I cannot agree with the majority opinion which holds that a creditor need not recover a judgment before bringing a suit to set aside a fraudulent conveyance and that a right accrues to the creditor to attack such conveyance after securing an attachment or some other lien on the debtor's property other than a judgment lien.
The rule in this state is that a creditor must first recover a judgment against the debtor before he can bring a suit to set aside a fraudulent conveyance. This rule is subject to certain exceptions, not available to defendants, and a creditor may attack a conveyance without securing a judgment by obtaining an attachment or other lien only under circumstances creating an exception to the general rule.
The majority opinion confuses the exceptions to the rule with the rule. In the early case of Buchanan v. Marsh, 17 Iowa 494, at page 496, the court said:
"The rule is, as far as we know, without exception, that the creditor must have completed his title at law, by judgment (if not by execution), before he can question the disposition of the debtor's property. Angell v. Draper, 1 Vern., 399; Shirley v. Watts, 3 Atk., 200; Bennett v. Musgrave, 2 Ves., 51; Wiggins v. Armstrong, 2 Johns. Ch., 144; Jeremy's Eq., 161. The reason of the rule is, that, until the creditor has established his title, or his debt, by the judgment of a court, *Page 442 he has no right to interfere; for, unless he has a certain claim upon the property of the debtor, he has no concern with his frauds. To establish any other rule, might lead to an unnecessary and perhaps fruitless and oppressive interruption of the exercise of the debtor's rights."
The pronouncement of the rule in Buchanan v. Marsh, supra, has never been overruled and has been followed and approved in the following cases: Clark v. Raymond, 84 Iowa 251, 50 N.W. 1068; Goode v. Garrity, 75 Iowa 713, 38 N.W. 150; Faivre v. Gillman,84 Iowa 573, 51 N.W. 46; Mickel v. Walraven, 92 Iowa 423, 60 N.W. 633; Ware v. Delahaye Purdy, 95 Iowa 667, 64 N.W. 640; Hill v. Denneny, 106 Iowa 726, 77 N.W. 472; Stubblefield v. Gadd,112 Iowa 681, 84 N.W. 917; Crary v. Kurtz, 132 Iowa 105, 105 N.W. 590, 109 N.W. 452, 119 Am. St. Rep. 549; Federal Reserve Bank v. Geannoulis, 203 Iowa 1385, 214 N.W. 576; Cooper v. Erickson,213 Iowa 448, 239 N.W. 87; Bristow v. Lange, 221 Iowa 904, 266 N.W. 808. The majority opinion overrules all of the above cases.
This court has recognized certain exceptions to the general rule. In Crary v. Kurtz, 132 Iowa 105, 111, 105 N.W. 590, 592, 109 N.W. 452, 119 Am. St. Rep. 549, the opinion states:
"`The reason of the rule,' [judgment a prerequisite] said Wright, C.J., in Buchanan v. Marsh, 17 Iowa, 494, `is that until the creditor has established his title, or his debt, by the judgment of a court, he has no right to interfere; for, unless he has a certain claim upon the property of the debtor, he has no concern with his frauds.' Clark v. Raymond, 84 Iowa, 251; Goode v. Garrity, 75 Iowa, 713. And ordinarily the judgment must be such as to constitute a lien on the debtor's property. Peterson v. Gittings, 107 Iowa, 306. This latter rule, however, is not inexorable, for in some cases a judgment against the debtor cannot be obtained, as where he is dead. Cooley v. Brown, 30 Iowa, 470; Harlin v. Stevenson, 30 Iowa, 371; Doe v. Clark, 42 Iowa, 123. Or, where the debtor has assigned for the benefit of creditors, his assignee cannot obtain judgment. Schaller v. Wright, 70 Iowa, 667; Mehlhop v. Ellsworth, 95 Iowa, 657."
In First National Bank v. Eichmeier, 153 Iowa 154, 163, 133 N.W. 454, 458, the court said: *Page 443
"The claims of plaintiff had not been reduced to judgment prior to beginning this suit. As defendants were nonresidents, this was unnecessary. Relief in the way of judgment against the debtor, and subjecting the land in the wife's name, was rightly sought in the same action. Taylor v. Branscombe, 74 Iowa, 534; Com. Exchange Bank v. Applegate, 91 Iowa, 411."
In Taylor v. Branscombe, 74 Iowa 534, 536, 38 N.W. 400, 401, cited in the majority opinion, it is stated:
"It has been held that a creditor's bill may be maintained, without judgment or attachment, in case the debtor is a non-resident, as were defendants in this case."
The opinion then states:
"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."
