Curlee v. Rembert

The opinion of the court was delivered by Mr. Justice McGowan. On March 16, 1868, Thomas G. Bobertson, in consideration of love and affection, conveyed a tract of land (440 acres) to hi', daughter, Mrs. Emeline Bembert. He was largely indebted at the time, and on the same day he confessed a judgment to his mother-in-law, Sarah S. Jones, which was regularly entered as of its date. On September 12, 1868, the debtor Bobertson conveyed to one Matthews twenty-eight and one half acres of other land, receiving therefor $2,000. This land was covered by the lien of the judgment of Mrs. Jones, and she, stating in writing as follows: “in consideration of my regard for the interest of my son-in-law, and my reliance upon the sufficiency of my security after the release,” &c., released the lien of her judgment on this land sold to Matthews. On November 25, 1868, Mrs. Jones transferred her judgment to Thomas W. Bembert in trust, &c., and thereafter, on December 30, 1868, the administrator of one Cook obtained a judgment against the said Thomas G. Bobertson, and issued execution, which, after being renewed from time to time, was finally returned nulla bona; and, on January 18,1889, the plain — 218 — tiff, as administrator, instituted these proceedings against Emetine Rembert and others, to set aside the deed of laud (440 acres) executed in her favor, by her father, Robertson, as being without consideration, fraudulent, and void. The action was not to marshal the assets of a deceased debtor, in which all creditors must be called in; but, so far as the pleadings show, for the benefit of the plaintiff alone. His honor, Judge Aldrich, heard the case, set aside the deed, ordered the land sold, and, after paying taxes, costs, &e., the officer was directed to hold the remainder of the proceeds of sale subject to the future order of the-court. He also ordered the referee to call in the creditors of Thomas G-. Robertson, to prove their demands, before Glenn W. Ragsdale, Esq., who was directed to take testimony as to the rank, priority, amount, and validity of the several claims presented, &c. The referee took the testimony, which is in the brief, and reported, that only two claims were presented: (1) the judgment of the plaintiff-balance $1,889; and (2) the judgment confessed to Mrs. Jones—balance $5,401.03; and the only contest was, which of them was to be paid first. The cause came on for a hearing by his honor, Judge Fraser, who held, that the fund in court should be first paid to the balance due on the j udgment of Mrs. Jones (that is, confessed to Mrs. Jones), and then the balance, if any, on the judgment of the plaintiff. From this decree the plaintiff appeals upon the following exceptions: 1. That his honor should have held, that the deed of Thomas G. Robertson to Emeline Rembert was not fraudulent and void as to the owners of the judgment of S. H. Jones, said judgment at the time of said conveyance constituting a first and exclusive lien upon the entire balance of the property, being at that time entirely sufficient to pay said Jones judgment. 2. That his honor should have held, that the release of the lien of said judgment on $2,000 of property of judgment debtor by Mrs. Jones, by a written instrument, wherein she declared her confidence in the sufficiency of her security by lien on the balance of the judgment debtor’s then remaining, estopped the said Sarah H. Jones and her assigns from attacking the — 219 — validity of said deed, or from, claiming the proceeds arising from the land. 3. For that his honor should have held, that the plaintiff was entitled first to the proceeds of sale, he having been first in diligence in the discovery of the fraud, and in setting aside the fraudulent deed. 4. That his honor erred in holding, that the proceeds of sale, after payment of costs and fees, should be first applied to the payment of the Jones judgment. 5. That his honor should have held, that the Jones judgment could not share at all in the fund realized from the attack upon the validity of the Rembert deed. 6. That his honor should have held it highly inequitable to permit the owners of the Jones judgment to reap the fruits of annulling the Rembert deed, when they not only did not contribute to the victory, but resisted the fight, and acquiesced all the while in the validity of said deed. 7. That his honor erred in holding, that in equity the owners of the Jones judgment could not be required to credit the release of the property sold Matthews of the value of ‡2,000, before claiming the fund realized from the successful attack on the Rembert deed. The decree of the Circuit Judge is so clear, that it is difficult to add any thing to it. The exceptions, taken together, seem to make three questions, which we will briefly consider in their logical order. 1 First. It is contended that, although the conveyance of the debtor to his daughter, Mrs. Rembert, was void as to the plaintiff 's claim, it was not void as to the judgment eon-fessed to Mrs. Jones, for the reason that at the time it was executed, the debtor Robertson had ample property to pay his debts. Whether the voluntary conveyance of a debtor is void as to existing creditors, must depend, with inconsiderable exception, upon the event—the ultimate insolvency of the debtor. “A voluntary settlement is void as to existing creditors, if the donor afterwards proves to be insolvent.” Izard v. Middleton, Bail. Eq., 228. See Richardson v. Rhodus, 14 Rich., 95. The decree in the case (Judge Aldrich’s) pro — 220 — nonneed the conveyance to Mrs. Rembert void, without limitation or qualification, and called in the creditors of the debtor. There was no appeal, and it is not plain how we can consider the conveyance void as to the plaintiff’s judgment, and not as to the judgment confessed to Mrs. Jones. The question is not as to what was intended by the parties, but simply as to the effect of the decree. It seems to me that, being void as to one, it was void as to all existing creditors without discrimination. 