Miller v. Maryland Casualty Co.

• Decision Date: 22 May 1944
• Docket Number: No. 7351.,7351.
• Parties: MILLER et al. v. MARYLAND CASUALTY CO.
• Court: Arkansas Supreme Court

Page 581

180 S.W.2d 581

MILLER et al. v. MARYLAND CASUALTY CO.

No. 7351.

Supreme Court of Arkansas.

May 22, 1944.

Rehearing Denied June 19, 1944.

Appeal from Chancery Court, Crawford County; C. M. Wofford, Chancellor.

Suit by Maryland Casualty Company against Mrs. Anne Wood Locher, individually, and Dell Miller and others, as trustees under the wills of Norma Wood, deceased, and Margaret Wood, deceased, in nature of a creditor's suit or equitable execution, based on an unsatisfied federal court judgment recovered in Texas. Decree for plaintiff, and defendant trustees appeal.

Affirmed.

Hill, Fitzhugh & Brizzolara, of Fort Smith, for appellants.

Daily & Woods, of Fort Smith, for appellee.

McFADDIN, Justice.

This appeal presents questions concerning foreign judgments, creditors' suits, and trusts.

The Maryland Casualty Company recovered judgment in personam in the United States District Court for the Southern District of Texas against Mrs. Anne Wood Locher for $13,000, and a nulla bona return was made on the execution issued on that judgment. The judgment and return were duly authenticated under the United States statutes. 28 U.S.C.A. § 687. Thereafter, this present suit was filed by the Maryland Casualty Company in the nature of a creditor's suit, or equitable execution, in the Chancery Court of Crawford County, Arkansas, based on the unsatisfied Texas Federal judgment and return evidenced by the authentication previously mentioned. The defendants named in this Arkansas suit were Mrs. Locher, individually, and Dell Miller, Harry Wood, and B. L. Hodges, as Trustees under the wills of Norma Wood, deceased, and Margaret Wood, deceased. The complaint alleged that the administration of each of the estates had long been closed and Mrs. Locher was beneficiary of one share in each trust estate for and during her natural life and that the trustees of the two wills were handling the trust funds of the estates and were making annual payments to Mrs. Locher of all of her share of income; and the complaint prayed that the annual payments going to Mrs. Locher should be paid to the Maryland Casualty Company during the life of Mrs. Locher until the Texas judgment should be satisfied. The complaint alleged the nonresidency of Mrs. Locher and her insolvency and the absence of any property belonging to her in the State of Arkansas. Mrs. Locher was served with summons in the State of Texas under the provisions of Sec. 1374 of Pope's Digest. She made no appearance or defense in this case. The three Trustees were personally summoned and made the defenses which we will discuss herein. Mrs. Locher testified by deposition taken on behalf of the Trustees.

The Crawford Chancery Court found that the balance due on the Texas judgment was $12,042 with interest at 6% from October, 1940; and that Mrs. Locher was a citizen of Texas and had no property in Texas or elsewhere subject to execution or attachment except her equitable interest in the trust here involved; and that under the wills involved Mrs. Locher was entitled to receive for her life the income from one share in the trust; and that this was not a spendthrift trust. Accordingly the Chancery Court enjoined the trustees from paying to Mrs. Locher any of the future net income of her share of the trust and decreed that the trustees should pay the future income of Mrs. Locher's share of the trust, during the lifetime of Mrs. Locher to the Maryland Casualty Company until the said judgment of $12,042 should have been paid in full. From this decree the Trustees (appellants) have brought this appeal. Six questions are presented either directly or inferentially; and we proceed to state and discuss them.

I. Is a Cause of Action Stated?

At the outset we have a creditor's suit based on a foreign judgment. Does the foreign judgment have to be domesticated before a creditor's suit can be maintained? In 14 Am.J. 689 in the discussion of creditors' suits the general rule is recognized:

"The prevailing rule is that a foreign judgment is not sufficient to support a creditor's bill to reach assets of the defendant which cannot be reached in proceedings at law, and that, in the absence of statute to the contrary, the creditor is required to set forth in his bill a judgment in the jurisdiction where the suit in equity is brought or to show that it is impossible to obtain such a judgment in any court within such jurisdiction."

