Somers v. Spaulding

294 N.W. 610, 229 Iowa 432

• Court: Supreme Court of Iowa
• Decided: November 12, 1940
• Docket: No. 45247.
• Status: Published

Opinions

Miller, J.

Several facts are undisputed under the record herein. They include the following: Prior to August 10, 1932, Henry W. Spaulding, now deceased, and his wife, Aimee H. Spaulding, one of the defendants, were indebted to the plaintiff in the sum of $700 for professional services. On August 10, 1932, Henry W. Spaulding paid plaintiff $350 on said account and the defendant Mrs. Spaulding executed and delivered to plaintiff her note for $350 due August 10, 1934. On the same day, to wit, August 10, 1932, Mr. and Mrs. Spaulding executed and delivered a deed conveying 160 acres in Poweshiek county, owned by Mrs. Spaulding, to their daughters Alice Spaulding Blair and Henryétta Spaulding Van Gorder, defendants herein. The deed was recorded the same day it was executed. On September 13, 1938, plaintiff obtained a judgment against Mrs. Spaulding on the note given to him as afore said and secured the issuance of an execution on the judgment, which was returned unsatisfied.

On September 22, 1938, plaintiff commenced this- action wherein he seeks to set aside the conveyance of the aforesaid 160-acre farm, asserting that it was a gift without consideration and executed with the intent to hinder, delay and defraud the plaintiff in the collection of his promissory note. Various defenses were asserted by the defendants, including waiver, equitable estoppel, statute of limitations and laches. The court found generally in favor of the defendants, entered judgment dismissing the action and plaintiff appeals.

It is only necessary that we discuss one of the defenses asserted herein, namely, that of laches, since we are convinced that the judgment must be affirmed on that defense. This makes it unnecessary to discuss many of the propositions argued in the briefs.

In the case of Mickel v. Walraven, 92 Iowa 423, 60 N. W. 633, this court established the following propositions: An action to set aside a conveyance as fraudulent is barred within five years after the cause of action accrues. The recording of the conveyance is constructive notice to the plaintiff and he is deemed to have discovered the fraud at the time that it was recorded. The plaintiff’s cause of action does not accrue until he obtains a lieta upon the real estate conveyed, either by attachment or judgment. Such a lien must be secured within a reasonable time. Plaintiff cannot, by his inaction, postpone the running of the statute indefinitely. If he fails to secure his lien within the time limited by the statute for the bringing of the action, in the absence of special circumstances, he will be denied the right to maintain the action because of laches.

In holding that the recording of the instrument is the equivalent of discovery of the fraud, we state at pages 427 and 428 of 92 Iowa, page 634 of 60 N. W., as follows:

“This ease was one heretofore solely cognizable in a court of chancery, and, therefore, comes within the provisions of the statute before quoted; and it is claimed that the action is barred within five years after the discovery of the alleged fraud. It has frequently been held by this court that the record of a deed is notice to the world of its contents, and that, where a deed which is fraudulent as against creditors is spread upon the public records, notice to the world is given of its character, or at least sufficient information is conveyed thereby, in the absence of special circumstances, to put creditors upon inquiry as to its contents and character. Gebhard v. Sattler, 40 Iowa, 152; Bishop v. Knowles, 53 Iowa, 268, 5 N. W. Rep. 139; Garden v. Cole, 21 Iowa 205; Hawley v. Page, 77 Iowa, 239, 42 N. W. Rep. 193; Laird v. Kilbourne, 70 Iowa, 83, 30 N. W. Rep. 9; Francis v. Wallace, 77 Iowa 373, 42 N. W. Rep. 323. Following these cases, we must hold that plaintiff discovered the fraud in these conveyances at the time they were recorded. ’ ’

In holding that the plaintiff must have a lien either by judgment or attachment before a cause of action is said to accrue so that the statute may commence to run against it, we state at pages 428 and 429 of 92 Iowa, page 634 of 60 N. W., as follows:

"At the time of the discovery of .the fraud, however, plaintiff’s right of action had not accrued. Before he could institute his action to subject the land to the payment of his claim, he must have had a lien upon it either by attachment or judgment. Clark v. Raymond, 84 Iowa, 251, 50 N. W. Rep. 1068; Faivre v. Gillman, 84 Iowa, 573, 51 N. W. Rep. 46; Gwyer v. Figgins, 37 Iowa, 517; Gordon v. Worthley, 48 Iowa, 429; Pearson v. Maxfield, 51 Iowa, 76, 50 N. W. Rep. 77; Miller v. Dayton, 47 Iowa, 312; Taylor v. Branscombe, 74 Iowa, 534, 38 N. W. Rep. 400.

