Morgan v. U.S. Fidelity & Guaranty Co.

• Decision Date: 14 April 1969
• Docket Number: No. 45195,45195
• Citation: 222 So.2d 820
• Court: Mississippi Supreme Court
• Parties: E. E. MORGAN, Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellee.

Page 820

222 So.2d 820

E. E. MORGAN, Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellee.

No. 45195.

Supreme Court of Mississippi.

April 14, 1969.

Rehearing Denied June 9, 1969.

Cox, Dunn & Clark, Jackson, for appellant.

Butler, Snow, O'Mara, Stevens & Cannada, Jackson, Snow, Covington, Temple & Watts, Meridian, for appellee.

PATTERSON, Justice:

This is an appeal by E. E. Morgan from a decree of the Chancery Court of Hinds County which was entered pursuant to the prayer of a bill of complaint filed by United States Fidelity & Guaranty Company, appellee and cross-appellant.

The gist of the bill of complaint, which is in the nature of a 'creditor's bill,' is that United States Fidelity & Guaranty Company is a judgment creditor of E. E. Morgan under a 1965 decree of the Chancery Court of Hinds County in the sum of $2,642,568.35, plus attorneys' fees of $125,000 ¹; that as a result of this judgment a lien was created against all of Morgan's assets and properties for the benefit of the complainant; that Morgan was the owner of certain assets and properties which were subject to this lien, but that appellant concealed such assets and property and engaged in a fraudulent course of conduct deliberately designed to hinder, delay, and defraud appellee of the benefits of its lien and thereby evade and defeat the decree against him. The bill further alleges that under the provisions of the 1965 decree Morgan was obligated and specifically required, upon request, to furnish complainant a financial statement showing his current financial status. The bill sought specific performance of this obligation. Additionally, the bill averred that Morgan had a considerable amount of money and other assets, the location, value and particulars of which were unknown to the complainant, and which should in justice and equity be applied to the satisfaction of the judgment against Morgan. The bill contained a detailed prayer for relief, including a prayer for discovery of Morgan's assets and the appointment of a receiver.

In advance of filing his answer, Morgan, by leave of court, filed a special plea of res judicata, merger and estoppel, based upon the judgment in the parent case. After a hearing, the plea of res judicata was overruled and Morgan was granted leave to plead further. Thereupon he filed his answer which incorporated (1) a general demurrer, (2) a plea of nonjoinder of necessary parties, (3) a plea of res judicata, merger and estoppel by the former judgment, and (4) a denial of the legality of the writ of execution.

Paragraphs 8 and 9 of the bill of complaint are as follows:

(8)

Complainant further avers that the money judgment in favor of complainant against defendant is and remains in full force and effect and has been affirmed by the Mississippi Supreme Court and there is now actually due to complainant thereon the principal amount of $2,968,962.11, together with lawful interest thereon from the date of the rendition thereof, together with the 5% damages provided by Section 1971, Mississippi Code of 1942, plus attorneys' fees of $25,000 allowed by the Supreme Court. Said judgment has been duly enrolled and constitutes a lien on the property of defendant. Complainant is informed and believes, and upon such information and belief avers that defendant has a considerable amount of money and of legal and equitable debts, claims and demands due to him from different persons, the names of whom are unknown to complainant, and that said defendant has a large amount of oil, gas and mineral interests and other interests in real estate, stocks of different kinds, securities, promissory notes and other evidences of debt, and other personal property, either in his possession or held in trust for him by others, the situation, value and particulars of which are unknown to complainant, and which ought in justice and equity be applied to the satisfaction of the aforesaid money judgment. Complainant avers upon information and belief that defendant has concealed his assets and resorted to other devices for the purpose of hindering, delaying and defrauding complainant of its rights as a judgment creditor, and complainant has no plain, adequate, speedy and complete remedy at law.

(9)

Complainant avers that in equity and good conscience the assets and property of the defendant should be applied to the satisfaction of complainant's judgment against said defendant, and defendant should be compelled to discover, set forth and disclose all the estate, real and personal, of every description, including goods, chattels, money, book accounts, notes, bonds, mortgages, securities, evidences of debt and choses in action belonging to said defendant, whether standing in his name or in the name of or in the hands of any other person or persons for his use or in trust for him, and the names of the persons who have the possession, custody or control of such real or personal property.

