Morton v. Grafflin

68 Md. 545 | Md. | 1888

Irving, J.,

delivered the opinion of the Court.

This is an appeal from an order of the Circuit Court of Baltimore City, sustaining a demurrer to the appellant’s bill in equity, and the decree afterwards dismissing the bill.

The appellant who is a resident of the city and State of New York, charges, that a certain Walter E. Lawton is indebted to him in the sum of $57,129.70; that Lawton prior to March 15th, 1887, was a resident of Spuvtin Duyvil of the State of New York, and is now at some place to the plaintiff unknown, but is not a resident of the State of Maryland, .nor within the jurisdiction of Maryland Courts. The bill further charges that the plaintiff has sued out of the Superior Court of Baltimore City, a writ of attachment against Lawton as a non-resident of Maryland for the debt alleged to be due him, and has caused it to be laid in the hands of John, C. Grafflin (the appellee,) as garnishee “of all the property, assets and money belonging to Walter E. Lawton;” and avers that the garnishee has in his hands “certain property belonging to the said Walter E. Lawton as follows, to wit: Upwards of four thousand shares of the capital stock of the Navassa Phosphate Company, and upwards of six hundred shares of the Rasin Fertilizer Company, together with other shares of the capital stock of other corporations, and other personal property;” which personal property the plaintiff avers and charges that John C. Grafflin the appellee claims to hold as security for an original debt on bond for one hundred and fifty thousand dollars, which with interest accrued he claims now to amount to over one hundred and sixty thousand dollars. The plaintiff further charges, that the bond of Lawton to Grafflin was executed on the fifth of July, 1884, and was made payable three years after date, with interest from date ; and that on the same day a mortgage on certain real estate in Bergen County, New Jersey, was executed and delivered to Grafflin to secure the aforesaid debt; and that this mortgage to Grafflin was not recorded in the office of the clerk of the County of Bergen in the State of New Jersey, until the 18th of March, 1887, but that Grafflin claims this mortgage to be a valid and subsisting lien on the property it mortgages; and that his claim is wholly unsatisfied. The bill then charges that the land embraced in the mortgage is more than sufficient to pay “ the amount, if any, that may be due under the said mortgage, and all costs incurred in foreclosing the said mortgage.” The bill also states, that Lawton has disposed of the equity of redemption in the New Jersey property so mortgaged to Grafflin, and rhat he has received no security for his debt beyond the promissory notes mentioned in the attachment proceedings, and that there is no other property he could have levied upon under the attachment.

It then prays, 1st, for an injunction restraining the garnishee from disposing of any of the assets in his hands ; 2ndly, for a receiver to take possession of the assets and property in Grafflin’s hands, and to hold the same subject to the order of the Court; and thirdly that Grafflin be required to bring into Court the shares of the stock of the several corporations which he has in his hands, and other property, that the same may be held by the Court until Grafflin shall have proved what balance is due him, if any, or that he may he ordered by the Court to foreclose his mortgage in New Jersey, “or elect to release the other securities held by him ; ” and that the securities attached may be held until such mortgage proceedings are had and account of his debt and balance due him is taken, or until he makes the election asked for ; and 4thly, for “such other and further relief as in equity his case may require.” Order of publication is prayed against Walter E. Lawton, and subpoena for John O. Grafflin. An order to show cause was issued Grafflin. who appeared and demurred to the bill.

The demurrer is to the whole bill, and for grounds of demurrer the appellee insists that such case is not made by the bill as entitles the plaintiff to the relief sought, and that he has complete remedy at law.

