Westervelt v. Hagge

• Decision Date: 10 April 1901
• Docket Number: 9,334
• Parties: EDGAR M. WESTERVELT, RECEIVER OF THE CITIZENS NATIONAL BANK OF GRAND ISLAND, APPELLANT, v. WILLIAM A. HAGGE ET AL., APPELLEES
• Court: Nebraska Supreme Court

85 N.W. 852

61 Neb. 647

EDGAR M. WESTERVELT, RECEIVER OF THE CITIZENS NATIONAL BANK OF GRAND ISLAND, APPELLANT, v. WILLIAM A. HAGGE ET AL., APPELLEES

No. 9,334

Supreme Court of Nebraska

April 10, 1901

APPEAL from the district court for Hall county. Heard below before THOMPSON, J. Affirmed.

AFFIRMED.

Othman A. Abbott, for appellant:

Under section 476 of the Code, under the title "Executions," only the legal title of the judgment debtor can be levied on. Dworak v. More, 25 Neb 735; Connell v. Galligher, 36 Neb. 749.

James H. Woolley, Fred W. Ashton, Charles G. Ryan, W. S. Pearne, W A. Prince and R. G. Glanville, contra.

OPINION

HOLCOMB, J.

One William Hagge was the owner of certain real estate situated in Hall county, upon which different alleged liens and their priorities are involved in this controversy. At or about the time of the transactions hereinafter narrated Hagge became financially distressed, because of his connection with, and liability as a stockholder in, the Citizens National Bank of Grand Island, which closed its doors and suspended business about December 4, 1893. On December 6 there was placed on record in the office of the county clerk a warranty deed, conveying the real estate in controversy from Hagge and wife to one D. H. Veiths, a relative of Hagge, for an expressed consideration of $ 10,500. The deed bore date August 9th preceding, and was acknowledged on the 24th of the same month. A mortgage from Veiths and wife on the premises was executed at the same time for an expressed consideration of $ 9,500, and recorded December 26, 1893. Soon after the recording of the instrument conveying the land from Hagge to Veiths, attachment suits were instituted by the appellee Taylor and appellant city of Grand Island, and the real estate was attached at the instance of Taylor as the property of Hagge, it being alleged that he had and was about to convey his property for the purpose of defrauding his creditors, and hindering and delaying them in the collection of their debts. In the suit brought by the city the property was attached as the property of Veiths on a contract liability claimed to be due the city on a bond, on which he was an obligor, in favor of the city, given by one West as city treasurer. Each of these two suits was prosecuted to final judgment, and the property attached was ordered sold in satisfaction of the judgments so rendered. On January 26, 1894, Veiths and wife transferred the real estate to Hagge, excepting in the covenants of warranty any lien or liens thereon by virtue of attachment proceedings in favor of the city of Grand Island, and all taxes. Afterwards, through a third party or trustee, the land was conveyed to Mrs. Hagge, the wife of William Hagge. Mortgages were then executed by Mrs. Hagge and her husband, one in favor of James H. Woolley to secure certain notes evidencing an indebtedness against Hagge, and one to the appellant as receiver of the Citizens National Bank to secure $ 6,000 of a judgment rendered against Hagge on his stockholders' liability in said bank. The receiver then brought an action in equity to foreclose his lien by virtue of the mortgage securing the judgment, making all others claiming an interest in or lien on the land parties to the action, and claiming a prior lien on the premises, except as to the mortgage executed in favor of Woolley, which, it was admitted, was superior to the lien in favor of the receiver. Issues were joined, in the formation of which Taylor and the city of Grand Island set up their attachment suits and the judgments rendered therein, claiming a lien on the land by virtue thereof superior to those created by reason of the mortgages subsequently executed. On the trial the court found in favor of Taylor, awarding him a first lien; in favor of the assignees of the indebtedness secured by the Woolley mortgage, giving them a second lien; the receiver was decreed to have a third lien. The court dismissed the action as to the city of Grand Island and one other cross-petitioner, whose case is not here for review. The receiver and the city of Grand Island appeal from the decree.

