192 Mo. App. 350 | Mo. Ct. App. | 1916
Lead Opinion
This is a suit brought by the appellants against Joseph W. Martin as defendant and the Shannon County Bank and the Citizens’ State Bank as garnishees.
The suit against Martin was to recover the purchase price of cattle sold and delivered to him by the plaintiffs. An attachment was issued, it being charged in the affidavit that Martin had conveyed and assigned his property so as to hinder and delay creditors, and that the debt sued for by plaintiffs was fraudulently contracted on the part of the defendant Martin, and that defendant failed to pay the price and value of seventy-five head of cattle which were sold and delivered by plaintiffs to defendant and which by contract he was bound to pay for on delivery.
The two above-named banks were garnished and in answer to interrogatories propounded to them denied having any property or effects in their possession or under their control belonging to Martin, and further denying that they owed Martin any sum whatever.
The plaintiffs in their replies to the answers of the garnishees among other grounds set up that the defendant Martin fraudulently contracted and purchased said cattle from the plaintiffs and purchased the same without any intention of paying therefor and with the intent and purpose of fraudulently transferring, assigning and delivering to the garnishees the proceeds from the sale of the cattle, and cheating, wronging and defrauding the plaintiffs out of said cattle and the proceeds thereof, and of fraudulently transferring and disposing of the proceeds of the same to the garnishees; that said garnishees induced, advised and counseled the said Martin to issue cheeks against said banks (the garnishees) for the purchase price of said cattle with the intent and purpose of enabling the said Martin to secure the possession of said cattle and sell the same and to pay a certain debt owing by Martin to said garnishees; that said garnishees assisted and abet
The court found judgment in favor of the plaintiffs against Martin and sustained the attachment on the grounds hereinbefore set out. After hearing evidence introduced by the plaintiffs tending to prove the allegations in their replies, the court directed the jury to find for the garnishees, and it is from the judgment rendered on the verdict that the plaintiffs appeal.
The question in this case narrows down to this: Do the facts-which are developed under the allegations in the replies make a case where garnishment is a remedy for the alleged fraud practiced on plaintiffs-by the agent of the garnishees ?
The facts developed in the testimony of the plaintiffs are substantially as follows: Defendant Mariiu owed these two banks, the garnishees herein, something like three thousand dollars. To secure this, they had taken a chattel mortgage on some cattle which Martin was shipping to St. Louis. For some reason these cattle were quarantined at St. James, Mo., and while.there Martin sold them to a person living at or near St. James without giving him any notice whatever of the chattel mortgage on the herd held by the garnishees herein. The garnishees sent one Sizemore,' an attorney, to St. James, and while there Sizemore ascertained that Martin had disposed of the herd to the
The evidence shows that when Martin bought the cattle from the plaintiffs he represented that he was going to ship them to Pike county in this State, and he in fact had them hilled by the railroad company to a point in that county.
It is shown that Sizemore, the agent and attorney of the garnished banks, met the defendant at a station on the railroad several stations below the station from which the cattle were shipped, and that the cattle were then re-billed to St. ¡Louis, Martin and Sizemore going with them.
Sizemore stayed with the defendant Martin until the cattle were sold and Martin had received the pro
The record shows the following examination of the defendant by the court: “Q. Why was it you did not use the proceeds to send to the Shannon County Bank to meet the checks you had drawn for the cattle? A. For the simple reason that I got drunk or I would have done it. Q. Who got the money? A. Sizemore got the money.”
He was asked how he expected to pay for plaintiffs’ cattle and said he expected to pay the checks, given at the time of the purchase, out of the proceeds derived from the sale of the cattle and that he did not intend the proceeds from the sale of these cattle to settle up past indebtedness to the two banks, the garniskees. And from the evidence it is clear that Sizemore knew of this intention on the part of Martin; and that he had aided and assisted Martin in purchasing the cattle and in getting possession of them as was done.
