I am unable to agree with the conclusion of Mr. Justice McDONALD that plaintiffs' bill of complaint should be dismissed. In an opinion filed by him the circuit judge made the following determinations:
(1) That the defendant Charles Jirasek was a party to the fraudulent conspiracy which rendered plaintiffs herein liable to the Detroit Savings Bank for the resultant loss.
(2) That the quitclaim deed of property known as Sylvan Shores in Oakland county from Charles Jirasek to his brother Joseph is in fact and in law a mortgage, that it was not made in good faith as security for prior indebtedness of Charles Jirasek to his relatives and is void as against plaintiffs' claim.
(3) That "it is true relatives (of Charles Jirasek who now claim prior rights under this quitclaim deed as a mortgage) had advanced considerable sums of money to Jirasek during a period of over ten years." (The undisputed proof shows these advancements are still unpaid.)
(4) That notwithstanding a prior attachment suit to recover the same amount here claimed by plaintiffs had been started by them in the circuit court of Wayne county, the circuit court of Oakland county, in chancery, has jurisdiction under the so-called uniform fraudulent conveyance act, Act No. 310, Pub. Acts 1919 (3 Comp. Laws 1929, § 13392 et seq.), to hear and determine the issues presented by the bill of complaint; and plaintiffs are entitled to the relief sought.
A careful examination of the record convinces us that the determination of the circuit judge should be sustained except that portion of paragraph 2 above wherein it is held the quitclaim deed (mortgage) was not made in good faith as security for a prior indebtedness and that it is void as against plaintiffs' claim.
We think it conclusively appears that this quitclaim deed (mortgage) was given in good faith to secure payment of an antecedent debt due from Charles to his relatives, and it cannot be said from this record that the amount of the debt was disproportionately small as compared with the value of the property mortgaged. Charles had the right to give preference to certain of his creditors if he so desired. (See cases cited in the opinion of Justice McDONALD.) But this quitclaim deed from Charles to Joseph purported to divest Charles of all his interest in the Sylvan Shores property, thus defeating plaintiffs' right to obtain satisfaction of any judgment or decree secured against Charles who possessed no other property of value. I fully agree with Mr. Justice McDONALD that "the vital proposition in the case is whether this deed is fraudulent as to creditors," particularly as to plaintiffs. If the conveyance is fraudulent, plaintiffs' bill should not be dismissed on the ground of lack of equity jurisdiction. Whether or not it is fraudulent should be determined in the light of the provisions of the uniform fraudulent conveyance act (3 Comp. Laws 1929, § 13392 et seq.) which provides:
" `Creditor' is a person having any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent. `Debt' includes any legal liability, whether matured or unmatured, liquidated, absolute, fixed or contingent. (3 Comp. Laws 1929, § 13392.)
"A person is insolvent when the present fair
salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured. * * * (3 Comp. Laws 1929, § 13393.)
"Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent isfraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without fair consideration." (3 Comp. Laws 1929, § 13395.)
There can be no question but that by giving this deed to his brother, Charles Jirasek became insolvent within the meaning of the act quoted. In this particular the circuit judge made the following finding:
"At the time of giving the deed practically all of the property possessed by the defendant Charles Jirasek of any value, including his automobile, was in the name of his brother, Joseph."
Because the conveyance rendered Charles Jirasek insolvent, it was fraudulent as to creditors if made "without fair consideration." The undisputed proof is that there was absolutely no consideration for Charles' conveyance of his equity over and above the amount he owed to his relatives. Within the meaning of the act plaintiffs are creditors of Charles Jirasek and he is their debtor.
"One who has a cause of action based on a tort is a `creditor' within the meaning of the uniform fraudulent conveyance act." (Syllabus) Dutcher v. Van Duine, 242 Mich. 477.
The obvious purpose of this legislation was to make available to a "creditor," as defined in the act, an adequate remedy which theretofore was not available until the creditor had first reduced his claim to judgment. This statute provides:
"SEC. 9. (1) Where a conveyance or obligation
is fraudulent as to a creditor, such creditor, when his claim is matured, may * * *
"(a) Have the conveyance set aside or the obligation annulled to the extent necessary to satisfy his claim. * * * (3 Comp. Laws 1929, § 13400.)