It is hardly necessary, at this day, to cite authorities for the statement that only facts well pleaded are admitted by the demurrer. Miller vs. Balto. County Marble Company, 52 Md., 643. As this was a bill for injunction and receiver, it was imperatively necessary, that the written documents upon which the relief was prayed should have accompanied the bill, or proper excuse be made for their non-production. No copy of the New Jersey mortgage was filed with the bill, arid no evidence of the plaintiff’s demand against Lawton. It is incidentally stated', that there are promissory notes for the indebtedness which are filed in the attachment proceedings; but the attachment proceedings, (or copies of them,) are not made part of the bill, nor are the proceedings so referred to as to make them part of the bill. Reliance, in this particular, is placed on the Act of 1884, ch. 23, as applicable to Baltimore City cases. This Act relieves from the necessity of producing a transcript of the record of any other Baltimore City Court in evidence, and allows the production of the docket and record hooks as evidence, and gives them the same effect as evidence as transcripts under seal. As-evidence such records are undoubtedly admissible; but in a bill for injunction, such charges should be made as showed an effectual levy to have been made, and at least the proceedings should' have been so referred to as to-make them a part of the bill, and enable them to be easily found. Whilst these defects would justify refusal of preliminary injunction, they and the want, of other ’parties, could be cured by amendment, and if when amended in these particulars a proper case would have been made for the intervention of a Court of equity, it would have been proper to retain the bill and allow the amendments to be made.

The theory of the appellant is, that by his attachment and levy thereunder, he has acquired a lien on the stocks of his debtor, in the hands of the garnishee, subject to the garnishee’s prior lien, which is set out; hut that he cannot make his lien available without the aid of a Court of equity, lie claims that the principle established in Alcock vs. Harris, 10 G. & J., 226, applies. He relies on 11th sec. of Art. 10 of the Code, which says “ any kind of property or credits of the defendant in the plaintiff’s own hands, or in the hands of any one else, may be attached,” in connection with the Act of 1868, ch. 471, sec. 198, which will be considered presently.

Section 199, of 1868, directs how such attachment shall be executed, and requires the sheriff to leave with the president or other chief officer of' the corporation, or leave at their place of business, a statement in writing of this levy on the stock of the defendant, and the purpose for which it is made, and the officer making the service is required to return a copy of such notice with his writ.

Upon such notice the corporation is required upon demand of the sheriff to furnish him with the number of the shares and' amount of stock standing in the defendant’s name on the books of the corporation; and the refusal of the corporation to comply is made punishable. The corporations being the debtors for the stock standing in stockholders’ names, the law provides for their notification. They are in fact intended to be parties defendant. So far as this bill discloses, none of these legal requirements were complied with ; nor are the corporations made defendants as was necessary, if the Court acquired any jurisdiction by virtue of the attachment, to condemn the stock by its judgment and thereby render it liable to sale. And if the attaching Court did not get jurisdiction to render judgment, the Chancery Court would have none on the subject.

If the levy was made in accordance with the provisions of the statute, and the corporations were notified, then these defects in the allegations of the bill, and the want of proper and necessary parties could be cured by amendment, if the law allows pledged stock, as this is, to be the subject of attachment. Section 198, of the Act of 1868, ch. 471, makes the interest of a defendant in the capital stock of a corporation, the subject of execution or attachment only when the writ issues by way of execution on a judgment or decree; but it was contended by appellant’s counsel, that section 11, of Art. 10, of the Code is broad enough to embrace an attachment upon original process such as this is. Whether such would be. a proper construction of the law is immaterial, as the Act of 1886, ch. 287, repealing, amending and enacting in new form section 198, expressly includes “proceedings by attachment on original process.” This Act of 1886, was not alluded to in the argument or in the briefs of counsel, but was overlooked, and attention has been called to it since. As its provisions must exercise a controlling effect upon this decision, we quote the proviso which has been added, after including attachments on original process with judgments and decrees:

"Provided, that all executions or attachments levied or laid upon the shares or interest of any defendant in the capital, joint stock, or debts of a corporation standing on its books in his name, shall only affect the interest which such defendant had in such capital, joint stock, or debts at the time of levying such execution or attachment, and shall not in any way affect the right, title or interest acquired by any bona fide purchaser or pledgee for value to or in the capital, joint stock or debts of such corporation standing on its books in the name of such defendant, by a sale or pledge thereof by such defendant by a delivery of the certificate representing such capital, joint stock or debts, with a power of attorney to transfer the same made prior to the levying of such execution or attachment, and that nothing contained in the succeeding sections of this Act shall be construed to apply tp any such capital, joint stock or debts so sold or pledged, or to prohibit or prevent any such corporation or purchaser or pledgee from transferring the said capital, joint stock or debts represented by such certificate upon the books of the corporation, in the same manner and to the same effect as if no such execution or attachment had been levied.”