2 Second. It is, however, further urged, that Mrs. Jones fully concurred in the conveyance to Mrs. Rembert, and that the insolvency of Robertson, the donor, was caused, in part at least, by her lifting thd lieu of her judgment from the land sold to Matthews; and that such conduct should, in equity, postpone her judgment, at least to the extent of the consideration ($2,000) realized for that land. It strikes me that there would be great force in this view, if the plaintiff’s judgment had been in existence at the time of the Matthews transaction. That was before the plaintiff recovered his judgment, which never had a lien upon the land sold to Matthews. We, therefore, feel constrained to concur with the Circuit Judge, when he said : “I do not see how, in the absence of fraud, the release of any portion of the security held can in any way interfere with other legal or equitable remedies, which the creditor does not release.” As was said in McAfee v. McAfee, 28 S. C., 223: ‘ ‘At the time of the conveyance to Moore (Rembert) of part, the Wright (Gurlee) judgment had not been rendered. There was no other lien but the mortgage (Jones judgment), and, as we suppose, the parties at that time could, if they saw fit, cancel the old mortgage and execute a new one, covering only the laud not conveyed to Moore. And if so, why could they not reduce the quantity of land under the old mortgage? It is only after receiving notice of such liens (subsequent) that the mortgagee becomes responsible for his acts in releasing portions of the lands.” 3 Third. But it is still further earnestly and ably insisted, that his honor should have held it “highly inequitable to permit the owners of the Jones judgment to reap the fruits of annulling the Rembert deed, when they not only did — 221 — not contribute to the victory, but resisted the fight, and acquiesced all the while in the validity of the said deed.” It is urged, that to give the owners of the Jones judgment all the fruits of a victory obtained against their efforts, would be to reverse all the equities of the case, and to violate especially that favorite rule of the court, expressed by the phrase, Tigilantibus, non dormientibus, jura subvenmnt. The point is, that these are equitable assets, and should be distributed equitably; that is to say, not by the unbending legal rights of the parties, but according to the merits of vigilance and activity which may have been exhibited by the parties, respectively, i n uncovering and securing the said assets, to be determined, as we suppose, in the discretion of the judge acting as chancellor. It must not, however, be overlooked that the principles of equity do not exist solely in the floating discretion of the chancellor, however wisely exercised, but that court proceeds upon fixed and established rules, as well as the court of law, one of which is, that “Equity follows the law.” We do not think it a controlling circumstance of the case, that the prayer of the complaint was limited to the plaintiff, and did not state in the usual form that it was also in behalf of creditors, who would contribute to the expenses, &c. As was said by Chancellor Dargan in the case of Heath v. Bishop, 4 Rich. Eq., 58: “Whenever this court takes hold of an equity for the purpose of giving relief to a creditor, it will do so in behalf of all the creditors, and will marshal the fund among them according to their respective rights. It is a wholesome rule of practice, and will be insisted on.” Hence, his honor, Judge Aldrich, in conformity with this practice, called in the creditors. The industry of the plaintiff’s attorneys enabled him to cite to the court several cases from other States, which seem to favor his view, that the vigilant creditor, pursuing his claim, acquires a preferable equity, which attaches and becomes a special lien by the filing of his bill. We have not had access to all the cases referred to, but we incline to think that there must be some special provisions in the statutes of those States, authorizing a lien upon the filing of a creditor’s bill, or the cases in which the questions arose were in reference to mere choses or — 222 — other intangible property, upon which there was not, and could not be, legal liens. However that may be, after carefully looking-through our own cases, we think it is well settled, in this State at least, that the proceeds of a tract of land, title to which has been declared void as to creditors, is distributed in the Court of Equity among the creditors of the debtor, according to their legal rights and priorities. This rests largely upon the ground that a fraudulent conveyance is no conveyance at all, but a mere nullity, the title remaining all the while in the debtor, and subject to all legal liens, as if the fraudulent deed never existed. We do not think it necessary to elaborate the question, or to do more than quote the opinion of the old Court of Appeals iu Equity, prepared by Chancellor Dunkin in the case of Gracey v. Davis, 3 Strob. Eq., 58, which in short compass states the doctrine and the reasons for it: “Where a deed is set aside as interfering with the rights of creditors, it is, as to those creditors, as if it had never existed. * * * The effect of setting aside the deeds is to leave the creditors to enforce their claims, and obtain satisfaction according to their legal priorities; or, if this court takes charge of the fund, to direct them to be paid according to their legal rank. This rule has been well established from an early period. See Austin v. Bell, 20 Johns., 442; Codwise v. Galveston, 10 Id., 508. Nor is the court aware of any decision to the contrary. The principle is fully recognized by the court in McDermutt v. Strong, 4 Johns. Ch., 687, and has been uniformly regarded by our own courts, as may be seeu by reference to the eases of McMeekin v. Edmonds, 1 Hill Ch., 293, and Anderson v. Fuller, 1 McMull. Eq., 34. If, as in LePrince v. Guillemot, 1 Rich. Eq., 220, the assigned estate has been sold, and only the fund was in the hands of the assignee when judgment was rendered, the judgment created no lien, and the judgment creditor was held to be entitled to no priority. But in the case before the court, the property was subject to a lien until the sale by the commissioner, the voluntary deed of the debtor being regarded as a nullity,” &c. The judgment of this court is that the judgment of the Circuit Court be affirmed.