Wright & Co. v. Levy

Baldwin, J., delivered the opinion of the Court—Terry, C. J., concurring. The answer of defendant Jones, denying all collusion with the plaintiff, in the judgment transferred to him, and asserting that he is a pur [262] chaser in good faith and for value of the judgment, raises the question whether a chose in action, not negotiable by the law merchant—the chose having been procured or created by the immediate parties to it to defraud creditors—can be affected or impeached in the hands of any innocent assignee, by the creditors of the debtors making it. We think, with the learned Judge below, that it cannot. It is conceded that the assignee of the judgment is only the holder of an equity, with the right to use the judgment and the name of the plaintiff to enforce it, and stands in the shoes of the assignor, as to all defenses which existed against the judgment between the parties to it. It is like a note assigned after due, the rule as to which is thus laid down in Story on Bills, (sec. 220, p. 260): “In the next place, as to the time of the transfer. In general, it may be stated that a transfer may be made at any time while the bill remains a good, subsisting, unpaid bill, whether it be before or after it has arrived at maturity. But the rights of the holder against the antecedent parties, may be most materially affected by the time of the transfer. If the transfer is made before the maturity of the bill, to a Iona fide holder, for a valuable consideration, he will take it free of all equities between the antecedent parties, of which he has no notice. If the transfer is after the maturity of the bill, the holder takes it as a dishonored bill, and is affected by all the equities between the original parties, whether he has any notice thereof or not. But when we speak of equities between the parties, it is not to be understood, by this expression, that all sorts of equities existing between the parties, from other independent transactions between them, are intended, but only such equities as attach to the particular bill, and, as between these parties, would be available to control, qualify, or extinguish any rights arising thereon. Still, however, subject to such equities, the holder, by indorsement after the maturity of the bill, will be clothed with the same rights and advantages as were possessed by the indorser, and may avail himself of them accordingly.” The judgment is property, which may be purchased like any other property. The purchaser is bound to inquire into the defenses of the debtor. He has the means to do this ; but he could not be held to inquire into latent equities existing in the hands of third persons. The law, when it made this sort of property subject to.sale, gave it the pro [263] tection which it extends to all other property. It is only by force of the Statute of Frauds that the judgment or sale of it could be avoided at the suit of the creditor, or by force of common law principles, of which the statute is an affirmance. But neither this statute nor these principles affect an innocent purchaser, nor an innocent purchaser of equities, any more than of legal estates. Between the parties, the assignee of equities stands in the place of his assignor, with no better rights; but as to the claims of third persons, the purchaser of an equity stands unaffected by frauds of which he has no knowledge,1 express or constructive. No authority has been cited which supports the ground taken by appellant, while the general principle which we have announced is asserted in many cases. The judgment is affirmed. At the April Term, 1859, a reargument was had in this case, and the Court, by Baldwin, J., and Terry, C. J., concurring, rendered the following opinion : On rehearing : The opinion which we delivered in this case at the last term is correct in principle. We erred, however, in assuming that the assignment was of a judgment of Levy, and made by Newmark to J ones before the attachment of the plaintiff was put upon the property of the defendant. It now appears, that after Newmark’s attachment was levied, the plaintiff got out an attachment on his debt, and it was levied on the same property as Newmark’s; and that pending these attachments, and before judgment, Newmark assigned the note and the lawsuit to the defendant Jones. It is found by the Court that this note, attachment, etc., of Newmark’s were fraudulent, but that the fraud was not known to J ones, who bought for value. The question then comes up whether Jones is protected in his purchase ? We think, on this hypothesis of fact, he is not. Newmark’s proceedings were all void against the plaintiff. The plaintiff by his levy took the property subject only to the superior rights or the claim of Newmark. He had, under the assumed facts, the real title as against Newmark. In this condition Jones buys; but Jones has only the right Newmark had. Newmark having been in fact superseded by the plaintiff, could not by any deed or act of his put his assignee in any better position. The [264] question is not as to the equities of third persons; the question is as to the relative equities of Jones and Wright; and it seems Wright has, as against Jones, the oldest equity and the legal title. While the property was legally subject to his claim, Wright subjected it by his attachment ; his title then vested, so to speak. No act of Newmark subsequently could divest it. All this is said on the assumption of the fraud of the Newmark proceedings; for the effect of that fraud unquestionably is to make those proceedings nullities as against Wright. When they were nullities, Wright levied on the property, and, of course, his title dating from the levy is superior to Jones’ title dating from the subsequent assignment to him by Newmark. None of the authorities cited by the respondent’s counsel apply to such a case as this. The principle of the case of Anderson v. Roberts (in 18 Johnson R. 531) is analogous, and two or three cases in Alabama are the same way. It is true that the case in 18 Johns, only holds that after a sale on execution of real estate fraudulently conveyed, the sale being made of it as the property of the fraudulent grantor, an innocent grantor takes no title; but the effect of a levy on chattels is not less decisive in changing the title and vesting it in the Sheriff as trustee for the creditor. After it does so vest, a sale by the fraudulent vendee cannot alter it. The Alabama cases go further, and hold that after the lien of a judgment attaches to property fraudulently conveyed, the lien of the creditor carries the title against a conveyance subsequently made by the fraudulent vendee. The question is not whether, when Jones took the assignment of the note, he took a good title as against third persons to the note ; but whether, when he took, as incident to the note, a title or claim to the property attached, he took a superior right to the plaintiff, who had an older and better claim on it ? If, by operation of law, Wright’s claim to this property was superior to Newmark’s, Wright was as much entitled to priority over Jones, as if his right was given by contract. We therefore reverse the decree on the finding. We think, however, the case has not been fully tried below, and we remand it that some irregularities may be cured, and an opportunity given to try the case de nova on such amendments of the pleadings as may be desired. Ordered accordingly.