10.3 The Unsecured Creditor’s Non-statutory Remedies

• Library: Enforcement of Liens and Judgments in Virginia (Virginia CLE) (2019 Ed.)

10.3 THE UNSECURED CREDITOR'S NON-STATUTORY REMEDIES

10.301 In General. The general rule is that a general or unsecured creditor may not file a creditor's suit requesting the appointment of a receiver to enable it to enforce its claim against an entity absent a statute or some other ground for equity jurisdiction. ⁶¹

A. Non-Corporate Entities. Title 13.1 of the Virginia Code provides for unsecured creditor actions against stock corporations. A similar statute governs non-stock corporations. ⁶² No analogous provisions exist for non-corporate entities or individuals.

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B. Creditors' Bill. The creditors' bill exists in cases not governed by statute. ⁶³

C. Equitable Liens. A creditor has standing to pursue a creditors' bill if it can claim an equitable lien on the property of the debtor. ⁶⁴

D. Fraudulent and Voluntary Conveyances. A creditor has standing in connection with a suit to recover a fraudulent or voluntary conveyance. ⁶⁵

10.302 The Nunnally Rule. In Nunnally v. Strauss, ⁶⁶ the court permitted an unsecured creditor to file a creditors' suit against a corporation requesting that a receiver be appointed to take charge of the corporation's assets and to have the assets administered and applied to the payment of its debts even though the unsecured creditor had not reduced its claim to judgment and had no lien. ⁶⁷

The court justified the unsecured creditor's ability to seek receiver-assisted liquidation because the "defendants suffer no possible disadvantage . . . and a number of suits may be avoided by the proceeding in its present form." ⁶⁸ In reaching its holding, the court identified five elements necessary for a general creditor to proceed under this exception (hereinafter referred to as the "Nunnally Rule"):

	1.	The corporation is insolvent;
2.	The

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