[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 887 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 888 Appellees as complainants below filed their bill in the Circuit Court of Highlands County on December 27, 1928, against appellants for the purpose of setting aside certain deeds and mortgages of real estate made by George E. Sebring Company for the alleged purpose of preventing complainants from realizing on certain indebtedness aggregating $100,000.00, evidenced by certain promissory notes secured by a mortgage dated July 25, 1927, maturing over a period of ten years. The bill alleges that none of said notes of complainants have been paid and only the first semi-annual interest due January 25, 1928, was paid; that the notes due July 5, 1928, being in default the acceleration clause in the mortgage securing them was invoked for the purpose of maturing the remainder of the notes, and that suit at law was brought on the notes.
It is further alleged that after the making of the said mortgage and notes by George E. Sebring Company to complainants and before any default in payment, the said *Page 889 company executed the said deeds and mortgages which complainants allege to be fraudulent and now seek to set aside, in that they were made for the purpose of defeating a recovery upon complainants' notes. The bill alleges that one of the mortgages was made by George E. Sebring Company to the Penn-Florida Cattle Company on February 11, 1928, but not filed for record until November 6, 1928; that there was executed to the Lake Jackson Company another mortgage deed on August 15, 1928, which was not recorded until November 6, 1928; that there was executed to the Lake Jackson Company another mortgage deed on August 15, 1928, but not recorded until November 6, 1928; that deeds were made to the Highlands Security Corporation covering other property on October 4, 1928, and recorded October 23, 1928. It is not alleged that any of said conveyances covered the same, or any, parcels of land included in complainants' mortgage.
Appellants filed separate general and special demurrers attacking the bill as bad in substance and insufficient because it seeks to set aside alleged fraudulent conveyances without showing that complainants' claims have been reduced to judgment, and that no injury to complainants is shown to have resulted from any action on the part of the respective defendants. The chancellor overruled the demurrers from which the appellants took appeal.
The principal question involved is one of procedure. Appellants insist that in this State, the obtaining of a judgment against the debtor is a condition precedent to the filing of a bill against such debtor the sole purpose of which is to set aside alleged fraudulent conveyances; or expressed in another way: May a creditor, such as one holding a note secured by a mortgage on real estate, without reducing his claim to judgment, maintain a bill in *Page 890 equity for the sole purpose of setting aside a fraudulent conveyance made by his debtor?
The bill does not allege that at the time complainants filed their bill they occupied the position of judgment creditors nor that they held any lien upon the parcels of land alleged to have been fraudulently conveyed. In other words as to such property not covered by complainants' mortgage, the complainants occupy the status of a mortgagee holding notes secured by a mortgage upon other property than that alleged to have been fraudulently conveyed. The withholding of a conveyance from record does not of itself render it fraudulent as to creditors, but it may be considered with all the facts attending the transaction. Dova v. Hancock, 88 Fla. 503, 102 So. 646.
It appears from the bill that the pleaders invoked the provisions of Section 5771, compiled General Laws of Florida, 1927, which declares certain conveyances void when made to delay, hinder, or defraud creditors of their just and lawful action, debts or demands. Appellants contend that the pleaders also undertook to invoke the provisions of Section 5035, Compiled General Laws of Florida, 1927, which referring to "Creditors' Bills," reads as follows:
"A creditors' bill may be filed in the courts of this State, having chancery jurisdiction, before the claims of indebtedness of the persons filing the same shall have been reduced to judgment, but no such bill shall be entertained by such court, unless the complainants therein shall have first instituted suits in the proper courts at law for the collection of their claims; and no final decree shall be entered upon such creditors' bill until such claims shall have been reduced to judgment." The rule in this State prior to the enactment in 1903 of *Page 891 the above statute was that before a creditor could resort to his remedy by "creditor's bill," he must first secure judgment at law and exhaust all means afforded by the law to recover upon an execution based upon such judgment. Armour Fertilizer Works v. First Nat. Bank, 87 Fla. 436, 100 So. 362; Scott v. Neely, 140 U.S. 106, 11 S. Ct. 712, 35 L. Ed. 358. In the first case above cited, this Court held that a creditor's bill is one brought by a creditor who has secured judgment at law and has in vain attempted at law to obtain satisfaction and who sues in equity for the purpose of reaching property in which defendant in execution has only an "equitable title," and which cannot be reached by an "execution at law." See 1 Bouvier's Law Dict. 726; 8 Rawle C. L. 6, Sec. 5. In the same case it was also also held that "the nature, purpose and scope of a creditor's bill is to bring into exercise the equitable powers of the court to enforce the satisfaction of a judgment by means of an equitable execution, because execution at law cannot be had."
