55 Mich. 39 | Mich. | 1884
Lead Opinion
On the 9th of October, 1880, the Superior Court of Detroit made a decree in a suit for divorce in favor of complainant and against the defendant Leonard Reeg, and for alimony. On the 30th.day of August, 1881, thirty dollars was due and unpaid on the decree for alimony, and execution was issued thereon and returned by the sheriff unsatisfied for the want of property from which to make it. On the 5th day of January [1883] there was due and unpaid upon-said decree, by the terms thereof, $765.61, and on the next day complainant caused execution to be issued therefor, which was returned unsatisfied. On the 11th day of January, 1883, the judge of the Superior Court made an additional decree in said cause in favor of the complainant, and against the defendant Reeg, for the sum of four thousand dollars, to be
In addition to the facts above stated, the bill avers that at the time of making the first above-mentioned decree, and for several years previous thereto, defendant Eeeg had been engaged in mercantile business in Detroit, and continued to be thereafter until about January 1, 1883; that at the time of filing the bill he had a large amount of claims outstanding due to him, for which he held paper and other securities, and owned a large amount of goods and wares and other personal property, which belonged to him and in which he was interested, and which he might and ought to apply to the payment of her decrees; that he owned and controlled, in a store occupied by him in Detroit, a large stock of dry goods, notions and ladies’ goods, and other merchandise, more than sufficient to satisfy her decrees; and that for ten months prior to filing her bill the defendants, other than Eeeg, have been in possession of them and pretend to be the owners of them.
The bill further avers that Eeeg is the equitable owner of said property, and has been for several years, and that if he has made any transfer of the same it has only been colorable, and made with a view to protect them against the decrees of complainant, while Mr. Eeeg in fact enjoys the avails thereof, and that the other defendants had notice of these facts; that
The complainant also shows and avers, in a supplemental bill, the issuing of execution and its return not satisfied, upon the last decree as above stated. The relief asked is that the property of Reeg aforesaid, may be applied to the payment of her decrees ; that an account be taken, under the statute!,' of the property received by the other defendants from defendant Reeg; that the defendants be enjoined from disposing of any of such property; and that a receiver be appointed, according to the practice of the court and for the usual purpose in sueli cases, and further prays for general relief.
The bill was taken as confessed by the defendant Reeg, he failing to appear or answer. The other defendants made their joint and several answer thereto, wherein they say they have no knowledge or information in regard to the decrees, amounts due thereon, or the efforts to collect them stated in the bill. They admit that defendant Reeg was engaged in • the mercantile business before and after the time the bill in this case was filed, and up to the last day of August, 1881, but deny that thereafter he was engaged in business on his own account, or otherwise than as an employee of another; and deny that defendant Reeg had any property, things in action or equitable interests, except what was exempt from execution, after the last-mentioned date, as charged in the bill. They admit that he kept store in Detroit, and that he had a stock of dry goods, but deny that the stock was largo or valuable, or that he owned or had any interest therein after September 1, 1881.