"As plaintiff’s cause of action did not accrue until he obtained his judgment on September 15, 1891, the statute did not begin to run until that time, although he had knowledge of the fraud, which he. complains was perpetrated nearly eighteen years before; and as he commenced this suit within a few months after he recovered his judgment, the action, strictly speaking, is not barred. This is the holding in other states under similar statutes. Gates v. Andrews, 37 N. Y. 657; Compton v. Perry, 23 Tex. 414; Eyre v. Beebe, 28 How. Pr. 333; Reynolds v. Lansford, 16 Tex. 286; Bump, Fraud. Conv. [2 Ed.] p. 547; Wilson v. Buchanan, 7 Gratt. 334, and authorities cited.”

In holding that the plaintiff cannot postpone the running of the statute indefinitely and that, where he fails to secure a lien within five years after discovery of the fraud (recording of the instrument), he will be deemed guilty of laches and will be denied the right to maintain the action, we state at pages 429 and 430 of 92 Iowa, pages 634 and 635 of 60 N. W., as follows:

“While, as we have said, the action is not, strictly speaking, barred by the statute, yet there must be some limitation to the right of putting the claim in judgment. A party will not be allowed to postpone the running of the statute indefinitely. One must-not be allowed to sleep over his rights, to th.e prejudice of the party of whom he makes a claim, and who, by the delay, may be deprived of the evidence and the means of effectually defending himself. The claim must be reduced to judgment within a reasonable time, otherwise it will be considered stale, and no relief will be granted. What is this reasonable time cannot be settled by any precise rule. It must depend upon circumstances. If no cause for delay can be shown, it would seem reasonable to require the judgment to be obtained within the time limited by the statute for bringing the action. In accordance with this rule it has frequently been held that where a demand or some other act is required of a plaintiff as a condition precedent to his right to sue, the demand must be made in a reasonable time, and this time, unless there be some special circumstances shown, will be fixed in analogy to the statute of limitations. Codman v. Rogers, 10 Pick. 112; Palmer v. Palmer, 36 Mich. 487; Railway Co. v. Byers, 32 Pa. St. 22; Wenman v. Ins. Co., 13 Wend. 268; Picquet v. Curtis, 1 Sumn. 478, Fed. Cas. No. 11131; Raymond v. Simonson, 4 Blackf. 77; Holmes v. Kerrison, 2 Taunt. 323; Stanton v. Stanton, 37 Vt. 411; Kraft v. Thomas, 123 Ind. 513, 24 N. E. Rep. 346; Keithler v. Foster, 22 Ohio St. 27; Morrison v. Mullin, 34 Pa. St. 12; Phillips v. Rogers, 12 Metc. (Mass.) 405; McDowell v. Bank, 20 Ala. 312. This doctrine is the accepted rule in this state (Ball v. Ry. Co., 62 Iowa, 751, 16 N. W. Rep. 592; Reizenstein v. Marquardt, 75 Iowa, 294, 39 N. W. Rep. 506).”

The position taken by this court in the case of Mickel v. Walraven, supra, above quoted, was expressly re-announced, adhered to and quoted with approval in the recent case of Bristow v. Lange, 221 Iowa 904, 266 N. W. 808. In holding that the plaintiff is required to obtain a lien within five years after the discovery of the alleged fraud, we state at page 916 of 221 Iowa, page 814 of 266 N. W., as follows:

“If, therefore, it can be said that plaintiff’s cause of action to set aside the deed was not strictly barred by the statute of limitations, because of the necessity of securing a lien by attachment or judgment prior to the commencement of the action to cancel the deed, such action should have been taken within a reasonable time thereafter, and that such reasonable time ‘unless there be some special circumstances shown, will be fixed in analogy to the statute of limitations.’ Mickel v. Walraven, 92 Iowa 423, 60 N. W. 633, 635; Stubblefield v. Gadd, 112 Iowa 681, 84 N. W. 917.”

Again, at page 918 of 221 Iowa, page 815 of 266 N. W., we state:

“Appellee, of course, had an additional period of time to commence his action upon the note, but if he, as a creditor, desired to take advantage of his right to commence an action to set aside the fraudulent conveyance within the statutory period for so doing, it necessarily follows, unless good cause to the contrary is shown, that it was incumbent upon him to accelerate the commencement of his action upon the note in order to secure a lien against the property in question within the five-year statutory period. * * * So while we do not hold that the action is barred by the statute of limitations, we do hold that plaintiff’s action to set aside the alleged fraudulent conveyance is barred by reason of his laches.”

