Glaser v. First National Bank

• Decision Date: 21 March 1896
• Citation: 34 S.W. 1061,62 Ark. 171
• Parties: GLASER v. FIRST NATIONAL BANK
• Court: Arkansas Supreme Court

34 S.W. 1061

62 Ark. 171

GLASER v. FIRST NATIONAL BANK

Supreme Court of Arkansas

March 21, 1896

Appeal from Sebastian Circuit Court, Fort Smith District, EDGAR E BRYANT, Judge.

The First National Bank of Fort Smith sued the firm of C. Tilles & Co., and caused their property to be attached. Glaser Brothers, and other creditors of C. Tilles & Co. subsequently brought suits against the latter, and caused attachments to be sued out and levied on the same property. Thereupon they intervened in the first-named suit, seeking to invalidate the bank's prior attachment upon grounds set out in the opinion. Judgment below was against the interveners, and they have appealed. The facts sufficiently appear in the opinion.

Judgment affirmed.

Joseph M. Hill, and Clendening, Mechem & Youmans, for appellants.

1. An attachment, known both to the creditor and debtor to be without grounds, and brought for the purpose of obtaining a preference, and suffered by the debtor with the intention to thereby give such creditor a preference, is fraudulent, and should be postponed to a junior attaching creditor who intervenes in such suit. This statement involves two propositions, viz: (a) A junior attacher can intervene in a senior attachment, and claim the attached property, or proceeds thereof, over such senior attaching creditor, upon a showing that the senior attachment is fraudulent and collusive. Sand. & H. Dig., sec. 372: 57 Ark. 541; 47 id. 31; 53 id. 140. (b) An attachment, based upon a false affidavit and known to be false by affiant and defendant, but brought with the purpose of obtaining a preference against a failing merchant, and suffered to be brought by such failing merchant, and suffered to be sustained with the intention thereby to give such creditor a preference over other creditors, is fraudulent as to such intervening junior attaching creditors. 74 Tex. 589, S. C. 12 S.W. 235; 11 id 1123; 19 id. 791; 8 So. 264; 11 So. 220; 15 S.E. 950; 12 S.W. 508. The latter case sustains appellee's theory.

2. The bank is estopped to claim priority over Rice, Stix & Co. and Bamberger, Bloom & Co., by reason of its false representations to them. 33 Ark. 465.

George H. Sanders also for appellants.

1. A senior attachment when issued without any grounds for it, is not good against a junior attachment issued, served and sustained, and confessedly good and unchallenged. 57 Ark. 541; 58 id. 255; Waples, Att. (Ed. 1895) sec. 775; Drake, Att., sec. 274; Wade, Att., sec. 54; Vanfleet, Collateral Attack, p. 583; 65 Tex. 266; 62 id. 328; 4 Rich. (S. C.) 561; 4 N.H. 513; 14 id. 129; 13 Cal. 435; 18 Cal. 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, and writs are levied on the same property. Burrill, Assignments, sec. 125; Black, Judgments, sec. 323; Pom. Eq. sec. 886.

3. The bank was guilty of fraud on Rice, Stix & Co. and Bamberger, Bloom & Co. just previous to the attachment, and is estopped by its false and fraudulent representations, to their injury. 66 Wis. 292; Suth. on Dam., vol. 3., p. 587; 28 F. 788.Clayton & Brizzolara, James F. Read and Jno. H. Rogers, for appellee.

1. All the questions of fact raised by the petition in this case were found against appellants. It must then be taken as true that (a) the bank's judgment was for a bona fide debt; (b) that its attachment was regular, and prior in time to appellants;' and (c), it not appearing on what grounds the bank's attachment was sued out, it must be assumed that it was correctly sustained. It was not a fraud for Tilles & Co. to consent or even procure the bank to attach them, for the purpose only of preferring the bank as to a bona fide debt. This preference could be made by assignment, mortgage, pledge, or sale, and why not by attachment, if made for no other purpose than to prefer the bank for a just debt? 52 Ark. 40, 41; 53 Ark. 538; 24 Pick. 191. It was neither fraud nor collusion. 45 Barb. (N. Y.) 369; 28 Md. 235; 1 Story, Eq. Jur., sec. 187.