The defendants further admit that Corwin, or those claiming under him, was, within two months immediately preceding the filing of the bill, in possession of a certain stock of goods in the store in Detroit mentioned in the bill, but aver that the stock did not belong to defendant Reeg,
Defendants further aver that defendants Burnham, Munger and Stoepel were copartners under the firm name of J. K. Burnham & Co., and engaged in the wholesale dry goods business in Detroit, and about the 13th of September, 1881, defendant Beeg, having less than twelve hundred dollars worth of goods, which were mortgaged, and being indebted for rent and unable to continue in business longer’, went to J. K. Burnham & Co. and offered to transfer to them, or any person they might designate, his stock of goods, provided the business could be continued, and he, defendant Beeg, be given employment in the business; and further say that J. K. Burnham & Co. yielded to his solicitation therefor, and Beeg executed a bill of sale to J. K. Burnham & Co.’s clerk, at Burnham’s suggestion, one Edward H. Dunning, who continued the business in the store where defendant Beeg had done business, and continued him in the store and in charge of the business — J. K. Burnham & Co. really being the owners and who subsequently qtaid up the back rent due and the mortgage on the goods, and furnished to said Dunning such goods as defendant Beeg from time to time selected, the latter having the charge of and operating the business, and drawing therefor enough to pay his personal expenses, and relying on the company for his compensation and such as they saw fit to give him; that in this manner Beeg continued the business until September 16, 1882, under the name of E. H. Dunning & Co.; that about that date said Dunning, in the name of E. H. Dunning & Co., at the request of J. K. Burnham & Co., executed a bill of sale of the stock, fixtures and furniture to the defendant Corwin, in consideration of his assuming the liabilities which had been contracted in the business, and thereafter the busi
Defendants answering further, aver that the business said Reeg did was not profitable; that the assets inventoried $6937.26, and that the indebtedness to J. K. Burnham was $6353.07, and that the goods inventoried were in fact worth not more than sixty per cent, of the inventoried price, by reason of the same being broken, and thereupon J. EL Burn-ham & Co. removed Reeg from further connection with the business ; that the stock was insufficient to pay the indebtedness ; that a short time after this Reeg claimed to own some fixtures and furniture in the store which he had not sold, and represented that he was in need of money to go west with, and the defendants not recognizing his pretended claim, but desiring to help him, and in consideration of a settlement of all matters between them, gave Reeg $290 ; that J. EL Burn-ham lost by said Reeg from one to two thousand dollars; that said Reeg has not by reason of the premises any claim, legal or equitable, against these defendants, or any interest whatever in said stock of goods.
Defendants answering further, aver that complainant, prior to filing her bill of complaint, took garnishee proceedings against the defendants upon the first decree ; that disclosure was made and issue joined therein, and that the same is still pending against said J. EL Burnham & Co. and said Corwin. Defendants also claim the benefit of a demurrer in their answer.
The case was heard before Judge Chip man in the Superior Court on pleadings and proofs. The complainant’s bills were both dismissed, and she now asks a review in this Court.
From the proofs in this case it appears that the defendant Reeg resided in Detroit, and carried on the business of a dry goods merchant for a period of about twenty-eight years immediately before the defendant obtained her decrees against him, and continued to do business there until about the 5th day of January, 1883, and to reside there until about the
“ Detroit, Mioh., September 13, 1881.
Bor and in consideration of the transfer to us, this day made by John B. Corliss, of Detroit, Michigan, of all the goods, wares and merchandise situated in store No. 207 Woodward avenue, Detroit, we, the undersigned, hereby agree by and with ’ the said Corliss that we will supply L. Beeg with a suitable line of goods in said store, and allow him to manage said business under our direction so long as we shall deem the same safe and beneficial; and in case said business is closed by us for any cause, we agree to turn over*46 to said. Corliss, or his order, all there may be in the stock of goods in said store managed as aforesaid, after realizing’ full payment for our advancements of stock and disbursements during the continuance thereof, and interest on past-duo accounts ; and also we agree to transfer said stock and all accumulations thereof to said Corliss, or his order, at any time that we are fully paid for all advances made as aforesaid. Edward H. Dunning & Co.
Indorsed : I hereby transfer the within contract to Leonard Eeeg without recourse to me. Jno. B. Corliss.”
That on the 15th day of September, 1882, by the direction of J. K. Burnham & Co., consented to by defendant Eeeg, said stock of goods was transferred by bill of sale from said Dunning (under t the name of Edward H. Dunning & Co.) for the named consideration therein of $5280.94 to one George A. Corwin (under the assumed name of Corwin & Co.), another clerk of J. K. Burnham & Co.; that all these changes, including the bill of sale from Corliss, were made by arrangements with J. K. Burnham & Co. by the defendant Eeeg and for his benefit, and that neither Dunning nor Corwin had any interest therein, and were only nominal parties occupying the positions they did at the request of J. K. Burnham & Co., and consented to by Eeeg; that no consideration passed on the making of the bills of sale between the parties thereto.