"SEC. 10. Where a conveyance made or an obligation incurred is fraudulent as to a creditor whose claim has not matured, he may proceed in a court of competent jurisdiction * * * and the court may,
"(a) Restrain the defendant from disposing of his property,
"(b) Appoint a receiver to take charge of the property,
"(c) Set aside the conveyance or annul the obligation, or
"(d) Make any order which the circumstances of the case may require." (3 Comp. Laws 1929, § 13401.)
The act is remedial. It should be given a liberal construction. It has been so construed in courts of other States wherein this uniform act has been adopted. InAmerican Surety Co. v. Conner, 251 N.Y. 1 (166 N.E. 783, 65 A.L.R. 244), Chief Justice Cardozo writing for the court said:
"We think the effect of these provisions is to abrogate the ancient rule whereby a judgment and a lien were essential preliminaries to equitable relief against a fraudulent conveyance. The uniform act has been so read in other States (Gross v. Pennsylvania Mtg. Loan Co., 101 N.J. Eq. 51
[137 A. 89]; United Stores Realty Corp. v. Asea, 102 N.J. Eq. 600
[142 A. 38]; Morse v. Roach, 229 Mich. 538;Lipskey v. Voloshen, 155 Md. 139 [141 A. 402]). * * * The reading seems to be inevitable, aside from any precedent. The act is explicit that a creditor may now maintain a suit in equity to annul a fraudulent conveyance, though his debt has not matured. * * * He (the creditor) may seek the
aid of equity, and without attachment or execution, may establish his debt, whether matured or unmatured, and challenge the conveyance in the compass of a single suit."
See, also, Conway v. Raphel, 102 N.J. Eq. 531 (141 A. 804);Adams v. Wallace, 94 Okla. 73 (220 P. 872).
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I am unable to agree with the conclusion of Mr. Justice McDONALD that plaintiffs' bill of complaint should be dismissed. In an opinion filed by him the circuit judge made the following determinations:
(1) That the defendant Charles Jirasek was a party to the fraudulent conspiracy which rendered plaintiffs herein liable to the Detroit Savings Bank for the resultant loss.
(2) That the quitclaim deed of property known as Sylvan Shores in Oakland county from Charles Jirasek to his brother Joseph is in fact and in law a mortgage, that it was not made in good faith as security for prior indebtedness of Charles Jirasek to his relatives and is void as against plaintiffs' claim.
(3) That "it is true relatives (of Charles Jirasek who now claim prior rights under this quitclaim deed as a mortgage) had advanced considerable sums of money to Jirasek during a period of over ten years." (The undisputed proof shows these advancements are still unpaid.)
(4) That notwithstanding a prior attachment suit to recover the same amount here claimed by plaintiffs had been started by them in the circuit court of Wayne county, the circuit court of Oakland county, in chancery, has jurisdiction under the so-called uniform fraudulent conveyance act, Act No. 310, Pub. Acts 1919 (3 Comp. Laws 1929, § 13392 et seq.), to hear and determine the issues presented by the bill of complaint; and plaintiffs are entitled to the relief sought.
A careful examination of the record convinces us that the determination of the circuit judge should be sustained except that portion of paragraph 2 above wherein it is held the quitclaim deed (mortgage) was not made in good faith as security for a prior indebtedness and that it is void as against plaintiffs' claim.