The object of this proviso is very obvious. It intended to enable, and does enable, the corporation to make an effectual transfer on its books of the stock held by a bona fide pledgee notwithstanding the attachment. It evidently contemplates that the levy is to be made in their hands as the debtor for the stock, and to protect the corporation from liability because of the same, if the same has been bona fide sold or pledged before the attachment laid; for in such case it expressly authorizes the completion of the transfer on the corporation books “ in the same manner and to the same effect as if no attachment had been laid.” In such case, clearly there could be no judgment against the corporation, and the plaintiff in such attachment must fail in his suit.

The object of the attachment is to condemn the property and subject it to sale. Where a credit is attached the judgment becomes a personal judgment against the garnishee owing the debt, and such judgment is a credit to him pro tanto as against his creditor ; but where the condemnation is of the property the judgment is in rem, and it is sold. In this case the stock being alleged to be pledged, cannot, under the statute, be condemned, unless it is held in fraud, which is not alleged. In such case neither corporation nor pledgee is restrained by the attachment from transferring the same. The Court by the attachment gets no control over the stock, and if the attaching Court does not, a Court of equity cannot take it away from the bona fide pledgee in the face of the statute and put it in the hands of a receiver, as is asked by the bill. As a rule of law, Drake on Attachment, sec. 244, says: Stock in a corporation is not attachable except by express statute ; and that when the statute allows it, the authority only extends to corporations existing in the State, and not to stock of those ■outside the State—-manifestly for the reason the corporation is the debtor. In this case it is not alleged that these corporations whose stock is sought to be reached are resident corporations. In all cases when allowed by statute its provisions must be substantially followed. 2 Wade an Attachment, sec. 408. It is hard to perceive how a lien has been acquired by the levy which is alleged. In Moore & Co. vs. Gennett & Co., 2 Tenn. Ch., 375, in a very analogous case, it was held that no lien was acquired.

This section, 198, as it now stands, says expressly that “nothing contained in the succeeding sections of this Act shall be construed to apply to any such capital, joint stock or debts so sold or pledged.” The succeeding sections regulate the method of the sheriff’s making the levy, giving the notice thereof, and procuring the data from which to make the schedule that he is to return to the Court. Thus, in the case of an attachment ordered against stock bona fide pledged, the very means of making an effectual levy is taken away by declaring the sections relating thereto shall not be construed to apply. As the stock therefore cannot be described and scheduled, it must follow that no lien can be acquired by the simple laying the same in the hands of a pledgee, who is not the simple custodian of it, but holds it for the payment of his debt due from the owner of it.

