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,
ORENDORF V. BUDLONG.
29
if he purchases at anex6Cution sale, must take proceedings a8 purchaser and not as judgment creditor, to attack the conveyance. Hia rights a,1l creditor are merged in those of purchaser. Bump, Fraud. Conv,'488 j Ohandler v. Von Roeder, 24 How. 224 j Oole v. Wend. 116 j Mwrphy v. Orr, 32 Ill. 489 j Barr v. Hatch, 3 Ohio, ti27; King v. Bailey, 6 Mo. 575. In Sands v. Hildreth, 14 Johns. 497, the court observes: "It has been contended that the respondent is not with the rights of Whitney and others, under whose judgment he became a p'urchaser at· a public sale made by the sheriff of Kings county und\3r executions on .thbse judgments. The statute, it is urged, protects creditors only from fraudulent de!lds, and not a person standing in the situation of respondent. 'J;his propositiQn is, in my jud'glllent, witho'utany foundation. All the respondent's right to the land in controversy is derived froIn and under the under which he purchased. The judgments are his title; and he is placed; by the judicial sale which took' place, precisely in the place of the creditors. If the title acqUired under the sheriff's sale fails, for want of title in the person against whom the execution issues, the purchaser is entitled to a restitution of the money paid. How can it, then, be pretended that the respondent is !lot clothed with all the rights of the jUdgment creditors, if they are liable to rafund all that has been advanced by the respondent on the failure of the title he bought? The idea itself is novel, and unsupported by reason or authority."
"
And, even if the judgment creditor buys the land at less than its value, who is entitled to complain:? Not the fraudulent transferee, for, as against the creditors of the grantor, his deed is as if it never had been written. Not the fraudulent grantor. because he has con,veyed away his title by deed which is perfectl,y good as to himself, and everyone except his creditors. We know of no reason why the rule which demands that a complainant shall come intos of eqUity with clean hands does not apply equally to a defence set up in that court which is not available in an action at law. Now, deciding whether a fraudulent debtor or his fraudulent grantee is entitled to any surplus that may be realized at the sale over and above the judgment debt, it seems to us that neither of them ought to be heard in a court of equity to complain that the judgment creditor did not file his bill before the sale, and have their deed set aside for fraud. "Ne'J!W allegans suam turpitudinem audiendus est." "He that hath committed iniquity shall not have equity." v. Haggm'd to be corConceding the rule established in rect, it seerp.s to us that the case of Oranson v. Smith, so far from being in affirmance of it, is a clear departure from it. We know of no authority which suppprts the principle announced in that case. None
FEDERAL-REPORTER· · OJ
are cited in: the opinion, and, so far as our r'esearches :none can be found in the books. The leading case upon the subject is that of Hildreth v. Sands, 2 Johns. Ch.35. This was a <bill by 'a purchaser upon execution to set aside as fraudulent a deed Of .land's made prior to the jndgment. In speaking of the defence,:w\:ich was held good in Cranson v. Smith, Chancellor Kent observes:' "If it [the statute of Elizabeth] protects the it must protect his sale, and the purchaf:jer under his judgment. The creditor,. on, ,any other construction, would deprived of the fruit of his the plaintiff, execution would be nugatory. There can be no doubt but that as a purchaser under Whitney's judgment. is entitled to all tlle relief that tb,e creditor himself would have been entitled to, for lle stallds in his place and is armed with his rights; and though"hehe a purchaser yerylpWl1rice, yet it was a fair purchase in the regular course of law, and it was 9wing t,o the unwarrantable acts at the debtor himself, in throwing a cloud. over the title, that his property was thus sacrificed. tt does not become the parties to a fraudulent deed to complain of the plaintiff's cheap purChase.' However it may be regretted that the property has yielded but a very small compensation to the creditors, this. fact cannot interfere with the questicm of rigIit. - The circumauction price was an accidental thing, growing out of the stances of the case, and affects only the partles ,concerned; but whether such a fraudulent conveyance shall stand or fall is deeply interesting to the whole community." " .
be
On appeal to the Murt of errors this decree of the learned6haneellor was affirmed. 14 Johns. '493; In the following cases, also, it was directly decided that a bill "of this description might be filed as well after as before the sale'under a judgm'ent: Gallman v. Perrie, 47 Miss. 131, 140; Mays v. Rose; 1 Freeman, Ch. 703; Frakes v. Brown, :3 Blackf. 295; Kellogg v; Wood, 4 Paige, 578; Carpenter v.Simmons, 1 Rob. 360; Porter v. 14 Abb. (N. S.) 16; Best v. Staple, 61 N. Y. 71; Barr v. HatCh, 3 Ohio, 527. In the following cases bills of this description have been sustained, though the point was not discussed: Pope v. Pope, 40 Miss. 516; Pepper v. Carter, 11 Mo. 540; Darganv.Waring, 11 Ala. ,988; White v. Williams, 1 Paige, 508; Fisher v. Lewis, 69 Mo. 629. It seems to us there can be no doubt of the power of this court to entertain a bill of this description. In so far as the merits are concerned, the testlmonymakes a clear case for the complainant. At the time of the deed to George Bud· .long, Philo was in default upon his bond, and a right of action had -accrued. It was almost inevitable that a suit would be bronght, an'd a judgment obtained against him. In this situation of things he conveys to his son George, who was without means and dependent upon
his Jfath.f3,r. fQF.
