Flack v. Charron

• Decision Date: 26 June 1868
• Citation: 29 Md. 311
• Parties: THOMAS J. FLACK, and others, v. CLAUDE B. CHARRON, JOHN M. TOWNSEND, CHARRON, POSEY & CO., and CHARRON, TOWNSEND & CO.
• Court: Maryland Court of Appeals

29 Md. 311

THOMAS J. FLACK, and others, v. CLAUDE B. CHARRON, JOHN M. TOWNSEND, CHARRON, POSEY & CO., and CHARRON, TOWNSEND & CO.

Court of Appeals of Maryland

June 26, 1868

APPEAL from the Circuit Court of Baltimore City.

This suit was instituted in the Circuit Court of Baltimore city by Thomas J. Flack & Sons and others, creditors of the firm of John B. Charron and others, at the time of its dissolution to obtain an injunction against said firm, and the firms of Charron, Posey & Co., and Charron, Townsend & Co., and for a receiver to take charge of their affairs.

The injunction was granted, and afterwards the defendants answered the bill, and evidence was taken. The case was then heard upon the motion to dissolve, and the Court below (PINKNEY, J.,) dissolved the injunction as to the two last named firms, but continued it and appointed a receiver as to the firm of J. B. Charron & Co. From this order an appeal was taken by the complainants, and also by the defendants, John B. Charron, Claude C. Charron, and John P. Posey.

Said appeals were argued before BARTOL, C.J., NELSON, STEWART and ALVEY, J.

S Teackle Wallis and Bernard Carter, for the complainants below:

It is supposed that whatever principles of law are necessary to be invoked in behalf of the complainants, may be found stated in the case of Sanderson vs. Stockdale, 11 Md Rep., 563.

The bill in this case was drawn in view of the principles there enunciated as warranting the interposition which the complainants asked of the Court, in the way of an injunction and receiver.

The transfer of the whole stock in trade owned by the firm of John B. Charron & Co., as made in February, 1867, to those to whom it was transferred, was not a bona fide sale for a fair and valuable consideration, but was, on the contrary, a fraudulent contrivance designed by the parties thereto, for the purpose of cheating the creditors of John B Charron & Co., and it was neither bona fide, nor made for a valuable consideration. The complainants understand the case of Sanderson vs. Stockdale, 11 Md. Rep., 563, to recognize the well settled principle that creditors of a partnership, while having no judgment, nor lien by execution on the stock in trade of a partnership, cannot deny to one partner of the firm the right to sell his interest in the stock to his co-partner or to a stranger, clear of any right of the creditor to follow that stock, provided the sale is bona fide, and for a valuable consideration. The same case as emphatically establishes the converse of this, viz: that if the sale, or transfer, in the case above put, is not bona fide, but a fraudulent device to delay, hinder or defraud creditors, it is void as against them, and may be set aside, and by proceedings and in the mode adopted in this case.

Nor in such a case will the creditors' right thus to proceed be prevented, even though there was a valuable consideration paid, if the transaction was intended to operate as a fraud on creditors. This is the well known operation and construction of the Statute of Elizabeth.

The complainants claim, therefore, that whether the evidence in this case shows, or does not show, clearly and affirmatively, that the firm of John B. Charron & Co. was insolvent in February, 1867, when this transfer was made, yet if they show that the transaction was fraudulent in its design, or show that it was made without a valuable consideration, then it will follow that it was altogether null and void as against them.

The complainants were creditors of J. B. Charron & Co. at the time of the transfer in question, and as such creditors, it is plain beyond all controversy, that the whole assets, stock in trade, as well as book accounts, & c., were in the first place applicable to the debts due them before either partner could appropriate any part thereof to himself, or transfer them to any one else, except in good faith and for a valuable consideration. The idea that that part of the assets which alone had a certain value, viz: the stock in trade, could be appropriated by the partners themselves, and the creditors be compelled to take the chances of the collection of debts due to the firm, is a monstrous proposition, in answer to which it cannot be necessary to cite authorities.

The transfer of the stock in trade of the firm of J. B. Charron & Co., as made in February, 1867, and all that was done in connection therewith, was a fraudulent device and contrivance, intended, designed and effectual, to deprive the complainants of their just right to have the benefit of the application of the proceeds of the stock in trade to the liquidation of their debts.

As a second ground on which this transfer is inoperative as against the complainants, it was not made for a valuable consideration, and the absence of consideration is itself a strong ground on which to presume fraud.

J. C. Carpenter, for the appellant, John P. Posey:

The withdrawal of John P. Posey from the solvent firm of Charron, Posey & Co. having been final, and his interest therein having been sold for a valuable and bona fide consideration, the sale thereof cannot be impugned by the creditors of J. B. Charron & Co. Especially as upon the dissolution of the latter, the portion of stock assigned him became his separate and individual property. Glenn vs. Gill, 2 Md. Rep., 16; Story on Part., sec. 358; Griffith vs. Buck, 13 Md. Rep., 114.