In this case there is no allegation or contention that the stock sought to be attached is more than enough to satisfy G-rafflin’s claim and lien thereon. So that there is no interest of Lawton that could be affected, except his equity of redemption, and what that is it is impossible to know, from the impossibility of getting a schedule of the same. It is said in Adams on Equity, page 271, that the only remedy of a subsequent lien-holdér as against one who is paramount, is to redeem and tack it to his debt— because the junior incumbrancer has no claim or equity against the paramount incumbrancer. No proffer to redeem is alleged, but the prayer is that Grafflin may be compelled to foreclose the New Jersey mortgage or elect between it aud the property in his hands as additional security. The case of Post vs. Mackall, 3 Bland, 515, clearly decides that a creditor situated as Grafflin will not be sent out of the State to enforce a lien for the purpose of leaving property here on which ho has a lien, for the benefit of other creditors who have a lien on the property within the State. And if it will not do it for creditors who havo a lien, a fortiori, it will not do so for a creditor who has acquired no lien. The doctrine of Post vs. Mackall has also been maintained in Denham vs. Williams, 39 Ga., 319, and Lewis, Trustee vs. U. S., 92 U. S., 618. In Post vs. Mackall, 3 Bl., the Chancellor says, “if the two funds cannot be embraced within the scope of the same suit; and much moro so, if they be not both of them within the jurisdiction of the Court, It would he impracticable to make any such arrangement in favor of any one set of creditors against another, whose claim may be thus greatly endangered, and the satisfaction of which must necessarily be delayed aud consequently lessened.” The Chancellor cites numerous authorities, and many more might be added. We refer to 2 White & Tudor’s Lead. C., 259 and 321, (Aldrich vs. Cooper,) and also to Adams on Equity, 272, note, and Emmons vs. Bradley, 56 Maine, 338. In this last case it was held that equity would not compel a secured creditor to elect that which is least available and convenient to him in favor of others who are not secured. That is precisely what this appellant is seeking to have done. In White de Tudor, above cited, page 259, it is said that the right of the paramount creditor is so far absolute as to both funds that he should not he delayed or hindered in any step requisite for him : and on page 321 it is said the fund to which he is referred must he shown to be reachable without litigation or delay ; and the burden of so establishing is on the creditor asking a marshalling. This bill does not even aver tbe mortgage in New Jersey is a good one and available. It only charges that the appellee claims it to be good. The plaintiff therefore does not jn his bill assume the discharge of the burden which the authorities say is on him; whilst he states facts respecting the record ■of the mortgage that would be fatal in this State, as against subsequent mortgagees who did record sooner, and for aught that appears it may be so in New Jersey. At any rate contest and delay are not unlikely.

It is said in Public Works vs. Columbia College, 17 Wallace, 530, that “the jurisdiction of a Court of equity to reach the property of a debtor justly applicable to the payment of his debts, even where there is no specific lien, is undoubted. It is a very ancient jurisdiction, but for its exercise the debt must be clear and undisputed, and there must exist some special circumstances, requiring the interposition of the Court to obtain possession of and apply the property.” In the same case, and further on in the opinion, Justice Field says, moreover, that “unless the suit relate to a deceased person’s estate, the debt must be established by some judicial prbceeding, and it must generally be shown that the legal means for its collection have been exhausted.” This appellant’s claim is wholly unestablished, and it is not claimed thatthe attachmentsuitupon it has proceeded further than the issuance and levy of the writ. Prior to the passage of the Act of 1835, chapter 380, which gives section 35 to Article 16 of the Code, it was uniformly held in this State that a creditor who pursues property in equity which has been fraudulently conveyed away, must first obtain judgment against his debtor, before he would have standing in a Court of equity; and if he pursued personal property a /?. fa, must have first issued. Birely and Holtz vs. Staley, 5 Gill & J., 433 ; Griffith vs. Frederick Co. Bank, 6 Gill & J., 444; Wanamaker vs. Bowes, 36 Md., 56 ; Swan vs. Dent, 2 Md. Ch. Dec., 117. In Brinkerhoff vs. Brown, 4 Johns. Ch. Rep., 677, Chancellor Kent says, if he seeks aid of equity as to real estate he must show a judgment, and if personal estate he must show execution giving legal preference. For the purpose of attacking a fraudulent conveyance the 35th section of Article 16 gives the right to a non-judgment creditor to file a bill in his own behalf and in behalf of other creditors ; but if the pleadings do not admit the indebtedness, the Court may, on application of the parties, or either of them, send the case to a Court of law on issues to try the fact of indebtedness vel non, subject to the usual chancery rules for such cases.