The opinion in the Taylor case, supra, did not cite any Iowa cases to support this latter statement for the good reason that there were none. The majority opinion cites the Taylor case as supporting its conclusion that the general rule is that the securing of an attachment lien authorizes the commencement of a suit to attack a fraudulent conveyance. In the Taylor case, the defendants were nonresidents and the conclusion reached in the case is sound because it is based on an exception to the rule.
In Hill v. Denneny, 106 Iowa 726, 728, 77 N.W. 472, 473, the court states:
"It was said, further, [in Clark v. Raymond, 84 Iowa 251, 50 N.W. 1068] that as a general rule, a creditor's bill cannot be maintained until judgment has been obtained in the principal action," etc. The court then refers on page 729 to the Taylor case as follows:
"In the case of Taylor v. Branscombe, 74 Iowa, 534, some statements were made which seem to be in conflict with the rule stated in the cases cited. It is to be observed, however, that the defendants in that case were non-residents of this state. The *Page 444 judgment debtor, by means of a fraudulent conveyance, had divested himself of all interest in the land which he could have asserted against his grantee. An action at law, aided by attachment, would have been wholly ineffectual, and the plaintiff would have been without remedy had he been restricted to proceedings at law. The action was commenced in equity, and was aided by attachment, and the right to proceed by that method was sustained. It would have been a reproach to our jurisprudence had there been no remedy in such a case."
In Ratekin v. Droge Elevator Co., 190 Iowa 596, 598, 180 N.W. 654, 655, the opinion states:
"Contrary to appellee's contention, the evidence conclusively proved J.W. Ratekin a resident of Nebraska. He being a nonresident, it was not necessary for cross-petitioner to reduce its claim to judgment, before questioning the bona fides of his assignment of profits to his father, J.R. Ratekin. Taylor v. Branscombe, 74 Iowa 534; Corn Exchange Bank v. Applegate, 91 Iowa 411; Gates v. McClenahan, 124 Iowa 593; First Nat. Bank v. Eichmeier, 153 Iowa 154."
It will be observed that in the Ratekin case, supra, the case of Taylor v. Branscombe, supra, is cited as being based on an exception to the rule.
I will refer to some of the cases cited in the majority opinion. It is true that in Goode v. Garrity, 75 Iowa 713, 716, 38 N.W. 150, 151, the court states:
"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 incumbrance of his property made by such debtor, and have the same set aside."
In the Goode case, supra, the creditor had not obtained any lien or judgment against the debtor's property. On page 716 the court clearly indicates that when it stated "until a creditor in some manner obtains a lien on his debtor's property" it meant a judgment lien in the following language:
"* * * we think this position must be sustained, for the *Page 445 reason that this court adopted such rule many years ago in Buchanan v. Marsh, 17 Iowa, 494. It is there said: `The rule is, so far as we know, without exception that the creditor must have completed his title at law by judgment, if not by execution, before he can question the disposition of the debtor's property.' In addition to the authorities referred to in the cited case, see Bump Fraud. Conv. 511, and authorities cited in note."
The majority opinion relies on the case of Mickel v. Walraven,92 Iowa 423, 428, 60 N.W. 633, 634, wherein it is stated:
"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."
The first six cases cited adhere to the general rule that the creditor must first obtain a judgment. The last cited case of Taylor v. Branscombe, supra, supports the statement of the court that an attachment lien is sufficient. In the Taylor case the defendants were nonresidents.
I should state that the case of Taylor v. Branscombe, supra, is consistently cited by subsequent decisions as based on an exception to the general rule.
The real holding of the case of Mickel v. Walraven, supra, is found on page 429 of 92 Iowa, page 635 of 60 N.W., where it is stated: "The claim must be reduced to judgment within a reasonable time, otherwise it will be considered stale, and no relief will be granted." In the Mickel case, none of the exceptions to the general rule was applicable.
The majority opinion contains the following quotation from Cooper v. Erickson, 213 Iowa 448, 451, 239 N.W. 87, 88:
"His action is in the nature of a creditor's bill. Under these circumstances it is necessary that the receiver first obtain, ifhe can, a judgment against the alleged debtor Hans Erickson, the *Page 446 appellee, or have a lien on the real estate involved." (Italics supplied.) The quotation means that a judgment is a prerequisite unless the circumstances bring a case within the exceptions to the rule. The court, in the Cooper case, then quotes from the case of Federal Reserve Bank v. Geannoulis, 203 Iowa 1385, 214 N.W. 576, as follows:
"`A number of our early Iowa decisions held that, under these circumstances (where there was no prior judgment), the original claim must be put into judgment before an action on a creditor's bill could be maintained. Later, we held that, under certaincircumstances, the proceedings for judgment on the original claim and an action to subject the property could be brought in the same proceeding. (The italics are ours).'"