The sworn answer of John P. Posey, as admitted in the opinion of the Court below, denies all the material facts alleged against him in the bill of complaint, and there being no testimony in support of said bill, as required by the established law in injunction cases, the Judge erred in continuing the injunction and appointing a receiver. The injunction should have been dissolved. Thompson vs. Diffenderfer, 1 Md. Ch. Dec., 495; Gelston vs. Rullman, 15 Md. Rep., 267; Feigly vs. Feigly, 7 Md. Rep., 563; Wood vs. Patterson, 4 Md. Ch. Dec., 336; Harris vs. Sangston, 4 Md. Ch. Dec., 396.

It is the settled law in cases of this kind, that an injunction will not be continued, or a receiver appointed, unless there is fraud and imminent danger clearly proved; and, though fraud is the only ground upon which the bill of T. J. Flack and others rests, there has not been one particle of evidence offered to support the charge, and it is emphatically denied in the answer. Mr. Posey, by their own witness, Stephen Richard, is proved to be a man of strict honesty and integrity; the assets of J. B. Charron & Co. are proved to have been faithfully and diligently collected and disbursed; two-thirds of the creditors have already been paid, and the remaining one-third were being satisfied as fast as funds could be obtained; and the affairs of the late firm were being settled in such a manner as to serve the best interests of its creditors. Therefore, as the Court never wantonly appoints a receiver, or grants an injunction, but only on the showing of the strongest necessity, the judgment of the Court below was in error both as regards the law and the facts of this case, and should be reversed. Drury vs. Roberts, 2 Md. Ch. Dec., 159; O'Bryan vs. Gibbons, 2 Md. Ch. Dec., 10; Clark vs. Ridgely, 1 Md. Ch. Dec., 71; Uhl vs. Dilton, 10 Md. Rep., 503; Nusbaum vs. Stein, 12 Md. Rep., 318; Hubbard vs. Hubbard, 14 Md. Rep., 360; Blondheim vs. Moore, 11 Md. Rep., 365; Williamson vs. Wilson, 1 Bland, 425, 426.

Wm. C. Schley, for the appellant, John B. Charron:

In addition to the above cases, cited Bouldin vs. Mayor and City Council of Balt., 15 Md. Rep., 18; Treibert vs. Burgess, 11 Md. Rep., 452.

William Schley and Wm. J. Waterman, for the appellees, Charron, Townsend & Co.:

In any view of the case, were the complainants in a position to give them any standing in a Court of Equity? Have they obtained a lien by judgment and execution, or are they merely ordinary creditors plunging at once into equity? Wiggins, et al. vs. Armstrong, 2 Johns. Ch. Rep., 144; Uhl vs. Dillon, 10 Md. Rep., 500; Georgia vs. Brailsford, 2 Dallas, 402; Shirly vs. Watts, 3 Atk., 200; Angell vs. Draper, 1 Vern., 399; Balch vs. Wastall, 1 P. Wms., 445; Starr vs. Rathbone, 1 Barb., 70; Mallett vs. Weybossett Bank, 1 Barb., 217; Wright vs. Strong, 3 How. Pr., 112; Ware vs. Morris Canal Co., 1 Halst., (N. J.,) Ch., 410; Caswell vs. Caswell, 28 Maine, (15 Shepp.,) 232.

The Act of 1835, ch. 380, sec. 2--Code of Pub. Gen'l Laws, Art. 16, sec. 35, gives the right, without judgment, to attack a fraudulent conveyance; but such is not this case. This is not a bill attacking a fraudulent conveyance; it alleges no conveyance, but a mere change of name covering the same parties and interests.

Fraud is alleged in order to force equity jurisdiction, but has it been proved? The answers, under oath, deny fraud, and these outweigh the allegations of the bill, and one witness swearing the same thing in support thereof. Story's Eq. Juris., sec. 1528; Watkins vs. Stockett, 6 H. & J., 435; Gelston vs. Rullman, 15 Md. Rep., 260.

It is admitted that J. B. Charron attempted, by direction of counsel, to cover or conceal his interest, as against the dry goods creditors. Was this a fraud? Even if it were a fraud, it was such only as against the dry goods creditors, of which they, alone, could complain. Does it lie in the mouths of these complainants to complain of fraud against others, and which did not injure them? De Vallengen vs. Duffy, 14 Peters, 282; The Schooner Lion, Sprague's Decisions, 40; Ayers vs. Hewitt, 19 Maine, 281; Brooks vs. Clayes & Morse, 10 Vermont, 37.

But further; did they not know of, and acquiesce in, this covering up of Charron's interest during eighteen months of J. B. Charron & Co.'s existence? And have they not stood quietly by and seen the various...