Wright v. Nelson, 16565

• Decision Date: 03 March 1952
• Docket Number: No. 16565,16565
• Citation: 242 P.2d 243,125 Colo. 217
• Parties: WRIGHT et al. v. NELSON et al.
• Court: Colorado Supreme Court

Page 243

242 P.2d 243

125 Colo. 217

WRIGHT et al. v. NELSON et al.

No. 16565.

Supreme Court of Colorado, en Banc.

March 3, 1952.

Rehearing Denied March 24, 1952.

Bernard J. Seeman and James D. Doyle, Denver, for all garnishees except Paul A. Nelson, plaintiffs in error.

A. D. Quaintance, William D. Johnson, Denver, for defendant in error.

CLARK, Justice.

Plaintiffs in error are here by writ of error to have reviewed the proceedings in the district court in and for the county of Jefferson, wherein judgment was entered against them as garnishees following traverse of their answer in an action in that court then pending wherein Tora Nelson was plaintiff, and Paul A. Nelson defendant. We will herein refer to plaintiffs in error by name or as garnishees; Tora Nelson will be designated as plaintiff, and Paul A. Nelson as defendant.

September 20, 1948, an execution was issued in the original proceeding of Nelson v. Nelson, and on September 30th garnishee summons was served upon all garnishees appearing herein, which are all those named in the title hereof with the exception of Paul A. Nelson. Answers were made by garnishees to the effect that they were not indebted to defendant, had no property of his in their possession, and knew of no debts owing to him. They also stated therein that defendant was not then a partner in Sharp Point Fish Hook Company, and that the only partners were Stanley M. Wright and Andrew D. McGill. Thereupon plaintiff traversed the answers of each and all of said garnishees alleging that defendant was an owner of a one-third interest in certain machine patents belonging to Sharp Point Fish Hook Company, and entitled to one-third of the profits from the manufacture and sale of its products; that defendant had assigned to Wright and McGill and transferred to them his one-third interest in said patents and profits without consideration and with intent to hinder, delay and defraud his creditors and particularly the plaintiff; that said garnishees knew of said fraud and deceit and of the purpose and intent of said defendant in undertaking to dispose of his property. To this traverse the garnishees filed answer, first setting forth certain admissions and denials, and by way of further defense alleged:

1. That plaintiff's action against the garnishees is barred by the statute of limitations;

2. That plaintiff is barred by reason of her acquiescence and laches; and

3. That the patent hereinabove referred to was not the property of Sharp Point Fish Hook Company, it having been assigned to Wright and McGill Company; that defendant had been a partner in the Sharp Point Fish Hook Company, but that he had sold his interest therein to Stanley M. Wright and Andrew D. McGill; that he received for such conveyance and assignment consideration in excess of the amount provided for in the partnership agreement; that at the time of said sale the garnishees knew nothing about domestic troubles between plaintiff and defendant and deny that said transfer was made for the purpose of defeating or delaying creditors.

Trial was begun before the court without a jury on October 27, 1948, during which, and at the conclusion of plaintiff's case, the garnishees moved for dismissal which was denied by the trial court. Upon conclusion of the trial the matter was taken under advisement by the court and final judgment entered therein on September 16, 1949, in favor of plaintiff and against the garnishees in the sum of $11,879.03.

To present a proper perspective of the matters before the court, it is necessary to review that background and relate the history as shown by the record herein prior to the issuance of the garnishee summons. Plaintiff and defendant were married in 1917, came to Denver in 1918, and defendant went to work for Wright and McGill Company in 1933. On July 28, 1936, defendant left home, and in September of the same year, plaintiff instituted her action for divorce. Notwithstanding that defendant waived service of summons in the divorce action and promptly entered his appearance therein, various delays occurred and interlocutory decree was not entered in the cause until January 29, 1942, followed by final decree on April 17, 1943. By the interlocutory decree plaintiff was awarded certain property, in addition to which defendant was directed to pay to her, within fifteen days, $5,000 support money and alimony pendente lite. Matters of permanent alimony and attorneys' fees were reserved for later determination. In its final decree of April 17, 1943, the court awarded judgment in favor of plaintiff in the sum of $35,000 plus attorneys' fees of $3,500. By our decision July 2, 1945, the judgment of the trial court with respect to these awards was reversed in part because not supported by competent evidence, but the original order for $5,000 temporary alimony, as set forth in the interlocutory decree, was affirmed, together with an allowance of attorneys' fees in the sum of $500. Nelson v. Nelson, 114 Colo. 31, 161 P.2d 780.

