Meinhard v. Strickland

• Decision Date: 29 October 1888
• Parties: MEINHARD et al. v. STRICKLAND et al.
• Court: South Carolina Supreme Court

7 S.E. 838

29 S.C. 491

MEINHARD et al. v. STRICKLAND et al.

Supreme Court of South Carolina

October 29, 1888

Appeal from common pleas, circuit court of Kershaw county; J. B KERSHAW, Judge.

Action by Meinhard Bros. & Co., H. B. Claflin & Co., and Bernheim Bauer & Co. against C. H. Strickland, Teresa H. Strickland S. A. Arnstein, and J. L. Haile, to restrain a sale under certain mortgages executed by C. H. Strickland upon his stock of goods, and to have the mortgages declared void, as in violation of Gen. St. S.C. § 2014, making assignments with preferences void, and for the appointment of a receiver. Gen St. S.C. § 2016, provides that, "whenever any debtor shall assign his or her property for the benefit of his or her creditors, it shall and may be lawful for any creditor or creditors of the said debtor *** either to attack and set aside the said deed of assignment, or to enforce the provisions thereof, or for any other purpose whatever, without first obtaining and entering up judgment against the said debtor upon the claim or demand so held by the said creditor or creditors." Code Civil Proc. § 245, provides that "when no provision is made by statute as to security upon an injunction, the court or judge shall require a written undertaking on the part of the plaintiff, with or without sureties," to secure the payment of damages to the party enjoined. From an order granting an injunction and appointing a receiver defendants appeal.

W. M. Shannon, C. L. Winkler, Nelson & Blakeney, and W. D. Trantham, for plaintiffs.

J. T. Hay, for defendants.

MCIVER J.

On the 21st of March, 1888, the appellant C. H. Strickland, a merchant of the town of Camden, S. C., being at the time in the city of New York, executed a mortgage in favor of his wife, the appellant Teresa H. Strickland, "upon all of his stock of goods in his store in the town of Camden, S. C., together with the fixtures, etc., and other credits pertaining to his business, to secure the payment, on demand, of the sum of forty-seven hundred dollars; alleging in said mortgage that the property therein described was worth the sum of twenty-eight thousand dollars." On the 23d of March, 1888, the said C. H. Strickland, being still in New York, executed a second mortgage, in favor of the appellant, S. A. Arnstein, upon the same stock of goods, to secure the payment on demand of two notes, both bearing date 23d of March, 1888,--one for the sum of $6,014.36, and the other for the sum of $475. Immediately thereafter, Strickland and wife, accompanied by Arnstein, left New York, and arrived in Camden on the 26th of March, 1888; and on the 28th of March, 1888, the stock of goods covered by these mortgages was surrendered by C. H. Strickland to the defendant Haile, as agent of the mortgagees, who took possession, and advertised the same for sale on the 16th of April, 1888, under said mortgages. On the same day of the surrender of the goods C. H. Strickland and Arnstein left the state together, and on the following day Mrs. Strickland also left Camden; C. H. Strickland alleging that he left to seek for employment elsewhere, and that his wife left to visit her mother in Anderson, while Arnstein says that he returned to his home in the city of New York, visiting Knoxville, Tenn., on his way home. On the 27th of March, 1888, the day before the surrender of the goods, it is admitted that Strickland and wife took goods from the store to the amount of about $125, which defendants claim were charged to Strickland on the books of the store, which were carried to the residence of Strickland, where they were at the time the goods in the store were taken possession of by the agent of the mortgagees, and where they still remain, as defendants allege. It is also admitted that about the same time, probably on the same day, C. H. Strickland transferred to Springs, Heath & Co. accounts due to him "for about $2,000, to secure them for about $1,300, money advanced by them to defendant in the conduct of his business, which said accounts are not worth more than the amount due Springs, Heath & Co." It is alleged on behalf of the defendants that the consideration of the mortgage to Mrs. Strickland was money loaned by her at previous times to her husband, which she had derived from the estates of her deceased father and brother; and that the consideration of the mortgage to Arnstein was two notes, the larger of which was to take up three notes given by Strickland to Arnstein on the 1st of January, 1887, payable, respectively, in one, two, and three years, for the interest of Arnstein in a partnership which had previously existed between himself and C. H. Strickland, which was dissolved on the 1st of January, 1887, and that the smaller note ($475) was given for money advanced by Arnstein to C. H. Strickland during his last visit to New York, when the mortgages were executed "to enable him to meet some of his liabilities, and to return home."