In determining the respective rights of the appellants we are required to consider different and distinct propositions of law, and it is, therefore, proper to treat the appeal under two heads. The decree of the trial court, giving to the appellee Taylor on his cross-petition a first lien on the property by virtue of the attachment proceedings instituted by him December 8, 1893, and the judgment rendered thereon, is objected to on the ground, as argued, that the legal title to the property at the time the attachment was levied being in the said Veiths, and Hagge having only an equitable interest therein, attachment would not lie, and the plaintiff in the attachment suit acquired no lien on the property by reason of the levy on the land while standing in the name of Veiths, the grantee of Hagge. In Shoemaker v. Harvey, 43 Neb. 75, 61 N.W. 109, it is held, in the second paragraph of the syllabus: "If there is no possession of real property by an attachment defendant having an equitable interest therein, no valid levy and sale can be made upon such equitable interest, neither can it under such circumstances be subjected otherwise than by invoking the aid of a court of chancery." The opinion in the case sustains the proposition thus announced in the syllabus, and we have no disposition to modify or recede from the same, and if it be proper to apply the same principle to the facts in the case at bar, then the decree pronounced by the trial court can not stand. But is the principle applicable? In the Harvey Case, and all similar cases, the underlying principle is that where the interest of the attachment debtor in real estate is purely equitable, uncoupled with possession, then an attachment or execution can not be validly levied, but resort must be had to a court of equity to bring together the legal and equitable estate, and decree the property to belong to the actual owner. To illustrate: In the Harvey Case the legal title to the property had never been vested in the Harveys; their interest and estate, if any, in the property sought to be attached was equitable only, and could not be reached by the attachment as "lands and tenements" of the attachment debtor. In the case at bar, Hagge was the legal and equitable owner of the property, save only as his title may have been divested by the conveyance made by him to the said Veiths. By the conveyance he attempted to convey all his interest in the land, both legal and equitable. He evidently sought to put it out of the reach of his creditors, either by process out of a court of law or in an action in equity. Taylor levied his attachment on the land on the ground that Hagge had fraudulently disposed of his property with the intent to cheat, hinder, delay and defraud his creditors. By section 17 of the Statute of Frauds (Compiled Statutes, ch. 32) such a conveyance is fraudulent and void as to the creditors of the grantors. As to such creditors, the conveyance may be treated as absolutely void and a nullity, as though it had never been made and the property remained as it actually was, the property of the debtor. The conveyance is at most only a cloud on the title of the debtor, and if required, may be removed in any proper proceeding brought for that purpose. The attachment laws would be ineffectual, and the provision for the attachment of property which has been fraudulently conveyed would be meaningless, if the construction contended for should prevail.

The proposition under consideration seems, however, to have been quite firmly settled by the prior decisions of this court. In Keene v. Sallenbach, 15 Neb. 200, 18 N.W. 75 it is held: "Where an attachment is levied upon real estate belonging to the debtor, whether held in his own name or not, the attaching creditor acquires a lien upon the interest of the debtor in the land which he may enforce after he recovers judgment." Says MAXWELL, J., the author of the opinion: "But where sufficient cause is shown for an attachment, and one is issued and levied upon real estate belonging to the debtor, whether held in his own name or not, the creditor acquires a lien upon the interest of the debtor in the land, which he may enforce after the recovery of judgment. Where in such case it is necessary to set aside a conveyance alleged to be fraudulent as to creditors, an action may be commenced for that purpose against the alleged fraudulent grantee and other proper parties, and it is the duty of the court to render such decree in the premises as the testimony will justify."

In Kimbro v. Clark, 17 Neb. 403, 22 N.W. 788, on the same subject, it is observed at page 406 by REESE, J., who wrote the opinion: "If the title to the property is held by another as a secret trust for the benefit of the debtor who is the real owner, and if such ownership is merely colorable such property will be deemed to be held for the benefit of creditors, and the conveyance, while good as between the parties, will be held void as to them. Sturdivant v. Davis, 31 N.C. 365, 9 Ired. Law 365; Bump, Fraudulent Conveyance, 215; Power v. Alston, 93 Ill. 587. And is subject to the process of attachment." To the same effect is Kennard v. Hollenbeck, 17 Neb. 362, 22 N.W. 771, where the facts are quite similar.

It is stated in Gormley v. Potter, 29 Ohio St. 597, 599 "The land in controversy was subject to levy on execution, and the levy upon it was properly made. The conveyance to Flynn by the judgment debtor, and by Flynn to the debtor's wife, having been made with intent to defraud creditors, was, as against the creditors, absolutely void. As respects the rights of creditors, the land was still the...