Humphreys v. Atlantic Milling Co.
| Decision Date | 20 December 1888 |
| Citation | 10 S.W. 140,98 Mo. 542 |
| Parties | Humphreys v. The Atlantic Milling Company et al., Appellants |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Geo. W. Lubke Judge.
Reversed and remanded.
Hough & Overall and C. M. Napton for appellants.
(1) It appears from the undisputed testimony that the share of the Atlantic Milling Company, in the acceptance, was represented by the note of the Victoria Flour Mill Company, whose solvency is not questioned, payable to Bain (the president of the Atlantic Milling Company), by whom the draft had to be drawn, as shown, and by him, Bain, immediately appropriated to the payment of the creditors to whom it had been promised and who had given the company indulgence on the faith of such promise, by delivery of the note with such instructions to defendant Judson, whose solvency, and whose good faith in the transaction are unquestioned, and the note was in the latter's hands when the injunction was served upon him. Plaintiff wholly failed to prove his case. (2) Plaintiff has no right to an injunction and no standing in a court of equity, and, if he had a right to attach at all, had a complete and adequate remedy by statutory process of attachment and garnishment. It is clear that if the transfer to Judson was inoperative, then he held the note for the Atlantic Milling Company. It is idle to pretend that because the note was payable to Bain (the president of the company) individually, that the creditors of the company could not have reached it by garnishment. Nor would the fact that the note was payable, subject to the payment of the acceptance relieve the partners from liability to garnishment, subject of course to the conditions under which it was payable. The decisions of our courts are clear and express upon this point. Lee v. Tabor, 8 Mo. 322; Eyerman v. Krieckhaus, 7 Mo.App. 456; Weil v. Posten, 77 Mo. 284. That the validity of the transfer to Judson could be fully determined in garnishment proceedings is clear
Dyer, Lee & Ellis and John G. Chandler for respondent.
(1) The objection that the claim of respondent had not been reduced to judgment before the commencement of this suit is without merit. It was admitted that his claim was justly due and it is immaterial whether he reduced it to judgment or not. Nieters v. Brockman, 11 Mo.App. 600; Pendleton v. Perkins, 49 Mo. 565; Luthy v. Woods, 1 Mo.App. 167; Russell v. Clark, 7 Cranch, 89; Kent v. Curtis, 4 Mo.App. 130; Miller v. Davidson, 3 Gilm. 523. (2) There was no remedy at law by which plaintiff could have reached the interest of the Atlantic Milling Company in the draft or acceptance of the White Line Central Transit Company because it embraced the undivided interests of the Atlantic Milling Company and the Victoria Milling Company. That part of the fund belonging to the Atlantic Milling Company could not have been reached by garnishment. If the debt or fund sought to be garnished belongs to the defendant, and another person, the garnishment will not lie. Kingsley v. Fire Co., 14 Mo. 465. And if the fund sought to be reached by garnishment could only be recovered by the defendant by a proceeding in equity, garnishment will not be maintainable. A creditor cannot bring the trustee into a court of law to answer in a case where equity has original and sole jurisdiction. Lackland v. Garesche, 53 Mo. 257; Sheedy v. Bank, 62 Mo. 17. (3) The proof in this case shows, beyond any reasonable doubt, the fraudulent purpose on the part of the Atlantic Milling Company, through its president, George Bain, to hinder, delay and defraud the creditors of that company. If the intent of the debtor, by the disposition of his property, is to hinder, delay or defraud creditors of their lawful actions, damages, debts or demands, then such transfer is clearly utterly void. Rupe v. Alkire, 77 Mo. 641, and cas. cit. If the conveyance is contrived and made with a view to defeat particular creditors, it is fraudulent as to them. Henderson v. Henderson, 55 Mo. 534. (4) The defendants did not plead a remedy at law. Blair v. Railroad, 89 Mo. 393.
OPINION
This and four other suits of a like character were tried at the same time. The suit is one in equity, and the defendants are the Atlantic Milling Company, Geo. Bain, who is president and managing officer of that company, the Victoria Milling Company, A. H. Smith, who is managing officer of the last-named company, the White Line Central Transit Company, and F. N. Judson. The two milling companies are corporations doing business in St. Louis.