On the 7th of April, 1888, this action was commenced to enjoin the sale under the mortgages, to have the same declared null and void as in violation of the assignment act; and for the appointment of a receiver, etc. The motion for an injunction and the appointment of a receiver was heard by his honor, Judge KERSHAW, upon the complaint and answers of the several defendants, together with affidavits submitted on both sides; and on the 21st April, 1888, he rendered his decree, in which he says: "The motion was elaborately argued by counsel on both sides. After due consideration of the authorities from Wilks v. Walker and Austin v. Morris to Magovern v. Richard and Pool v. Hunt, [probably a misprint for Lamar v. Pool, hereafter cited,] I am constrained to hold the proceedings and conduct of C. H. Strickland, in regard to his property and assets, as accomplishing the identical results usually obtained by a general assignment for the benefit of creditors, with preferences, though mortgages and specific assignments of portions of his property to individual creditors have been employed for that purpose. All these transactions were accomplished within a very few days, and must be considered as constituting a scheme for the purpose of closing his business on the part of C. H. Strickland, and not done in the course of business, and for the purpose or with a view of continuing the same; and the advantages secured to certain of the creditors, to the exclusion of many others, accomplishes the very result which it was the object of the assignment act, as said in Magovern v. Richard, to 'cut up root and branch.' To sustain these transactions would be entirely to defeat the purposes of the statute. A person cannot be permitted to accomplish a result, by indirect and evasive measures, which the law expressly forbids; certainly not in a court of equity." He therefore rendered judgment granting an order for injunction, and for the appointment of receivers, enjoining all creditors from suing and calling them in to prove their demands. The plaintiffs were required to enter into the usual injunction bond in the sum of $1,000, without security; and it was also ordered "that the plaintiffs have leave to make as additional parties defendant hereto, by proper amendments and service of summons, Springs, Heath & Co., who are said to be in possession of a portion of the assets of said C. H. Strickland."

From this judgment defendants appeal upon the following grounds: "(1) That his honor erred in not deciding that the verification of the complaint herein was insufficient in law. (2) That his honor erred in not deciding that the plaintiffs, not having any legal evidence, by affidavit, sworn complaint, or otherwise, upon which the rule to show cause could be based, that the complaint, rule to show cause, and all proceedings thereunder should be dismissed. (3) That his honor erred in not deciding that he was without jurisdiction to hear the cause and grant relief, it not appearing that the plaintiffs had recovered judgment, or exhausted their legal remedies. (4) That his honor erred in holding that the transactions between C. H. Strickland and the creditors to whom he gave security for their debts, amounted to a general assignment for the benefit of creditors, with preferences. (5) That his honor erred in not deciding that the plaintiffs had not furnished any legal evidence as to the allegations of their complaint, as to the indebtedness of C. H. Strickland, his alleged insolvency, any mortgages or transfers executed by him to any of his creditors, and other matters upon which the rule to show cause and the order thereon of his honor is based. (6) That his honor erred in not deciding that Springs, Heath & Co. and others, to whom it was alleged in complaint that C. H. Strickland had transferred and assigned choses in action, were necessary parties to the proceedings herein, and in not dismissing the proceedings herein, because they were not made parties. (7) That his honor erred in not requiring the plaintiffs to give security on injunction, the plaintiffs not being citizens of this state, and the rules of court requiring that non-resident plaintiffs should give security. (8) That his honor erred in granting an injunction and appointing a receiver in this cause he being without jurisdiction in the premises, and there being no legal evidence before him to sustain his rulings. (9) That his honor erred in not dismissing the proceedings herein."

Instead of taking up these grounds in regular consecutive order, we will proceed, first, to consider the question raised by the fourth ground, which seems to be regarded by counsel as the most material leaving the other grounds to be considered hereafter. That question has been before this court in various forms, on several recent occasions, and the principles...