Eaton v. Patterson , 2 Stew. & P. 9 ( 1832 )

Lipscomb, C. J.

This cause comes before us on an appeal from the decree of the Court of Chancery for the County of Madison.

For the sake of perspicuity, it will be proper to make a statement of the material facts on which the decree was founded. One N. Ragland recovered a judgment against Brali.au & Atwood, as indorsers of a promissory note ; which judgment, at the time this bill was filed, amounted to near three thousand dollars. Ragland ateo recovered another judgment against Simon Turner, a second indorser of the same note. Turner paid up the judgment against him, to Rag-land, on condition, that Ragland’s judgment against Brahaa & Atwood, should be for his benefit, and execution should run on it to his use ; and on the 28th June, LS25, an indorsement was made on the execution of Ragland against Brahan & Atwood, that the whole amount of the execution was to be paid to John McKinley, the aitornej'- for the plaintiff, for the use of Simon Turner, and such persons as he had given orders for parts of it, and was not to be paid to any body else. About the sainé time, Turner being indebted to Childress & Patterson, on a note to the amount of something more than seven hundred dollars, gave in discharge of that debt, three orders — one on the attorney, Mr. McKinley, one on the sheriff, and one on Mr. Mead, the clerk of the Court, in favor of Childress & Hickman, directing each of them, if the money collected on the judgment against Bra-han Sr Atwood, should come into their hands, to pay Childress and Patterson the amount of the principal and interest of his note due to them, Childress having transferred to Patterson the entire control of the business. Patterson purchased from Turner the entire interest in the judgment; but, as he alleges, fearing that .Brahan and Atwood, from their being a family connexion between them, might expect greater indulgence than his situation would permit him to extend to them, if the transfer stood in his own name, agreed with one Henry Stokes, that it should be transferred to him, and he was to hold it subject to the control, and entire direction of Patterson ; and the transfer of Turner’s interest was made, not on the execution, but on a separate piece of paper, in the following words: “ For value received, I hereby assign to Henry Stokes, the full benefit of a judgment at law, in favor 'of Nathaniel Ragland, against Brahan & Atwood, the execution in which case is endorsed for my benefit; and which judgment has been enjoined upon a bill filed by said Braham & Atwood against said Ragland and myself, and which is now depending in the Madison Circuit Court in Chancery; and I hereby authorise the said’ Henry Stokes, or assigns, to manage and superintend the said suit in Chancery, and I promise to give any aid that may be necessary on my part, to carrying on and managing of said suit And the said Henry Stokes or his assigns, are hereby further authorised, to have said execution, when issued, endorsed as they may direct, so as to enable them, or either of them, to receive the amount of the said judgment. Witness my hand and seal, this 11th day of April, 1826.

(Signed) “SIMON TURNER, Seal.”

Patterson alleges, that he paid about thirteen hundred. dollars for the judgment, to Turner, including the note due to Childress & Patterson. Stokes af-terwards endorsed Turner’s assignment to Patterson in the words following, “ I assign the within judgment, or debt to Benjamin Patterson, without any recourse on me, either in law or equity. 10th September 1826.

(Signed,) HENRY STOKES.”

Afterwards, Patterson being indebted to Benjamin M. Hinchman, for the payment thereof, transferred by assignment to him a part of his interest in the judgment he had purchased from Turner, in the words following :

“ For value received, I assign twenty-six hundred dollars of the judgment within named, with interest thereon from the 13th of July last, to Benjamin M. Hinchman, in trust, for the use of Samuel Archer, (Philadelphia,) and guarantee the payment to him, free of all charges, for collection. Witness, my hand, this 12th September, 1826.

(Signed,) BENJAMIN PATTERSON.”

By an arrangement subsequently made between Scruggs, the agent of Hinchman, it was agreed, that the whole interest of the judgment should stand for the benefit of Hinchman, on Scruggs undertaking that the balance, after paying the amount due to Hinchman, should be paid over to Patterson. The injunction granted Brahan & Atwood, had in the mean time been dissolved, and an execution against them had been levied on the 25th January, 1828. The indorsement made on the first execution was copied on this; and there was a further indorsement on the execution last issued

“ The whole amount of this execution, is to be paid to McKinley & Hopkins, for the use of Benja-inin M. Hinchman, and is not to be paid to aity other person. 15th Februaiy, 1828.

