24

FEDERAL BBPORTER.

Looking outside of the pleadings into the proofs, enough appears to indicate that if the complainants had asserted an equitable title to the bonds, the extent of which is to be determined by ascertaining and settling the rights of various other parties, the jurisdiction would have. been properly invoked. The defendants Fry and Saborde and Beynes seem to have supposed that an answer instead of a cross-bill entitles them to affirmative relief. It is much to be regretted that the parties, all of whom are interested in a speedy settlement of the controversy, should have been subjected to the delay and expense of this fruitless proceeding. The bill is dismissed for want of jurisdiction, without costs.

ORENDORF

and others v.

BUDLONG

and others.

(Oircuit Court, E. IJ. Michigan.

May 8,1882.)

1.

EQUITY-SETTING ASIDE DEEDS-CONCURRENT JURIBDICTION.

A court of equity has concurrent jU1;,isdiction with a court of law to set a$ide deeds of real estate made to hinder, delay, and defraud creditors.
2. SAME-ExEcUTION SALE-RIGHTS OF Pu'liCHABER.

This jurisdiction may be invoked by" judgment creditor either before 01 after sale upon execution. A purchaser upon execution has the same right in this respect as a judgment creditor.
3. JUDGMENT DEBTOR-AsSETS.

The interest of a judgment debtor in lands fraudulently conveyed by him is a legal and not an equitable asset.
4. PRACTICE-DEMURRER OVERRULED-ONJ:NING PROOFS.

Where a defendant answers and demurs, but takes no testimony in support of his answer, and elects to go to a hearing upon his demurrer, leave will not be granted to open proofs upon overruling the demurrer.

In Equity. On motion for rehearing. This was a bill by a judgment creditor, who was also purchaser upon the execution sale, to set aside a fraudulent conveyance made by the judgment debtor. The proofs showed that judgment was obtained in this court against the defendant Philo H. Budlong, June 12, 1877, execution issued and levied July 3, 1877, upon lands theretofore owned by the defendant, and a certificate of the levy filed in the county register's office; that the lands were sold upon such execution November 30, 1877, and were bid in by the complainants. A certificate of sale under the statute was recorded December 1st. This judgment was rendered upon a bond given by the defendant

ORENDOBF

v.

25

Budlong to plaintiff's intesta.te. On October 8, 1".875, priortothe rendition of this judgment, but after a breach in the' condition of thl! bond, the defendant Philo H. Budlong the property in ques· tion to his son George, who gave a mortgage back upon the same day for $3,500,-the entire consideration,-payable ten years from date. This mortgage was assigned in January, 1877, to one Ranney, of Chicago, and again assigned by Ranney to defendant Markham in July following. On November 26th, four days before the sale upon execution, George Budlong oonveyed to Markham by 80' deedwhi,.ch was not delivered or recorded until December 26th, but remained in escrow after its execution awaiting payment of the consideration. . The bill prayed that these several conveyances be set aside as fraudulent, and that the property be adjudged to belong to complainants. The answer of defendant Markham (who is now in possession of the property) denied the severa,} allegations of fraud, and also set,up by way of demurrer the insufficiency of the bill. Defendant took no testimony, but relied solely upon his demurrer. A decree was ordered for complainants. J. H. OampbeU, for complainants. George Woodruff, for defendant. !) BROWN, D. J. There can be no doubt of the general jurisdictioIJ of a court of equity to set aside fraudulent transfers of property at the instance of a judgment creditor. Such bills are constantlysuBtained, notwithstanding there may also be a remedy by ejectmen:t, upon the ground that no remedy is full, adequate, and complete which leaves the fraudulent deed outstanding as an apparent cloud upon the title. Never since the case of Bean v. Smith, 2 Mas. 252, decided by Mr. Justice Story in 1821, has the power of the federal courts ,to entertain bills of this description been questioned. Bump, Fraud.Conv. 508j Pratt v. Ourtis, 6 N. B. R.139; Buck v. Shennan, 2 Doug. (Mich.) 176. It was insisted, however, that this bill would not lie, because, under Comp. Laws, § 4628, it should have been filed within a year after the sale. The material parts of the section read as follows:
II All the real estate of any debtor, includinK legal and equitable interests in lands acquired by parties to contracts for the sale and purchase of lands, whether in possession, reversion, or remaiJ.1der, including lands conveyed with intent to defeat, delay, or defraud his creditors, and the equities and rights of redemption hereinafter mentioned, shall be subject to the payment of his debts, liabilities, and obligations, and may be levied upon and sold upon execution as hereinafter provided. * * * In case of a levy upon the equitable interest of a judgment debtor, the judgment creditor may, before sale, institute proceedings in aid of said execution to ascertain and determill6

