Epp v. Federal Trust Company

• Decision Date: 10 June 1932
• Docket Number: 28009
• Citation: 242 N.W. 922,123 Neb. 375
• Parties: E. A. EPP ET AL., APPELLEES, v. FEDERAL TRUST COMPANY ET AL., APPELLANTS
• Court: Nebraska Supreme Court

242 N.W. 922

123 Neb. 375

E. A. EPP ET AL., APPELLEES, v. FEDERAL TRUST COMPANY ET AL., APPELLANTS

No. 28009

Supreme Court of Nebraska

June 10, 1932

APPEAL from the district court for Lancaster county: ELWOOD B CHAPPELL, JUDGE. Reversed.

REVERSED.

Syllabus by the Court.

1. " The test for determining whether an action is rightly brought in one county against the defendant found and served therein, so that others made defendants may be served in a foreign county, is whether the defendant served in the county in which the action is brought is a bona fide defendant to that action--whether his interest in the action and the result thereof is adverse to that of the plaintiff." Barry v. Wachosky, 57 Neb. 534, 77 N.W. 1080.

2. In an action in personam brought to recover a money judgment only, where the local defendant has no interest in the action or the result of it adverse to the plaintiff, jurisdiction cannot be acquired over a nonresident codefendant by the service of summons upon him in a county other than that in which the action is begun.

3. Numerous persons gave their individual notes for a membership fee in the Nebraska Wheat Growers Association. Separate actions at law thereon were instituted in a county other than the county of their residence by the holder thereof, and a local defendant was joined with the nonresident defendant service was had upon the local defendant and by alias summons upon the nonresident defendants in another county, and it appears that the local defendant had no interest in said actions and the result thereof adverse to the plaintiff, but was joined with the nonresident defendant for the purpose of clothing the court with apparent jurisdiction over him. After many such actions were begun, some of the nonresident defendants, against whom suits were pending, and other nonresident makers of such notes threatened with similar actions, brought an action in equity to enjoin further prosecution of pending actions and the bringing of other similar actions. Held under the facts indicated, equity will not assume jurisdiction to grant the injunction simply to prevent a mere procedural wrong, where there is no evidence proving or tending to prove a meritorious defense, common to all nonresident makers of the notes, to the actions at law.

Appeal from District Court, Lancaster County; Chappell, Judge.

Action by E. A. Epp and others against the Federal Trust Company and others. From the judgment rendered, the defendants Federal Trust Company and Wheat Growers Finance Company appeal.

Reversed, and cause remanded for a new trial.

Max V. Beghtol, Glen H. Foe and J. Lee Rankin, for appellants.

F. L. Bollen and J. C. McReynolds, contra.

Heard before GOSS, C. J., DEAN and EBERLY, JJ., and CHASE and LOVEL S. HASTINGS, District Judges.

OPINION

HASTINGS, District Judge.

This is an action in equity brought by E. A. Epp and others, nonresidents of Lancaster county, on their own behalf and for others similarly situated, to enjoin the Federal Trust Company, the Wheat Growers Finance Company, corporations with their principal places of business in said county, and others, from collecting default judgments, from prosecuting pending suits, and from commencing other threatened suits in the justice court of E. G. Maggi or any other court in said county.

There is no conflict in the evidence. It is established that the plaintiffs and the others in whose behalf the action is brought are members of the Nebraska Wheat Growers Association, which name was changed later to that of the Midwest Grain Marketing Association. The Nebraska Wheat Growers Association was organized as a nonstock cooperative association under chapter 80, Laws 1925, now sections 24-1401 to 24-1414, Comp. St. 1929, to "promote, foster and encourage the business of marketing wheat cooperatively; to minimize speculation and waste in the production and marketing of wheat and wheat products; to establish wheat markets; to handle cooperatively and collectively the problems of wheat growers." To become a member of the association it was necessary to sign what is known as a "Standard Marketing Agreement," consisting of two pages of finely printed matter wherein the members agreed to market their wheat through said association. Attached to said marketing agreement was an application for membership in the association, and a membership note, by the terms of which the member agreed to pay $ 10 to the order of the association on or before July 15, 1929. All the marketing agreements, the applications for membership, and notes were in the same form.

