Paulson v. Ward

• Decision Date: 19 March 1894
• Citation: 58 N.W. 792,4 N.D. 100
• Parties: PAULSON et al. v. WARD et al.
• Court: North Dakota Supreme Court

4 N.D. 100

58 N.W. 792

PAULSON et al.

v.WARD et al.¹

Supreme Court of North Dakota.

March 19, 1894.

Syllabus by the Court.

1. A complaint in equity which alleges that the grantors in a certain conveyance were insolvent, and were being pushed by their creditors, and that such conveyance was without consideration, and wholly voluntary, and made with intent to hinder, delay, and defraud the creditors of the grantors, sufficiently sets forth the facts constituting the fraud.

2. When a complaint is defective by reason of the omission of a certain allegation, not jurisdictional, but is not objected to on that ground, and evidence of the omitted fact is introduced without objection, and the court finds that such omitted fact existed, the defect in the complaint cannot be urged in the appellate court for the first time.

3. Equity clearly recognizes an action in aid of a legal process, which action, while closely allied to a creditor's bill proper, is clearly distinct therefrom, and in such action it is not necessary that an execution be issued, and returned nulla bona. As the purpose of the action is to procure the removal by a court of equity of obstructions that hinder the enforcement of the legal process, the execution should be levied upon the property, and remain outstanding until equity removes the impediments.

4. In order to set aside a conveyance of land, as a fraud upon creditors, it is not sufficient to show that the grantors intended by the conveyance to hinder, delay, and defraud their creditors, or that the grantee knew of such intent on the part of the grantors, or knew that such must be the necessary result of the conveyance, when the sole object of the grantee was to secure an honest indebtedness owing to him from the grantors.

5. Evidence in this case held sufficient to sustain a finding that the grantee participated in the fraudulent intent to hinder, delay, and defraud the creditors of the grantors.

Appeal from district court, Traill county; William B. McConnell, Judge.

Action by John E. Paulson and P. S. Peterson, copartners as J. E. Paulson & Co., against G. A. Ward and others. Judgment for plaintiffs, and defendants appeal. Affirmed.J. F. Selby (M. A. Hildreth, of counsel), for appellants. Carmody & Leslie, for respondents.

BARTHOLOMEW, C. J.

This action was brought by the present respondents in aid of an execution issued upon a judgment in their favor, and against the property of G. A. Ward and Jessie S. Ward and H. H. Hall. The aid which is asked at the hands of a court of equity consists in setting aside two real-estate conveyances; one made by the Wards-who are husband and wife-to the defendant Patterson, the other made by Hall, who is the son of Jessie S. Ward, to Patterson. The district court granted the relief prayed, and defendants appeal. We will discuss the points in the order in which they are presented in the able brief of appellants' counsel.

It is first urged that the complaint does not set forth sufficient facts and circumstances of the fraud alleged to sustain an action for equitable relief. It is true that a bald statement that a transfer is fraudulent, or that it was made and received with intent to hinder, delay, and defraud the creditors of the grantor is not sufficient. The facts that enter into the transaction and impart its fraudulent character must be stated. The statement in this case is somewhat meager, but, we think, sufficient. The complaint avers “that, as they (plaintiffs) are informed and believe, the defendant Daniel Patterson never really and in truth purchased said real estate, or any part thereof, and that he never paid any consideration for the said deeds of said land, but that said deeds were wholly voluntary and without consideration.” And this was followed by the allegation of intent upon the part of all the defendants to hinder, delay, and defraud the creditors of the Wards and Hall. The voluntary character of the transfer, coupled with the insolvency of the grantors, as pleaded, and with the fact that creditors of the grantors were pushing their claims to judgment, if true, rendered the transfer necessarily fraudulent as to such creditors.