The conclusion is that it was the intent of the above-quoted statute to permit a "creditor's bill" to be filed to reach "equitable assets" before reducing creditor's claim to a judgment, provided an action at law has been at the time brought for that purpose, and that no final decree can be properly entered on the creditor's bill until such action at law shall have been reduced to judgment. See Adam Brewing Co. v. Bowman, 92 Fla. 509, 109 So. 583.
Complainants' bill in effect was to reach lands to which said company actually "had title" but on which it had executed mortgages on part and given deeds on part after the execution of the notes and mortgage to appellees.
The legal title to property involved in a fraudulent conveyance so far as the judgment creditor is concerned, *Page 892 may never pass from the grantor, by virtue of said Section 5771, Compiled General Laws of Florida, 1927, which declares void all conveyances made to defraud creditors. Balsley v. Union Cypress Co., 92 Fla. 706, 110 So. 263, and cases there cited.
If the "legal estate" never left George E. Sebring Co. by reason of the conveyances being fraudulent, the "legal" title is still subject to any execution obtained on the notes. While a "creditor's bill" as such may not be entertained in this State unless there is a suit at law then pending, however, such requirement is not made a condition precedent to filing a bill to set aside a fraudulent conveyance of lands to which debtor had "legal title," when brought by a judgment creditor. The appellees alleged that suit had been brought against George E. Sebring Co. for the principal and interest on the notes made payable July 5, 1928, which were past due and unpaid; that said suit is pending and undetermined in the Circuit Court of Taylor County; in fact the bill appears to have been drawn with special reference to said Section 5035, Compiled General Laws of Florida, 1927.
In the well-considered case of Balsley v. Union Cypress Co.,92 Fla. 706, 110 So. 263, this Court approved the following principles:
"A judgment creditor has the right to treat an attempted transfer of property to which the judgment debtor had the legal title as a nullity and to sell the property so conveyed under execution, as though no transfer by connivance had been made, but the existence of such remedy at law does not interfere with the right to resort to a court of equity for the vacation of the fraudulent conveyance as an obstacle in the way of the full enforcement of the judgment, and to remove a cloud on the title to the property, fraud being one of *Page 893 the recognized subjects and most ancient foundation for equity jurisdiction." (Italics ours).
It was also there held that:
"Where a judgment creditor seeks by bill in equity to set aside an alleged fraudulent conveyance and subject the property therein attempted to be conveyed to his judgment, if the judgment debtor had only an equitable title to such property it is necessary to exhaust the legal remedies and have a return nulla bona upon execution, before filing such bill in equity, but it is otherwise where the judgment debtor had legal title and fraudulently conveyed the same." (Italics ours.)
In other words in the instant case a nulla bona on execution is not a prerequisite to filing such bill. Entry of judgment is required.
The above is cited and approved in the more recent case of Punta Gorda State Bank v. Wilder, 93 Fla. 301, 112 So. 569, in which it is stated that this distinction between "equitable title" and "legal title" is the "very gist of the cause now before the court."
Section 4509, Compiled General Laws of Florida, 1927, provides as follows:
"Lands and tenements, goods and chattels, equities of redemption in real and personal property, and stock in corporation, shall be subject to levy and sale under execution."
Under the above statute an execution is a lien only upon such property as the writ may be levied upon, and all "equities of redemption in real property" are subject to such levy and sale under executions. Evins v. Gainesville Nat. Bank, 80 Fla. 84, 85 So. 659. The debtor in the present case according to the bill holds the equity of redemption in two of the tracts of land conveyed by him after making the mortgage and notes to appellants. It was also *Page 894 held in the above case that "a mortgage on real estate being merely a contract lien upon the land (mortgaged) is not subject to levy and consequently not subject to the lien of an execution."
In the instant case there can be no doubt that on the facts as alleged the lands, title to which was in the Sebring Company upon which it gave mortgages to other parties, would be subject to any execution obtained on the notes in a suit at law; but as to any mortgage received back on lands sold as part of the purchase price, such mortgage might not be subject to an execution obtained at law, unless by virtue of the fact that the title to the property covered by it never passed from the debtor in his attempted conveyance.
The general rule seems to be that where "an equity of redemption in the debtor may be reached by an execution, a creditor's bill will not lie to subject it to the payment of a judgment." 8 Rawle C. L. 11, Sec. 11; Ann. Cas. 1914B, 953; 15 C. J. 1401, Sec. 62.
