Kimbro v. Clark

Reese, J. On the 19th day of December, 1881, defendants in error-began a suit in the district coui’t of Lancaster county against Robert L. Kimbro for the purpose of collecting the amount due them upon a promissory note executed by him to-them. At the same time they caused an order of attachment to be issued out of said court and levied upon the west half of the south-east quarter of section number thirty-four, township seven north, of range seven, in Lancaster county. The defendant in that action was a nonresident of the state, and service was made by publication.. The title of the land, as shown by the record of deeds for said county, was held by Melissa A. Kimbro, the wife of the defendant, Robert L. Kimbro. No appearance was made by Robert L. Kimbro, but his wife, Melissa A., appeared and filed a petition of intervention, claiming the land, and alleging that the defendant in the action had no interest or title in it whatever. The proceedings resulted in a finding by the court that Robert L. was indebted to the plaintiff, in the action in the sum of $1,160.00, for which a judgment was rendered and the land ordered to be sold and the proceeds applied to the satisfaction of the judgment and costs. Afterwards the plaintiffs in that action, defendants in error here, began a suit in the same court, in the nature of a creditor’s bill, alleging that they405 had caused the property to be attached but they were unable to sell the same for the reason that the title to the land stood in the name of Melissa A. Kimbro (plaintiff in error here), that the conveyance to her instead of her husband had been procured for the purpose of defrauding the creditors of the husband, and as against defendants in error was fraudulent, and asking that the title to the land for the purpose of the satisfaction of their claim ■against Robert L. Kimbro might be adjudged to be in him, and that it might be ordered to be sold and the proceeds of the sale applied to the payment of their judgment. A decree was entered in favor of defendants in ■error in accordance with the. prayer of their petition, and plaintiff in error brings the case into this court for review by petition in error. It is suggested by defendant in error that since plaintiff in error appeared in the attachment case and filed her intervenor’s petition that “ in such case the judgment and ■order of sale in the attachment suit will divest her of her title and render a creditor’s bill unnecessary.” No authorities are cited to sustain this view and we are inclined to believe the statement made by counsel that they “ have not found any one having enough confidence in such opinion to be willing to purchase under the order of sale.” ■Section 478 of the civil code provides that' “when, in an •action for the recovery of real or personal property, any person having an interest in the property applies to be made a party the court may order it to be done.” But our attention has not been called to any statute of this state nor to the decision of any court where the rights of third parties to property seized in the auxiliary proceeding of attachment can be adjudicated in an ordinary action upon •a promissory note. It is insisted by plaintiff in error that as no personal judgment could be rendered against Robert L. Kimbro in the attachment proceeding, the service having been by — 406 — publication alone, that an action in the nature of a creditor’s bill cannot be maintained to subject the land held by another to the payment of the judgment. That “ if defendants (in error) by levying the attachment upon the land acquired a lien thereon, then it was not necessary for them to institute proceedings in the nature of a creditor’s bill, and if they did not get any lien by reason of said attachment, then the court certainly had no authority to render judgment in the first case on the service by publication and attachment.” These questions have been decided by this court. In Keene v. Sallenbach, 15 Neb., 203, it is said that “when sufficient cause is shown for an.attachment and one is issued and levied upon real estate belonging to the debtor, whether held in his own name or not, the creditor acquires a lien upon the interest of the debtor in the land, which he may enforce after the recovery of a judgment. When in such case it is necessary to set aside a conveyance alleged to be fraudulent as to creditors, an action may be commenced for that purpose against the alleged fraudulent grantee and other proper parties, and it is the duty of the court to render such decree in the premises as the testi-. mony will justify.” But it is said by plaintiff in error that it is a fundamental principle that an attaching creditor can acquire no greater right in attaching property than the defendant had at the time of the attachment. That the property having been conveyed to plaintiff in error, it. is beyond his control, and he has lost his power over it, and it cannot be attached to satisfy his debt. While it is true that an attaching creditor or purchaser at judicial sale takes no higher or greater lien or title than was held by the defendant in the action, yet this principle is not applicable to cases where property has been fraudulently conveyed for the purpose of defeating the right of creditors to have the property applied to the payment of their claims.. If the title to the property is held by another as a secret — 407 — trust for the benefit of the debtor who is the real owner, and if such ownership is merely colorable such property will be deemed to be held for the benefit of creditors, and the conveyance, while good as between the parties, will be held void as to them. Sturdevant v: Davis, 9 Ind., 360. Bump on Fraudulent Conveyances, 215. Power v. Alston, 93 Ills., 587. And is subject to the process of attachment. The case of Kennard, Daniel & Co. v. Hollenbeck, ante p. 363, was a case in some respects similar to the case at bar, and is decisive of the question now under consideration. In that case, although it was stipulated that a judgment had been rendered in the attachment case, yet it was also stipulated that the only service of summons was a personal service within the state of Iowa. Property, the title of which was held by a third person, was levied upon under the attachment, and after judgment an action, similar to the one in this case, was instituted for the purpose of subjecting the land to the. payment of the claim of the attachment creditor. In that case it is said that “ in such cases the plaintiff having obtained his attachment and a special judgment thereon can enforce his lien by an action in the nature of a creditor’s bill.” See also Haswell v. Lincks, 87 N. Y., 637. Ward v. McKenzie, 33 Tex., 297. In the holding of the district court upon the foregoing questions we see no error. The counsel for plaintiff in error contend that there was no evidence submitted to the trial court of any fraudulent intent on the part of either the plaintiff in error or Robert L. Kimbro in the matter of the conveyance of the real estate in question to plaintiff in error by her grantor, Peter B. Stauffer. The petition of defendants in error alleges substantially that prior to the