But in continuing the discussion of the same subject there are mentioned, in the same authority, several recognized exceptions and some of these exceptions are (1) impossibility or impracticability, (2) where judgment dispensed with by statute, and (3) nonresidence or absence of the debtor. On the first of these exceptions it is stated in 14 Am.J. 695:

"The general rule that equity will not enforce a demand by creditor's bill until a judgment has been obtained and an execution issued thereunder and returned unsatisfied, or at least partially unsatisfied, is not applied without exception; its application is limited by the reasons which support it. The impossibility, impracticability, or futility of exhausting the remedy at law has been held to be a sufficient excuse for not doing so."

And the second exception the rule is stated in 14 Am.J. 695 as follows:

"In some jurisdictions the necessity of a previous judgment as a condition precedent to obtaining equitable relief under a creditor's bill is dispensed with by statute. A statute authorizing bills by creditors to reach and apply to the payment of a debt any property right, title, or interest, legal or equitable, of a debtor, which cannot be attached or taken at execution in a suit at law against such debtor, has been construed to authorize the creditor to proceed without first obtaining judgment. Such statutes, being remedial, are given a liberal construction to effect the object designed."

And our own case of Riggin v. Hillard, 56 Ark. 476, 20 S.W. 402, 35 Am.St.Rep. 113, is cited to sustain the text.

And on the third exception (nonresidence of defendant), the rule is stated in 14 Am.J. 697 as follows:

"The weight of authority supports the view that nonresidence or absence of the debtor, as where he is a fugitive from justice, obviates the necessity of a prior judgment at law, at least where such nonresidence or absence renders it impossible or impracticable to obtain such a judgment and there is no adequate remedy by which the debtor's property can be reached. The theory underlying the rule is that a prior judgment is required in any case merely because it is the best evidence that the creditor has exhausted his remedies at law, and that where the nonresidence or absence of the debtor has rendered it impossible to obtain this evidence, equity may act upon other evidence which it finds is sufficient to show that the creditor has no adequate remedy at law. Equity does not permit a nonresident debtor to escape payment of the just claim of a resident creditor because his absence from the jurisdiction prevents the creditor from obtaining a personal judgment against him, and there is no other adequate remedy at law to reach the debtor's property."

Among other authorities cited to sustain the text there is the annotation in 38 A.L.R. 272. See also 21 C.J.S., Creditors' Suits, § 45. We think that the case at bar comes within one if not all of the three exceptions to the general rule as has been pointed out. These exceptions would dispense with the necessity of first obtaining any judgment. So even if we consider the Texas judgment as mere evidence of indebtedness, we reach the conclusion that the Texas judgment and the nulla bona return thereon and the proof of Mrs. Locher's insolvency and absence from this State dispense with the necessity of a domestic judgment; and to that extent a cause of action was stated.

II. Is There Sufficient Service?

Since Mrs. Locher was not in Arkansas to be served and did not enter her appearance, there was therefore no personal service on her in this State. Neither did plaintiff have a warning order published, nor attorney ad litem appointed, nor statutory writ of attachment or garnishment issued against the Res (the trust); and so appellants argue that there is no semblance of service to support judgment.

But it must be remembered that the plaintiff did name Mrs. Locher as defendant in this case and did cause a copy of the complaint to be served on her in Texas, as provided by Sec. 1374 of Pope's Digest. Because of Sec. 8226 of Pope's Digest, this service under Sec. 1374 of Pope's Digest did not support a personal judgment against Mrs. Locher, but this service under Sec. 1374 of Pope's Digest notified Mrs. Locher of this suit just as effectively — perhaps even more effectively — than would publication of warning order and appointment and report of attorney ad litem. See Martin v. Gwynn, 90 Ark. 44, 117 S.W. 754; Sinclair Refining Co. v. Bounds, 198 Ark. 149, 127 S.W.2d 629; Bank of Dover v. Jones, 192 Ark. 740, 95 S.W.2d 92. While Sec. 5378 et seq. of Pope's Digest seems to envision proceedings on local judgments against local defendants, still Sec. 5381 says that even in those cases there need be no attachment, affidavit, or bond. We therefore hold that since personal service could not be obtained on Mrs. Locher in Arkansas the nonresidence service under Sec. 1374 and Sec. 1379 of Pope's Digest amply dispensed with any further constructive service, and that the service under Sec. 1374 was sufficient to support any judgment in this case except one in personam. The judgment of the Crawford Chancery Court does not purport to be in personam against Mrs. Locher, but merely to fix the amount of the balance of the indebtedness due by her on the Texas Federal judgment, and to direct the trustees to make payments to the plaintiff instead of to Mrs. Locher. Sec. 8225 of Pope's Digest invoked by appellants affords them no support, because, here, there was a lien created by the judgment...