Merchants' Nat. Bank of Omaha v. McDonald

• Decision Date: 18 December 1901
• Citation: 88 N.W. 492,63 Neb. 363
• Parties: MERCHANTS' NAT. BANK OF OMAHA v. MCDONALD, SHERIFF.
• Court: Nebraska Supreme Court

63 Neb. 363

88 N.W. 492

MERCHANTS' NAT. BANK OF OMAHA

v.MCDONALD, SHERIFF.

Supreme Court of Nebraska.

Dec. 18, 1901.

Syllabus by the Court.

1. It is the firmly established rule in this state that the officers of an insolvent corporation cannot prefer debts to third persons for which they are obligated as sureties.

2. The filing of a creditors' bill establishes a lien in favor of the plaintiff on the property or fund sought to be reached thereby from the date of the filing. One who intervenes in an action in the nature of a creditors' bill is entitled to a lien on the fund sought to be reached in such proceedings from the date of such intervention.

3. A creditor whose claim has not been reduced to judgment cannot maintain an action against an insolvent corporation for the ratable distribution of its assets among its creditors; and a creditor who has reduced his claim to judgment and had execution thereon returned unsatisfied who intervenes in such action is entitled to a preference in payment of his claim.

4. It is a settled rule of this court that a judgment will not be reversed simply because the trial court, sitting without a jury, erred in admitting incompetent or immaterial evidence; but this rule has no application in a case in which it appears that such evidence is the sole basis of the findings and judgment assailed.

5. When personal property held by a sheriff under a valid writ of attachment is wrongfully taken from him in replevin, by a person not a party to the suit, the measure of damages, in case the property cannot be returned, is its value at the time of the taking, with interest, not exceeding the amount required to satisfy the writs.

6. When personal property, consisting of a stock of merchandise held by a sheriff under a valid writ of attachment, is wrongfully taken from him in replevin by a person not a party to the suit, it is error to confine the evidence upon the measure of damages to the market value of the goods in the ordinary course of trade, and to the price at which new fresh goods of like descriptions could have been purchased from wholesale dealers in them. The true inquiry in such case is what the value of the goods was at the time of the taking in the situation in which they then were, having a view to the manner in which the sheriff, if his possession had not been disturbed, could lawfully have disposed of them; and if there is no evidence in the record directed to that inquiry, there is no competent evidence from which to assess the amount of the sheriff's recovery.

7. In a case like the foregoing testimony by competent witnesses to the value of the goods in the ordinary course of trade is admissible, as having an indirect bearing upon the principal inquiry; but when it appears that the goods, or a part of them, are to some extent shopworn and deteriorated in value, a witness who has never seen them or one whose only knowledge of values is derived from the inspection of invoices and the examination of trade catalogues of prices, or one who is ignorant of the kind of manufacture and of the description or the form and structure of the articles in controversy, is incompetent to testify as to values.

8. On an appeal to this court, in a case in which an important question is that of value, and in which there is not sufficient evidence in the record to permit of its adjudication, the judgment of the district court will be reversed, and a new trial awarded.

Commissioners' opinion. Department No. 3. Appeal from district court, Douglas county; Scott, Judge.

Action by John W. McDonald, sheriff, etc., against the Merchants' National Bank of Omaha, consolidated with other actions for the distribution of the assets of the Hobrecker Stove Company. From a judgment in favor of the sheriff, and directing distribution, the bank appeals. Reversed.Geo. E. Pritchett, for appellant.

Waren Switzler, Edson Rich, Win S. Strawn, W. A. Corson, C. W. Delamatre, Arthur C. Wakeley, Bartlett, Baldridge & De Bord, and Congdon & Parish, for appellee.

DUFFIE, C.