2. A junior attaching creditor cannot attack the validity of a prior attachment where the debt is bona fide, because of irregularity in the attachment proceedings, nor because of the non-existence of any valid ground of attachment, nor because the debtor instigated the prior attachment. 47 Ark. 41, recently followed in U.S. Ct. Ct. App. in Rice, Stix & Co. v. Adler-Goldman & Co; Sand. & H. Dig., sec. 372; 53 Ark. 140; 57 id. 542; 2 So. 168; 34 N.W. 229; 24 Pick. 198; 46 N.W. 910; 58 Ark. 527; 60 id. 444; 99 Am. Dec. 719.

3. In law the bank was not required to answer or disclose anything; and if it did speak and deceive Fields, it had the right to do so, if done in order to protect itself only, and not to wrong Rice, Stix & Co. 19 Vt. 292. But appellants were not injured by these representations, and the doctrine of estoppel has no application. 33 Ark. 465.

OPINION

BATTLE, J.

When two creditors have sued out orders of attachment against a debtor, and caused them to be levied on the same property, has the junior the right to file a complaint in the action instituted by the senior, thereby claiming the first lien, and to have the first attachment set aside by showing that it was known at the commencement thereof by both parties to the same to be without legal grounds, that it was based on an affidavit known to be false by both parties to the action in which it was filed, that it was made for the purpose of obtaining a preference over creditors, and that it was permitted by the debtor for that purpose, he and the first attachment creditor knowing at the time that he was in failing circumstances?

No creditor has the right to defend an action or proceeding against his debtor, to which he is not a party, on the ground that, if the suit or proceeding is maintained, he will not be able to recover the whole of his debt. Having no right to interpose a defense in such an action, he could not, for the same reason, have a judgment rendered therein set aside by a motion or other original proceeding at law or in equity, "on the ground that the defendant had defenses which he might have asserted, or that, in the transaction between the plaintiff and the defendant out of which the judgment grew, the former overreached the latter." ^[*] But if he is injuriously affected by the judgment, he may obtain relief by showing that it was procured by fraud and collusion, or suffered for the purpose of hindering, delaying or defrauding the creditors of the defendant. ^[+]

It has been held that he is entitled to relief against judgments by confession or default against his insolvent debtors for amounts larger than were actually due the plaintiffs, on the ground they are fraudulent and void as to creditors. ^[*] So it has been held that he is entitled to relief against a judgment which is not founded on an actual debt, or other legal liability, in existence at the time of its entry, and was suffered by the defendant on the ground that it is invalid against the creditors of the judgment debtor. ^[++] But if the judgment be only constructively fraudulent, like mortgages, in like manner affected, it may stand good in equity for what is actually due. ^[+]

The interference of creditors in attachment proceedings is controlled by the same rule. A junior attaching creditor cannot take advantage of irregularities or informalities in the proceedings in a prior attachment, though constituting good grounds for setting aside the attachment on the motion of the defendant. The reason for this is, "priority is in the gift of the debtor;" and when it is obtained from him by means of an irregular or informal attachment, with which both parties to the same are content, no one has room to complain of it. "The formality and regularity of such proceedings, the rightful issuing the attachment, in the absence of fraud and collusion between the plaintiffs and defendants, are matters pertaining exclusively to the defendants." Bona fide advantages obtained thereby by one creditor over the others, which entitle him to the satisfaction of his claim out of the debtor's property in preference to and before the remaining creditors, are sustained by the law, although by such payment the collection of other debts will be defeated. But if, in obtaining such advantages, there is any collusion between the debtor and creditor for the purpose of hindering, delaying, or defrauding other creditors, their rights are thereby affected, and they have the right to interfere in the disposition of the property attached for the purpose of asserting and protecting them. ^[*]

Attachments levied in proceedings instituted by debtors against themselves in behalf of certain creditors, and ratified by such creditors, in the absence of fraud, have been sustained by courts. ^[+]

In First Nat. Bank v. Greenwood (Wis.), 79 Wis. 269, 45 N.W. 810, which was a contest between creditors over a fund held by an attachment, the court said: "The existence of the alleged grounds for the attachment cannot be controverted by the bank. The right to do so is given to the attachment debtors alone, and it is entirely competent for them to abstain from interposing traverses, or to waive the same after they have been interposed, as was done in all the attachment suits."

In First Nat. Bank v. Cochran (Miss.), 71 Miss. 175, 14 So. 439, creditors intervening under a statute of Mississippi sought to set aside an attachment for fraud. Judge Cooper, in delivering the opinion of the court, said "During the investigation it was made to appear that the plaintiffs in the attachment had paid to the defendants, or to their attorneys for them, $ 300 in cash, in consideration of the withdrawal by the defendants of the plea traversing the...