George v. Wamsley

• Decision Date: 12 June 1884
• Citation: 64 Iowa 175,20 N.W. 1
• Parties: GEORGE AND OTHERS v. WAMSLEY AND OTHERS.
• Court: Iowa Supreme Court

64 Iowa 175

20 N.W. 1

GEORGE AND OTHERS

v.WAMSLEY AND OTHERS.

Supreme Court of Iowa.

Filed June 12, 1884.

Appeal from Butler district court.

Plaintiffs brought an action by attachment against defendants Wamsley & Hartness, and caused the Butler County Bank to be served with process of garnishment. The garnishee answered, denying indebtedness to defendants, and denying that it held any property of defendants. Issue was joined upon this answer, and upon the final hearing of the cause the garnishee was discharged. Plaintiffs appeal. The facts of the case appear in the opinion.Mills & Keeler and H. C. Hemenway, for appellants.

Gibson & Dawson and C. A. L. Rozell, for appellees.

BECK, J.

1. The answer of the garnishee was made before a commissioner, and in detail states and explains the transactions by virtue of which plaintiffs claim that it is liable in this proceeding, and in effect denies indebtedness to defendants, and liability as a garnishee. The plaintiffs filed a pleading controverting the answer of the garnishee, and showing facts whereon they base the claim of its liability in this proceeding. The pleadings of the parties need not be more particularly stated just now.

The facts upon which the garnishee is sought to be charged are shown by the evidence to be as follows: The defendants were engaged in a general merchandise business upon a capital of $500, contributed in equal parts by each partner. Wamsley had no means other than the sum he put in the firm, and Hartness was entirely without means, and was indebted as a partner in a firm that had ceased to do business. He borrowed from the bank the money which he put into the business with Wamsley. He also owed the bank as a partner in the firm with which he had before been conected. Wamsley & Hartness became indebted to the bank in the course of their business. It is shown that Hartness, who had more acquaintance with and experience in business than his partner, proposed to retire from the firm and appropriate his interest therein to the payment of the debts he owed to the bank. He was induced to remain in the concern by an arrangement that the firm should pay his debts to the bank, amounting to less than $500. In pursuance of this arrangement the partners borrowed of Perrin, the vice-president and a director of the bank, a sum sufficient to pay the debts, both of the firm and Hartness, to the bank. This loan was secured by a chattel mortgage upon the stock of goods held by the firm, and the money realized by the loan was paid to the bank. The next day after the execution of the mortgage to Perrin, the firm made a bill of sale to Burton on account of an indebtedness to him. Burton took possession of the goods, and immediately the partners made an assignment of all their other property for the benefit of their other creditors, whose debts amounted to more than $3,500. The invoice value of the property assigned was about $1,200, and $575 have been realized therefrom. The evidence shows that the bank, at the time the money was borrowed and paid to it, had notice of the arrangement by which the payment was effected, and also had notice of the pecuniary condition of Hartness. It is not shown that the bank had knowledge of the indebtedness of the firm to other creditors besides itself and Burton, and of the value of its assets. The partners testify that they believed the device of borrowing the money of the bank to retain Hartness in the firm would enable it in the course of its business to pay all its debts, and it is shown that one or both of them so informed the bank.

2. The plaintiffs claim that the bank should be held liable in this proceeding for the amount of the individual debt of Hartness, paid to it by the firm. The grounds upon which this claim is based we understand to be: First, that the act of the bank in securing payment from the firm was fraudulent in fact as against other creditors of the firm; second, the payment of the individual debt of the partner from the firm assets...