the .eqWttfesof3l\id jUdgmant.dep!or in the premises .so le,vied upon_ and that ip of a sale, .preptises" ,after having ascertained and detersa,id de!;ltor in the premises so levied upon and mined tlle within one year, institute proceedings to ascertain and detersold, .he miile the 'Bame; and to :settlethe lights of parties in interest therein." ,;,
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.

, Thare,are,twoBu81cient;.answetatQ the complainants' proposition thavthes6 p¥oceedings should have been taken within the l:;LThejurisdiction of thisCQu,rt a.s a court of equityis uniform thl'otitghbutithe UnitedJStates,ian:dis; una.ffected by state la>y8( .. The.. Rev4B$d Statutes, ,§ 913,' forms and modes of proceeding in snits of equity shall be according ,to the principl-es, usages which' belong to· courts .of.eqUity, as oontts 1 oh:ommoh law. ' ,Under thisl'provision, which is taken frolU thal it has alwaysl.beeu held that the jurisdiction.. and, practi'ce' of' the' circuit counts' in' equity was..1,1lliform throughout the. United St'ates, ..andnot stibjeet to. restr,i,ction or limitation by 8:Wheat. 212; U. $. :v. Howland, 4c Wheat. 108; Boyle v. Zacha,rie, 6 Pet. 648, 658; N{)f>rnan v. Lee, 9. Black, It is a natural corollary ·of this that IWeare not bound by the decisions of the state courts upon questiona,of Scott, 13 How. 268. 2. Thfj limitation 'of the section in question applies only to tableJinte'r'0sts," while-the interest of a creditor in the land of hia debtOi','frand1l1ently'conveyed, isB. legal and not an equitable asset. Pulliam v. Taylor, 50 Miss. 555. That this is tbe proper construction to be placed upon this statute is aleo by referring to the section of the Revised StatutJ38 of 1846, from which it was taken. This, chaptel' (llhapter 79, § 1) "thltt all' the real.· estate of a debtor, whether in -possession; reversion, or. remainder, including lands fraudulently conV"lyed with .:intent to defeat, 'delay, or defraud creditors, ,. · · shall be subject to the payment of his debts, and may be sold on execution." Thisohapter makes no reference to equitae:j(.cept th,e equity of redemption of amortgagol; and ble ,in.:Trask v'. Green, 9 Mich. 358, and Maynard v. Hoskins, Id.A85, it 'was' held that it did ·not reach the case of lands which a judgment 'debttn'had purchased and caused to be conveyed by the vendor di· rectly to a third persDn to defraud his6rEiditors,and thatiluch lands only.be reached by a creditor's ,after the return: execut,ioll unsatisfied. .

OBE):'iDOBll' v.BODLONG.

