Wright & Co. v. Levy

California Supreme Court Jan 15, 1859Published

Before: Baldwin

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Holding. An innocent purchaser of a fraudulent judgment or claim does not acquire superior rights to a creditor who has already established a prior, valid attachment lien on the property. The assignee of a fraudulent claim stands in the shoes of the assignor and cannot acquire a better title than the assignor possessed at the time of the assignment.

Issues

Whether an innocent assignee of a fraudulent claim acquires rights superior to a creditor who has already levied an attachment on the property.
Whether a fraudulent claim can be enforced against a creditor who has established a prior legal title through attachment.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“Newmark having been in fact superseded by the plaintiff, could not by any deed or act of his put his assignee in any better position.”

“The effect of that fraud unquestionably is to make those proceedings nullities as against Wright.”

Synopsis

Appeal from the Sixth District, County of Sacramento.

This was an action brought in the Court below to set aside a judgment rendered therein in favor of John Jones., assignee of Marcus New-mark, and against Davis Levy, upon the ground of fraud, and for an injunction to restrain the collection of the same, etc.

The bill of exceptions discloses the following facts : Davis Levy . executed and delivered a promissory note to Marcus Newmark. The note was given without consideration, and for the purpose of hindering, delaying and defrauding the creditors of Levy. Newmark was cognizant of the fraud, and a participant in it. Subsequently, Newmark sued out an attachment upon this note, and had it levied upon the property of Levy. After the levy of this attachment, the plaintiffs, Wright & Co. and others, creditors of Levy, also sued out attachments, and levied them upon the same property. After this second levy, and pending the suit of Newmark, he sold and assigned for a valuable consideration the note executed by Levy, together with the action then pending on it, to the defendant, John Jones. Jones was an innocent purchaser, and knew nothing of the fraudulent intent of the parties to the note. The suit upon the note, together with those of the jfiaintiffs and creditors of Levy, went to judgment. Thereupon Wright & Co., together with others, creditors of Levy, filed this bill against Levy, Jones and others, setting up the fraud and praying an injunction against the collection of Jones’ judgment, and that plaintiffs may be adjudged entitled to the money arising from the sale of the property now in the hands of the Sheriff. The Court below dismissed the bill, and gave judgment for defendant, Jones, from which the plaintiffs appealed to this Court.

Baldwin, J., delivered the opinion of the Court—Terry, C. J., concurring.

The answer of defendant Jones, denying all collusion with the plaintiff, in the judgment transferred to him, and asserting that he is a pur[262]chaser in good faith and for value of the judgment, raises the question whether a chose in action, not negotiable by the law merchant—the chose having been procured or created by the immediate parties to it to defraud creditors—can be affected or impeached in the hands of any innocent assignee, by the creditors of the debtors making it. We think, with the learned Judge below, that it cannot. It is conceded that the assignee of the judgment is only the holder of an equity, with the right to use the judgment and the name of the plaintiff to enforce it, and stands in the shoes of the assignor, as to all defenses which existed against the judgment between the parties to it. It is like a note assigned after due, the rule as to which is thus laid down in Story on Bills, (sec. 220, p. 260): “In the next place, as to the time of the transfer. In general, it may be stated that a transfer may be made at any time while the bill remains a good, subsisting, unpaid bill, whether it be before or after it has arrived at maturity. But the rights of the holder against the antecedent parties, may be most materially affected by the time of the transfer. If the transfer is made before the maturity of the bill, to a Iona fide holder, for a valuable consideration, he will take it free of all equities between the antecedent parties, of which he has no notice. If the transfer is after the maturity of the bill, the holder takes it as a dishonored bill, and is affected by all the equities between the original parties, whether he has any notice thereof or not. But when we speak of equities between the parties, it is not to be understood, by this expression, that all sorts of equities existing between the parties, from other independent transactions between them, are intended, but only such equities as attach to the particular bill, and, as between these parties, would be available to control, qualify, or extinguish any rights arising thereon. Still, however, subject to such equities, the holder, by indorsement after the maturity of the bill, will be clothed with the same rights and advantages as were possessed by the indorser, and may avail himself of them accordingly.” The judgment is property, which may be purchased like any other property. The purchaser is bound to inquire into the defenses of the debtor. He has the means to do this ; but he could not be held to inquire into latent equities existing in the hands of third persons. The law, when it made this sort of property subject to.sale, gave it the pro

Wright & Co. v. Levy

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