The following testimony given by J. K. Burnham also appears in the case relating to the transfer of this stock of goods, viz.:
“I have, known Leonard Eeeg, of this city, eight or ten years. I have known John B. Corliss three or four years. I was aware of the fact that in Mr. Eeeg’s litigation with his wife Mr. Corliss has been acting for him as his attorney, as adviser; I did not know that he ever had any cases for him. I know the store No. 207 on Woodward avenue. I know that Mr. Eeeg did business there as a dry goods merchant. * * * Early in September, 1881, I had a talk with Mr. Eeeg. He had been trying to buy goods of us for five or six years. We never would give him any credit, never would trust him for any goods; everything we sent up C. O. D. He came to me and represented matters and wanted credit early in Sep*47 tomber. I don’t know but Mr. Corliss came and said he had a bill of sale of the property, and said he thought there was in the neighborhood of $1200 or $1500 worth of goods there; that he could not pay expenses on that amount of goods, and he wanted some one to give him credit — put some goods in there. I declined to do anything with it, and -they came again, and said if we would sell some goods to that concern up there they would give us a bill of sale of the goods — turn them over; they should be wholly in our charge; and I agreed to put in some $1500 worth of goods, and "take those goods that were in the store and pay up their bills that they could not pay — the insurance, rent and whatever might be so agreed upon. I decided to advance that money and take a bill of sale of that stock. The bill of sale was taken in the name of Dunning & Co. Dunning is the only man concerned in the firm of Dunning & Co. The company was a mere nominal matter. Mr. Beeg has no interest in that store and its business, and none whatever in the goods that are in the store. Mr. Beeg has been in that store until within a few weeks. He managed the business there, hired the clerks, and I suppose discharged the clerks that were discharged, and paid the clerks, too. He did not have charge of the goods; he merely selected the goods for that stock.”
This testimony was given in February, 1883. It further appears from his testimony that he did not know of the indebtedness of Mr. Beeg at the time he took the bill of sale, except some back rent due Corliss, taxes and insurance, which J. K. Burnham & Co. paid, amounting to between $350 and $700, and that is what they paid Beeg for the goods •on the sale to Burnham; that no inventory was taken of the stock at the time of the sale; that Beeg, in the management of the business, bought goods of other parties than J. K. Burnham & Go. at his pleasure; was never asked to account for the proceeds of the business; that when Beeg left the business, in January, 1883, J. K. Burnham & Co. did not owe Beeg anything, but on his request gave him $290 to go west with, and took his receipt therefor, in full of all claims •on settlement.
The testimony of defendant Beeg, under an order of the ■court on the 20th day of March, 1883, was offered in evidence by complainant’s counsel, wherein he testifies in the
Reeg further testified that he was surprised and bewildered when he found he was to be turned out, but Burnham & Go. had him in their power and he could do nothing; that he tried to get them to give back goods to the amount of his interest, and they ■ refused; that he then tried to get them to take out goods to the amount of his indebtedness to them, and let him have the rest, and this they refused; that he then tried to get them to let him have $500, and he finally got $290 and about $70 in accounts of them, as above stated; that he never made any settlement with them; that he never received any more money from any of them, and never gave any receipt on a settlement of his matter with Corwin, Burnham & Go., or Dunning.
The foregoing is the substance of the testimony of Mr. Reeg. Several witnesses (Reeg’s clerks) were sworn on the part of complainant, whose testimony was mostly corroborative of Reeg’s statement of his doing the business, and the manner of doing it; also of the statement of Reeg that the
Mr. Burnham and several of his clerks were sworn for defendants, and testified to the effect that the consideration paid for the bill of sale to Dunning was about $350, paid by Burnham & Co., and that they advanced about $700; that when the stock was transferred to Corwin there was owing to them about $4000 or $4500 ; that the inventory taken in January, 1883, showed the value of the goods $6937, but that they were worth not over $4500, and that on the 13th of September, 1881, the stock was not worth over $1500; that when Burnham & Co. entered into the arrangement with Beeg they did not intend to give him a line of credit of more than $1200, but that he did get $4500, and that they then took possession of the stock of goods, after offering to let Beeg have it for less than that amount if he would pay it.