Pursuant to the pronouncements of this court above quoted, it necessarily follows that the court below was right in dismissing this action because the same is barred by laches, Under the record herein, the deed appellant seeks to have set aside was executed, delivered and recorded on August 10, 1932. If such conveyance was fraudulent as plaintiff asserts, he is deemed to have discovered the fraud on that date. It was necessary that he secure a lien upon the property by a judgment or attachment within five years following August 10, 1932, to prevent loss of his cause of action through laches. No lien was obtained until September 13, 1938, over six years after the deed was recorded. No special circumstances are shown. This lapse of time deprived the plaintiff of his right to maintain the cause of action because of laches. The decision of the trial court is, therefore, right.

Appellant asserts, however, that under our decisions the only lien which will be recognized in an action of this kind is a judgment lien; he was not entitled to a judgment until after his note matured; his note did not mature until August 10, 1934; he obtained his judgment lien within five years after the maturity of the note; therefore, he is not guilty of laches. We do not so interpret our decisions.

In the case of Cooper v. Erickson, 213 Iowa 448, 451, 239 N. W. 87, 88, where a receiver sought to set aside a conveyance as fraudulent, we state that it was necessary that he “first obtain, if he can, a judgment against the alleged debtor * * * or have a lien on the real estate involved.” In Michel v. Walraven, supra, we state at page 428 of 92 Iowa, page 634 of 60 N. W., that the right of action accrued when plaintiff obtained a lien upon the land, ‘ ‘either by attachment or judgment. ’ ’ In Bristow v. Lange, supra, at page 916 of 221 Iowa, page 814 of 266 N. W., we make the same statement.

In Goode v. Garrity, 75 Iowa 713, 716, 38 N. W. 150, 151, we state:

‘ ‘ It will be conceded that if the plaintiff had obtained a lien on the property in the hands of Welch by attachment or otherwise, he could in this proceeding remove any clouds cast on his title or right. * * * But until a creditor in some manner obtains a lien on his debtor’s property, or has exhausted his remedies at law, or done what is equivalent thereto, he cannot question in equity a fraudulent conveyance or incumbrauee of his property made by such debtor, and have the same set aside. ’ ’

In Taylor v. Branscombe, 74 Iowa 534, 536, 38 N. W. 400, 401, an action was held to be proper, where the creditor attached the real estate in his action for a judgment on the debt and sought to. set aside a conveyance and subject the land to the judgment, this court stating:

“The attachment, having been lawfully issued, was a lien upon the property attached for the security o'f plaintiff’s claim, which may be enforced by a creditor’s bill against the lands fraudulently conveyed. See cases cited in 3 Pom. Eq. Jur., notes to sec. 1415. * * * The rule that a creditor’s bill may be maintained before judgment, but after the lands have been seized under an attachment, has been recognized by the practice of the courts of this state in cases within our memory.”

There is a dispute among the authorities on this question, whether a judgment is the exclusive method of accruing a right to set aside a conveyance as fraudulent. In discussing such conflict it is stated -in 24 American Jurisprudence 309, as follows, “The trend of the recent decisions, however, is in favor of thé view that where a valid lien has been obtained by attachment, a bill in equity to set aside a fraudulent conveyance may be maintained without a judgment.” This trend of the recent decisions is in accord with repeated pronouncements of this court.

Subparagraph 4 of section 12080 and subparagraph 3 of section 12086 of the Code, 1931, expressly authorized and empowered the plaintiff to secure a lien by attachment if the conveyance herein challenged was in fact made “with intent to defraud creditors.” Our holding is that such a lien is sufficient to mature a cause of action to set aside a conveyance made in fraud of creditors. Were we to hold otherwise and limit the plaintiff to a judgment lien as the sole means of accruing his cause of action to set aside the deed as fraudulent, we would, by that rule, be lending the aid of our decisions to the perpetration of fraud in such cases. In this ease, plaintiff asserts that the defendant executed and delivered the challenged conveyance on the same day that she executed and delivered a note due two years hence. Under appellant’s theory, by this transaction, if it was fraudulent, he tied his own hands for two years within which to challenge the conveyance. Anyone knows that within two years the property might have been transferred to innocent purchasers and the plaintiff’s recourse to the real estate effectively destroyed. If the note were for a longer period, the opportunity to destroy the right of action would be greatly increased. We are unwilling to so tie the hands of a plaintiff in an action of this kind. We cannot subscribe to the contentions of appellant.

By reason of the foregoing, the decree appealed from is affirmed. — Affirmed.

Mitchell, Sager, and Hale, JJ., concur. Richards, C. J., and Bliss, J., concurring specially. Stiger and Hamilton, JJ., dissent.