Tate v. Sanders

• Decision Date: 05 July 1904
• Citation: 149 S.W. 485,245 Mo. 186
• Parties: CHARLES H. TATE v. LON SANDERS et al., Appellant
• Court: Missouri Supreme Court

149 S.W. 485

245 Mo. 186

CHARLES H. TATE v. LON SANDERS et al., Appellant

Supreme Court of Missouri, Second Division

July 5, 1904

245 Mo. 186 at 207.

Original Opinion of July 5, 1904, Reported at: 245 Mo. 186.

Motion overruled.

ROY, C Blair, C., concurs.

OPINION

ON MOTION FOR REHEARING.

ROY, C.

-- In a motion for a rehearing, appellant has asked us to review the question of the liability of the fraudulent grantee for rents, his contention being that such grantee is liable for all rents after the conveyance to him. We have gone through the authorities and will first state what we find the law to be, and then give our reasons for reaching such results.

We can best understand what are the rights of the creditor against a fraudulent grantee by first ascertaining what his rights are against the debtor in the absence of a fraudulent conveyance, leaving out of consideration questions arising on proceedings by attachment.

In the first place, the creditor must obtain a judgment. Secondly property subject to execution can only be reached by levy and sale thereunder, and the execution of the sheriff's deed in case of the sale of land. Prior to such sheriff's deed, the creditor has no right to call the debtor to account for rents and profits, and after such deed the liability for rents does not go back of such deed.

On the other hand, the debtor or his estate may have property not subject to execution, but which should be applied to the payment of his debts. The debtor may have assigned his property for the benefit of his creditors, or may have been adjudged a bankrupt, or may have died. In which cases, the rents of his real estate, from the time it passed into the hands of the assignee, or the trustees in bankruptcy or administrator, would be collectible by such representative for the payment of debts. There are many other cases where the property of the debtor, for some reason or other, is not subject to execution. In those cases, the creditor may, after obtaining judgment, bring his creditor's bill, and is allowed to collect rents and profits from the bringing of such bill. Most of the authorities require that before the creditor can bring such bill there should be an execution returned unsatisfied.

Fraudulent conveyances are not all alike. Some are made with an understanding between the debtor and the fraudulent grantee that the latter shall hold the same for the use and benefit of the debtor. Such an arrangement is known as a "secret trust." The grantee is, to all intents and purposes the alter ego of the debtor. As he has agreed in effect at least with the debtor to account to him for rents and profits, there is no hardship in compelling him to pay to the creditor that which he agreed to pay to the debtor. There is no controversy anywhere over the question of the liability for rents in such case from the time of the fraudulent conveyance.

But in the case of the ordinary plain fraudulent conveyance, where the grantee takes the property without any such "secret trust" and claiming it not only against the creditor but against the debtor, such grantee is liable for rents only from such time as the debtor himself would have been liable had the property remained in his hands. Such is the result of the fact that the conveyance is simply void. The parties are left just where they would have been had no such conveyance been made. If the debtor is still alive and his property has not passed to trustees in bankruptcy or other legal representatives authorized to collect the rents, the creditor must move straight along the statutory road laid out for him and get his sheriff's deed under execution on his judgment before his right to rents begins.

We will now review the authorities as briefly as possible. It should be stated in the beginning that so far as the results of the cases considered are concerned, there is very little disagreement. The language used is often much broader than the necessities of the case require. The liability of the fraudulent grantee for rents is often discussed without any distinction made between a case of secret trust and one where there is no such trust. The cases holding the grantee who takes without any secret trust liable for rents prior to sale under execution where the property is subject to execution are so few in number and of such a character as to be practically negligible.

