Davis v. H. B. Claflin Co.

• Citation: 38 S.W. 662
• Parties: DAVIS et al. v. H. B. CLAFLIN CO.<SMALL><SUP>1</SUP></SMALL>
• Decision Date: 07 November 1896
• Court: Arkansas Supreme Court

38 S.W. 662

DAVIS et al. v. H. B. CLAFLIN CO.¹

Supreme Court of Arkansas.

November 7, 1896.²

Appeal from circuit court. Sebastian county; Edgar E. Bryant, Judge.

Action by attachment by the H. B. Claflin Company against the Holmes Dry-Goods Company. After judgment and sale of the attached property, Samuel C. Davis and others, junior attachment creditors, intervened, ask ing that plaintiff's attachment be postponed to their lien. The cause was transferred to equity, and from a decree denying their petition the interveners appeal. Reversed.

H. B. Claflin & Co. brought suit against the Holmes Dry-Goods Company, of Ft. Smith, in this state, for $28,333.34, for which amount Claflin & Co. held the promissory notes, eight in number, of the Holmes-Dry Goods Company, which had been transferred to it in due course of trade, before maturity, by one Daughaday. Claflin & Co. sued out an attachment in said suit, and had it levied upon the stock of goods of the Holmes Dry-Goods Company, at Ft. Smith, Ark.; alleging in their affidavit for attachment that the Holmes Dry-Goods Company was a nonresident of the state, and that it had fraudulently disposed of its property with the fraudulent intent to hinder and delay its creditors. This affidavit was made by Leo Frank, the agent of Claflin & Co. Subsequently the appellants, as interveners, brought suits on their demands against the Holmes Dry-Goods Company, sued out attachments, and had them levied upon the same stock of goods. Immediately before Claflin & Co. had their attachment levied, the American National Bank of Ft. Smith had brought suit, and had an attachment against the Holmes Dry-Goods Company, which was levied prior to either of the other attachments. Judgment went against the Holmes Dry-Goods Company in all the suits, the attachments having been all sustained. The stock of goods of the Holmes Dry-Goods Company was sold by the sheriff, under order of the court, and he held the proceeds, when appellants intervened, and upon their intervention the cause was transferred to equity. The interveners claim that H. B. Claflin & Co. ought to be postponed to them in the distribution of the proceeds of the sale of the stock of goods of the Holmes Dry-Goods Company, — not, however, contesting the right of the bank to precedence. The interveners charge that the notes upon which Claflin & Co.'s suit is based do not represent bona fide debts owing by the Holmes Dry-Goods Company to them, and say that they are "collusive, simulated, and fraudulent, and were contrived, executed, delivered, and received by the plaintiff and the managing officers and agents of the defendant for the purpose of hindering, delaying, and defrauding the bona fide creditors of defendant; that the said notes were never legally executed by defendant." The interveners in their petition allege also that, at the time the plaintiff's attachment was issued, no grounds for said attachment existed, and said suit, with others, was brought with the assent, connivance, and procurement of the defendant's managing officers, and with the knowledge on the part of the plaintiff that no ground for attachment existed; that the attachment of plaintiff was not sued out in good faith adversely, but in the furtherance of a conspiracy between plaintiff and the managing officers and agents of defendant to apply the assets of the defendant to the payment of the simulated and fictitious debts of plaintiff, etc. There are other matters alleged in the petition of the interveners, which the court finds it unnecessary to mention, in the view it takes of the case. They concluded with a prayer that the plaintiff, Claflin & Co., be postponed to the liens of the petitioners under their attachment, etc.; and by way of amendment to their petition, made by leave of court, the interveners "allege that on the 8th of December, 1892, the Holmes Dry-Goods Company was an insolvent company; that the attachment herein was sued out by H. B. Claflin & Co., and judgment obtained, for the purpose of obtaining preference in violation of the act of the general assembly approved April 14, 1893, entitled "An act to prevent preferences among the creditors of insolvent corporations," and the interveners thereupon pray that if it be found that Claflin & Co.'s debt is bona fide, and their attachment not fraudulent as to petitioners, the funds in the hands of the sheriff be distributed ratably among all the creditors of the Holmes Dry-Goods Company. The appellee in its answer deny all fraud and conspiracy, and that their debts were simulated, and say they were bona fide, and that the debts for which the notes were given upon which their suit is brought were just debts; and they deny that they were parties to any schemes, conspiracy, or contrivance for the purpose of hindering, delaying, and defrauding the bona fide creditors of the Holmes Dry-Goods Company; deny that said notes were never legally executed; deny that no grounds for attachment existed when they sued out their attachment; deny that their attachment was not sued out in good faith, and that it was sued out in furtherance of a conspiracy, as charged; deny that they sued out their attachment to obtain a preference under the act of April 14, 1893, entitled "An act to prevent preference among the creditors of insolvent corporations"; and prayed that the interveners' petition be dismissed. There was much testimony in the case which it is not necessary for this court to notice. It appeared in evidence, and from the pleadings and exhibits in the cause, which was transferred to equity, that the Holmes Dry-Goods Company made no defense in the suit by H. B. Claflin & Co. against it, and it also appeared from the notes sued upon by Claflin & Co. in the suit against the Holmes Dry-Goods Company, and by the testimony of their agent, Leo Frank, who filed the affidavit for their attachment, that seven of the eight notes sued upon were not due when they had their attachment issued. The court decreed for Claflin & Co., and dismissed interveners' petition, from which decree they appealed to this court.

Geo. H. Sanders, Clendening, Mechem & Youmans, and Jos. M. Hill, for appellants. Morris M. Cohn and Clayton & Brizzolari, for appellee.

HUGHES, J. (after stating the facts).

Are the interveners entitled to the relief they ask; that is, that H. B. Claflin & Co. be postponed to them in the distribution of the balance of funds, proceeds of the sale of the goods of the Holmes Dry-Goods Company, in the hands of the sheriff? Can they be heard to complain, inasmuch as the Holmes Dry-Goods Company made no defense, and does not complain? At the time of the execution of the notes which are the basis of the suit of H. B. Claflin & Co. v. Holmes Dry-Goods Co., and the date of the institution of this suit and the issuance of the attachment in favor of the appellees, preferences among creditors by insolvent debtors were allowed in this state. This court decided in Glaser v. Bank, 34 S. W. 1061, 62 Ark. 171, that when two creditors have sued out attachments, and cause them to be levied on the same property, the junior...