: “When a defendant seeks affirmative relief, he becomes, quoad hoc, a plaintiff, and must state the facts constituting his right of action in the same manner and with the same degree of particularity that would be requisite if he were stating them in a complaint, except that he may refer to and adopt matters stated in the comjolaint. * * * In matter of form, the cross-demand should be stated separately from matters of mere defense; and even where the same facts constitute both a defense and a counterclaim some authorities hold that they should be twice stated in separate divisions. In no other way can their sufficiency in each aspect be separately questioned or determined. If matters of defense and matters of cross-demand are commingled in one statement, it is a defect of form. * * * In order that the plaintiff may know what use the defendant intends to make of his alleged facts, he should in some way indicate his purpose to rely upon certain allegations for affirmative relief; and in most jurisdictions this is required.” Phillips on Code Pleading, § 260. Mr. Estee, in discussing the same subject, uses the following language: “In California the usual practice is, at the conclusion of the matter pleaded by way of answer to state, ‘And the defendant, A. B. by way of cross-complaint against the plaintiff, alleges,’ etc., the signature of the attorneys and verification following at the end of the whole pleading. In such case the verification should be that he has read the foregoing answer and cross-complaint, and that the same and each of them are true, etc. The better mode of pleading is to conclude and verify the answer, and prepare the cross-complaint as a separate pleading. If the cross-complaint seeks relief against codefendants alone, or against the plaintiff and one or more defendants, it is eminently proper that it should be a separate pleading. * * * It seems to be essential that the name ‘cross-complaint’ be given to this pleading, or at least .that it should not be misnamed.” Estee’s Pleadings, vol. 3, § 4555. “A cross-complaint must state all the facts which would109 be required in an original complaint, to entitle the party pleading it to affirmative relief, and it cannot be aided by the averment of any other pleading in the action.” Estee’s Pleadings, vol. 3, § 4554. It would therefore seem to be the better practice, where affirmative relief is asked in equity, to file a cross-bill. But waiving the question as to whether or not there should have been a separate cross-bill or a statement in the answer that by way of cross-complaint the defendant makes certain averments and prays for certain relief, there can be no serious contention but that the answer wherein it is sought to cancel the alleged fraudulent conveyance made by J. C. Crawford, defendant’s judgment debtor, to the complainant, W. A. Crawford, should contain all of the averments necessary to sustain a creditors’ bill filed by appellant Parrott against the Crawfords. Smith, Equitable Remedies of Creditors, p. 122. What averments are necessary? That complainant has secured a judgment against his debtor, or some legal reason shown why it cannot be had. Smith, Equitable Remedies of Creditors, § 158. That an execution has issued upon the judgment thus obtained. Morrow Shoe Manufacturing Co. vs New England Shoe Co. et al., 57 Fed. 685, 6 C. C. A. 508, 24 L. R. A. 417. That there has been a return of the execution by the proper officer nulla bona. Meux vs Anthony et al., 11 Ark. 411, 52 Am. Dec. 274. That the defendant in the execution has conveyed the premises to defendant in the creditors’ suit for the purpose of hindering, delaying, defrauding, or defeating his creditors (stating clearly in what manner and by what means, and, if fraud is alleged, state fully all the facts constituting the alleged ¡fraud, so that the court, from the facts alleged, can determine as to whether or not they constitute fraud in law). A mere conclusion of the pleader is not sufficient. Loucheim vs Talladega First National Bank (Ala.) 13 So. 374. That the grantee was a party to the fraud, or had — 110 — knowledge of the purpose of the grantor in making the conveyance. That the indebtedness of the judgment debtor to complainant accrued prior to the date of the alleged fraudulent conveyance: Michael Moritz vs Francis Á. Hoffman, -35 Ill. 553. That the judgment debtor is insolvent, and has no other property out of which he can make his judgment, and a prayer for the proper relief. “In order that a recovery may be had under a bill filed to set aside a conveyance alleged to have been fraudulent as to creditors, it is incumbent on the plaintiff to show that the property conveyed was substantially all of the debtor's property, or that at the time of the.conveyance he was insolvent, or was rendered so by the conveyance. If it does not so appear, the bill will not be sustained.” Smith’s Equitable Remedies of Creditors, p . 