On October 28, 1946, plaintiff filed in the trial court a petition said by her counsel to have been in pursuance of further showing with respect to defendant's financial ability to pay, and to the end that increased allowance of alimony be adjudged on account of changed conditions. To this petition defendant's attorney filed a motion to dismiss which, on May 14, 1947, was granted. No further direct proceedings in the divorce action were had, and such was the state of the record with respect thereto at the time of the issuance of the execution and garnishment of the plaintiffs in error herein.

We think it also well to show somewhat in detail the relationship, during the period of time covered by said divorce proceeding, between the defendant therein and these garnishees.

Pursuant to a formal contract of employment dated September 12, 1933, between defendant, as first party, and Wright and McGill Company, a Colorado corporation, of the second part, defendant entered the employ of said company as a draftsman and mechanic at a certain stipulated wage scale and for the purpose of designing a 'hook making machine,' agreeing therein to assign to the party of the second part all claims for design, mechanical features and title to said hook making machine. By written instrument, dated July 23, 1935, defendant assigned all of his patent rights on said machine to Wright and McGill Company. Pursuant to the aforementioned agreement, on September 15, 1936, patent was issued to Wright and McGill Company.

Under date of September 3, 1937--over a year after defendant had left plaintiff, and approximately a year after plaintiff had commenced her divorce proceeding--Paul A. Nelson, Andrew D. McGill and Stanley M. Wright entered into a limited partnership agreement, known as Sharp Point Fish Hook Company, for the purpose of manufacturing fishhooks as a licensee by use of the machine to which Wright and McGill Company held patent. Each party held a one-third interest in the concern, and it was specifically provided therein that in the event of the death, withdrawal or retirement of any partner, the two remaining partners would have the exclusive right to purchase his one-third share upon payment of $2,000, together with one-third of the cash on hand and accounts receivable as of that date; providing such option was exercised within six months of the date of such death, withdrawal or retirement.

Operations under the partnership agreement continued until March 31, 1941, when defendant Nelson served notice upon his partners that he was desirous of retiring from said Sharp Point Fish Hook Company, whereupon the partnership was dissolved and the settlement agreement put in writing and signed by the parties as of that date, Andrew D. McGill and Stanley M. Wright purchasing the interest of Nelson. The agreement itself does not reflect the cash consideration, but it is undisputed that McGill and Wright were to pay Nelson a total sum of $16,879.73 in full for his entire one-third interest; that figure having been agreed upon after the making of certain adjustments. It further was agreed that the purchasers should pay Nelson $5,000 cash at that time, which was done, and should have time within which to pay the balance of $11,879.73. It also is without dispute that the final payment of said amount in the sum of $1,879.73 was made to Nelson on the 29th day of December, 1941, at which time he executed an instrument constituting a full receipt for all moneys due him, and likewise a confirmation of the settlement agreement.

At and about the time of the conclusion of the settlement and under date of April 1, 1941, the three former partners of the Sharp Point Fish Hook Company signed a notice of dissolution, which later was published in The Colorado Graphic in four consecutive issues, the first of which was November 15 and the last December 6, 1941.

From the foregoing it is manifest that error of the trial court in certain respects is disclosed by the record itself and needs only to be mentioned to be clearly apparent. (1) After finding and determining in its decree that the sale of Nelson to Wright and McGill was and is fraudulent as to the rights of the plaintiff, the trial court limits the fraudulent transaction to the balance of $11,879.03 due Nelson under the sale contract, but exempts therefrom the $5,000 cash payment made to him under the same contract. There clearly is no logical reason for such differentiation. If the contract be fraudulent in part, it is fraudulent in whole, and the judgment of the court under the rule it adopted should have been $16,879.73. (2) On the other hand, garnishment is but an ancillary proceeding, here in aid of execution issued pursuant to an existing judgment, thus limiting any judgment proper to be entered against the garnishees to the extent of the unpaid balance of the judgment upon which the execution issued. Witkowski v. Hill, 17 Colo. 372, 374, 375, 30 P. 55. I...