Humphreys v. Atlantic Milling Co.

• Decision Date: 20 December 1888
• Parties: HUMPHREYS v. ATLANTIC MILLING CO. et al.
• Court: Missouri Supreme Court

10 S.W. 140

98 Mo. 542

HUMPHREYS v. ATLANTIC MILLING CO. et al.

Supreme Court of Missouri.

December 20, 1888.

1. CREDITORS' BILL — BEFORE JUDGMENT — REMEDY AT LAW — GARNISHMENT.

Where two, to whom jointly another is indebted, make a draft upon him payable to one of them at a future day, and the payee, who is solvent, gives his note to the president of his co-drawer for the latter's share of the debt, and the president assigns the note for collection and for payment of certain creditors of such co-drawer, of whom plaintiff is one, and both drawers and the assignee are within the jurisdiction, plaintiff, who alleges that the assignment of the note is void for fraud, cannot maintain a suit in equity before judgment to have the draft applied to his debt, his remedy being at law by garnishment, under Rev. St. Mo. § 2541, providing for issues on which the alleged invalidity of the assignment can be adjudged, and section 2540, allowing the garnishment of a debt not due.

2. PLEADING — EVIDENCE — VARIANCE.

Variances between the allegations that the note was made by the president of the payee, and that the assignee procured its discount, and evidence that it was made by the payee, and no negotiation of it was made by the assignee, are not fatal.

3. EQUITY — ADEQUATE REMEDY AT LAW — PLEADING.

Where plaintiff has an adequate remedy at law, it need not be pleaded, in order to oust a court of equity of jurisdiction.

Appeal from St. Louis circuit court; GEORGE W. LUBKE, Judge.

Bill by William S. Humphreys against the Atlantic Milling Company and others for the application of the proceeds of a draft to the payment of a debt to plaintiff. Plaintiff obtained a decree, and defendants appeal. The cause was transferred from the St. Louis court of appeals. Rev. St. Mo. § 2541, provide that "if the garnishee disclose in his answer and declare his belief that the debt * * * has been sold or assigned to a third person, and plaintiff" contests the validity, etc., "of such sale or assignment, the court shall make an order upon the supposed vendee or assignee to appear" to sustain his claim, and, if he fails to appear, "the garnishee's averment of such sale or assignment shall be disregarded; but if he appear, and * * * claim under such sale or assignment, a trial of his right shall be had * * * upon an issue made thereon. * * *"

Hough, Overall & Judson and C. M. Napton, for appellants. Dyer, Lee & Ellis and John G. Chandler, for respondent.

BLACK, J.

This, and four other suits of a like character, were tried at the same time. The suit is one in equity, and the defendants are the Atlantic Milling Company, George Bain, who is president and managing officer of that company, the Victoria Milling Company, A. H. Smith, who is managing officer of the last-named company, the White Line Central Transit Company, and F. N. Judson. The two milling companies are corporations doing business in St. Louis. The evidence discloses these general facts: Plaintiff is a general creditor of the Atlantic Milling Company to the amount of $2,046, for wheat sold in December, 1883. In the spring of 1883 that company failed, and suspended business. It resumed business in November of that year, most of the old debts having been extended. Towards the middle of December that company became indebted, and was pressed on account of these new debts, called the debts of the "new running." Plaintiff's demand is of this class. The Atlantic Milling Company and the Victoria Milling Company had a demand against the transit company for rebates on shipments, and Mr. Bain, for the Atlantic Milling Company, promised to pay the proceeds of his share of this claim to the creditors of the "new running." The result of several trips to New York was that Bain and Smith drew their individual and joint draft, of date 12th January, 1884, on Darling, manager of the transit company, for $12,327.54, payable at Buffalo in 60 days, to the order of the Victoria Milling Company, which draft Darling accepted. The Victoria Milling Company then made its note of the same date for $9,818.24, payable to Bain in 60 days. This note represents the interest of the Atlantic Milling Company in the rebates. There was a verbal agreement that the payment of this note should be conditioned upon the payment of the draft. On the 14th January, 1884, Bain indorsed the note, and delivered it to Mr. Judson, for the purpose, and with the understanding, that he should collect it, and pay the proceeds, pro rata, to the November and December creditors.

The petition alleges that the draft upon Darling was drawn by Bain and Smith, in their individual names, for the purpose of defrauding the creditors of the Atlantic Milling Company; that in furtherance of such purpose Smith executed to Bain his note for the $9,818.24; that for a like purpose Bain indorsed the note to Judson, who procured a discount of it, taking a check therefor, with the understanding that the check should not be paid until the draft was paid; that these transactions were all thus made to defraud creditors. The prayer is that defendants be restrained from collecting the draft, or disposing of it; that it be delivered into court; the appointment of a receiver; and that plaintiff be paid out of the proceeds of the draft. The defendants denied all the allegations of fraud, and set out a history of the transactions as they are before stated, and as they appeared on the trial. Various creditors, both old and new, interpleaded for the fund, and ask that the petition of the plaintiff be dismissed.

The court granted a temporary injunction, ordered the acceptance to be collected by a receiver, and the $9,818.24 is in court. On the final hearing the plaintiff prevailed.

The proofs show that Bain, Smith, and the Atlantic Milling Company were insolvent. Judson and the Victoria Milling Company are solvent. The note to Bain was made by the last-named company, and not by Smith, as stated in the petition. Mr. Judson made no negotiation of the note, nor did he attempt to do so. Much is said about these variances between the petition and proofs. We do not regard them as fatal to the plaintiff, though the real facts are to be kept in mind. The proof is clear that Bain and Smith drew the draft on Darling in their individual names, because the transit company refused to settle in any other way. There is no proof of any fraudulent purpose in the settlement with the transit company, or in taking the draft payable to the Victoria Milling Company. It is clear, too, that Mr. Judson took the note from Bain in good faith, and for the purposes before stated, without any knowledge of any fraudulent purpose on the part of Bain, if any there was.

As to the other questions of fraud in fact, it is sufficient to say, in the view we feel bound to take of this case, that there is much evidence tending to show that Bain urged the settlement of rebates for the sole purpose of paying these new creditors, that he had agreed with them to pay their debts out of this collection, and that he placed the note with Mr. Judson for that purpose alone. The evidence shows that he was guilty of deception to some of these creditors, after he had given the note to Judson, in this: that he did not tell them who had the note, and that he said he had a check for it, when in fact he had no check. Bain says he made these statements because he wanted the matter of his getting the rebates kept quiet. Smith, however, did give the plaintiff a copy of the draft, and he endeavored to aid Smith in negotiating it, but the draft seems to have had no commercial standing.

That the plaintiff's demand is just and due is conceded; but it stands in the shape of an open account, and the first question is whether he can maintain this suit in equity. The general rule is that a creditor, before he can maintain a creditors' bill, must show that he has exhausted all remedy at law; and this because a court of equity will not entertain such a suit where the plaintiff has a complete and adequate remedy at law. In general, it must be shown that judgment has been recovered, and that execution has been issued and returned nulla, bona, but there are exceptions to this rule. Thus, where judgment has been recovered, and the debtor is insolvent, the issuance and return of an execution will be dispensed with. Turner v. Adams, 46 Mo. 95. It is sufficient that the demand be allowed by the probate court where the debtor's estate is insolvent. Merry v. Fremon, 44 Mo. 518; Lyons v. Murray, 95...