Ellis v. Southwestern Land Co.

Babdeest, J. Eor many years the law has been settled in this state that a creditor is not entitled to maintain an action in equity to set aside a fraudulent conveyance until he has exhausted his remedy at law by obtaining a judgment against his debtor, issuing execution thereon, and having it returned unsatisfied. Montague v. Horton, 12 Wis. 599; Gilbert v. Stockman, 81 Wis. 602; Weber v. Weber, 90 Wis. 467; French L. Co. v. Theriault, 107 Wis. 627. As between the parties and their representatives, a conveyance in fraud of creditors is valid and binding. One of the first requirements that must exist to enable a creditor to attack a fraudulent conveyance is that his demand should be legally enforceable. 14 Am. & Eng. Ency. of Law (2d ed.), 281. The plaintiff is a mere surety. He has paid no part of the judgment against him. He may never do so. It may be collected from the principal, or from some one of the other parties who signed the undertaking. At law he would have no standing in court until he had paid the debt. Taylor v. Coon, 79 Wis. 76; Barth v. Graf, 101 Wis. 27. But it is said plaintiff may maintain this action upon the principle stated in the case of Dobie v. Fidelity & C. Co. 95 Wis. 540. That case holds that a surety may maintain an action in equity against his principal to compel him to exonerate him from liability by discharging the debt for which both are liable, without first paying it himself. But that is not this case. The surety here is attempting to go much farther. He is seeking to attack a conveyance which he could not attack, under the circumstances stated, even if he was a creditor. His rights as surety in such a case are no [315] greater than, those of creditors. A creditor could not proceed until he had exhausted his legal remedies. The conveyance being good as between the parties, it can only be attacked by creditors of the fraudulent grantor who have been defrauded, and then only under the circumstances already pointed out. The rule that a surety who has not paid the debt cannot bring a suit to have a fraudulent conveyance of property made by his principal set aside is laid down in the following cases: Barnes v. Sammons, 128 Ind. 596; Williams v. Tipton, 5 Humph. 66. See Mugge v. Ewing, 54 Ill. 236; Nash v. Burchard, 87 Mich. 85. In Tennessee, under a statute passed since Williams v. Tipton was decided, a surety may now maintain such an action. Greene v. Starnes, 1 Heisk. 582. The only case plaintiff’s counsel was able to find which is claimed to support his position is a memorandum decision found in Stump v. Rogers, 1 Ohio, 242, the syllabus of which reads as follows: “ Security may proceed against principal in equity to have his estate subjected to the payment of the debt without making payment himself before commencing his suit.” The statement of the case shows that the action w.as brought by a surety to set aside an alleged fraudulent conveyance, but there is no discussion of the right in the opinion, and the decision, tested by the syllabus, is of little weight. The true principle seems to be that a surety paying the debt of his principal is subrogated to the rights of his creditor. Until such payment he has no right enforceable against third parties. He may compel his principal to exonerate him from liability by applying his property to payment of the debt. But, when the principal has put his property beyond his power to use it for that purpose, the surety must be content to follow it along the same lines that a creditor may follow it. By the Gourt.— The order appealed from is affirmed.