40; Kain vs Larkin, 131 N. Y. 300, 30 N. E. 105. Measured ■ by these requirements, do the allegations made by the defendants suffice? It will be seen at a glance that there are some defects which are fatal, and that it falls short of coming up to these standards. There is no allegation that the indebtedness of J. C. Crawford to Parrott was contracted prior to tbe alleged fraudulent conveyance. “If the appellant at the time of the conveyance was not a creditor, then he had no standing in a court of equity, and cannot attack the conveyance, unless it is shown that the conveyance was made by the debtor with the expectation of incurring heavy liabilities which he would not be able to meet.” Cunningham vs Williams, 42 Ark. 170. “The plaintiff must allege that he is a creditor of the debtor defendant, and, where the object of attack is the fraudulent alienation of property, he must, generally, show the existence of the indebtedness at the time the transfer was made.” Smith’s Equitable Remedies of Creditors, p. 123, and cases cited therein. There is no allegation that the execution was returned nulla bona. “The exhaustion of legal remedies should — 111 — be alleged, which is usually done in this class .of actions by showing a judgment in force and effect, an execution issued thereon, and a return thereon nulla bona.” Smith’s Equitable Remedies of Creditors, § 100, p. 123. There is no allegation that the judgment debtor is insolvent. For aught that appears, he may have ample means out of which the judgment could be made. Kain vs Larkin, supra. “The complaint is bad for the reason that it fails to allege that the alleged fraudulent'grantor had no property subject to execution at the time the suit was commenced. It issottledlawinthis jurisdiction that a complaint to set aside a fraudulent conveyance is bad unless it shows that at the time, the suit was commenced as well as at the time the conveyance was made, the grantor had no property subject to execution. The reason for the rule is that a plaintiff has no right to subject property in the hands of a grantee of his debtor to sale unless it appears that there is no other property which can be reached by ordinary legal process. The question is one of pleading, and not of process.” Line et al vs State ex rel. Lander (Ind. Sup.) 30 N. E. 703. The statute in force in this jurisdiction provides: “The following described property shall be liable to be seized and sold under any execution upon any judgment, order, or decree of a court of record: * * * Sixth, All real estate, whether patented or not, whereof the defendant, or any person for his use, was seized in law or-equity on the day of rendition of the judgment, order or decree whereon execution issued, or at any time thereafter.” 'Mansi. Dig. § 3001 (Ind. Ter. St. 1899, § 2116). The record in this case shows that the transfer from J. C. Crawford and wife to appellee was' made on the 26th day of Api’il, 1899— almost a year before the issuance of the execution and levy upon the property. This transfer, whether fraudulently made or not, divested J. C. Crawford of all the right, title, or interest he may have in the property. The Supreme Court .of Arkansas, in the case of Doster vs Manistee National Bank, 55 S. W. 138, 48 L. R. A. — 112 — 334, 77 Am. St. Rep. 116, in passing upon this question, says: “The statute gives a lien from the daj1- of the rendition of the judgment upon the real estate owned by the defendant, or. whereof he, or any person for his use, is seised in law or equity. Where a debtor has fraudulently conveyed his real estate before any judgment is rendered against him, or has procured same to be fraudulently conveyed to another, he is not in any sense the owner of such real estate, nor is he thereafter seised in law or equity of such real estate, nor is the grantee seised for his use. The authorities generally recognize the fact that a deed to land, although fraudulently conveyed, carries the title of the grantor. The deed is good inter partes” — citing Meux vs Anthony, 11 Ark. 411, 52 Am. Dec. 274; Millington vs Hill, 47 Ark. 309, 1 S. W. 547; Bell vs Wilson, 52 Ark. 309, 12 S. W. 328, 5 L. R. A. 370; Bump, Fraud. Convey. §§ 432, 433, Wait, Fraud. Convey. 395-399; 8 Am. and Eng. Enc. Law (1st Ed.) p, 771; and authorities, cited by these. “The fraudulent grantee gets a title that he can alienate, and by so doing confer a perfect title upon his alienee, if the alienee be an innocent purchaser for value. This is the doctrine of our own court and of nearly all the states. Ringgold vs Waggoner, 14 Ark. 69; Stix vs Chaytor, 55 Ark. 116-123, 17 S. W. 707; Wait, Fraud. Convey. 386; Bump, Fraud. Convey. 492; and numerous authorities cited. Of course, this would not be possible if the conveyance of the fraudulent grantor did not carry the title to the fraudulent grantee. It follows, then, logically and necessarily, that under tins statute alone the judgment creditor has no lien upon lands fraudulently conveyed by the debtor prior to the rendition of his judgment. This -construction certainly conforms to the plain and unequivocal language of the act. Why should we so change and extend it as to make it apply to lands which the defendant, at the time of the rendition of the judgment, did not own, and of which neither he, nor any one for Mm, was seised in law or equity? To so construe it would be judicial legislation, — 113 — and that, too, with unjust results, because, 'when the law gives priority, equity will follow it.’ ” In speaking of section 3472 of Sandels & Hill's Digest of Arkansas which is section 3374 of Mansfield's Digest (Ind. Ter. St. 1899, § 2308), and which is as follows: “Every conveyance or assignment, in writing or otherwise, of any estate or interest in lands, or in goods and chattels, or things in action, or of any rents issuing therefor, and every charge upon lands, goods or things in action, or upon the rents and profits thereof, and every bond, suit, judgment, decree or execution, made or contrived with the intent to hinder, delay or defraud creditors or other persons of their lawful actions, damages, forfeitures, debts or demands, as against creditors and purchasers, prior and subsequent, shall be void” — the court in the above case said: “If the latter statute is to be taken as in pari materia with the statute under consideration as between judgment creditors and their debtors, still that cannot aid appellant. Ever since the passage of 13 Eliz., after which our statute as to fraudulent conveyances was modeled, the word ‘void,’ as therein used has generally been held to mean 'voidable.' Mew. Eng. Cas. Law Dig. 338, and authorities collected; Pom. Conti § 451, and authorities cited; Bump, Fraud. Conv. § 451, and authorities cited in note 1. As we have seen, gupra, such is the view of our own court, and this is undoubtedly correct, for every fraudulent conveyance carries the legal title, subject only to defeasance by creditors and purchasers. Such conveyance is not void per se, even as between debtor and creditor. If the creditor condones the fraud, and takes no steps to avoid the conveyance, it stands forever as a divestiture of the title of the debtor.” In the case of Ewell vs Daggs, 108 U. S. 148, 2 Sup. Ct. 412, 27 L. Ed. 682, the Supreme Court of the United States, in passing upon the use of the word “void’V as used in such statutes, says: “It is quite true that the usury statute referred to declares the contract of a loan, so far as the whole interest is concerned, to be ‘void and of no effect.' But — 114 — these words are often used in statutes and legal documents, such as deeds, leases, bonds, mortgages, and others, in the sense of 'voidable' merely- — that is, capable of being avoided — and not as meaning that the act or transaction is absolutely a nullity, as if it never had existed, incapable of giving rise to any rights or obligations under any circumstances. Thus we speak of conveyances being void-as to creditors, meaning that creditors may avoid them, but not others.” In passing upon the question of whether a conveyance of a debtor, fraudulently made, passed the title to the grantee, the Supreme Court of the United States, in the case of Miller vs Sherry, 2 Wall. 249, 17 L. Ed. 827, said: “It is not contended that the judgment was a lien on the premises. The legal title having passed from the judgment debtor before its rendition, by a deed valid as between him and Jbis grantee, it could not have that effect by operation of law.” All the authorities which recognize the right of a creditor to disregard the transfer by the debtor to a third person and levy upon the. premises the same as if no transfer had been made, construe the word “void "to mean absolutely void, and the Supreme Court of Arkansas, in passing upon this matter in the case of Doster vs^Manistee Natiofl^tl Bank, supra, says: “The courts which fall into such glaring incongruities in prescribing the remedies under this statute are no more discrinjinating, logical, and consistent when discussing the principles upon which the rights are founded giving rise to the remedies. A1 the authorities which hold that a judgment creditor has a judgment lien upon land which has been fraudulently conveyed by the debtor prior to the date of the rendition of the judgment are grounded upon the egregious fallacy that a fraudulent conveyance is not voidable merely, but absolutely void.” At the time of the rendition of judgment against J. C. Crawford he was not seised in law or equity of the premises described in the corn-complaint. He had conveyed the title to these premises to W. A. Crawford, as shown in the pleadings, nearly a year prior to the — 115 — issuing of the execution. If the indebtedness represented by the judgment had been incurred and credit given on the strength of the title to the premises in J. C. Crawford, surely such an important averment would not have been omitted by defendant It is the opinion of the court that the decision of the trial court was correct in sustaining the demurrer, and the judgment isaffirmed. Clayton and Townsend, JJ., concur.