The Supreme Court of the United States, in Conard v. Atlantic Ins. Co., 1 Pet. 443, stated the rights of a judgment creditor as follows: "Now it is not understood that a general lien by judgment on land, constitutes, per se, a property, or right, in the land itself. It only confers a right to levy on the same, to the exclusion of other adverse interests, subsequent to the judgment; and when the levy is actually made on the same, the title of the creditor for this purpose relates back to the time of his judgment, so as to cut out intermediate incumbrances. But, subject to this, the debtor has full power to sell, or otherwise dispose of the land. His title to it is not divested or transferred by the judgment to the judgment creditor. It may be levied upon by any other creditor, who is entitled to hold it against every other person except such judgment creditor; and even against him, unless he consummates his title by a levy on the land, under his judgment. In that event, the prior levy is, as to him, void; and the creditor loses all right under it. The case stands, in this respect, precisely upon the same ground as any other defective levy, or sale. The title to the land does not pass under it. In short a judgment creditor has no jus in re, but a mere power to make his general lien effectual, by following up the steps of the law, and consummating his judgment by an execution and levy on the land. If the debtor should sell the estate, he has no right to follow the proceeds of the sale, into the hands of vendor or vendee; or to claim the purchase money in the hands of the latter. It is not like the case where the goods of a person have been tortiously taken and sold, and he can trace the proceeds, and, waiving the tort, chooses to claim the latter. The only remedy of the judgment creditor is against the thing itself, by making that a specific title which was before a general lien. He can only claim the proceeds of the sale of the land, when it has been sold on his own execution, and ought to be applied to its satisfaction."

2 Freeman on Judgments (4 Ed.), Sec. 338, p. 618, speaking of the rights of the judgment creditor, says: "He has no interest in such land, other than the right to sell it." The same position is held by 1 Black on Judgments (2 Ed.), Sec. 400. The main cause of all the disagreement on this question is Sec. 626 of Bump on Fraudulent Conveyances, which is as follows: "It certainly is not consonant with the principles of the law that the grantee should derive any advantage from his fraud. Consequently, he may be compelled to account for the profits from the time of the transfer. An account may also be taken of what has been received as compensation for the use of the property. The grantee should not be charged with the increased rent and profits arising from improvements made by him."

Then follows a long list of citations, many of which are in direct opposition to the text, and a majority of which are cases of "secret trusts," while others were cases where the property had passed into the hands of administrators, trustees in bankruptcy or other fiduciaries. The leading case relied on by Bump is Loos v. Wilkinson, 110 N.Y. 195. It must be frankly admitted that the language of the opinion in that case is strongly in favor of the right of the creditor to rents. But an examination of that case shows that the transfer was made under a secret trust for the benefit of the debtor. Under the rules above stated by us the grantee was liable because of the fact that he was such trustee. In so far as that opinion declared a grantee who did not take under a secret trust liable for rents, it ought to be regarded as obiter. In that respect it is squarely against the decisions of the New York courts, as hereafter shown.

The cases of Marshall v. Croom, 60 Ala. 121; Robinson v. Stewart, 10 N.Y. 189; Ringgold v. Waggoner, 14 Ark. 69; Higgins v. York Buildings Co., 2 Atk. 107; Warner v. Blakeman, 4 Abb. App. (N.Y.) 530; United States v. Griswold, 8 F. 556, all of which are cited by Bump in support of his text, hold that the grantee is liable for rents only from the date of the sheriff's deed.

Higgins v. York Buildings Co., supra, is the only English case cited by him, and that case closes with the following paragraph:

"I do not know in the case of fraudulent conveyances, that this court have ever done anything more than remove such fraudulent conveyances out of the way, nor are there any cases that I can find of decreeing profits back, against the original debtor and owner of the estate, received pendente lite in this court, in favor of judgment creditors from the filing of the bill, nor any instance of a decree for a sale; but equity follows the law, and leaves them to their remedy by elegit, without interfering one way or the other."

Not one of the cases cited by that work on Fraudulent Conveyances holds the grantee liable for rents where there was no secret trust and where the property was subject to execution.

In Robinson v. Stewart, 10 N.Y. 189, the court said "But the question then arises, whether the complainant was entitled to an account of the rents and profits. I think he was not. As before remarked, he had no lien, and the conveyances were valid between the parties. The remedy of the complainant was to procure the land to be sold, and the proceeds to be applied towards the debts. But until...