(Signed,) SIMON TURNER.’'

This, though 'bearing date on the 15th, was signed on the 16th- On the same day Eaton sued out a summons of garnishment from the County Court of Madison county, then in session, requiring Brahan & Atwood, as garnishees, to say on oath, what they wore indebted to Simon Turner.

There is no evidence of Eaton’s being a judgment creditor of Turner, further than the allegation in the bill, that he had, some years before, recovered a judgment in the Comity Court of Madison County, against one Hart & Turner; and a recital in the Writ of Injunction, and a like recital in the Injunction Bond, that Eaton had recovered a judgment against Hart & Turner in the County Court of Madison County, at the Spring Term, 1824, of that Court. 'To the summons of garnishment, Brahan & Atwood answer-, ed, that they owed to Turner the amount of the judgment, as it appeared by the record of the said judgment. But before they had finished their answer, and before any judgment had been rendered against them, a bill was filed by Patterson cc Hinchman, on the facts stated, and the County Court enjoined from further proceeding in the garnishment, against Brahan & Atwood: and this injunction was after-wards, on the hearing of the bill, answer, and testimony, made perpetual, and Eaton decreed to pay cost.

A great many objections have been urged against the decree, by the appellants. Such as we may consider material, wo shall endeavor to examine with due consideration. We shall nut, however, in tins investigation, confine ourselves to the order, in which, points were made and presented to us in argument.

It is contended, that the facts charged in the bill do not make out a case for chancery jurisdiction, in as much as the bill shows that a court of competent jurisdiction, had the subject matter of the bill in a courso of adjudication. It is an admitted principle, that whore two courts have an equal and concurrent, jurisdiction, that the one that commences the exer.cise of its jurisdiction, first, has the preference, and is not to bo obstructed in the legitimate exercise of its powers, by the court, that on the. subject matter would be only co-ordinate.

Let us enquire how far the facts will make out a case of concurrent jurisdiction. What was the subject of judicial investigation before the County Court, and how xvas it exercising its jurisdiction, at the time its further progress was stayed by the chancellor’s writ of injunction? lindera statute of this State, and not in the exercise of plenary common law authority on the subject, the County Court had awarded a summons of garnishment to Brahan & Atwood, at the instance of Eaton, and they were required to answer on oath, what they were indebted to Turner, the debtor of Eaton. The court of chancery could have compelled the same disclosure if it had been resorted to; and so far the two jurisdictions, the one in the exercise of plenary chancery jurisdiction, and the other, the limited power conferred by statute, would have been concurrent, in compelling a supposed debtor to disclose, what he was indebted, with a view of subjecting it to the payment of a debt, that the ordinary common law process had not the power to enforce. But the two jurisdictions will not run any further to-getlier. The County Court was limited and restrained in the exercise of its jurisdiction by the statute. If Brahan & Atwood had denied any indebtedness, an issue could have been made up to try the question of such supposed indebtedness; and on the trial of that issue, the testimony would have been confined to the isolated fact, whether they owed Turner, or not. If, however, as in this case, they were disposed to admit that they appeared to be indebted the amount of the judgment, what authority had the County Court to permit Patterson & Hincbman to say that the interest of that judgment was in them, and not in Turner; that the debt supposed by the garnishees to be due to Turner, was in fact, before that time, transferred by Turner to them? -Such an enquiry could not have been instituted by the County Court. We can readily suppose a case, that the principle contended for would interpose a bar to the court of chancery. If, after Eaton had garnisheed Brahan & Atwood, on his judgment against Turner, some other judgment, creditor had applied to chancery to compel them to make the very same disclosure of their indebtedness to Turner, and condemn it to the payment of the debt, chancery would then have been ousted of its jurisdiction; because, that the County Court had concurrent power, under the statute, to effect the same object, and had commenced first. If the County Court would have been competent to adjudicate the right of the different claimants to the proceeds of the judgment against Brahan & Atwood, and afforded all of them as ample an opportunity to assert their respective rights; the court of chancery could not have interposed, without violating a principle equally as well settled and as universal in its application, that parties must always be remitted to their legal remedy, where it is as clear and as complete as it could be in chancery. It will be perceived, that we are now viewing the. case- as one not of concurrent jurisdiction; because, when concurrent, a party may elect which he will resort to. It. seems pretty clear that the County Court could'not have determined the rights of Patterson & Hinchman. But it may be asked, if their rights could not be adjudicated, in what way could they have been prejudiced by the judgment of that court? And why should they have an interest in preventing a judgment being entered against the garnishee? To these objections it may he answered, that it is true, that if judgment had been rendered against Brahan & Atwood, from any misconduct of theirs;' such as their falsely swearing that they owed Turner, when they knew that the debt had been transferred; or, as in the case of Wyman & Clark vs. Vertch, they knew that a bill had been filed to complete a disclosure of the same facts, and had not made it known to the court; such judgment would not discharge them, but would only subject them to a double liability. Yet if the judgment should be rendered against them, from their honestly answering that they were indebted, because they believed so, not knowing any thing to the contrary but that Turner was the owner of the judgment against them : if they should answer under such circumstances, and Patterson & Hinchman, knowing that they had been garnisheed, should be silent and not assert their right to prevent judgment being rendered on their answers, such criminal silence would enable Brahan & A.t-wood, successfully, to resist the effort to íix a double liability on them. And this defence too, would be founded on the clearest principles of honesty and sound morality.