From the briefs and from the oral arguments it appears that the trial court directed a verdict for the garnishees on the ground that garnishment was not a remedy open in this case to these plaintiffs. In this we think the court erred. It is well settled in this State that the issuance of checks on a bank in payment of the purchase price of property when the drawer has no funds in the bank is a fraud (Matthews v. Eby, 168 Mo. App. 134, 151 S. W. 470), and is a fraudulent act within the meaning of the attachment law. [Alexander v. Wade, 107 Mo. App. 321, 80 S. W. 917]
It is also open to a plaintiff to ratify a sale and sue for the purchase price and then attach on the ground of a fraud, and by such ratification he does not waive, the fraud of the defendant in obtaining the thing sold. [Kansas City Stained Glass Works & Sign Co. v. Rob
A creditor having a bona-fide indebtedness is not permitted under the Missouri law to enter into a scheme with his debtor to hinder and delay other creditors in the just collection .of their indebtedness. In other words, the law requires that a creditor shall collect his honest debt by honest methods and will not permit him to hold that which he has applied on his bona-fide indebtedness where it has been procured through a fraud practiced by such creditor and the debtor on other creditors. [National Tube Works Co. v. Machine Co., 118 Mo. l. c. 375, 22 S. W. 947; Kurtz v. Troll, 175 Mo. 506, 75 S. W. 386; Aull v. Gaffin, 234 Mo. 171, 136 S. W. 343.]
It is also properly held to be the law that although a fraudulent grantee may have disposed of the property acquired by him before an attachment was issued, where the facts' show that he did participate in the fraud and did acquire the property, he will be held as a garnishee to account for the proceeds derived from the sale of the property which had been fraudulently transferred to him. [Epstein v. Clothing Co., 67 Mo. App. 221.]
Where fraud enters into the transaction it creates an exception to the general rule that a creditor has no greater right against a garnishee than the debtor had. [Potter v. Whitten, 170 Mo. App. 108, 155 S. W. 80, and cases cited.]
With these general principles in mind, we think the facts developed by the plaintiffs give them clearly the remedy of garnishment. The title to the cattle undoubtedly passed to Martin for the purpose of allowing plaintiffs to bring suit and to institute attachment proceedings to procure the purchase price. The drafts which were given to Martin for the cattle in St. Louis likewise became his property, having been acquired by him, according to plaintiffs’ testimony, through the
All the cases in Missouri to which our attention has been called have made the exception only where there has been a fraudulent disposition of the property of the debtor. The reason that garnishment is open to the creditor is because fraud has entered into the case; ■fraud furnishes the basis for the exception; and we cannot see why, where there is fraud, the remedy of garnishment would not be open to a creditor against one who has acquired property from the debtor where such party fraudulently aided and abetted the debtor in the acquisition of the property. That is, of course, only in cases where the party who aided and abetted, procured the property from or through the defrauding debtor.