On April 24, 1896, the Hobrecker Stove Company, a corporation doing business in the city of Omaha, made a bill of sale of all its stock in trade to the Merchants' National Bank of Omaha, to secure the payment of notes in the sum of about $10,000, claimed to be made by said corporation to the bank, and which notes James C. McKell, a director and president of the corporation, signed as comaker or surety. On the same day, and as a part of the same transaction, the corporation assigned all its book accounts and bills receivable to Luther Drake, trustee, for the purpose of further securing the payment of said notes to the bank. It is conceded that at that time the corporation was insolvent. On said April 24, 1896, the Ellwood Gas & Vapor Stove Company commenced an action in the district court against the Hobrecker Stove Company to recover the sum of about $1,000, and a writ of attachment was issued in that action and levied upon a portion of the stock in trade of the defendant, the Hobrecker Stove Company. On April 27, 1896, the Cleveland Steel Range Company and the Galusha Company each commenced actions in the district court against the Hobrecker Stove Company, which actions were aided by attachment, and the remainder of the stock in trade not levied on under the attachment in favor of the Ellwood Gas & Vapor Stove Company was attached by the sheriff of Douglas county. On May 27, 1896, this action was commenced by the March-Brownback Stove Company, a general creditor of the Hobrecker Stove Company, the action being in the nature of a creditors' bill, alleging the insolvency of the defendant corporation, that it had suspended business and was no longer a going concern, charging that the assets of the corporation were a trust fund for the benefit of all its creditors, and asking the court to appoint a receiver and take possession of the assets and make a distribution of them ratably among the creditors of the concern. The petition recited the bill of sale made by the defendant corporation to the Merchants' National Bank, as well also as the assignment to Luther Drake, trustee, of the book accounts and bills receivable, and asked that these conveyances and the attachments above referred to might be set aside and the property covered thereby held to be the assets of the corporation and distributed among its creditors. The Merchants' National Bank, Drake, trustee, and the attaching creditors of the corporation were made parties defendant to this bill. On June 8, 1896, the Merchants' National Bank brought an action in replevin against the sheriff of Douglas county, Neb., to recover possession of the goods under its bill of sale, and which had been taken possession of by the sheriff under the attachments in the three actions above mentioned. May 28, 1897, the Cannonsburg Iron & Steel Company filed a supplemental answer and cross bill in this action, alleging the entry of a judgment in its favor against the Hobrecker Stove Company subsequent to the commencement of the action, and asking a ratable distribution of the assets. October 19, 1896, the Novelty Manufacturing Company filed its answer and cross bill in this action, and on October 29, 1896, A. J. Linderman filed his answer and cross bill in this action. The two parties last named are nonjudgment creditors of the Hobrecker Stove Company. March 6, 1897, the Dayton Manufacturing Company, the Victor Stove Company, the Farmers' National Bank, and Shill Bros. intervened in the action, alleging in their petition of intervention that they were creditors of the Hobrecker Company, that they had reduced their claims to judgment, had execution issued and returned unsatisfied, and had thereafter garnished the Merchants' National Bank and Luther Drake, trustee, as parties having property and funds of the Hobrecker Stove Company in possession, and claiming a priority in the distribution of the assets of the defendant corporation over all creditors, with the exception of the three attaching creditors first above mentioned. November 1, 1897, the Belding-Hall Manufacturing Company, a creditor at large, intervened in this action, and asked to be allowed to participate in the distribution of the assets. By consent of all the parties the replevin action brought by the Merchants' National Bank against McDonald, sheriff, was consolidated with this action and tried to the court. Upon a trial a decree was entered canceling the bill of sale made by the defendant corporation to the Merchants' National Bank, as well also as the assignment of book accounts and bills receivable made to Drake, trustee, and ordering a distribution of the assets of the corporation, giving the three attaching creditors first above named a first lien on the assets for the payment in full of their claims, and directing the remaining assets to be ratably distributed among all the creditors. It was further found that the value of the property taken by the bank in the action of replevin against the sheriff, together with interest thereon to the date of trial, was $7,682, and that the amount collected by the Merchants' National Bank of Omaha on the accounts and bills receivable assigned to Drake, as trustee, amounted, with interest, to the sum of $1,429.85, and these several amounts the bank was ordered to pay to the clerk of the court, to be distributed under the terms of the decree. The Merchants' National Bank has taken an appeal from this decree, and insists that the value of the goods taken in replevin found by the court is excessive, as well also as the amounts collected on the accounts. The four intervening parties whose claims had been reduced to judgment prior to their intervention in this case, and who had garnished the bank and Drake, trustee, also appealed, and insist that the court erred in not allowing them a preference in the payment of their claims over the nonjudgment creditors.

The conveyances to the bank, and to Drake, tru...