Several other witnesses were sworn on the part of the defendants, tending to show the value of the goods, and that Beeg’s credit was bad.
The foregoing is a brief summary of the pleadings and proofs as shown by the record. The testimony is very conflicting, indefinite and unsatisfactory as to the value of the Beeg stock, both at the time the bill of sale was made to Dunning, and also at the time J. 3L Burnham & Co. took possession of the stock in January, 1883. It is, however, quite certain that Beeg must have known their amount and value, when the bill of sale was made, better than any of the other witnesses, and he puts the value at $3000 or $3500 at that time. I think their fair value, from the testimony, may be safely placed at $2500. I am not satisfied that the evidence shows Mr. Beeg’s interest in this stock was increased in value by his management between that time and the time J. X. Burnham & Co. took possession, and if they can be held at all responsible in this case to account to the receiver for the goods, the amount should not exceed the sum named.
There is no question about the indebtedness of Beeg to
J. K. Burnham, as the evidence shows, liad known Mr. Beeg ten or twelve years; knew that his commercial honesty and his commercial credit were bad; that he had been purchasing on credit, and could no longer, except for cash; that he had been trying to purchase of J. K. Burn-ham & Co. on credit for five or six years, and had been all the time refused; that he had been in litigation with complainant. He knew the existence of Corliss’ mortgages, which stated Beeg’s indebtedness to him at over $3000, and knew that it was not true, as Burnham paid the actual indebtedness thereon, with $119.47; that the bill of sale to Corliss was a sham; that Beeg was unable longer to continue his trade in his own name and escape the complainant’s execution, and that Beeg desired him to name the
With all these facts before him, it is impossible for me not to come to the conclusion that all the defendants must be held to have known of the fraudulent intent of Mr. Eeeg to prevent complainant from making her claim out of his property, and that the action taken by J. IL Burnham & Co. could not fail to hinder, delay and defraud Mr. Eeeg’s creditors. Certainly the facts were sufficient to lead any honest, prudent business man to that conclusion, and that is all that is required to make him liable. Bump, on Fraud. Conv. (2d ed.) 308, 309, and eases there cited.
The whole transaction and the operations of the defendants present very singular proceedings for business men engaged in an honest endeavor to meet and discharge legal liabilities to their creditors. Indeed, they did not seem to quite agree upon this point among themselves. Under the view herein taken of the case, of course the ignorance or honest intentions on the part of the defendants J. IL Burnham & Co. cannot save them from liability. They have sold and disposed of the goods to innocent parties, so far as the testimony shows, and they are beyond the reach of process upon the decrees of complainant in legal or equitable proceedings in her behalf, and J. IL Burnham & Co. have received the pay therefor. To the extent, therefore, of the amount we have heretofore mentioned, they are in equity the trustees of Mr. Eeeg, and the complainant has the right to have that amount applied to the payment of her decrees.
The remaining question is, has the complainant the right to have the application made under the proceedings she has taken? -It is urged that the claimed settlement between Messrs. Eeeg and Corwin, and the receipt given by the former, was a recognition by him of the right of Corwin to take possession of the goods j but such recognition, if it may be considered as such, is of no consequence, since whatever Corwin did in the premises was so done in the interest of
It is further claimed that complainant’s bill is insufficient, under the law and rules of practice, to cover the case claimed upon her proofs, and that therefore she cannot have the relief she prays. The bill of complaint is not, perhaps, as artistically drawn, or so specific in its averments of some facts disclosed by the proofs as it might .have been, relating to the. defendants’ dealings with the property, its character and value ; but the bill was not demurred to by any of the defendants, and technical nicety or formality in statements or averments will not be looked after very closely in such •cases if the substantial rights of the complainant appear, and the grounds of equitable relief are stated in the bill. I quite agree with Mr. Justice Campbell that in this class of cases “ there are difficulties in requiring very specific averments in cases of fraudulent intent, and the rules of pleading do not contemplate that evidence shall be set out in a bill.” Tong v. Marvim 15 Mich. 60. “No universal rule can be laid down where most of the facts must necessarily be within the knowledge of defendants.” Hubbard v. McNaughton 43 Mich. 220. It is true, the defendants in their answer claim the benefit of a demurrer; but the record does not disclose that it was ever brought to a hearing, or relied on upon the argument.
