Phelps v. Smith

• Decision Date: 20 December 1888
• Docket Number: 13,189
• Parties: Phelps et al. v. Smith et al
• Court: Indiana Supreme Court

19 N.E. 156

116 Ind. 387

Phelps et al. v. Smith et al

No. 13,189

Supreme Court of Indiana

December 20, 1888

Original Opinion of June 27, 1888, Reported at: 116 Ind. 387.

OPINION

Elliott, J.

The principal point decided affecting the rights of Mrs. Collins who petitions for a rehearing, may be thus stated: A defendant who enters into a conspiracy to defraud the creditors of a co-conspirator, and who, pursuant to the purpose of the conspiracy, obtains a judgment, secures a sale under an execution thereon, thereby securing and retaining the avails of property that, of right, should have gone to the good-faith creditors of the co-conspirator, may be compelled to account for the proceeds of the sale so procured by fraud.

As our former opinion shows, we sustained our conclusion by ample authority, and we then thought, and still think, that it rests on solid principle. Neither in the original argument nor in that on this petition was there cited any relevant authority to the contrary.

We did not overrule the case of Tasker v. Moss, 82 Ind. 62, nor was it necessary to do so; we did, however, deny its relevancy. We deny its relevancy because, whatever may be thought of its soundness, it is easily discriminated from this case, for here the fraudulent vendee received and retains the proceeds of property which ought to have gone to the bona fide creditors, and not the person who, by fraud, was made to seem a creditor but, in fact, was not.

The cases of First Nat'l Bank v. Carter, 89 Ind. 317, and Beach v. Carter, 93 Ind. 602, are not in point, for here the special finding shows that the defendant was an active participant in the fraud. It appears in the special finding not only that Mrs. Collins had actual knowledge of the fraud, and participated in it as a conspirator, but also that she paid no consideration whatever for the claim she asserted against Smith, and by means of which she consummated her fraudulent purpose.

We disposed of the decisions in other States which declare that only judgment creditors can assail a fraudulent conveyance, by reference to our statute and our decisions. To the cases referred to in the former opinion we might add others if it were necessary. It is, and long has been, the law of Indiana that a creditor, although he has not taken judgment, may successfully assail a fraudulent conveyance. Field v. Holzman, 93 Ind. 205; Lindley v. Cross, 31 Ind. 106; Love v. Mikals, 11 Ind. 227.

No question as to parties was made in the court below, and none can be made here. We are not concerned with the question as to how the funds derived from the judgment shall be distributed, since that question is not before us. It may be true that if there are other creditors, they will be entitled to share in the avails of the judgment when it is enforced, but that is nothing to the purpose. Here we are required to decide, and, properly, can only decide, whether, upon the pleadings as the record presents them and the special finding as it is written, the plaintiffs were entitled to judgment. If other creditors come in and present an issue involving the distribution of the proceeds of the judgment, the question as to what the decree shall be will arise; but it is not now before us, as no pleadings of any description were filed presenting that question. If the complaint was thought defective for lack of parties, there was a plain method of attack; or, if facts not apparent on the face of the complaint required the presence of other parties, the question could easily have been presented by an answer.

The cases of Adler v. Fenton, 65 U.S. 407, 24 HOW 407, 16 L.Ed. 696, and Lamb v. Stone, 11 Pick. 527, can not, it is very clear, be of force in a jurisdiction like ours, where the same tribunal possesses both law and chancery powers, and where the statute gives a creditor, who has no judgment, a right to relief against a fraudulent conspiracy and a fraudulent conveyance of property. Adler v. Fenton, supra, in truth sustains our position, for it is there said "Unquestionably, the claims of morality and justice, as well as the legitimate interests of creditors, require there should be protection against those acts of an insolvent or dishonest debtor that are contrary to the prescriptions of law, and are unfaithful and injurious. But the Legislature must determine upon the remedies appropriate for this end." Our statutes and our decisions have given the honest creditor the protection which the Supreme Court of the United...