3

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instead of an execution. But a sale of land fraudulently conveyed, on application of one not entitled to assert its invalidity, at the instance of his creditors, conveys no title, and a sale of lands by trustee under a decree in chancery will be adjudged invalid where such sale is not made pursuant to the decree. A judgment setting aside a sale and conveyance of lands as fraudulent as to creditors, and decreeing a sale to pay plaintiff's debt, is void as to a pledgee of the notes executed for the purchase money, who was not a party to the action, and the sale made thereunder is void. The judgment, in a creditors' suit, setting aside a sale as fraudulent, and ordering a sale of the property, should not be enforced until an execution has been issued on personal property shown on the trial to be owned by the judgment debtor and subject to execution, and the property sold and the proceeds applied on the judgment. Where there are valid liens prior to that of the plaintiff, and the money secured by them is due and payable, the court should ascertain the amounts and priorities of such liens, and decree a sale to satisfy the same, as well as that of plaintiff. A judgment obtained against a debtor after he has conveyed land in fraud of creditors only binds the title of the fraudulent grantee, and a sale thereunder does not discharge prior liens." The title given pursuant to a decree ordering the debtor and his fraudulent grantee to join with the receiver in the suit in executing a conveyance on a sale of the land directed by the decree is full and

7

3. McNally v. White, 154 Ind. 163, 54 N. E. 794, 56 N. E. 214; Teabout v. Jaffray, 74 Iowa, 28, 36 N. W. 783, 7 Am. St. Rep. 466; Stillwell v. Stillwell, 47 N. J. Eq. 275, 20 Atl. 960, 24 Am. St. Rep. 408, rev'g 18 Atl. 679, decree for sale set aside, at the instance of the debtor's wife, to whom he had conveyed, where by reason of the fraud of the husband she was not made a party to the proceedings; Benton v. Collins, 125 N. C. 83, 34 S. E. 242, 47 L. R. A. 33.

4. George v. Williamson, 26 Mo.

190, 72 Am. Dec. 203.

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5. Quarles v. Lacy, 4 Munf. (Va.) 251.

6. Gunn v. Orndorff, 23 Ky. L. Rep. 2369, 67 S. W. 372, 68 S. W. 461.

7. Hyatt v. Dusenbury, 12 Civ. Proc. R. (N. Y.) 152.

8. Dent v. Pickens, 50 W. Va. 382, 40 S. E. 572; Root-Tea-Na-Herb Co. v. Rightmire, 48 W. Va. 222, 36 S. E. 359.

9. Appeal of Dungan, 88 Pa. St. 414.

perfect, and discharged of all right on the part of the debtor or other judgment creditors of his to redeem.10 Where, in an action on behalf of all the judgment creditors of the grantor in an alleged fraudulent conveyance, a receiver is appointed to take and sell the real estate, and a claimant of other interest therein is made a party defendant, and the validity of his claim or lien is made a question which is disposed of adversely to him, such lien becomes subordinate to the title of the receiver's grantee." The purchaser at a valid sale by a receiver to whom property has been transferred by order of court is vested with all the title of the owner of the property at the time of the transfer to the receiver, as against the lien of a judgment subsequently obtained against the debtor."2 Where, when a wife has joined her husband in a conveyance of his real estate, and the conveyance is subsequently set aside in an action to which the wife is not a party, as fraudulent as against the husband's creditors, and the land is sold to the creditors at a sheriff's sale in satisfaction of their claims, her inchoate interest becomes vested in her by statute, she is entitled to recover her third interest in the property of her husband so sold, in a suit against the purchasers, and the purchasers are not entitled to set up that her interest is held by the grantee in the fraudulent deed, who is not a party to the action.13

§ 13. Disposition of property and proceeds -Subjection to claims of creditors. Subsequent creditors may share in the proceeds where the conveyance of land by the debtor is set aside as fraudulent at the instance of existing creditors.14 Where a voluntary conveyance has been set aside by pre-existing creditors of the grantor, his subsequent creditors may avail themselves of the property, but there must be proof of actual or intentional fraud.15

10. McCalmont v. Lawrence, 15 Fed. Cas. No. 8,676, 1 Blatchf. 232.

11. Shaud v. Hanley, 71 N. Y. 319. 12. Chautauqua County Bank v. White, 6 N. Y. 236, 57 Am. Dec. 442, rev'g 6 Barb. 589.

13. Rupe v. Hadley, 113 Ind. 416, 16 N. E. 391.

14. O'Brien v. Stambach, 101 Iowa, 40, 69 N. W. 1133.

15. N. Y.-Reade v. Livingston, 3 Johns. Ch. 481, 8 Am. Dec. 520.

Where a conveyance of a deceased debtor is set aside at the suit of creditors, the court will order the property to be delivered to the executor or administrator, to be applied in the course of administration.16 Where upon the complaint of one or more creditors of an estate, fraudulent conveyances made by the deceased are set aside, the creditors should all share therein." But where a transfer of the debtor's property is set aside as fraudulent as to creditors, creditors who have ratified the transfer or claimed under it should not be allowed to participate in the fund arising therefrom.18 Where an assignor gives a fraudulent trust deed, and a judgment creditor by process of garnishment reaches the funds or effects held by such trustee, the creditor is entitled to have all the funds or effects applied to his demand, there being no other creditors in a position to share the fund.19 Although a trust deed is held to be valid in a suit by a judgment creditor to set it aside, the creditor is entitled to the surplus after paying the debt secured.20 Where a judgment is obtained after a conveyance by a debtor, if such conveyance is in good faith for full consideration, the creditor has no remedy against the land; if fraudulent as to the creditor, he may sell the grantee's title, which sale will not discharge the prior liens, nor will the proceeds be applied to their payment.2 Where

S. C.-Brock v. Bowman, 1 Rich. Eq. Cas. 185; Iley v. Niswanger, 1 McCord Eq. 518.

16. Brockman v. Bowman, 1 Hill Eq. (S. C.) 338. Contra.-Bank of United States v. Burke, 4 Blackf. (Ind.) 141; McNaughtin v. Lamb, 2 Ind. 642.