In answering these allegations Morgan admitted the validity and finality of the money decree and that it constituted a lien on his assets, but declined to answer the remaining allegations of Paragraph 8, stating on oath that an answer in this regard might tend to incriminate him. He expressly invoked the privilege against self-incrimination under the Fifth and Fourteenth Amendments to the Federal Constitution and Article 3, Section 26, Mississippi Constitution (1890).

A motion was filed by the complainant for determination of defendant's claim of privilege to refuse to answer. A preliminary hearing was held and the claim of privilege was rejected by the court on the premise that it had not been made apparent that a full answer would incriminate the appellant. Therefore, Morgan was ordered to answer on penalty of having the unanswered allegations of the bill taken as confessed.

Thereupon Morgan filed a supplemental answer under oath which reiterated his claim of the privilege against self-incrimination and continued to decline to answer the allegations of Paragraphs 8 and 9, answering in regard thereto as follows:

Without admission or denial of implication in the crimes involved, this Defendant states on his oath that he fears that an answer could tend to incriminate him under several Mississippi criminal statutes, to which his attention has been called, including those referred to by his Counsel on said hearing, and that further factual explanation would tend to destroy the privilege which he claims under the Constitution of the United States and State of Mississippi.

Thereafter, the court reconsidered its order directing an answer to be filed and acknowledged the applicability of Mississippi Code 1942 Annotated section 2252 (1956), entitled 'Larceny-removing property subject to lien out of the county-selling,' to a judgment lien. It held that the allegations of concealment in the bill of complaint were sufficient to bring the answer within the constitutional privilege against self-incrimination and that this privilege did extend to an answer in chancery. The court concluded, however, that there had been a specific contractual waiver of the constitutional privilege under the terms of a bond application which provided that appellant would present a financial statement, on request, to the surety companies involved in that particular project. United States Fidelity & Guaranty Company was one of these companies.

Nevertheless, the chancellor upheld the claim of privilege as to that portion of the complaint which stated: '* * * defendant has concealed his assets and resorted to other devices for the purpose of hindering, delaying, and defrauding complainant of its rights as a judgment creditor.' It was the opinion of the chancellor that 'To hold otherwise would * * * possibly deny the right of immunity from self-incrimination in view of Section 2252, Code of 1942, Recompiled,' and that 'being forced to answer * * * runs head-on into Section 2252 of the Code which does make such action a crime.' The court further rules that '* * * such averment shall not be taken as having been admitted or confessed by reason of defendant's failure to make answer thereto, nor shall it be considered that defendant has denied said above quoted averment of the Bill of Complaint.' Other than the above statement the court reconfirmed its prior order and held that each averment of Paragraph 8 should be taken as admitted.

Thereafter, the hearing was held on the complaint and answer, including the pleas incorporated therein. The demurrer, plea of nonjoinder, plea of res judicata, merger and estoppel by judgment, were all preliminarily overruled. At the trial the complainant presented detailed evidence in support of its bill of complaint. Morgan could not be located for service of process, did not appear at trial, did not testify or offer testimony, and rested his case.

At the conclusion of the hearing the court held (1) that the creditor's bill was not maintainable under Mississippi Code 1942 Annotated section 1327 (1956), but was proper under the ancient equity practice, (2) that a course of conduct was shown indicating concealment of assets when regard was had to Morgan's failure to testify, (3) that the case did not justify an injunction requiring Morgan to pay the judgment on pain of contempt, (4) that complainant was entitled to a full discovery of identity, status and location of assets of every kind, including the names of persons having possession, custody or control of assets, (5) that a receiver should be appointed for collection of appellant's assets, and (6) that Morgan should be enjoined from disposing of any assets which might be owned by him. As to the discovery feature of the opinion, the chancellor ruled that he would require the appellant to furnish a financial statement and that in any event the complainant was entitled to a full discovery, stating: '* * * and whether this be done by a statement by way of discovery or by a financial statement, I think it...