Lind v. O. N. Johnson Co.

• Decision Date: 02 December 1938
• Docket Number: No. 31735.,31735.
• Parties: LIND v. O. N. JOHNSON CO. et al.
• Court: Minnesota Supreme Court

282 N.W. 661

204 Minn. 30

LIND v. O. N. JOHNSON CO. et al.

No. 31735.

Supreme Court of Minnesota.

December 2, 1938.

Appeal from District Court, Sibley County; J. J. Moriarty, Judge.

Suit by August Lind, receiver of the Oriente Sugar Company, and August Lind, as trustee for the Lind-Larson Company, against the O. N. Johnson Company and others to subject stock allegedly transferred in fraud of creditors to the claims of plaintiff as judgment creditor. From an order sustaining defendants' demurrer to the complaint, the plaintiff appeals.

Order reversed.

Erland Lind, of Minneapolis, for appellant.

Philip L. Scherer, of Winthrop, and H. H. Flor, of New Ulm, for respondents.

JULIUS J. OLSON, Justice.

Plaintiff appeals from an order sustaining defendants' demurrer to his complaint. This suit was brought October 25, 1937, by Mr. Lind as receiver of the Oriente Sugar Company, a foreign corporation and as trustee for Lind-Larson Company, a domestic corporation. The facts alleged may be thus summarized: The Lind-Larson Company held certain shares of stock in the sugar company. The latter company's corporate existence had been terminated by virtue of the law of its domicile; but at the time of its dissolution there were certain of its assets within this state, and these had not been distributed to its stockholders. To recover these assets for the stockholders of the sugar company, Lind, as trustee for the Lind-Larson Company, in November, 1928, instituted a representative action for the benefit of himself and the other stockholders of the dissolved sugar company against O. N. Johnson and others. That suit went to judgment on August 31, 1932, and plaintiff as receiver of the sugar company was awarded $26,733.37, said Lind having been appointed such receiver before that judgment was entered. The costs in that suit were entered in his favor as trustee for the Lind-Larson Company, the amount of that judgment being $38.11. The liabilities created by virtue of these judgments were based upon obligations which accrued between October 21, 1920, and March 15, 1922. An execution was promptly issued upon the larger judgment, and was returned wholly unsatisfied October 22, 1932.

The judgment debtor, O. N. Johnson, died in 1935. His estate was insolvent. Nevertheless claims representing these judgments were filed and duly allowed as claims against his estate; but nothing has been collected upon them for the reason that there were and are no assets belonging to the estate wherewith to meet them.

In January, 1923, and over a period of many years prior thereto Johnson was the owner of large property interests in the village of Gibbon, this state. In February of that year he organized a corporation known as O. N. Johnson Company. That corporation is a party defendant here. He transferred to it large property interests, taking in exchange therefor 778 shares of stock in the corporation so formed, the par value of which was $100 per share. Additional shares were later issued in exchange for property owned by him individually. For the purpose and with the intent of hindering, delaying and defrauding his creditors, Johnson caused such stock to be issued to his wife (now widow) Johanna, and to his daughters, defendants Frances, Victoria, and Elizabeth. In 1932 Johnson and the other defendants entered into a conspiracy amongst themselves to hinder, delay, and defraud Johnson's creditors, and in carrying out their wrongful purposes certain other shares of such stock were issued to the other defendants, all without consideration and in furtherance of the fraudulent schemes of defendants.

The relief sought in the present suit is to subject all of the stock so transferred to the claims of plaintiff as judgment creditor. In event the stock is no longer available thereto, plaintiff seeks a money judgment against the several defendants for the value of the shares of stock so transferred to each of them and as of the time so wrongfully transferred and acquired. There are other charges of fraud and wrongdoing, but we refrain from further comment respecting such, as what has been related sufficiently outlines the general plan and purpose of the suit. One defendant, Mr. Otting, has not been served with process.

The defendants demurred to the complaint on the following grounds: (1) Misjoinder of parties plaintiff; (2) misjoinder of parties defendant; (3) misjoinder of causes of action; and (4) that as to several of the pretended causes of action the facts stated in the complaint are not sufficient to constitute a cause of action against any of the demurring defendants.

The court sustained this demurrer in all respects. Nothing is said by the court as to its reasons for reaching this conclusion except "that the inconsistencies and perplexities of this complaint are such that it should not be dignified by a memorandum pointing out its defects." Nor was any provision made for leave to plead over. Thus we are left to our own research (with counsels' help) to find solution to the problems presented. In considering these we think the first three grounds upon which demurrants rely may be considered together. The legal principles involved in their solution are virtually identical.