fljr
tli$
chase llloney. :/Thb morlgage he to Ranney, who Wlla -his feeble iuhealth, broth,er,i,n-law, ;;lond a man witpoufJ' on hi.s relatives for. support. Ranneyaphave this mortgage at t4etiqJ.e of the sale to Bu4long's request,andnothing,seemsto llaive beeu paid or.'control of the him. ,There.:wasllo changeiu e:rty. Rill, who,w&8, wor.king tile miUmrd.er an anangement with :was made,: testifies that. Gedrge made Philo" :wb.enthe RP to, the< Qwnel(flhip or cOl1trot, Ehilo ,)VElnt colof the mill, settled: with ;Hill :fol" profits up, t,o June; W6lJ,t out·. lhilp tb(lbookS{Jontaining time. PU'tingthat)per:iod, George worked a tl!.e,M<lou:ntsupw part. of thetjmft by the day iuthem:ill·. After ,the ,de:ed to George Hill, having hadhia attention called to it; aske<lrJlhiloabout it, and whether he wanted him torun the mill any, he .did. said, ".1 under.sta.nd .the mill to. George, l),p,d I suppose yon want George that: tomq.:itt,;, P'bilo.lilays; "I want ,you to run it; I own the mill as 'L h"v:e,.,a.lways' oWI;led it."Another witness testifies that in the fall. l,an,AwQ the d.eedto George, Philo hired him to work in the U?-iH for it, anda.lso paid· hiJP.·forworkdone duriui' 1876 'anq 1,877:., Wedo .nott4iqk'thftt cQnsider:ed a..1Jona fide pur", entitled to complain of this decree. He was a near neigh-l chaser, bor; lived Budlongs and -nearthe,millfp:r;niany years, and during all of these transactions. He knew that George was in indigent circumstances, and that Philo was embarrassed and becoming insolvent. He knew of the' complainant's judgment, and had actual personal knowledge of the levy and sale of the mill property. The notice of sale was posted oil his lana: and near his door. The witness Diehl saw the notice there October 18, 1877, went in, saw Markham, and cailJa his attention to 'it, telling hini'that the mill was advertised. Another witness saw the. notice, of sale there Il>lopgr in November.- Indeed, Markham admits inhi8 answer that he knew description, and he could not have failedtokn'owofthe levy' ip this case, as they were together. Aftertbe. sale and op..the same day, he met: the witness Joslin, who had been present at the sale, and asked him mill property was sold and how muoh it brqught. 'This was 30, 1877. After this, apd op.December
or'
'lIlDEBAL nEPORTER.
hi" deed, whiie the marshal's certificate of sale was on record. This of itself was notice to him. Atwood"t'. Bearr8, 45 Mich. 469. Nor do we think that the decree ought to oe opened to let in Markham's defence. The case was put at issue by filine a replication August 28, 1880. The demurrer was never set down fot hearing. On October 1st counsel on both sides signed a stipulation to proceed to take testimony. A commissioner was then agreed upon. Complainants' proofs were closed in November,and the time for taking of defend. ant's testimony was extended from time to time until the seventh of April, when an order for the closing of proofs was entered. Late in April defendant made an effort to take the testimony of one witness, but abandoned it, and consented to go to a hearing upon his demurrer, relying upon that as a defence. Rule W requires thatl'testimony in equity cases shall· betaken within three months after the case is a.t issue," and we are clearly of the opinion that defendant has hot made a case for the opening of proofs now. No request for further time was made, no request for pOstponement, and counsel deliberately consented to submit the case upon the demurrer. . But an equally conclusive answer is found in the fact that the affidavits do not disclose any defence which wduld be available to Markham. They tend to show that he made a bargain for the land in 1877 at $700, but the answer alleges that there was no money paid until December 26, (the day the deed was delivered,) when the marshal's certifillate of levy was on file, and Markham had actual notice that the property was sold upon execution. The motion for the rehearing must therefore be denied.
SMITH
v.
GAGE.
(Circuit Oourt, N. D. IUin()is. 1.
April 24, 1882.)
TAX TITLE-VALIDITy-BuRNT RECORDS ACT-PROCEEDINGS.
The circuit court has jurisdiction to consider and pass upon the valfdity (If· a claim of title under a tax deed accrued subsequent to the destruction of the records, in an action by bill to restore title under the burnt records act. The practice in such cases stated. 2. ACTUAL POSSESSION-NoTICE OF TIME TO REDEEM.
Whel'e a party was in actual possession of the premises, it is the duty of the person seeking to obtain title through a tax sale to serve personal notice on the occupant of the premises of the expiration of the time to redeem from the tax sale to render the tax deed valid.