We think it conclusively appears that this quitclaim deed (mortgage) was given in good faith to secure payment of an antecedent debt due from Charles to his relatives, and it cannot be said from this record that the amount of the debt was disproportionately small as compared with the value of the property mortgaged. Charles had the right to give preference to certain of his creditors if he so desired. (See cases cited in the opinion of Justice McDONALD.) But this quitclaim deed from Charles to Joseph purported to divest Charles of all his interest in the Sylvan Shores property, thus defeating plaintiffs' right to obtain satisfaction of any judgment or decree secured against Charles who possessed no other property of value. I fully agree with Mr. Justice McDONALD that "the vital proposition in the case is whether this deed is fraudulent as to creditors," particularly as to plaintiffs. If the conveyance is fraudulent, plaintiffs' bill should not be dismissed on the ground of lack of equity jurisdiction. Whether or not it is fraudulent should be determined in the light of the provisions of the uniform fraudulent conveyance act (3 Comp. Laws 1929, § 13392 et seq.) which provides:
" `Creditor' is a person having any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent. `Debt' includes any legal liability, whether matured or unmatured, liquidated, absolute, fixed or contingent. (3 Comp. Laws 1929, § 13392.)
"A person is insolvent when the present fair
salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured. * * * (3 Comp. Laws 1929, § 13393.)
"Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent isfraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without fair consideration." (3 Comp. Laws 1929, § 13395.)
There can be no question but that by giving this deed to his brother, Charles Jirasek became insolvent within the meaning of the act quoted. In this particular the circuit judge made the following finding:
"At the time of giving the deed practically all of the property possessed by the defendant Charles Jirasek of any value, including his automobile, was in the name of his brother, Joseph."
Because the conveyance rendered Charles Jirasek insolvent, it was fraudulent as to creditors if made "without fair consideration." The undisputed proof is that there was absolutely no consideration for Charles' conveyance of his equity over and above the amount he owed to his relatives. Within the meaning of the act plaintiffs are creditors of Charles Jirasek and he is their debtor.
"One who has a cause of action based on a tort is a `creditor' within the meaning of the uniform fraudulent conveyance act." (Syllabus) Dutcher v. Van Duine, 242 Mich. 477.
The obvious purpose of this legislation was to make available to a "creditor," as defined in the act, an adequate remedy which theretofore was not available until the creditor had first reduced his claim to judgment. This statute provides:
"SEC. 9. (1) Where a conveyance or obligation
is fraudulent as to a creditor, such creditor, when his claim is matured, may * * *
"(a) Have the conveyance set aside or the obligation annulled to the extent necessary to satisfy his claim. * * * (3 Comp. Laws 1929, § 13400.)
"SEC. 10. Where a conveyance made or an obligation incurred is fraudulent as to a creditor whose claim has not matured, he may proceed in a court of competent jurisdiction * * * and the court may,
"(a) Restrain the defendant from disposing of his property,
"(b) Appoint a receiver to take charge of the property,
"(c) Set aside the conveyance or annul the obligation, or
"(d) Make any order which the circumstances of the case may require." (3 Comp. Laws 1929, § 13401.)
The act is remedial. It should be given a liberal construction. It has been so construed in courts of other States wherein this uniform act has been adopted. InAmerican Surety Co. v. Conner, 251 N.Y. 1 (166 N.E. 783, 65 A.L.R. 244), Chief Justice Cardozo writing for the court said:
"We think the effect of these provisions is to abrogate the ancient rule whereby a judgment and a lien were essential preliminaries to equitable relief against a fraudulent conveyance. The uniform act has been so read in other States (Gross v. Pennsylvania Mtg. Loan Co., 101 N.J. Eq. 51
[137 A. 89]; United Stores Realty Corp. v. Asea, 102 N.J. Eq. 600
[142 A. 38]; Morse v. Roach, 229 Mich. 538;Lipskey v. Voloshen, 155 Md. 139 [141 A. 402]). * * * The reading seems to be inevitable, aside from any precedent. The act is explicit that a creditor may now maintain a suit in equity to annul a fraudulent conveyance, though his debt has not matured. * * * He (the creditor) may seek the
aid of equity, and without attachment or execution, may establish his debt, whether matured or unmatured, and challenge the conveyance in the compass of a single suit."
See, also, Conway v. Raphel, 102 N.J. Eq. 531 (141 A. 804);Adams v. Wallace, 94 Okla. 73 (220 P. 872).
