A bill in equity will not lie on behalf of judgment creditors to
subject real property of their debtor, held by a third party upon a
secret trust for him, to the satisfaction of their judgment until a
fruitless attempt has been made for its collection by execution at
law.
In February, 1859, C. and J. Green and C. and I. Gill filed a
bill in chancery in the district court of the territory just
mentioned against one Jones and a certain Brown. It set forth that
in March, 1858, the said Greens had obtained judgment in the
District Court of the First Judicial District of Nebraska against
Brown, for $1,155, and that in October of the same year, the other
two complainants, G. and C. Gill, had obtained judgment against him
in the same court for $450. It charged that on the 15th of July,
1857, Brown was engaged in mercantile pursuits in the City of
Omaha, that he was on that day utterly insolvent, and being about
to suspend business and the payment of his debts, purchased certain
real estate in the city just named, and in order to place it beyond
the reach of his creditors, procured a conveyance to be made to the
other defendant, Jones, who it was alleged now held the property
upon a secret trust for
him. The bill set forth also that
executions had been issued and returned unsatisfied, and prayed
that the premises might be sold and the proceeds applied to the
payment of the judgments.
The
Page 68 U. S. 331
answer denied that executions had been issued and returned
unsatisfied, and there was no sufficient proof that they had
been.
The district court rendered a decree in favor of the
complainants, and the supreme court of the territory affirmed it.
On the argument of the appeal in this Court -- which was by Messrs.
Carlisle and Redick for the appellant, and by Mr. Woolworth
contra -- several objections were made to the decree, but
the only one considered by the Court was whether the bill would lie
before the judgment creditors had attempted to collect their
judgments by execution at law.
MR. JUSTICE FIELD delivered the opinion of the Court:
In March, 1858, two of the complainants recovered judgment
against Brown, in one of the district courts of the Territory of
Nebraska, for upwards of eleven hundred dollars. In October
following, the other complainants also recovered judgment in the
same court against Brown for upwards of four hundred dollars. In
February, 1859, the judgment creditors instituted the present suit,
the object of which is to subject certain real property situated in
the City of Omaha to the satisfaction of their respective
judgments.
The bill charges that on the 15th of July, 1857, Brown was
engaged in mercantile pursuits in that city; that he was on that
day insolvent, and being about to suspend business and the payment
of his debts, purchased the real property in question, and in order
to place it beyond the reach of his creditors, procured a
conveyance to be made to the defendant Jones, who now holds the
property upon a secret trust for him. The bill prays that the
premises may be sold and the proceeds applied to the payment of the
judgments. The district court rendered a decree in favor of the
complainants; the supreme court of the territory affirmed the
decree, and the defendant Jones has appealed to this Court.
Several objections to the decree were urged upon the Court on
the argument which we do not deem it necessary to consider. The
objection that the complainants have not shown any attempt to
enforce their remedy at law is fatal to the relief prayed. A court
of equity exercises its jurisdiction
Page 68 U. S. 332
in favor of a judgment creditor only when the remedy afforded
him at law is ineffectual to reach the property of the debtor, or
the enforcement of the legal remedy is obstructed by some
encumbrance upon the debtor's property, or some fraudulent transfer
of it.
In the first case, the court, when its aid is invoked, looks
only to the execution and the return of the officer to whom the
execution was directed. The execution shows that the remedy
afforded at law has been pursued, and of course is the highest
evidence of the fact. The return shows whether the remedy has
proved effectual or not, and from the embarrassments which would
attend any other rule the return is held conclusive. The court will
not entertain inquiries as to the diligence of the officer in
endeavoring to find property upon which to levy. If the return be
false, the law furnishes to the injured party ample remedy.
In the second case, the equitable relief sought rests upon the
fact that the execution has issued and a specific lien has been
acquired upon the property of the debtor by its levy, but that the
obstruction interposed prevents a sale of the property at a fair
valuation. It is to remove the obstruction, and thus enable the
creditor to obtain a full price for the property, that the suit is
brought.
*
In this case, the bill alleges that executions were issued upon
the judgments of the complainants and were returned unsatisfied,
but the allegation was not admitted, and no proof on the subject
was produced at the hearing. The case, therefore, stands as a suit
in equity commenced for the satisfaction of judgments before any
attempt had been made for their collection at law by the issue of
execution thereon. That the suit cannot be maintained under these
circumstances is clear both upon principle and authority.
The decree appealed from must therefore be reversed and the
court below directed to enter a decree for the defendant dismissing
the suit.
Remanded with directions accordingly.
*
Beck v. Burdett, 1 Paige 307;
McElwain v.
Willis, 9 Wendell 559;
Crippen v. Hudson, 3 Kernan
164.