17. Ark.-Jackson v. McNabb, 39 Ark. 111.

D. C.-Gilbert v. Washington Ben., etc., Assoc., 10 App. Cas. 316.

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secured creditors prosecute a bill to subject to the satisfaction of their claims property fraudulently conveyed by the debtor, they will be required to account for the security held by them before they can appropriate the property sought to be reached.22 Upon an application of the surplus money arising under a sale of real estate fraudulently conveyed, a receiver is entitled to priority over judg ment creditors who did not become parties plaintiff under the decree.23 A creditor whose judgment was entered after a fraudulent conveyance of the debtor's property, but is a lien prior to that of another creditor, under whose execution the property is sold, is entitled to participate in the proceeds only to the extent that the previous conveyance tended to defraud him.24 Cases in which other questions relating to this subject have been passed upon by the courts are cited in the note below.25

§ 14. Costs and attorney's fees.--Although, where a creditor secures a decree setting aside his debtor's fraudulent conveyance, the recovery inures to the benefit of all the debtor's other creditors, yet the complaining creditor is first entitled to a reimbursement, out of the fund created, of all his costs and expenses necessarily incurred in prosecuting his suit.26 Upon conveyances by a debtor

being set aside as fraudulent at the suit of a creditor, and a sale

22. Barret v. Reed, Wright (Ohio), 700.

23. Warden v. Browning, 12 Hun (N. Y.), 497.

24. Appeal of Henderson, 133 Pa. St. 399, 19 Atl. 424.

25. Hines v. Dresher, 93 Ind. 551, disposition of property conveyed to a bona fide mortgagee, by a fraudulent grantee; Tilford v. Burnham, 37 Ky. 109, the assignee of notes given as the apparent consideration of a deed fraudulent as to creditors cannot have the notes satisfied out of the land in preference to a bona fide creditor who has filed his bill to set the conveyance

aside; Bank of Kentucky v. Allen, 7 Ky. L. Rep. 595, division of property transferred between bona fides transferee attacking creditor; Bernard v. Barney, Myroleum Co., 147 Mass. 356, 17 N. E. 837, bill held not a creditor's bill under the statute and a decree applying the property to complainant's claim, without regard to other creditors, proper; Boyle v. Thomas, 1 Chest. Co. Rep. (Pa.) 117, court will not order a conveyance of lands to an assignee to whom defendant had made an assignment for the benefit of creditors.

26. Rains v. Rainey, 30 Tenn. 261; Hinton v. Ellis, 27 W. Va. 422.

of the property being ordered, the creditor's attorney may be allowed a fee out of the proceeds, 27 but the fee should be paid out of that part applicable to the demands of creditors, and not out of such balance as may come to the debtor after the liquidation of the debts proven and passed."

§ 15. Mortgages and other liens.-Where the fraudulent grantee, at the request and to secure debts of the fraudulent grantor then existing, has given mortgages upon the property to creditors ignorant of his pecuniary condition and of his intent in making the conveyance, the rights of such mortgagees are superior to those of creditors.29 A fraudulent grantee of land, who pays of a mortgage thereon which is prior to the lien of plaintiff's judgment, is entitled to the lien of the mortgage as a prior lien over plaintiff's claim, where it appears that there was no fraud in the transaction, and that plaintiff will not be prejudiced.30 When preferential mortgages are set aside at the suit of creditors for reasons not involving a charge of fraudulent intent or moral turpitude, the mortgagees will be permitted to share pari passu in the fund made out of the mortgaged property. Where a conveyance of a husband's land by husband and wife is set aside as in fraud of creditors, the wife's right to dower therein is subject to a ratable contribution towards the payment of a mortgage on the premises executed by the grantee. Where a grantor executes successive deeds of the same property to secure different debts, none of them being given subject to

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27. Davis v. H. Feltman Co., 112 Ky. 293, 65 S. W. 615, 23 Ky. L. Rep. 1510, 99 Am. St. Rep. 289; Armour Packing Co. v. London, 53 S. C. 539, 31 S. E. 500; Wagener v. Mars, 27 S. C. 97, 2 S. E. 844. Compare Darby v. Gilligan, 37 W. Va. 69, 16 S. E.

507.

28. Wagener v. Mars, supra.

29. Murphy v. Moore, 23 Hun (N. Y.), 95.

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30. Garner v. Phillips, 35 Iowa,

597.

31. Lippincott v. Shaw Carriage Co., 25 Fed. 577.

32. McMahon v. Specht, 64 App. Div. (N. Y.) 128, 71 N. Y. Supp. 806, and it is immaterial, as affecting such right by the mortgagee, that the wife was not a party to the action to set aside the convey

ance.