The statute removes the disability of non-judgment creditors to sue in a Court of equity to subject a debtor’s property, fraudulently conveyed away, to the payment of his debts; but leaves the law in all other cases wholly unaffected; so that tiie decisions of our own Court, applicable to cases other than such as seek to set aside fraudulent conveyances, are as authoritative as ever. The appellant contends that, although he has no judgment, he has acquired a lien by virtue of his attachment which gives him a standing in equity. If he has no such lien, it is clear, he is without, standing in Court. A judgment is a lien on land only because the land can be taken in execution and sold. An execution' is a lien on personal property only because the personal property can be sold in satisfaction of the execution. Eschbach vs. Pitts, 6 Md., 71; Hanson vs. Barnes, 3 Gill & J., 359. If there be a judgment, and execution on it be levied as an equitable interest, a Court of equity will aid in making the execution effective. Harris vs. Alcock, 10 Gill & J., 226. Here an equitable interest— a.n equity of redemption—is sought to be reached through an attachment before judgment of condemnation, and a Court of equity is asked to aid in perfecting the remedy sought by this special and extraordinary writ, which all the authorities say must be specially and strictly framed in order to be sustained and made effective. When an attachment writ is actually levied and the property seized by the sheriff, ah inchoate lien is acquired by the levy—but it is only inchoate, and must be perfected by a judgment. Rhodes & Williams vs. Amsinck & Co., 38 Md., 345, and Cooke, Garn. vs. Cooke, 43 Md., 522. A lien is acquired because the property seized may be condemned, and then sold on execution. It cannot be sold until there is such judgment of condemnation, unless ordered by the Court-because property is perishable. A seizure must be made.. Drake on Att., secs. 255, 255a and 256. We have already seen that so far as the stocks alleged to have been attached,, and -which are alleged to be pledged, and for aught that the bill charges, are bona fide held in pledge, he has not acquired a lien, for they are protected from being affected by the attachment. Has he acquired a lien by virtue of the attachment on any thing else? He avers there is “other property” in the hands of the garnishee—the appellee—what that is he does not allege. It is not described in the bill, and it is not averred that the sheriff has-scheduled it, or given any description of it. It is only alleged that the attachment is “laid in the hands” of the-garnishee. That would be sufficient to support a judgment for credits; that is, for what G-rafflin owed Mr. Law-ton. But he is not Lawton’s debtor. Lawton is admitted to be his debtor, and anything in Grafflin’s hands is therein pledge for debt. Supposing Grafflin to be the debtor of Lawton for'any excess of the value of the property in Grafflin’s hands after paying Grafflin’s claim, and this attachment of appellant binds it, having resorted to attachment he must perfect his lien by the means the law gives him. The onus is on the plaintiff to show not only the amount of his claim, but the value of the property in the garnishee’s hands, and he may not take more than enough for the purpose of meeting his claim and costs. The Act of 1880, oh. 28, expressly so provides. This Act and the other provisions of the attachment law give him the right to interrogate the garnishee, and he had no need to resort to a, Court of equity for discovery on the subject, if it were competent for equity to aid in perfecting his legal remedy. An inchoate and unperfected lien is sought to be made the basis of equitable interference for the purpose of perfecting that which can only be done at law; and if the law has failed to make adequate provision for accomplishing it, an ■equity Court cannot supply it. It was so decided by this Court in McPherson vs. Snowden, 19 Md., 199. If he had filed his interrogatories and the garnishee had failed to answer them, the Act of 1880, ch. 28, provides for judgment against the garnishee. Appellant does not seem to have resorted to his legal rights in this regard. But the appellant contends that he avers the garnishee has “other property” in his hands, and that having laid the attachment on it he has acquired a lien on it, whatever that is, and that supports his prayer for discovery in equity. This, we think, is unsound. If the property is to be condemned, it must be scheduled by the sheriff; or, if he is not permitted to seize it actually and so returns, then it may be discovered and reached by interrogatories to the garnishee. If is only that which is seized and scheduled, and so returned by the sheriff; or that which is disclosed by interrogatories so that it may be taken, that can be condemned. Only the specific thing can be condemned. This levy to affect a specific thing was too vague. There is nothing described. If through that levy it was designed to make that levy the basis of a judgment in personam, under the Act of 1880, ch. 28, then to secure such judgment the means supplied by the Act of 1880, must be pursued to procure such judgment. Under it’he could put interrogatories, and if not answered, and plaintiff could show the value of the property he could get his judgment. The remedy is a legal one and a Court of equity cannot aid in its administration. Being an extraordinary and special remedy it must be strictly pursued, and • the case must-stand or fall accordingly.

(Decided 15th March, 1888.)

