James H. Rice Co. v. McJohn

Joseph McJohn (defendant) owed money to James H. Rice Co. (Rice) (plaintiff). Rice sued and obtained a judgment in the amount of $1,801.60 against Joseph. However, a month before the judgment was issued, Joseph transferred his only asset, a piece of real estate with a three-story brick building on it, to his father, Edward McJohn (defendant). The sale documents claimed that Edward paid $1 for the property, but Edward did not actually pay anything for it. Rather, Edward held the property in trust for Joseph so that Joseph could avoid Rice’s judgment. The sheriff asked Joseph to pay Rice’s judgment, but Joseph did not pay it. Rice sued Joseph and Edward, requesting the court to set aside the property sale as a fraudulent conveyance. Neither Joseph nor Edward responded to the complaint, and the trial court entered a default against them. The court appointed a receiver to handle the property and collect rents while the lawsuit was pending. Edward then died. The administrator of Edward’s estate moved to have the default judgment vacated. The administrator also complained that the court had lacked authority to appoint a receiver for the property, which Edward still owned. The administrator argued that this meant the receiver had unlawfully collected rents that should have gone to Edward and asked the court to order the receiver to turn over the unlawfully collected rents to Edward’s estate. The court ordered that (1) the fraudulent conveyance be set aside, meaning the property transfer to Edward was undone, and (2) the receiver pay the rents collected so far to Rice to satisfy part of Joseph’s debt. The administrator of Edward’s estate appealed.