"An equitable title is 'a right or interest in land, which not having the properties of a legal estate, but being merely a right of which courts of equity will take notice, requires the aid of such court to make it available." Pogue v. Simon, 47 Or. 6, 81 P. 566, 8 Ann. Cas. 474, 114 Am. St. Rep. 903.
"Equitable title" has also been defined to be a right, imperfect at law but which may be perfected by the aid of a court of chancery by compelling parties to do that which in good faith they are bound to do, or removing obstacles interposed in bad faith to the prejudice of another. See 2 Words Phrases (2d Series) 308, and authorities there cited.
In the case of Logan v. Logan, 22 Fla. 561, 1 Am. St. Rep. 212, it was said that: *Page 895
"It is also alleged as a ground of demurrer that the execution of complainant had not been returned to the clerk's office unsatisfied. The rule laid down by this court in Robinson v. Springfield Company, 21 Fla. 203, was to the effect that this was only necessary when the title to the property had never been in the debtor, but was held by another on a secret trust for him, or in case of an equitable asset which could not be levied on by execution at law. When the creditor seeks the aid of a court of equity for the satisfaction of a judgment out of the property of his debtor, the title to which property has been in the debtor, but has been fraudulently transferred, it is sufficient for the creditor to show a judgment at law and execution to entitle him to resort to equity to vacate such fraudulent conveyance." See also Balsley v. Union Cypress Co., supra.
On the other hand before a judgment creditor can file a bill in equity to set aside conveyances of property to which the judgment debtor had only an "equitable title" the judgment creditor must have returned a "nulla bona" on execution. Punta Gorda State Bank v. Wilder, 93 Fla. 301, 112 So. 569. The legal assumption is that if the debtor had legal title, an execution at law may be satisfied without the necessity of a suit in equity, while if the debtor had only an equitable title such fact could not be properly ascertained until the execution at law is actually served and returned.
In the case of Holly v. Gainesville Nat. Bank, 80 Fla. 523, 86 So. 444, the property sought to be reached by the creditors' bill was not the "legal estate" of the defendant, but at most the equitable estate, and it was held that a judgment creditor must first exhaust legal remedies before subjecting debtor's equitable assets. In the case of Robinson v. Springfield,21 Fla. 203, it was held that: *Page 896
"Where a creditor seeks the aid of a court of equity against the real estate of his debtor, the title to which has been in such debtor, and is alleged to have been conveyed by him in fraud of his creditors, it is sufficient for the creditor to show a judgment at law, or, as equivalent thereto, a decree in equity for a balance remaining after a foreclosure sale of mortgage property, creating a lien on such real estate; if, however, the title to such real estate has never been in the debtor, but is held by another on a secret trust for him, or is an equitable asset not liable to be sold under an execution at law, there must be an execution sued out and pursued to every available extent and returned unsatisfied." (Italics ours.)
Also it was held that:
"A bill may be filed to remove from real estate liable to sale under execution at law, fraudulent incumbrances or conveyances as soon as judgment is obtained, without proceeding to obtain satisfaction out of other property." (Italics ours).
In the case of Beasley v. Coggins, 48 Fla. 215, 37 So. 213, 5 Ann. Cas. 801, it was held that:
"The general rule is that before a creditor can maintain a bill in equity to set aside a conveyance by his debtor, of his real estate, on the ground of fraud, the creditor must reduce his claim to judgment or its equivalent, a decree for a balance remaining, after a foreclosure sale of mortgaged property, creating a lien on such real estate, and when personal property or equitable assets are pursued he must have an execution issued and returned nulla bona. Robinson v. Springfield Company, 21 Fla. 203."
We reach the conclusion that before a bill can legally be filed and entertained to set aside conveyances of property, "legal title" to which had been in debtor, and especially where such creditors' claim is based upon notes *Page 897 secured by a mortgage in their favor on lands other than that alleged to have been fraudulently conveyed, that it is necessary for the creditor to show a judgment at law or its equivalent "creating a lien on such real estate." For all that may appear in this case to the contrary, the lands upon which creditors hold a first lien together with the lands to which debtor still holds the "equity of redemption" may be ample to satisfy any judgment on the notes in case of a suit at law or a deficiency decree entered in a foreclosure in equity.
The bill of complaint in the present case fails to show such prerequisite and therefore error was committed in overruling the demurrers to the bill.
Reversed.