While technically it may be dicta, this court, speaking through Justice WIEST, in the case above cited by Chief Justice Cardozo, said:
"With the adoption of the uniform fraudulent conveyance act * * * the troublesome question of whether a levy should be made and a bill in aid of execution filed, or a creditor's bill filed upon return of an execution, or a bill with double aspect filed, has departed. Now, in case a conveyance is fraudulent as to a creditor he may" have relief under this act.Morse v. Roach, supra.
It is of no consequence in this equitable proceeding whether plaintiffs' recovery from Charles Jirasek is based on fraud and deceit or that it is considered as in assumpsit upon waiver of a tort. Charles Jirasek's fraudulent conveyance of his property rendered him insolvent, and under the uniform fraudulent conveyance act the equity court acquired jurisdiction of the whole subject-matter in litigation. This case is unlike our recent decision in Farrell v. Hannan Real Estate Exchange,251 Mich. 669, wherein the court found the plaintiff was not entitled to equitable relief of any character whatever but only to damages recoverable, if at all, in an action at law. Under such circumstances the proceeding in equity was properly dismissed. But in the instant case, as against all the defendants, plaintiffs have established a clear right to injunctive and other equitable relief provided they maintain their conspiracy charge against Charles Jirasek.
Under the circumstances of this record, to hold that these plaintiffs do not have a right to equitable relief in this case is to say that the uniform fraudulent conveyance act affords a defrauded victim no remedy which he did not have prior to the enactment of this statute. For all practical purposes it would nullify the act. To make available the remedy provided by this legislation we should hold and do hold that the court of equity has and retains jurisdiction to adjudicate the whole controversy between these litigants.
Defendants' contention that since plaintiffs first instituted attachment in Wayne county they have elected their remedy and cannot proceed in equity in Oakland county is not well founded. At the time the decree was taken in the circuit, the suit at law in Wayne county had not proceeded to trial. In fact, the alleged fraudulent conveyance which gave the court in equity in Oakland county jurisdiction had not been recorded at the time the suit at law was started in Wayne county, and plaintiffs then had no knowledge thereof. The mere starting of an action at law or suit in equity does not constitute an election. 15 Cyc. p. 264. This court has said:
"But a lawsuit pending and not determined is not a bar to a suit in equity upon the same subject. At a proper stage of the cause, the court in equity may and will, on a motion for that purpose, determine whether the interests of justice require a complainant to be put to his election of remedies. He will always be allowed to elect his equitable remedy if he chooses. Story's Equity Jurisprudence (6th Ed.), § 889; 2 Daniell's Chancery Practice, 961, and seq. and notes." McGunn v. Hanlin,29 Mich. 476, 480.
See, also, Morse v. Roach, supra.
The pending suit at law in Wayne county did not constitute a conclusive election which barred plaintiffs
from instituting the equity case in Oakland county under the circumstances here presented. Nor do we find anything in the record which constitutes an estoppel against or a waiver of plaintiffs' right to pursue their equitable remedy. Defendants' claim that partial restitution by one of the other joint tort-feasors or the giving of security incident to an agreement to make restitution constitutes an estoppel barring plaintiffs from resorting to the remedy in equity is not well founded.
Since we hold the quitclaim deed constitutes a valid mortgage lien prior to plaintiffs' claim, adjudication of the latter's rights necessitates both the determination of the amount of Charles Jirasek's liability to plaintiffs and also the amount of his indebtedness to his relatives, payment of which is secured by the quitclaim deed (mortgage). On the face of the present record it seems to appear that Charles Jirasek has a very substantial equity in this property over and above his indebtedness to his relatives. This equity should be held liable for the payment of the amount found due from Charles to plaintiffs. Because of his holding that the quitclaim deed (mortgage) was wholly void as against plaintiffs' claim, the trial judge made no determination of the exact amount of Charles' indebtedness which it secured. We are unable to determine from the record before us whether or not the amount claimed was in excess of the actual bona fide indebtedness of Charles to his relatives. This should be determined upon a further hearing before the trial judge. The case will be remanded for such further hearing and final determination, and decree in accordance herewith. Costs of this court to the appellants.
BUTZEL, C.J., and WIEST, POTTER, SHARPE, and FEAD, JJ., concurred with NORTH, J.