Wallace v. Bernheim

• Decision Date: 17 October 1896
• Citation: 37 S.W. 712,63 Ark. 108
• Parties: WALLACE v. BERNHEIM
• Court: Arkansas Supreme Court

37 S.W. 712

63 Ark. 108

WALLACE v. BERNHEIM

Supreme Court of Arkansas

October 17, 1896

Appeal from Sebastian Circuit Court, Greenwood District EDGAR E BRYANT, Judge.

STATEMENT BY THE COURT.

Bernheim Brothers filed a petition of intervention in an attachment suit brought by M. C. Wallace against George Aitken. Aitken was engaged in the saloon business at Huntington, Sebastian County, Arkansas, and purchased liquors of M. C. Wallace, of Fort Smith, and of the interveners, and was indebted to both of said parties. Wallace testified that, on the 8th day of May, he sold to Aitken five barrels of whiskey, for which Aitken agreed to pay him, upon demand, five hundred dollars. He said that, at the time he sold Aitken this whiskey, Aitken owed him about seven hundred dollars, in addition to the price of the five barrels. He further testified that, after he had shipped the whiskey to Aitken, he heard that Aitken had been trying to sell his stock of goods, and, being apprehensive that he might lose his debt, he took steps to attach Aitken. He went to Huntington on the 10th of May, and demanded payment of the five hundred dollars agreed to be paid for the whiskey. Not being paid, he brought suit, and attached Aitken's stock of goods, including the five barrels of whiskey shipped by him, which had not yet been delivered by the railway company to Aitken. Bernheim Brothers also brought suit by attachment against Aitken, and filed a petition of intervention in the suit brought by Wallace. Among other things, they alleged that, "at the time of the suit and the attachment of the said M. C. Wallace herein against the defendant, Geo. Aitken, no ground of attachment existed against him, and that said attachment was sued out and levied at the instance and request of the said George Aitken, under a collusive agreement and understanding previously had, that the plaintiff should first pretend to sell said Aitken a large amount of goods, and sue therefor and cause an attachment to be issued and levied on the property of the defendant, and that the same should be sold at a sacrifice, and be bought in by the said plaintiff, M. C Wallace, for the purpose of hindering these defendants and others in the collection of their debts; and that the defendant George Aitken, under and in pursuance of said collusive agreement, was to have and realize some benefit as one of the results and objects of said collusive agreement as aforesaid." Wherefore they prayed that the attachment lien of said Wallace be postponed to the lien of petitioners.

Aitken made no defense to either attachment suit. Both parties took judgment against him, and both attachments were sustained. On the trial of the intervening petition, the circuit judge, at the request of interveners, gave instruction No. 2 as follows:

"2. The court instructs the jury that a debt created with a view at the time the debt is contracted, of suing out an attachment, and thereby breaking up and destroying the vendee's business, for the purpose of either securing some benefit to the creditors, or for the purpose of delaying, hindering, or defrauding other creditors, is fraudulent as to the latter; and, if you find that any portion of Wallace's debt was created in that way, you must find for the interpleader."

In addition to other instructions, the court also gave, on his own motion, instructions Nos. 3 and 7, as follows:

"3. So in this case the issue is simply reduced to the query, was Wallace's debt bona fide, or was it, in whole or in part, fraudulent? Upon this issue the evidence in the record presents two questions: (1) Was any part of Wallace's debt, on which suit was brought, paid off, and no credit given therefor? (2) Was any of it contracted by Wallace with the intention at the time such part was contracted to attach on the debt? If the affirmative of either of these propositions existed, the debt was fraudulent."

"7. The second proposition is that if any part of Wallace's debt was contracted with the specific purpose in view of running this attachment, the debt is fraudulent. Of course, a person may sell to a debtor with a general purpose of securing himself by attachment, if it should become necessary, but he must not sell with the specific intention and purpose in view at the time of the sale of running an attachment that would absorb the debtor's property to the exclusion or detriment of other creditors. This proposition in this case arises on the items in Wallace's claim sold to Aitken on May 8th or 9th, 1893. If, when Wallace sold these items to Aitken, he intended to run this attachment, it was fraud, and renders the whole debt fraudulent. But if he sold the articles straight out, in the usual course of business, without any purpose at the time of the sale of running this attachment, but conceived the intention of attaching after the sale, no matter how short a time thereafter, there would be no fraud in the transaction. This question turns on the intention in the mind of Wallace at the time the items were sold to Aitken. If at that time he intended to run this attachment, whether by collusion with Aitken or on his own accord, the debt was fraudulent, and the attachment cannot stand. But if he sold the items honestly, with no intention at that time of attaching, there was no fraud in the transaction, and in such case it is immaterial how short a time elapsed before he conceived the idea of attaching, nor was he obliged to take back the goods, for, if honestly sold, he had the right to rely on the debt therefor, and to secure himself by attachment, even if he attach with the understanding with Aitken that he will not contest it."