Another objection is, that proper parties were not made in the court below to the bill. It in said that Brahan & Atwood ought to have been mads parties. This objection may be disposed of in a very few words. Brahan & Atwood had no interest, either direct or contingent, in the result of the bill; they were not sought to be charged, or rendered liable in the most, remote degree; they have not been affected by the decree, and could not have been by any that could have been rendered ; hence, there would have been no propriety in making them parties. The objection to the joinder of Patterson & Hiuchrnan, as complainants, is equally untenable. Their interest in staying the proceedings in the County Court, was identified, and not to be separated; because, they both were to be benefited by the debt due from Bra-han & Atwood, in an unequal degree, but deduced from the same title. There was a privity, too, between them, that rendered it fit that they should prosecute their claim together.

Having disposed of the objections to the jurisdiction exercised by the chancellor, and to the fitness of parties to the bill, the most interesting enquiry remains to be made into the merits of the case. The mode of transferring the interest from Turner to the complainants, is not understood to have been questioned. Courts of law will protect an equitable lien, whenever they can do it: courts of chancery will always afford this protection when resorted to in time. To constitute an equitable lien, it must be founded on a consideration not deemed merely good in law; basil must be valuable and adequate. "What is an adequate consideration, is a subject of much, difficulty to determine; and the Supreme Court of this state felt the full force of this very embarrassing question in the celebrated usury casos. Those cases were of extraordinary features, and were calculated to elicit the most vigorous exercise of chancery powers, to relieve against hard bargains; and with every disposition to affoid relief and protect an unfortunate class of debtors, from the ruinous effects of their hard bargains. The Court could give no other solution, to this difficult subject of enquiry, than “ that the consideration must not, be so disproportionate, as to shock our sense of that morality and fair dealing, that should always characterize transactions between man and man.”

In those cases, the original parties to the contracts, were before the Court. Ido not know that the principle is different in the case we have now under consideration. A creditor complains that the assets of his debtor have been transferred, without an adequate consideration. If this should be found to be the case ; and if it should be found that Patterson and Hindi man had not .paid an adequate consideration to Turner, chancery should not aid them, but should leave them to the full consequences of any advantage that Eaton might have over them in a Court of law.

The evidence folly establishes the consideration paid by Patterson to Turner, to amount to upwards of thirteen hundred dollars; for more than half of which amount Turner had been previously the bona fide debtor of Patterson. When it is bourne in mind that this consideration was paid at a time when Bva-han & Atwood were still contesting the right of Turner to obtain satisfaction of the judgment against them,- and had by bill, enjoined proceedings at law ; the consideration will not seem so inadequate, as to shock honest mon at the transaction. It is clear .too, that'if Patterson should fail to recover the amount of the judgment against Brahan& Atwood, he would be subjected to an entire loss of the consideration money. There was an objection taken in the argument, to the testimony of Turner and Stokes, by whom the consideration and the transfer from Turner was proven, on the ground that they were interested and incompetent witnesses. There is not the slightest ground to believe that Turner had any interest in the result of this suit; if he had any, it was fully balanced between the parties. It was said that Stokes being the security of Turner on the refunding bond given tó Eraban & Atwood, on the dissolution of the injunction'they had obtained, fixed his interest; the objection would have been a good one, if it had been taken in that suit; but it does not make him an interested witness in this. There was no exception takeu to the tsstimony of either of the witnesses on the hearing of the bill before the chancellor, and it is too late to make it now: besides, the record shows, that the testimony was taken and read by consent.