·To obviate in -some measure the difficulty -of ,- -reaching interests the statute was amended in 1867 by including legal and eqhitable- interests in lands acquired by the parties to contracts for the sale and purchase of lands. It is obvious that the Emitation of the one year within which proceedings mlty be taken after' the sale applies only to those equitable interests, and perhaps those of a mortgagor, and not to the case oflands fraudulently conveyed.. This was also the opinion of the supreme court of this state in Oranson v. Smith, 10 N. W. Rep. 194.· · But the main defence to this case is that this bill should have been filed in aid of the execution and before the sale ; the theory of the defendant being that if the judgment creditor waits until the land is sold, and he has obtained his deed, there isa complete and adequate remedy at law in an action of ejectment, and that he can no longer invoke the aid of a court in equity. In support of this proposition defendant relies upon the case of Crallson v. Smith, above cited, r.ecently decided by the supreme court of this state. This case i,s directly in point. Complainants have to distinguish' it from the case under consideration, in the fact that Markham's title -was not taken and did not appear of record, until after the sale on execution. But the deed from Budlong to his soli was the one in .controversy. This was taken long before the bill was filed. If this deed was :valid, and George Budlong was a bop,a fide purchaser, thell Markham's deed conveyed a perfect title to him, even thQugh he had notice of the levy. On the other hand, if George, Budlong was not a bona fide purchaser, Markham, having notice of the levy, could not take a good from him. Complainants' cRee, then, muat stand or fall with the view taken by this court of the correctness of thl;l.ruling in the case of Cranson v. Smith. This case undoubtedly conflicts with the previous intimations of the supreme court upon the Bame question, although the point had never been directly decided. Thus, in Cleland v. To,ylor, 3 Mich. 201, which was an action of ejectment by a judgment creditor, who was also a purGbaser at the -sheriff's sale, to test the· validity of !lo deed mado by the judgment debtor, it was assumed,both by, the eourt and cotinsel, that the right of the plaintiff to have the deed set aside in a court of chancery was unquestioned. So, in Haggard, 9 N. W. Rep. 853, which was a bill by a judgment 6'red·itor, who was also purchaser upon execution, to set aside a fraud· ulent mortgage made by the judgment debtor, it was held that the bil1ahould have been filed before the sale, for the reason that if the

nDERAL REPORTER.

judgment oreditor could 'buy with a secret assurance that he was to have an unencumbered when others must suppose they were buying subject to the mortgage, this assurance gave him an advantage in bidding to the full amount of the mortgage, and practically put competition entirely out of the question. It was thought to be unfair to the other bidders and to the mortgagee to give him this advantage. "There can be no equity in permitting him to purchase the lands apparently subjeot to the mortgage, and then to have its lien annulled afterwards." But in delivering the opinion Mr. Justice Gooley draws a clear distinction between that case and one where the judgment debtor has made a fraudulent conveyance of all his interest in the land:
"In those cases," he says, "the judgment debtor had conveyed away his whole interest, and any offer to sell on an execution against him necessarily attacked his conveyance. The judgment debtor would understand this, and his grantee would understand it, and take his measures accordingly. So would all persons, who should be inclined to he bidders at the sale, undetstand it, and all would stand on an equality with the judgment creditor in making bids. No doubt it would be proper for the sheriff expressly to give notice at the sale that the validity of the debtor's conveyance was disputed, but as the offer to sell would be idle and meaningless if the conveyance was not contested, any such notice would be obviously unimportant."

But in'Granson v. Smith the reservation thus made by Mr. Justice 'Cooley, (which seems to us unanswerable,) of cases like the present, where all bidders stand upon an equality, is expressly overruled. The reasons for'his conclusion are stated as follows by Mr. Justice Marston:
"At the time the levy b:ntlsale was made under the execution, complainant, the judgment ozreditor, had full and ample knOWledge of the conveyance from John F. Smith to his wife, the deed having been duly recorded. The complainant did not then, although he had an undoubted right to, file his bill in aid of his execution, and, if the conveyance was frauuulent, have it set aside, thus restoring and revesting the legal title in the judgment debtor, and thus enable intending purchasers to compete with him at the sale. He preferred to leave the matter not only in doubt as to the fraudulent character of the conveyance, but thereby to prevent any person from bidding against him, as purchasers under the levy made and interest sold could not have moved to have the conveyance declareu void. The complainant could not thus acquire the title, and then come into a court of eqUity and ask to have the deed set aside."

But why cannot a purchaser under an execution sale move to have the conveyance declared void? We know of no reason. Clearly the authorities are in his favor. Indeed, the judgment creditor himself,