There was a verdict and judgment in favor of interveners. The other facts sufficiently appear in the opinion.

Judgment reversed and case remanded for new trial.

Winchester & Martin and S. R. Cockrill for appellant.

1. The court erred in the admission of evidence. The ledger of Wallace showing transactions with Aitken & Evans, and continuing down in the name of Aitken, to March 21, 1893, was improperly admitted. Bump, Fr. Conv. (3 Ed.), 385. They were not declarations or acts which occurred while on the prosecution of the common design to defraud. 20 Ark. 225; 50 id. 287. Only acts and declarations of the parties while engaged in the furtherance of the common design to defraud are admissible. Stephen's Diff. Ev. 10; Bump, Fr. Conv. (3 Ed.), 587; 20 Ark. 225. The evidence of Handlin as to Aitken's check, and the check itself, were not admissible. They were transactions of Aitken with appellees in the absence of Wallace. So was the account of Aitken with the First National Bank. All these were irrelevant, because not made in pursuance of the conspiracy; because they were had in appellant's absence; and because no connection or knowledge is shown on the part of Wallace with Aitken's fraudulent purposes, if they existed at that time. Testimony of this character is not admissible to prove a conspiracy. Bump. Fr. Conv. 586; 1 Gr. Ev. (14 Ed.), sec. 111. It was error to allow Aitken to testify as to his fraudulent intentions, etc., because, no matter how corrupt Aitken might have been, unless he acquainted Wallace with them, and Wallace became a party to them, Aitken's frauds could in no wise bind him. 46 Mich. 268. It was also error to allow Aitken's testimony as to purchase of seven barrels of whiskey from appellee's agent and as to $ 100 he gave him together with the $ 300 check. Conversations had by Aitken in the absence of appellant are irrelevant, and not competent; for it is only after a confederation has been established that such declarations of a conspirator are allowed, and then only while engaged in the prosecution of the purpose for which they had confederated. Bump, Fr. Conv. 584; 40 N.Y. 221; 33 Barb. 165. The same objections apply to the other testimony admitted over appellant's objections. 18 Ark. 124; 9 id. 92; 5 id. 13; 45 id. 135; Bump, Fr. Conv. 587.

2. The court's charge was erroneous. It is not necessary to set out all the evidence for the purpose of determining whether the charge is right or wrong. That could be determined without any evidence at all. 44 Ark. 74; 15 id. 118. The most obvious errors in the charge relate to fraud in contracting the debt. The court told the jury that appellant's prior attachment was void, if the appellant entertained the design of suing out an attachment at the time any part of his debt was contracted. This was repeated in several forms. Such is not the law. 60 Ga. 669; 53 Ark. 327; Bishop, Ins. Debtors, sec. 203; 58 Ark. 293; 104 N.Y. 297; 123 U.S. 436; 47 Ark. 48. The error was repeated, but never corrected. 32 S.W. 500. In the fourth given by the court on its own motion the jury are told that, in order to find for appellant, they must find that his debt was "all honestly contracted in the usual course of business." Again, in the ninth the court makes it a condition to finding in appellant's favor that he should have sold the goods "straight out, in the usual course of business." If the goods were actually sold, and the price had not been paid, it was a matter of no concern to the appellees, who were only second attachers, whether, as between Aitken and appellant, it was a "straight out" or some other sort of a sale; or whether the sales, as between the parties, was honest or dishonest. 47 Ark. 48.

3. Withholding credits of payments. The third and ninth, on the court's own motion on this subject, leave out of consideration the creditor's intent to commit a fraud. If the suit was inadvertently for more than was due, it would not avoid the attachment. 7 Cush. (Mass.), 587. It was error to make the question of fraud depend solely on the fact whether a payment by the debtor had not been credited. That was to be...