Next, it is urged that the complaint does not allege that the debtors had not sufficient property remaining to pay their debts after the alienation. The allegation of lack of other property is contained in the complaint, but it is claimed that it refers to the time of the commencement of this action, and not to the time of the alienation. This is undoubtedly true, but when we look at this objection to the complaint, as urged in the trial court, we find it runs: “For the further reason that it (the complaint) does not state sufficient facts, or allegations that may be construed to be facts, that at the time of the commencement of this action the defendants did not have property out of which their demands might have been satisfied.” The objection that is now urged is not the objection that was made below. Had it been made, undoubtedly the complaint would have been amended to cover the point, as evidence was introduced without objection on this point to show that the grantors were insolvent at the time the deeds were executed, and the court finds “that neither of the defendants Ward and Hall were possessed of any property, real or personal, on said 20th day of December, 1888 (date of transfer), or have been since that date, save such as were covered by such deeds or chattel mortgages, or chattel mortgages subsequently issued to said Patterson, and from which an execution could be collected.” The evidence showed, without substantial conflict, that all real estate owned by the debtors was transferred to Patterson on December 20, 1888, and all personalty then owned by them was mortgaged to Patterson on that date, and all personalty subsequently acquired was so mortgaged as soon as received. Under these circumstances this objection cannot be urged in this court for the first time. See Martyn v. Lamar, 75 Iowa, 235, 39 N. W. 285;Waterhouse v. Black (Iowa) 54 N. W. 342;Benton v. Beattie, 63 Vt. 186, 22 Atl. 422;Reed v. Nixon, 36 W. Va. 681, 15 S. E. 416; and the copious citation of authorities in note to section 470, Elliott, App. Proc.

But a further point is made that equity is without jurisdiction in this case, because it is not shown that an execution had been issued on the judgment in favor of plaintiff, and returned nulla bona. This purely formal requirement is a necessary condition precedent to the right to file a creditor's bill proper. McElwain v. Willis, 9 Wend. 548;Crippen v. Hudson, 13 N. Y. 161;Dunlevy v. Tallmadge, 32 N. Y. 457;Adsit v. Butler, 87 N. Y. 585;Taylor v. Bowker, 111 U. S. 110, 4 Sup. Ct. 397. But we are convinced that, for two sufficient reasons, the point is not applicable in this case. Respondents seem to have acted with caution, and advisedly. The complaint is dated January 15, 1891. It is alleged, and so found by the court, that on the 27th day of December, 1890, an execution was duly and properly issued upon the judgment that the respondents had obtained against the Wards and Hall, and placed in the hands of the sheriff of the proper county, being the county wherein the real estate in controversy is situated, and in which all the said debtors resided, and that on January 3, 1891, the said sheriff made his return on said execution, stating that he had made diligent search, and could find no personal property in his county belonging to the said defendants in the execution, or any of them, upon which he could levy such execution, and no real estate belonging to said defendants, or either of them, except the real estate in controversy; that he levied said execution upon said real estate, but was requested by plaintiffs' attorneys not to sell the same until the determination of an action to be instituted to remove the obstacles in the way of such sale. The execution was returned entirely unsatisfied. This was, under the circumstances, equivalent to a return nulla bona, and would have furnished jurisdiction for a creditor's bill. But on January 13, 1891, an alias execution was issued on the judgment, and placed in the hands of the sheriff, who on the same day indorsed thereon his inability to find any personal property belonging to the defendants therein upon which to levy such execution, and thereupon levied upon the real estate in controversy, and still holds the same under the levy. It is in aid of this alias execution that this action is brought. In such an action it is neither necessary or proper to show a return nulla bona. The execution should remain outstanding, particularly where the property is personalty whereon a lien exists only by virtue of the levy, and it can do no harm, and is the better practice in any case. The action is not strictly a creditor's bill. That action is intended to discover assets, and to reach equitable and intangible estates and interests that could not be reached by the common-law process, and also to set aside fraudulent conveyances. The action in aid of legal process, while closely allied to the creditor's bill proper, is yet clearly distinct. It is never employed to discover assets or to reach intangible assets. It can only be employed where there are tangible assets, in their nature subject to execution, and upon which the plaintiff has obtained a specific lien. Where that lien depends upon the levy of execution, a return of the execution would of course destroy the lien; hence, it is generally said in these cases that the execution must remain outstanding. When a court of equity has removed the obstruction or incumbrance that prevents a proper enforcement of the lien, then satisfaction is had through the process from the law court. This remedy is not exclusive. A party may proceed to sell under the levy, and the purchaser subsequently take the proper steps to obtain possession. But equity does not consider the legal remedy adequate in these...