First National Bank v. McDonough

• Decision Date: 08 November 1917
• Docket Number: Civil 1541
• Citation: 168 P. 635,19 Ariz. 223
• Parties: FIRST NATIONAL BANK OF GLOBE, a Corporation, Appellant, v. MARY McDONOUGH and MARY McDONOUGH, Executrix of the Estate of J. N. McDONOUGH, Deceased, and E. F. PFISTER and GEORGE E. SHUTE, Appellees
• Court: Arizona Supreme Court

168 P. 635

19 Ariz. 223

FIRST NATIONAL BANK OF GLOBE, a Corporation, Appellant, v. MARY McDONOUGH and MARY McDONOUGH, Executrix of the Estate of J. N. McDONOUGH, Deceased, and E. F. PFISTER and GEORGE E. SHUTE, Appellees

Civil No. 1541

Supreme Court of Arizona

November 8, 1917

APPEAL from a judgment of the Superior Court of the county of Gila. F. B. Laine, Judge. Affirmed.

Mr. A C. McKillop, for Appellant.

Mr Eugene W. Miller and Messrs. Rawlins & Little, for Appellees.

OPINION

FRANKLIN, C. J.

J. N McDonough died testate at Globe, Arizona. His will was admitted to probate and the widow, Mary McDonough, was appointed executrix of his estate. From plaintiff's complaint it appears that the value of the estate of McDonough, deceased, as inventoried and appraised in the probate proceedings, was $417.50 and consisted of community property. It is alleged that said McDonough in his lifetime, together with E. F. Pfister and George E. Shute, jointly and severally executed their promissory note in favor of the First National Bank of Globe for the sum of $500. In the course of administration a claim founded upon the indebtedness evidenced by this note was presented to the executrix and rejected. The present action was commenced against Mary McDonough and Mary McDonough, as executrix of the estate of J. N. McDonough, deceased, E. F. Pfister, and George E. Shute. The object of the suit was to establish the indebtedness as evidenced by the note and recover judgment for the amount alleged to be due the plaintiff from the makers thereof. The plaintiff also asked relief in equity against an alleged fraudulent conveyance of certain property made by the deceased, in his lifetime, to his wife, Mary McDonough, to defeat his creditors, and which, if not set aside, would render the action of the plaintiff fruitless. Among other defenses interposed and by way of demurrer the executrix asserted the statute of limitations, in that it appeared upon the face of the complaint that the cause of action was barred by the provisions of paragraph 887 of the Civil Code of 1913, because plaintiff did not bring its action within three months after its claim was rejected by the executrix; also that the complaint does not state a cause of action for equitable relief to set aside an alleged fraudulent conveyance because plaintiff's demand on the indebtedness has not been established at law by judgment or otherwise; and, further, on the ground that a cause of action upon the legal demand is improperly joined with a cause of action to set aside a fraudulent conveyance. The court sustained the demurrer, with leave to amend the complaint, but, plaintiff declining to amend, the court gave judgment, dismissing the action as to Mary McDonough, both individually and as the personal representative of J. N. McDonough, deceased, with costs. Upon the trial and on the proofs adduced judgment was given the plaintiff against defendants E. F. Pfister and George E. Shute. From the judgment in favor of Mary McDonough individually this appeal is prosecuted. There is no appeal from the judgment in favor of the personal representative of J. N. McDonough, deceased.

However interesting it may be, it is entirely unnecessary to follow learned counsel in the discussion as to what conditions must be present before a creditor can be heard in equity to challenge a conveyance for fraud. Our laws confer jurisdiction upon the superior court to hear and determine all causes of action, whether legal or equitable or both. It is provided that:

The complaint shall set forth clearly the names of the parties, a concise statement of the cause of action, without any distinction between suits at law and in equity, and shall also state the nature of the relief which he demands. Paragraph 425, Civil Code 1913.

That: The judgment of the court shall conform to the pleadings, the nature of the case proved, and the verdict, if any, and shall be so framed as to give the party all the relief to which he may be entitled either in law or equity. Paragraph 548, Civil Code 1913.