We think the corect rule is declared in the case of Hill et al. v. Mallory, 112 Mich. 327, 70 N. W. 1016, where the Supreme Court of Michigan used this language : “In view of this evidence, it was error to leave the subject to the jury under the following instruction: ‘If it is payment of an honest debt, it will be sustained by the law, even though the effect of it may defeat all other creditors in the collection of their claims, and I may say to you that it would be good in law even if that was the intention of the transfer, so long as the indebtedness that it was turned over to satisfy was an honest, bona-fide, and legal indebtedness. It would follow from this rule that if the indebtedness from Michael Hill to his sons was an honest, bona-fide, and legal indebtedness, in such amount as would be fair, just and reasonable compensation for the amount of property that he turned over to them, the transfer would be valid in law, even though it defeated Fletcher & Sons,% and even though it was intended to do so.’ They should have instructed that, if these purchases were made with full knowledge by the plaintiffs, and
In the case of Thompson v. Furr, 57 Miss. 478, 484, the court used the following language: “A creditor h'as a perfect right to protect his own interests, but in so doing he must not lend himself to any scheme whereby others may be defrauded; and he does this whenever he knowingly accepts the benefits of an arrangement by which others are deceived and misled, and the interests of the debtor thereby improperly protected from the lawful demands of his creditors. ’ ’ Although that was not a case in which the facts were identical with those of our case, the court declared a principle which we think is applicable to the facts before us. ’
As hereinbefore noted, in the cases of Mapes v. Burns, 72 Mo. App. 411, and Kansas City Stained Glass Works & Sign Co. v. Robertson, 73 Mo. App. 154, a creditor is not precluded from relying on the fraud to sustain an attachment where the ground is that the debt was fraudulently contracted, although he may
We have kept in mind the cases holding that a creditor cannot take advantage of a defrauded debtor and that the fraudulent conveyance statute is directed against, the acts of the grantor. [Parker v. Roberts, 116 Mo. 657, 22 S. W. 914; Colbern v. Robinson, 80 Mo. 541.]
And while Martin testifies that Sizemore got the drafts away from him while he was drunk in St. Louis, there is yet sufficient evidence in the record from which a jury might find that the scheme to purchase plaintiffs ’ cattle and not pay for them and to divert the proceeds derived from the sale of the cattle to the payment of pre-existing indebtedness due the two banks was in the minds of both Martin and Sizemore before the cattle were purchased.
Nor have we lost sight of what is said in the case of Bangs Milling Co. v. Burns, 152 Mo. 350, 53 S. W. 923, holding that creditors can only complain of fraudulent conveyances made by a debtor and not those made to him. What is said on this point in that case was purely obiter dicta as the court before taking up that
Tfie determination of this question in this ca,se is probably of vital importance to these plaintiffs as it is doubtful whether, having elected to proceed by attachment to a final judgment against Martin, they could now sue, as was done in Pile v. Bank of Flemington, 187 Mo. App. 61, 173 S. W. 50, for money fiad and received, or have an action for tfie damages occasioned by tfie fraud. [The Johnson-Brinkman Commission Co. v. Railway Co., 126 Mo. 344, 28 S. W. 870; Tower v. Compton Hill Improvement Co., 192 Mo. 379, 91 S. W. 104; see, also, chapter on Election of Remedies in 9 R. C. L. pp. 956 to 971 inclusive.]
We are therefore of tfie opinion tfiat plaintiffs in justice and in law are entitled to try tfie issue presented in this case by a garnishment proceeding and tfiat tfie trial court erred in denying them this right. Tfie judgment as to tfie garnishees is reversed and the cause remanded for a new trial.
Dissenting Opinion
As an original proposition, I would fully concur in the opinion filed. To my mind it seems illogical to hold that a creditor who has been defrauded of his property can affirm the sale so as to sue on the debt thereby created and take advantage of the fraud practiced on him in sustaining the attachment whereby such property is seized in the hands of such fraud practicing debtor, but cannot so seize it by attachment or its proceeds by garnishment in the hands of one who assisted such debtor in obtaining the property by fraud • — that he can sue one of the tort-feazors by attachment but cannot the other. This must be due merely to the form of the action, as the party so participating in the fraud is liable in a direct proceeding having the same result. [Pile v. Bank, 187 Mo. App. 61, 173 S. W. 50.] But it seems to me that the Supreme Court, in Bangs Milling Co. v. Burns, 152 Mo. 350, 53 S. W. 923, and the Kansas City Court of Appeals in Mapes v. Burns, 72 Mo. App. 411, have held the contrary. It is there held that the participation of the garnishee in the fraudulent acquisition of the property by the attached debtor is of no moment, provided the fraudulently acquired property passes from the attached debtor to the garnishee in payment of a bona-fide debt. Deeming the majority opinion in conflict with the two cases last mentioned, I dissent, and ask that this case be certified to the Supreme Court.