execution of the promissory note upon •which the judgment against Robert L. Kimbro was obtained the defendants in error were the holders of a promissory note executed by Robert Stradden for the sum of — 408 — $1,200, the payment of which was secured by a chattel mortgage upon a stock of goods owned by Stradden. After the maturity of the note, the maker having failed to pay it, they placed the note and mortgage in the hands of Kim-bro for collection by the foreclosure of the mortgage; the proceeds to be paid over to defendants in error to the extent of $898.34, the overplus, if any, to be retained by Kimbro. And that “ solely as an evidence and memorandum of the amount of such proceeds which said Robert L. agreed to pay over to these plaintiffs (defendants in error), he executed and delivered to them a promissory note for said amount, on and bearing date the 10th day of December, 1879, and among other things it was agreed by and between said Robert L. and said Stradden and these plaintiffs (defendants in error) that said mortgaged property should be offered for sale and sold by said Robert L. for the purpose aforesaid, at retail, in the city of Sterling, Illinois.” It is further alleged that Kimbro took possession of the goods, but instead of selling them and applying the money received from such sale as directed, he exchanged them with Stauffer for the land levied upon in the attachment suit, and for the purpose of defrauding defendants in error caused the title to be conveyed to plaintiff in error without any consideration having passed from her to Stauffer or Kimbro, her husband, and that plaintiff in error .had full knowledge of all the facts alleged at the time she accepted said conveyance. It is also averred that defendants commenced the action upon the note, caused the attachment to issue and be levied upon the land, and that judgment was subsequently rendered for the amonnt due on the note, and the land ordered to be sold, and that Kimbro is insolvent. The prayer is that the deed from Stauffer be held fraudulent, and that the land be subjected to the payment of the judgment. The answer of plaintiff in error admitted the execution of the notes to defendants in error, but denies any fraud or — 409 — knowledge of fraud on her part, and alleges a consideration paid for the land. Upon the trial one of the defendants in error was sworn ns a witness, and detailed the facts and circumstances substantially as alleged in the petition, excepting that it is •shown that Kimbro had authority to dispose of the mortgaged goods—either at wholesale or retail—as he saw fit. The proof of his insolvency is not definite nor convincing; •and no proof is offered anywhere of any fraudulent intent Upon the part of either Kimbro or his wife (plaintiff in error) at the time of the execution of the deed by Stauffer, •or at any other time. The note and a transcript of the attachment proceedings and judgment were also introduced in evidence. Kimbro and wife (plaintiffs in error) were each sworn on the part of the defense. Kimbro admitted the execution ■of the note to defendants in error, but testified it was exe•cuted to them for the amount due them upon the note and mortgage, and that he took the note and mortgage as his •own, his note being given for the amount found- due on final settlement, and that no contract or agreement was made whereby he was to return to defendants in error any part of the proceeds of the goods; that he sold of the goods in Sterling, at retail, for about six weeks, and then traded them to Stauffer for the land in Lancaster county. The deed was not executed until about a year after the trade, and not until he had commenced an action against Stauffer for the specific performance of the contract, when a settlement was made and the deed executed. They both testified that Mrs. Kimbro had previously furnished her husband five hundred dollars of money received by Mrs. Kimbro from her father, and at her request the land was deeded to her in consideration of the money furnished her husband. In the direct testimony of Mr. Kimbro he stated that at the time of the execution of the note to defendants in error they wanted to make a settlement; they were in — 410 — debt some, and were afraid he would be garnished for what, they owed; that they wanted to make a settlement and get it out of the way .of their creditors. The final settlement, was made and the note given. This witness was cross-examined by Mr. Ward, who was a witness on behalf of defendants in error, but no mention is made of this particular fact detailed. W. S. Ward, one of the defendants in error—the one who transacted the business with Kimbro—• was called as a witness in his own behalf on rebuttal, but no contradiction of the facts stated by Kimbro is made by him. This statement must be taken as true. If true it tends very strongly to contradict the theory of defendants in error, that the note was given solely as a memorandum» and the proceeds of sale of the goods belonged to them until their claim was paid. It is evident frqm the record and the briefs of counsel that the decision of the district court was founded upon the theory of the case contended for by defendants in error—^ that the goods traded by Kimbro for the land constituted a kind of trust fund for the payment of their debt against Stradden—rather than any proof of fraud in the transfer of the land to Mrs. Kimbro. The testimony of both Kim-bro and his wife is virtually uncontradicted. The cross-examination of the husband failed to develop anything in favor of defendants in error, and Mrs. Kimbro was not. cross-examined at all. Assuming, as we may safely do, that the decision was founded upon the theory above suggested, it becomes important to inquire whether or not the facts presented by the petition and evidence, if true, can in any view sustain the decree. The note was executed as alleged, on the sixth day of December, 1879. The goods were traded for the land as alleged. The deed was not executed until in November, 1880, after the commencement of an action to compel its execution. On the nineteenth day of December, 1881, an ordinary action at law was commenced upon — 411 — the note given by Kimbro to defendants in error, an attachment was issued and levied upon the real estate in question, and a judgment at law was taken for the amount found due upon the note. In all these proceedings no. mention is made of any equities growing out of the consideration in favor of defendants in error. If such equities existed they were clearly abandoned by defendants in error, and in so far as this action is concerned they stand in no better attitude before the court than any other creditor with a just debt would stand. The question of the consideration for the note must be wholly eliminated, and if defendants in error succeed in the action at all it must be upon the ground that the deed from Stauffer to plaintiff in error was in fraud of the creditors of Robert L. Kimbro. This being our view of the case it follows that the decision of the district court must be reversed and the cause remanded for further proceedings in accordance with this opinion. Reversed and remanded. The other judges concur.