The evidence discloses these general facts: Plaintiff is a general creditor of the Atlantic Milling Company to the amount of $ 2,046 for wheat sold in December, 1883. In the spring of 1883, that company failed and suspended business. It resumed business in November of that year, most of the old debts having been extended. Towards the middle of December that company became indebted and was pressed on account of these new debts, called the debts of the "new running;" plaintiff's demand is of this class. The Atlantic Milling Company and the Victoria Milling Company had a demand against the transit company for rebates on shipments, and Mr. Bain, for the Atlantic Milling Company, promised to pay the proceeds of his share of this claim to the creditors of the "new running." The result of several trips to New York was, that Bain and Smith drew their individual and joint draft, of date January 12, 1884, on Darling, manager of the transit company, for $ 12,327.54, payable at Buffalo in sixty days, to the order of the Victoria Milling Company, which draft Darling accepted. The Victoria Milling Company then made its note of the same date for $ 9,818.24, payable to Bain in sixty days. This note represents the interest of the Atlantic Milling Company in the rebates. There was a verbal agreement that the payment of this note should be conditioned upon the payment of the draft. On January 14, 1884, Bain endorsed the note and delivered it to Mr. Judson for the purpose and with the understanding that he should collect it and pay the proceeds pro rata to the November and December creditors.
The petition alleges that the draft upon Darling was drawn by Bain and Smith in their individual names for the purpose of defrauding the creditors of the Atlantic Milling Company; that in the furtherance of such purpose, Smith executed to Bain his note for the $ 9,818.24; that for a like purpose Bain endorsed the note to Judson who procured a discount of it, taking a check therefor with the understanding that the check should not be paid until the draft was paid; that these transactions were all thus made to defraud creditors. The prayer is, that defendants be restrained from collecting the draft or disposing of it, that it be delivered into court, the appointment of a receiver, and that plaintiff be paid out of the proceeds of the draft.
The defendant denied all the allegations of fraud and set out a history of the transactions as they are before stated, and as they appear on trial. Various creditors, both old and new, interpleaded for the fund and ask that the petition of the plaintiff be dismissed. The court granted a temporary injunction, ordered the acceptance to be collected by a receiver, and the $ 9,818.24 is in court. On the final hearing the plaintiff prevailed.
The proof shows that Bain, Smith and the Atlantic Milling Company were insolvent. Judson and the Victoria Milling Company are solvent. The note to Bain was made by the last-named company and not by Smith, as stated in the petition. Mr. Judson made no negotiation of the note, nor did he attempt to do so. Much is said about these variances between the petition and proofs. We do not regard them as fatal to the plaintiff, though the real facts are to be kept in mind.
The proof is clear that Bain and Smith drew the draft on Darling in their individual names because the transit company refused to settle in any other way. There is no proof of any fraudulent purpose in the settlement with the transit company or in taking the draft payable to the Victoria Milling Company. It is clear, too, that Mr. Judson took the note from Bain in good faith and for the purposes before stated, without any knowledge of any fraudulent purpose on the part of Bain, if any there was.
As to the other questions of fraud in fact, it is sufficient to say, in the view we feel bound to take of this case, that there is much evidence tending to show that Bain urged the settlement of rebates for the sole purpose of paying these new creditors; that he had agreed with them to pay their debts out of this collection, and that he placed the note with Mr. Judson for that purpose alone. The evidence shows that he was guilty of deception to some of these creditors, after he had given the note to Judson in this, that he did not tell them who had the note, and that he said he had a check for it, when in fact he had no check. Bain says he made these statements because he wanted the matter of his getting the rebates kept quiet. Smith, however, did give the plaintiff a copy of the draft, and he endeavored to aid Smith in negotiating it, but the draft seems to have had no commercial standing.
That the plaintiff's demand is just and due is conceded; but it stands in the shape of an open account, and the first question is, whether he can maintain this suit in equity. The general rule is that a creditor, before he can maintain a creditor's bill, must show that he has exhausted all remedy at law; and this because a court of equity will not entertain such a suit where the plaintiff has a complete and adequate remedy at law. In general, it must be shown that judgment has been recovered and that execution has...
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