The authority in 1st Massachusetts Reports, 117, can not control this case. It goes only to show, that if the consideration of an assignment is adequate, that a Court of law will protect this equitable lien against the creditor of the assignor. One of the Judge sex-pressed a doubt, whether the assignment ought not to be made by deed. And perhaps, in Massachusetts, where they have no court of equity, and the relief granted is by an application of the principles of the common law, there is something' plausible in the doubt. The other Judge was, however, of the opin- . ion, that the assignment need not be by deed. If there had been a court of chancery in Massachusetts, and the application had been made to that Court, there would have been no doubt of its competency to protect an equitable lien acquired by parol.

It is contended that Eaton’s equity is the oldest, and should be preferred : that by Ragland’s assignment to Turner, Eaton’s judgment had acquired a lien — that it could not lose by Turner’s assignment to Patterson.

If Patterson and Eaton had both went into a court of chancery, to compel Brahan & Atwood to pay over to them the amount of their respective,demands against Turner, out of the judgment, a court of equity would have first satisfied the oldest lien ; and in that event, the party who had first exhausted his legal-means to obtain payment, would be preferred. If Eaton had used all the means that a court of law could furnish him with, without success, and had been first in point of time, in employing those means, his lien would relate back to the time when his legal remedy failed.

But this principle is not to be so construed as to prevent a debtor from preferring one bona fide creditor to another : and it has been seen, that Patterson occupies that ground of preference. If Eaton had filed his bill, or if he had issued his garnishment before the transfer by Turner to Stokes had been made, he would have acquired a preference by his superior diligence. This principle was ruled, in the case of Lucas, et al. v. Atwood, et al..^a But until a lien had actually attached, Turner had a right to prefer any one of his bona fide creditors.

The case in 20 Johns. 554, was relied on by the plaintiff in error, as 'an authority restraining this right of preference given by Turner, and setting up a superior equity in Eaton, as the judgment creditor of Turner. In that case, Davis, a merchant in New York, became greatly involved in debt, and stopped payment. He transferred all his stock of goods, and debts due him, to Haden, in trust, for all his creditors, on condition that they should discharge him from further liability within thirty days from the date of the assignment, on their receiving their several dividends: the creditors refused then to assent to the conditions. He then made a second assignment to Haden, for the benefit of certain of his creditors, to be void if they would not accept five shillings in the pound, as full satisfaction. - The creditors refused to give their as~ sent to these terms.

Some of Davis’ creditors sued him to judgment, and had fi. fa. returned nulla bona, and then filed their bill against Haden the trustee, to have the funds of Davis, in his hands, applied to the satisfaction of their judgments. Haden paid over to Davis a part of the funds he had collected, as trustee, after the bill had been filed. The court condemned the trust fund in the hands of the trustee, and further decreed against him, for the amount of money paid over to Davis, after the filing of the bill. This case was decided on the authority of Chancellor Kent, in McDermot vs. Strong :^b and there is not a principle contained in either of the cases to impair the right acquired by a bona fide assignmentt,o a creditor, before means bad been taken to subject the trust fund in the hands of the trustee. Much stress was laid on the fact that Brahan & Atwood had no notice of Patterson’s and Hinchman’s interest until they were, one of them, on his way to the Court-house to answer to the garnishment of Eaton, and the other in the act of making his answer.

This can not be an important enquiry: if Patterson & Hi noli man held the interest in the judgment for an adequate consideration, passed before the issuance of the summons of garnishment, it is not material, that Brahan and Atwood should have had notice of the assignment, for any other purpose than their own protection from a judgment on the garnishment : if they received the notice before they had made their answer, it was in time for that purpose.

There were a great many authorities referred toby the counsel for the plaintiff in error, not here noticed, because it did not appear, on an examination of them, that they werE important to a correct disposition of the case.

The decree affirmed.

Taylor, J. not sitting.

a 2Stewart, 378

b 4johns.c. Rep. 687-