In those jurisdictions where law and equity are separately administered there is much confusion in the cases as to the true meaning and application of the rules in equity that a party who seeks relief as a creditor against a fraudulent conveyance of his debtor's property must show that he has exhausted his remedy at law or that he has no adequate remedy at law. While under the former system the two courts acted one in aid of the other, they proceeded upon different principles and were governed by distinct rules. Not a little jealousy crept in to disturb that harmony so essential to the determination of all judicial controversies, and so necessary in the administration of the law. It was but a feeling common to all who have power to see that there should be no assumption of a jurisdiction or the exercise of a power on the part of one which properly belonged to the other, and herein we may discover in part the cause of the confusion in the cases. This controversy, never completely settled, must necessarily continue between the law and equity courts until their separate jurisdictions are so blended that the full measure of relief to which a party may be entitled shall be afforded him in one action and by the same court. The rules once being formulated by a precedent, any substantial modification of the principle has met resistance in the conservatism of the courts on account of their unwillingness to allow any change in the doctrines once established by their prior decisions. The frequent occurrence of cases in which a rigid adherence to the precedents produced manifest injustice has happily been reformed by the statutory provisions blending law and equity, so that a party may have his full measure of relief in one action and by the same court and judge amply equipped to administer the justice of the case upon equitable as well as upon legal principles. Whatever embarrassment that might attend the discovery and application of the true principles governing equitable assistance to creditors when a party under the old system was seeking relief as a creditor against a fraudulent conveyance of his debtor's property, and, being compelled to resort to two separate courts for full relief, was confronted with these rules of equity, is now largely dissipated by the simple provisions of the statute, the meaning and intent of which are that plaintiff may have a complete remedy in one action and ask the court, in the exercise of its law power, to establish his legal demand and give judgment for the amount found due him, and in the same action ask its equitable interposition to relieve him from the fraud which would render his action fruitless. Uniting in the one action both his legal and equitable causes of action that are capable of the same character of relief, the court is given ample power by the statute to conform its judgment to the pleadings, the nature of the case proved, and the verdict, if any, and so frame its judgment "as to give the party all the relief to which he may be entitled either in law or equity." The reasons usually given in support of the old rule where law and equity are separately administered are that equity should not interfere to aid a legal right before the legal remedy is tried; that a simple contract creditor may never obtain a judgment, and if he does not, he cannot be injured by any disposition of the property; and that the judgment may not be obtained in equity upon the legal demand because the parties are entitled to a jury trial. It is perceived that the system of judicature established by our Code may not operate to support the reasons upon which these rules governing the former system were based, and, the reasons for the rules failing, the rules must fall. In the action all controverted questions of fact may be submitted for the determination of a jury, and it would be manifestly absurd to hold that a party must go into the superior court and establish his legal demand and then institute another action in the same court, asking equitable relief that the recovery of his judgment may not prove fruitless, when under the statute the judgment for the recovery of the money could be rendered in the very action and before the same court in which the equitable relief is asked.

We are not without light upon this matter from those jurisdictions where the system is one of blended law and equity.

"A creditor's bill," said the court in the case of Vail v. Hammond, 60 Conn. 374, 25 Am. St. Rep. 330, 22 A. 954, "strictly exists only in those jurisdictions where law and equity are administered by separate tribunals. A creditor first obtains a judgment in a court of law, and then seeks the aid of a court of equity to apply in payment of the judgment some property which could not be attached or taken on execution in the action at law. But in this state where the same court administers both law and equity, and where legal and equitable remedies can be granted in the same action, a creditor can in the same complaint have judgment for his debt and also the necessary equitable aid to obtain payment out of any property of the debtor which the law court could not reach."

In North Carolina, where it was urged that a court of equity would not aid a creditor in attacking a fraudulent conveyance until he had exhausted his legal remedies, it was said:

"It is obvious, that as this rule grew out of the relations of the two courts under the former system, one acting in aid of the other, and was essential to the harmony of their action in the exercise of their separate functions in the administration of the law, so it must of necessity cease to have any force, when the powers of both and the functions of each are committed to a single...