1. The questions of misjoinder of parties, both as to plaintiff and defendants, and of causes of action are, in substance and effect, interrelated and interdependent. What plaintiff seeks to accomplish in his two capacities of receiver and trustee for two different corporate enterprises is the enforcement of judgment claims by means of what was during the pre-code system known as a creditor's bill. While law and equity are under our code wholly within the jurisdiction of and administered by the same court, yet we have substantial remnants of the old systems. In this case, if we assume the old system still applicable to the present situation, we must look to the old equity practice in order to determine whether there is a misjoinder of parties or causes. Could the present suit have been maintained against the objections here raised under the pre-code practice without rendering the bill multifarious?

In North v. Bradway, 9 Minn. 183, Gil. 169, these identical questions were thoroughly and adequately considered and determined. In that case two separate and distinct judgment creditors brought a joint suit against the judgment debtor and numerous grantees who had rendered aid and assistance to the debtor in attempting to place his property beyond the reach of plaintiffs. The complaint was sustained against the same objections as are raised here. That case became and still remains the leading case on this subject in this state and has been followed in numerous decisions since. From these many cases Mr. Dunnell, (5 Dunnell Minn.Dig. [2 ed. and Supps.] § 7505), succinctly states the rule:

"In equity causes of action may be joined if they might have been included in a bill in equity under the old practice without making it multifarious. A bill in equity is not multifarious, where one general right only is claimed by it, though the defendants have only separate interests in distinct questions which arise out of or are connected with such right. All of the defendants, however, must be affected in some respect by the action, or by some part thereof, but they need not be equally affected."

Especially helpful to solution here are State ex rel. Brooks-Scanlon Lumber Co. v. Knife Falls Boom Corp., 96 Minn. 194, 199, 102 N.W. 817, and Bacich v. Northland Transportation Co., 173 Minn. 538, 217 N.W. 930. The underlying thought, the basis for decision in all these cases, is that only one general right is asserted in the complaint, i. e., the right to reach and to subject fraudulently transferred property to the payment of just claims of complaining judgment creditors. While Johnson made these several transfers, or caused them to be made, independently and in separate and distinct transactions, yet each such transfer and each such transferee is affected by the fraud involved to the extent of the property thus received by him. Every defendant who rendered aid or assistance to Johnson in the accomplishment of this purpose, with resulting injury to plaintiff, is a proper party to this suit, thereby avoiding a multiplicity of suits. Each such party is but a cog in a wheel designed, made, and used for dishonest and improper purposes to plaintiff's detriment and consequent damage. "The fraud is one work, the steps to accomplish it are various." North v. Bradway, 9 Minn. 183, Gil. 169, 174. The rule mentioned and sustained in our cases is in accord with the weight of authority elsewhere. Hutchins v. Nickerson, 212 Mass. 118, 98 N.E. 791; Fellows v. Fellows, 4 Cow. 682, 15 Am.Dec. 412; Tucker v. Foster, 154 Va. 182, 152 S.E. 376, 69 A. L.R. 220, and note going with that decision; Regester v. Regester, 104 Md. 359, 65 A. 12; 21 C.J. p. 318 (under title "Bills for relief against fraud") and cases under notes 85, 86, and 87; 27 C.J. p. 747 [§ 619] F., and cases under notes 70 to 78, inclusive.

The fact that plaintiff is suing in two different capacities as judgment creditor cannot place him in any worse position than if there were two separate individuals bringing this suit. We can see no objection on this ground, for it is well established that several creditors having distinct claims can join as plaintiffs in a single complaint brought to reach fraudulently conveyed property. North v. Bradway, supra; Steiner Land & Lumber Co. v. King, 118 Ala. 546, 24 So. 35; Gamet & Ogden v. Simmons, 103 Iowa 163, 72 N.W. 444; M. Ferst's Sons & Co. v. Powers, 64 S.C. 221, 41 S.E. 974; Cullen v. Walsh, 97 Misc. 177, 161 N.Y.S. 123; 27 C.J. p. 750 [§ 628]C, and cases under notes 18, 19 and 20.

2. It is also urged that the complaint fails to allege that Johnson was insolvent when these transfers were made or that he became insolvent by reason thereof; rather that, by inference at least, he was in fact...