Equity gives relief to the judgment creditor in two ways: First, in aid of an execution at law for the purpose of setting aside fraudulent transfers of property sought to be reached by that process; second, by bill to have the judgment paid or satisfied out of choses in action or other property of the debtor not liable to execution, or that cannot be reached by execution, and which the debtor in equity should apply to the payment of the judgment. Beck v. Burdett 1 Paige 305; Williams v. Hubbard Walk. Ch. 28. The bill may be filed in a proper case to embrace both kinds of relief provided. Williams v. Hubbard supra; Clark v. Davis Har. Ch. 227; Cuyler v. Moreland 6 Paige 274.
The bill in this case avers the judgment, issue of execu
Defendant’s counsel admits the bill is sufficient to reach the equitable assets of defendant Reeg in the hands of J. K. Burnham & Co., if the conveyances can be attacked under the averments made. I think the bill is sufficient, and that the testimony offered showing the facts above stated was competent.
In this case, so far as defendants J. K. Burnham & Go. are-concerned, the complainant shows by her bill and her proofs-that she has been defrauded by the conveyance to them of the goods, and by means of which she could not make the-debt in due course of law. J. K. Burnham & Go. thus became the fraudulent grantees of the property as to complainant, and as such equity will hold them to account to her to the amount of her debt, if the property conveyed is sufficient for that purpose; and if not, then to the extent of the-property received by them. It is only necessary to obtain a lien before invoking equitable aid, when the fraudulent grantee is in possession of property which may be levied upon at the time of filing the bill; and as we have already shown,, such was not this case.
There was no laches on the part of complainant in not. instituting her equity proceedings sooner. The whole proceeding so far as J. K. Burnham & Co. are concerned, was-'
The effect of the garnishee proceedings of complainant was not presented in the brief of counsel for defendants, and is therefore no further noticed here.
I think the decree of the judge of the Superior Court in this case dismissing complainant’s bill should be reversed, and the cause remanded to the Superior Court of Detroit with directions to enter a decree in favor of the complainant and against the defendants for the sum of twenty-five hundred dollars and the costs of both courts, and for the proper execution thereof.
Rehearing
Afterwards, at the same term a motion was made for a rehearing, which was denied November 19.
Motion is made in this case for a rehearing upon the following grounds :
1. “And your petitioners further show that said decree is erroneous because it is apparent that your petitioners received no more from Leonard Beeg than enough to pay for what they had contributed to the stock, and because they were not equitably indebted to him.”
2. “ Because it sufficiently appears in and by the proceedings that the decree for the payment of four thousand dollars alimony in gross, instead of ten dollars per week, and upon*56 wliich the decree in this case is based, was obtained by collusion, and is unauthorized.”
3. “ Because in no event can said complainant have been prejudiced by these defendants and their dealings with defendant Roeg beyond the sum of $130, which was the amount due and owing complainant when these petitioners took possession of said stock.”
4. “ Because said decree is against the weight of evidence.”
The positions taken by counsel for the motion in their first, third and fourth points above stated were all fully considered by this Court upon the hearing, and we find no occasion to review them; still a re-examination of the case fails to modify our views already expressed.
As regards the second point, the Superior Court had jurisdiction in the case in which the decree for alimony was made, and which constituted the complainant a creditor of James K. Burnham, and no appeal was taken therefrom. We know of no rule by which that decree can be impeached in this case. Its validity was not attacked upon the hearing when the cause was fully argued by able counsel. W e find nothing in this motion rendering a change in the opinion filed or a modification of the directions given for decree, necessary.
A re-hearing will not be had for the purpose of considering the gains or losses between parties engaged in a venture or enterprise of aiding or abetting fraudulent transactions. Neither do we feel called upon to consider whether or not the complainant in the action she has taken has selected the best remedy for redressing the injuries arising from the fraud perpetrated, when the one adopted is proper.
The motion must be denied with costs.