In argument and in his brief the appellant relies on his-having filed what he calls a creditors’ bill against an absconding debtor; and that this gives him standing in Court. He has cited numerous authorities in support of this contention, which we do not think applicable to this case, and the law as we understand it to obtain in this State, where fraud is not alleged., His debtor is a non-resident. His attachment proceeds against the debtor as a non-resident, and not as an absconding debtor. The bill does not aver him to be an absconding debtor even from'New York State,, of which he is averred to be a citizen and resident. It only charges that he does not know where he is, and asks publication against him. The bill is not a general creditors’’ bill seeking to set aside the assignment to Grafflin for fraud therein, for the purpose of subjecting tbe .property to-creditors generally; but is an effort to subject the property to plaintiff’s own claim through the virtue of a supposed, lien acquired by the attachment he sets out as. having been-laid in Graffiin’s hands.

In anything we have said we do not mean to be understood as impugning in the slightest degree the doctrine-that property out of the jurisdiction may be reached through the conscience of a defendant who is served with process in equity; nor the other principle that property within the jurisdiction may, in a proper case, be reached, through a Court of equity, though the owner may be out. of tbe jurisdiction. We only mean to decide that the appellant has hot brought his case within the proper application of either principle for a Court of equity to interfere ;. and if the formal defects as to additional parties and exhibits had not existed, the bill would have been properly' dismissed.

Decree affirmed.

On the 29th of March, 1888, a motion was made for a re-argument of the foregoing case, and also for a modification of the decree therein. The motions were overruled, and Judge Ibviitg delivered the following opinion of the Court:

We have carefully considered the very strong argument of counsel for appellant and the authorities cited, but have been able to find no ground for a re-argument bf the case or modification of our decree. As fully and as clearly as we could, we expressed our views as to the matters involved in the appeal. We decided that stocks of a corporation bona fide pledged for debt, were not, under our statute, attachable ; and that no lien had been acquired upon the stocks alleged to have been attached. We adhere to that view. We also decided that the lien alleged to have been acquired by the attachment on any property of the debtor, mortgaged or pledged to appellee other than stocks, was bur an inchoate lien which needed perfecting in a Court of law before resort could be had to equity to secure a sale by way of execution. We cited McPherson vs. Snowden, 19 Md., 197, as so expressly deciding. The remedy by attachment being special and extraordinary, it must be specially pursued ; and equity cannot aid the law in that regard. We see no conflict between Thomas vs. Brown & Lowndes, 67 Md., 512, and Rhodes vs. Amsinck, 38 Md., 345; on the contrary the case of Thomas vs. Brown & Lowndes, clearly recognizes the lien acquired by the levy as inchoate and needing perfection by judgment of condemnation to be available. From the argument of counsel we may infer that the other property claimed to be attached consists of “choses in action” of Lawton pledged to Grafflin. If that be so, then the Court below was clearly right in holding they could only be reached as credits through the debtor who had them to pay, and not through Grafflin alone as pledgee and custodian. They are not attachable as chattels. If it was chattel property, and Grafflin owed Lawton for it, of course, under the return “laid in the hands,” the appellant could show what it was Grafflin owed him for. In Odend’hal vs. Devlin, 48 Md., 440, cited by appellant, that was the case. The husband owed the wife for property he had taken of hers with agreement to pay for it; what that property was the evidence showed, and judgment in personam for its value as proven, was rendered against the husband. Condemnation of specific property was not sought or obtained. Considered in the light of what was sought and obtained, it is clear certain expressions were not intended to sanction the return in that case as a sufficient one for the condemnation of specific chattels. There is, we think, no inconsistency between that case and what we have said is necessary, if the specific thing is to be condemned and sold. Here only an equity of redemption in certain property is alleged to have been attached. If it be chattel property, the same being lawfully and bona fide in the hands of another and cannot be taken from his possession, and if the sheriff cannot schedule and describe it, for lack of knowledge, of course the plaintiff has his right to interrogate the garnishee and thus get such a description of the property into the record, so that the judgment of condemnation of the equitable interest may be definite and certain. When the appellant has secured such condemnation of such equitable interest he will be in position to claim the aid of equity to make it available, but not before.

The motion for re-argument and for modification of the decree must be overruled.

(Decided 14th June, 1888.)