Lyle v. Barton D. Slegman, Lucile R. Slegman, Cecil L. Bell, Nellie B. Heffernan & Henry Waterhouse Trust Co.
| Decision Date | 23 March 1922 |
| Docket Number | No. 1384.,1384. |
| Citation | 26 Haw. 351 |
| Parties | J. A. LYLE v. BARTON D. SLEGMAN, LUCILE R. SLEGMAN, CECIL L. BELL, NELLIE B. HEFFERNAN AND HENRY WATERHOUSE TRUST COMPANY, LIMITED. |
| Court | Hawaii Supreme Court |
OPINION TEXT STARTS HEREAPPEAL FROM CIRCUIT JUDGE FIRST CIRCUIT. HON. C. S. FRANKLIN, JUDGE.
Syllabus by the Court
Where not modified by statute it is a general rule, to which there are a few exceptions, that a creditor cannot resort to equity for aid in the collection of his debt until he has established his claim by recovering judgment at law thereon.
The insolvency of a debtor does not excuse a creditor from reducing his claim to judgment before resorting to equity for aid in the collection of his debt.
The fact that a debtor's interest in the asset sought to be reached by a creditor's bill is an equitable one does not excuse the creditor from basing his bill upon a previous judgment.
Brown, Cristy & Davis for petitioner.
W. B. Lymer and Marguerite K. Ashford for respondent B. D. Slegman.
Robertson & Castle for the other respondents.
Petitioner filed his bill entitled “Bill for Discovery, Injunction and Relief in Equity,” but essentially a creditor's bill, to subject a certain promissory note and mortgage, executed by the respondents Cecil L. Bell and Nellie B. Heffernan, alleged to belong to the respondent Barton D. Slegman, but standing in the name of his wife Lucile R. Slegman, in the actual possession of the Henry Waterhouse Trust Company, Limited, to the payment of his alleged debt against said Barton D. Slegman. It is alleged in substance that said note was transferred to Lucile R. Slegman in fraud of the creditors of said Barton D. Slegman, including the petitioner, and that the debtor is otherwise insolvent. It does not appear from the allegations of the bill that the petitioner has reduced his claim against the debtor to judgment. In fact the bill discloses that he has not done so and it is not alleged that it is impossible for him to obtain a judgment. In view of the conclusions which we have reached as to the disposition of the questions presented by the appeal before us we do not deem it necessary to set out even the substance of the other allegations of the bill. The respondents demurred to the bill and as ground for demurrer among others set up the fact that the bill affirmatively shows that no judgment has been had or execution levied. The circuit judge sustained the demurrer on this ground and one other and the petitioner has appealed.
Where the rule has not been modified by statute it is the general rule, to which there are a few exceptions, that a creditor cannot resort to equity for aid in the collection of his debt until he has established his claim by procuring judgment thereon. (Middleditch v. Kalanianaole, 18 Haw. 272; D'Herblay v. Macomber, 20 Haw. 274;H. B. & M. Co. v. Bartlett, 23 Haw. 192.) It has been held that our statute does not modify the general rule. ( Middleditch v. Kalanianaole, supra.) It remains then for the petitioner to bring his case within an exception to the general rule or else fail.
Creditors' bills originated in the ineffectiveness of legal executions and were designed to aid creditors, who, having exhausted their legal remedies, still remain with their debts unsatisfied, to reach property of their debtors not reachable by ordinary legal process. The theory upon which equity jurisdiction has developed is that it should afford a remedy for every wrong, reparation for which is not to be gained in courts of law and the necessary result of this is that equity will not interfere in a case wherein the parties have an adequate legal remedy which has not been exhausted. It is an elementary rule that to enable one to file a creditor's bill he must have exhausted all legal remedies which might afford him the redress which he seeks. (National Tube Works Co. v. Ballou, 146 U. S. 517;Cates v. Allen, 149 U. S. 451.) In the application of the rule just stated it must often be determined under peculiar facts whether or not the complainant is sufficiently without legal remedies to become entitled to the aid of equity's extraordinary ones. Courts do not agree as to when this is so. For instance, it has been held that if it is impossible to obtain a personal judgment against a debtor by reason of his nonresidence or of the fact that he has absconded, there being no adequate remedy provided by statute whereby his property can be reached, a creditor's bill will lie in the first instance from the necessity of the case if the debtor have property reachable thereby. ( Pope v. Solomons, 36 Ga. 541; Taylor v. Branscombe, 74 Ia. 534, 38 N. W. 400; Corn Exchange Bank v. Applegate, 91 Ia. 411; Earle v. Circuit Judge, 92 Mich. 285; Overmire v. Haworth, 48 Minn. 372, 31 Am. St. Rep. 660; Pendleton v. Perkins, 49 Mo. 565; Merchants' National Bank v. Paine, 13 R. I. 592.) Other state courts hold to the contrary. (Ladd v. Judson, 174 Ill. 344; Smith v. Moore, 35 Ala. 76.)
It has also been held that the insolvency of a judgment debtor renders the issuance of an execution and a return thereof nulla bona unnecessary as a condition precedent to the filing of a creditor's bill although this holding is not universally followed. ( Thurmond v. Reese, 3 Ga. 449, 46 Am. Dec. 440; Miller v. Dayton, 47 Ia. 312; Turner v. Adams, 46 Mo. 95; Bomberger v. Turner, 13 Oh. St. 263, 82 Am. Dec. 438; Enright v. Grant, 5 Utah 334; Whitehouse v. Point Defiance etc. R. R. Co., 9 Wash. 558;Case v. Beauregard, 101 U. S. 688.) Contra. (Adsit v. Butler, 87 N. Y. 585.)
As to whether or not the insolvency of the debtor will enable the creditor to file a creditor's bill before having reduced his claim to judgment the cases are also in almost hopeless conflict. In one line of cases it is held that a creditor should not be required to procure a judgment upon which execution must prove fruitless-that it may be otherwise satisfactorily proved to the court that the debtor has not sufficient property of which levy can be made by legal process and that the creditor should not be prejudiced in the enforcement of his rights by useless delay. (Austin, Nichols & Co. v. Morris, 23 S. C....
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