Davis v. H. B. Claflin Co.
| Decision Date | 07 November 1896 |
| Citation | 38 S.W. 662,63 Ark. 157 |
| Parties | DAVIS v. H. B. CLAFLIN COMPANY |
| Court | Arkansas Supreme Court |
Appeal from Sebastian Circuit Court in Chancery, Fort Smith District, EDGAR E. BRYANT, Judge.
STATEMENT BY THE COURT.
H. B Claflin Company brought suit against the Holmes Dry Goods Company, of Fort Smith, in this state, for $ 28,333.34, for which amount H. B. Claflin Company 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.
H. B Claflin Company sued out an attachment in said suit, and had it levied upon the stock of goods of the Holmes Dry Goods Company, at Fort Smith, Ark.; alleging in its affidavit for attachment that the Holmes Dry Goods Company was a non-resident 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 H. B. Claflin Company.
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 H. B. Claflin Company had their attachment levied, the American National Bank of Fort 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 all having been 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 Company 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 H. B. Claflin Company's suit is based do not represent bona fide debts owing by the Holmes Dry Goods Company to it 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, H. B. Claflin Company, 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 Company, 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 preference among the creditors of insolvent corporations,' and the interveners thereupon pray that if it be found that H. B. Claflin Company's debt is bona fide, and its 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 denies all fraud and conspiracy, and that its debts were simulated, and says they were bona fide, and that the debts for which the notes were given, upon which its suit is brought, were just debts; and it denies that it was party to any schemes, conspiracy, or contrivance for the purpose of hindering, delaying, and defrauding' the bona fide creditors of the Holmes Dry Goods Company; denies that said notes were never legally executed; denies that no grounds for attachment existed when it sued out its attachment; denies that its attachment was not sued out in good faith, and that it was sued out in furtherance of a conspiracy, as charged; denies that it sued out its attachment to obtain a preference, under the act of April 14, 1893, entitled "An act to prevent preferences 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 Company against it, and it also appeared from the notes sued upon by H. B. Claflin Company 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 H. B. Claflin Company, and dismissed interveners' petition, from which decree they appealed to this court.
Decree reversed and cause remanded.
Geo. H. Sanders, for appellants.
1. In Sannoner v. Jacobson, 47 Ark. 31, as also in the cases from South Carolina, Missouri and Massachusetts, the ruling is that an intervener is prohibited from interfering in a case where there is an irregularity or informality in the proceedings which could have been amended, and thus made whole; but that in all other cases where there is or was a radical defect in the cause of action, as where no ground of attachment existed, or any other defect that showed there was no authority for maintaining the action, then the intervention is admitted to show this defect, and, upon proof of the fact, the prior attachment is postponed to the clear right of the subsequent attachment. Sand. & H. Dig. secs. 377, 372; 47 Ark. 38; 4 N.H. 319; 2 Bailey, 209; 3 McCord, 201; ib. 345; 35 Ohio St. 664; 9 Mo. 397; 57 Ark. 541; Mans. Dig. secs. 356, 358; 53 Ark. 140; Waples, Att. sec. 775 (Ed. of 1895); Drake, Att. sec. 274; Wade, Att. sec. 54; Van Vleet, Col. Attack, p. 583; 93 Ky. 270; 44 La. An. 843; 65 Tex. 266; 62 id. 328; 4 Rich. S. C. 561; 14 N.H. 129; 13 Cal. 435; 18 id. 378; 36 Ind. 361; 85 N.Y. 243; 3 Mich. 531.
2. A preference of a creditor cannot be made by attachment without grounds, where other creditors follow with grounds, and writs are levied on the same property. Burrill, Assignments, sec. 125; Pore. Eq. Jur. sec. 886.
3. The debt sued on in this case was not bona fide, and not such as would support an attachment against third parties holding bona fide debts against the party attached. Cook on Corp. sec. 716, and notes; Dan. Neg. Inst. sec. 393; 146 U.S. 705; 55 F. 471; 120 N.Y. 145.
Clendenning, Mechem & Youmans and Jos. M. Hill also for appellants.
An attachment known to both debtor and creditor to be without grounds, and resorted to, in pursuance of an agreement between them as a method of giving a preference, should be postponed at the instance of a prior attaching creditor. 47 Ark. 31; 58 id. 524; 60 id, 444; 53 id. 140; 57 id. 545; 12 S.W. 235; 18 id. 1019. There are two grounds of attachment in this case: (1) That defendant was a non-resident, and (2) that it had fraudulently disposed of its property, etc. The first ground is applicable only to due debts. Sand. & H. Dig. secs. 325, 327. Six of the notes, aggregating $ 20,000, were not due, and this amount must depend on the second ground of the attachment, that the Holmes company had fraudulently disposed of its property, etc. This ground is shown to be false, and the attachments fail.12 S.W. 508. There was a clear abuse of the court's process--a fraud on the court and junior attachers in good faith.
Morris M. Cohn for appellee, Clayton & Brizzolara of counsel.
1. In Arkansas it is settled that interveners cannot contest the ground of the attachment, whether they are denied or confessed by the defendant in the attachment. 47 Ark. 31, 41-2, 71 F. 151; 2 So. 168; 69 Wis. 434; 34 N.W. 229; Drake, Att. (6 Ed.) secs. 280, 281.
2. The statute expressly authorizes an attachment for debts not due. And if a judgment was taken thereon, it was a matter for the Holmes Dry Goods Company to set up, not a matter of which the interveners could complain. Cases supra, and Freeman, Judgments, sec. 337; 76 Ind. 78; 102 Pa.St. 536; 16 id. 18; 22 A. 90; 10 Pet. 449; 141 U.S. 260; 71 F. 591-5.
3. If as has been held, the failure to give bond or make the affidavit is immaterial, surely the fact that the affidavit was based on no sufficient grounds would be immaterial, on collateral attack. 3 Pet. 193, 207; 131 U.S. 352; 150 id. 371, 380; 152 id. 327, 329; 156 id. 527, 533. After appearance by defendant and plea, it is too late to take advantage of preliminary defects. Drake, Att. sec. 112. The absence of bond, or affidavit, does not impair the right of the attaching creditor on collateral attack by an intervener. 60 Ark. 444; 10 Wall. 308; Drake, Att. (6 Ed.)...
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