About fourteen thousand persons engaged in raising wheat in Nebraska signed said marketing agreements, applications for membership and notes. For the purpose of providing money to pay the debts which the association would be required to incur before the membership notes became due and payable, the Wheat Growers Finance Company was incorporated September 14, 1928, with a capital stock of $ 50,000, and under a written agreement entered into between the association and the Wheat Growers Finance Company said finance company agreed to purchase all the contract membership notes obtained by the association for $ 7.50 each, and the association under said agreement agreed to assign and guarantee the payment of all such membership notes. The finance company, not having sufficient resources of its own to purchase all the membership notes, entered into a trust agreement with the Federal Trust Company, whereby the finance company was to issue its collateral trust gold notes, which the trust company was to negotiate for the finance company, and as security therefor were to sign and indorse to the trust company all the contracts and membership notes purchased by them. The trust agreement further provided that the trust property for the security of outstanding collateral trust gold notes should consist of membership contract notes for the payment of the principal, amounting in the aggregate to at least 120 per cent. of all outstanding collateral trust gold notes, and if at any time a deficiency in the trust property should occur, the finance company, without demand or other action upon the part of the trustee, should forthwith deposit with the trustee, to be held as part of the trust property, additional moneys or like membership notes to an aggregate amount sufficient to make up any such deficiency. The contract membership notes were also pledged with the trust company to secure payment of the costs and expenses of collection of such contract notes and of any sale thereof, including reasonable compensation to the trustee, its agents, attorneys and counsel, and all other expenses, liabilities and advances made or incurred by the trustee under the trust agreement.

The trust agreement further provided that as the money was collected on the membership notes it be used in retiring the collateral trust gold notes of the finance company. The finance company issued its collateral trust gold notes in the sum of $ 29,000, and these were sold to different parties by the trust company.

These marketing agreements and notes were grouped in lots of about one hundred and for each such lot an assignment on a separate instrument was made by the wheat growers association to the finance company. The finance company, below this assignment, assigned and indorsed said notes in said lots and all substitutions thereof to the Federal Trust Company. In this manner the Federal Trust Company received from the finance company contracts and notes to the number of 10,156, amounting to $ 101,560. Prior to November 10, 1930, and before the commencement of this action, the trust company had collected membership notes to the amount of $ 54,635 and out of the amount so collected had paid all of the collateral trust gold notes, paid itself the amount due to it of $ 1,040 for negotiating the collateral trust gold notes, a fee of $ 400 as trustee, and advanced therefrom to its and the finance company's attorney for attorney's fees and costs in connection with the collection of membership notes the sum of $ 1,000. In addition thereto expenses incurred by the trust company had been paid. Furthermore, there had been paid a 40 per cent. dividend to the stockholders of the finance company in liquidation of their stock. On the date mentioned the Federal Trust Company had in its possession in banks the sum of $ 3,467.73 of money of the finance company held under the trust agreement. From November 10, 1930, up to the time of the trial of this action, the attorney for the trust company and the finance company had collected other membership notes to the amount of $ 5,532.89.

Suits were commenced on membership notes in the justice court of E. G. Maggi in Lancaster county by the Federal Trust Company as plaintiff against the members signing the different notes and the Wheat Growers Finance Company as an alleged indorser thereof, summons was issued and served upon the Wheat Growers Finance Company in Lancaster county, and upon the summons being returned by the Lancaster county sheriff without service upon the maker of the membership note, an alias summons was issued to the county of his residence and served upon him in that county. All summons thus served upon the Wheat Growers Finance Company were sent to its attorney, who was also attorney for the trust company, and the matter of looking after its interests was left to him. Prior to the commencement of this action 375 such suits had been commenced in that court and like service obtained on the makers of the contract notes sued upon. Between the commencement of this action and the trial hereof (no temporary injunction having been granted) on April 15, 1931, 211 additional suits had been commenced, making in all 586...