The court then states:
"No situation amounting to the exceptions referred to in the Federal Reserve Bank case (203 Iowa 1385), supra, is present in the proceedings now under review."
Bristow v. Lange, 221 Iowa 904, 266 N.W. 808, follows the rule announced in Buchanan v. Marsh, 17 Iowa 494, Mickel v. Walraven,92 Iowa 423, 60 N.W. 633, Stubblefield v. Gadd, 112 Iowa 681, 84 N.W. 917, all of which are cited in this dissenting opinion.
In the Bristow case, the plaintiff procured a judgment, not an attachment or other lien, against the debtor before bringing a creditor's bill.
The court states, page 913 of 221 Iowa, page 812 of 266 N.W.:
"There is a line of cases holding that although the fraud is presumed to have been discovered on recording of a deed claimed to have been made in fraud of creditors, the action to set aside the deed does not accrue until plaintiff's claim has been reduced to judgment, this being on the theory that the conveyance could not be attacked until after a lien was obtained against the property. Mickel v. Walraven, 92 Iowa 423, 60 N.W. 633; Stubblefield v. Gadd, 112 Iowa 681, 84 N.W. 917; 17 R.C.L. 742, section 106; 17 R.C.L. 755, section 121; Adams v. Holden,111 Iowa 54, 82 N.W. 468. * * * *Page 447
"Following the rule laid down by these cases, we are impelled to hold that as the plaintiff in the case at bar did not secure his judgment until April, 1933, and as he commenced his action to set aside the conveyance within a month thereafter, it necessarily follows that `strictly speaking,' the action to set aside the deed is not barred by the statute of limitations. * * * They [appellants] contend that the action to reduce appellee's claim to judgment should have been commenced within a reasonable time after the maturity of said claim, and his failure so to do barred the action under the doctrine of laches. * * * 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 [judgment] lien against the property in question within the five-year statutory period."
Whenever our decisions have used the words "attachment or judgment lien" or "judgment or other lien", the text clearly shows that, in using the words "attachment lien" and "or other lien", they are referring to the exceptions to the general rule.
The law is stated in 24 Am. Jur. 306, section 175, as follows:
"Subject to certain exceptions noted in the following sections, the rule is elementary that a general creditor must obtain a judgment before he can have relief against his debtor in equity. He must prove his debt, and reduce it to a certainty; this is true of negative as well as affirmative relief. If the claim of the complaining creditor is unliquidated and unadjudicated, he has no standing to have the conveyance set aside as being fraudulent." Crary v. Kurtz, 132 Iowa 105, 105 N.W. 590, is cited as an authority for the text.
Section 11007, subsection 5, 1939 Code, provides that an action for recovery on the ground of fraud must be brought within five years after the action accrues. As defendants are not within exceptions to the general rule, plaintiff's right to *Page 448 attack the conveyance accrued when he obtained his judgment on the note. Plaintiff obtained his judgment on the note on September 13, 1938, and commenced this proceeding on September 22, 1938. Obviously, this suit is not barred by the statute of limitations.
With reference to the issue of laches, we have often recognized and applied the rule that a claimant will not be permitted to postpone the operation of the statute of limitations an unreasonable length of time by delaying or refusing to take the legal steps essential to the commencement of his suit and the reasonable time within which the prerequisite act must be performed is, in the absence of special circumstances, fixed in analogy to the statute of limitations (five years). Bristow v. Lange, supra; Mickel v. Walraven, 92 Iowa 423, 60 N.W. 633.
Plaintiff's note was not due until August 10, 1934. He reduced the note to judgment, the condition precedent to his right to bring this proceeding, on September 13, 1938. He delayed reducing the note to judgment a little over four years, a period well within the statutory limitation of five years.
Under the rule above stated, plaintiff had five years from the time his note was due to secure his judgment, in the absence of special circumstances. There is no showing by defendants of unusual circumstances that would make it inequitable to permit plaintiff to maintain this suit. There is not one word in the record to indicate that defendants were prejudiced by the four-year delay in reducing the note to judgment. As above stated, the reasonable time within which the prerequisite act must be performed is fixed in analogy to the statute of limitations, which is five years. Plaintiff performed the prerequisite act of obtaining judgment within a reasonable time and it follows that defendants have failed to establish the defense of laches.
In addition to the statute of limitations and laches, defendants pleaded waiver and equitable estoppel. I have carefully read the record and in my opinion defendants failed to establish any of the defenses interposed. I would reverse.
HAMILTON, J., joins in this dissent. *Page 449