Tolerton-Stetson Co. v. McLain

• Decision Date: 23 November 1892
• Citation: 53 N.W. 667,35 Neb. 725
• Parties: TOLERTON-STETSON CO. ET AL. v. MCLAIN ET AL.
• Court: Nebraska Supreme Court

35 Neb. 725

53 N.W. 667

TOLERTON-STETSON CO. ET AL.

v.MCLAIN ET AL.

Supreme Court of Nebraska.

Nov. 23, 1892.

Syllabus by the Court.

M. and H., doing business at C. under the name of M., sold their business and stock, taking the notes of the purchasers payable to M. M. sold one of the notes to a bank, and indorsed the same. He also delivered to the bank other firm notes to secure his private indebtedness. In a creditors' bill by creditors of the firm to subject the latter notes to payment of the firm debts, held, that the proof clearly showed that the officer of the bank taking the notes as security for a personal debt of M., a member of the firm, knew that they belonged to the partnership, and that the creditors of the firm were entitled to the proceeds of such notes.

Appeal from district court, Dawes county; KINKAID, Judge.

Creditors' bill by the Tolerton-Stetson Company and others against the German-American Savings Bank, George W. McLain, and others to set aside a fraudulent sale of notes made by one member of a firm, and apply the same to pay the firm's debts. There was judgment for plaintiffs. Defendant German-American Savings Bank appeals. Affirmed.Ira T. Martin, Barnes & Tyler, and Jenckes & Bane, for appellant.

Alfred Bartow, Spargur & Fisher, E. S. Ricker, Albert W. Crites, and W. H. Fanning, for appellees.

MAXWELL, C. J.

It is claimed that on or about the 1st of April, 1890, one G. W. McLain borrowed from the German-American Savings Bank of Le Mars, Iowa, the sum of $600. As security for such loan, he pledged and delivered to the bank certain promissory notes, executed by other persons, which on their face were payable to him, amounting to about $1,000. Afterwards, and during the month of June of the same year, McLain again obtained from appellant $665, $1,200, and $1,702.50, executing his several notes for the above-mentioned sums; and as security therefor, and for the payment of some notes of his, which had been executed prior to that date, pledged certain promissory notes executed by Manning & Gorton, payable to the order of said G. W. McLain, at the bank of Crawford, at Crawford, Neb. At the same time he sold one of the Manning & Gorton notes to the bank outright. All of the above security notes were duly indorsed by him, and delivered to the appellant herein. When the notes became due, on or about October, 1890, the appellant forwarded the same by way of the Wells-Fargo Express Company's express to the Bank of Crawford for collection. Thereupon the appellees, the Tolerton-Stetson Company and others, commenced actions in the several courts of Dawes county against G. W. McLain, at the same time suing out the writs of attachment, and causing the Wells-Fargo Express Company to be served with notices of garnishment. Such proceedings were had in the several cases that judgments were obtained against G. W. McLain, and the answer of the garnishee was taken. On or about the 1st day of November, 1890, all of the appellees joined in a suit in the nature of a creditors' bill against G. W. McLain, Henry Henrich, the Wells-Fargo & Company's Express, the German-American Savings Bank of Le Mars, Iowa, appellant herein, and T. E. Bradway, and filed their petition in the district court of Dawes county, alleging, in substance, that G. W. McLain and Henry Henrich, prior to that time, had been doing business at Crawford, Neb., as copartners; that the several judgments which the plaintiffs had obtained, as above stated, were against the said firm of G. W. McLain and Henry Henrich; that the said firm was insolvent, and that executions on said judgments had been returned unsatisfied; that the notes pledged by the said G. W. McLain, as collateral security, to the appellant, the German-American Savings Bank, were the property of the said firm of G. W. McLain and Henry Henrich; that the same were taken by the bank without authority, and in fraud of the rights of such firm and of the plaintiffs, with full knowledge of said facts on the part of the bank; that the same were subject to the attachment liens of the plaintiffs, and the lien of the bank was subsequent and inferior thereto; that the same ought to be applied to the satisfaction of their said judgments; which petition concluded with the proper prayer for such relief. The German-American Savings Bank thereupon filed its answer to the said petition, denying the material allegations thereof, alleging that it took the notes in question as collateral security for the money borrowed by G. W. McLain, without any knowledge or information that any one else had any interest in them whatsoever; that it purchased one of the notes in question, and paid for the same the sum of $2,000 outright; and concluding with a prayer that the proceeds of the notes be held subject, first, to their lien and applied to the payment thereof; that they recover their costs; and for general, equitable relief. No answer was filed by G. W. McLain, but Henry Henrich filed an answer in which he alleges that the notes in question were the property of such firm; that they had been pledged without his knowledge or consent; that they ought to be applied to the satisfaction of the judgments, to the exclusion of the rights of the appellant; and that he ought to have the balance of the proceeds of the notes for himself.

Upon these issues the case was tried to the court, and a decree rendered as follows: “Said cause coming on to a hearing upon the petitions of the plaintiffs, the answers of the defendant the German-American Savings Bank of Le Mars and Henry Henrich, and the reply of the defendant the German-American Savings Bank of Le Mars, Iowa, and the evidence adduced and taken in open court, upon the hearing by and in behalf of the respective parties, and the conrt, being fully advised in the premises, now here finds that all the facts stated in the said petitions of the plaintiffs are true, and that they are entitled to the relief prayed in their said petitions, and that the facts stated in the answer of the defendant Henry Henrich are true, and that he is entitled to the relief prayed in his said answer, and that the court finds that the defendant the German-American Savings Bank of Le Mars, Iowa, has a first lien upon the notes and securities and the proceeds thereof described in the pleadings herein, for the sum of $2,800, with 8% interest per annum thereon, from the 10th of October, A. D. 1890, and is entitled to be first paid this aforesaid sum, and interest due, out of such proceeds; that the said plaintiffs are entitled to specific liens upon rest and residue of such notes and proceeds for the amount of their said several judgments and claims, with interest thereon from the date of such judgments, as therein provided, in the order of priority alleged and set forth in said petition; that the plaintiff the First National Bank of Chicago, Ill., had a specific lien upon such proceeds, by virtue of its attachment and garnishment, but which said action is still pending and undetermined; that, after the payment of the aforesaid several sums of money out of the proceeds of such notes, the rest and residue of such proceeds, if any such there be, shall be divided between the defendant Henry Henrich and the defendant George W. McLain, or his representatives or assigns, in the proportion of 41-89 to 48-89, which said last-named fractional proportion of such last-named...