Davis v. H. B. Claflin Co. , 63 Ark. 157 ( 1896 )

Hughejs, J.,

(after stating the facts.) Are the interveners entitled to the relief thejr ask, that is, that H. B. Claflin Company be postponed to them in the distribution of the balance of funds, proceeds of the sale of the goods of the Holmes Dry Goods Company in the hands of the sheriff? Can they be heard ito complain, inasmuch as the Holmes Dry Goods Company made no defense, and does not complain ?

At the time of the execution of the notes, which are the basis of the suit of H. B. Claflin Company v. Holmes Dry Goods Company, and the date of the institution of this suit, and the issuance of the attachment in favor of the appellees, preferences among creditors by insolvent debtors were allowed in this state.

This court decided, in Glaser v. First National Bank, 62 Ark. 171, that when two creditors have sued out attachments, and cause them to be levied on the same property, the junior attacher has no right to file a complaint in the action instituted by the senior attacher, and have the senior attachment set aside, by showing that it was known at the commencement thereof by both parties to the same to be without legál grounds, that it was based on an affidavit known to be false by both parties to the action in which it was filed, that it was made for the purpose of obtaining a preference over creditors» and that it was permitted by the debtor for that purpose, he and the first attaching- creditor-knowing at the time that he was in failing circumstances; that section 372, Sand. & H. Dig., providing that any person may before sale of the attached property present his complaint to the court disputing the validity of the attachment and setting up some claim to the attached property, and his claim shall be investigated, gives no such right. We adhere to this.

As is said in that case, and the cases generally involving this question, “no creditor has the right to defend an action or proceeding against his debtor, to which he is not a party. * * * A junior attaching creditor cannot take advantage of irregularities or informalities in the proceedings in a prior attachment, though constituting good grounds to set aside the attachment on the motion of the defendant. * * * Priority is in the gift of the debtor.” If he is content, no one else can complain of mere irregularities or infor-malities. “The formality and regularity of such proceedings, * * * in the absence of fraud and collusion between the plaintiffs and defendants, are matters pertaining exclusively to the defendants.”

In the case of Glaser v. First National Bank, there was no showing or contention that the debts for which attachments were issued were not due when suit was brought, and when the attachments were issued.

The weight of judicial determination seems to be that subsequent attaching creditors, whose attachments’ are sustained, and who obtain judgments upon their claims, ought to have relief against attachments based on demands not yet due, where there is no statute allowing attachments for debts not due. Ward v. Howard, 12 Ohio St. 158; Seibert v. Switzer, 35 Ohio St. 661; Nenney v. Schluter, 62 Tex. 327; McCluny v. Jackson, 6 Gratt. 96; Fairfield v. Baldwin, 12 Pick. 388; Pierce v. Jackson, 6 Mass. 242; Henderson v. Thornton, 37 Miss. 448; Taaffe v. Johnson, 7 Cal. 352; Ayres v. Husted, 15 Conn. 504; Patrick v. Montader, 13 Cal. 434; Davis v. Eppinger, 18 Cal. 378; Walker v. Roberts, 4 Rich. Law. 561; Palmer v. Martindell, 43 N. J. Fq. 90 (10 Atl. 802); Drake, Attachments, secs. 273-275; Peirce v. Partridge, 3 Met. 49; Hale v. Chandler, 3 Mich. 531. “And in California, Indiana, Mississippi, and Michigan, where an attachment could not be had upon a demand not due, the issue of an attachment to secure such debt was a fraud upon junior attaching creditors, for which they could have the prior attachment dismissed.” Shinn, Attachments, note 1 to section 411, p. 760, and authorities cited. See also Fairfield v. Baldwin, 12 Pick. 388; Pierce v. Jackson, 6 Mass. 242; Kollette v. Seibel, (Tex. Civ. App.) 26 S. W. 863; Bateman v. Ramsey, 74 Tex. 589, S. C. 12 S. W. 238.

..construe-preference!, validity of attachment on det>taotdue-

The act of April 14, 1893, entitled “An act to prevent preferences among the creditors of insolvent corporations,” has no application to this case, as the attachments in this case were levied before the passage of said act.

Section 377 of Mansfield’s Digest provides: “In an ° A action brought by a creditor against his debtor, the plaintiff may, before his claim is due, have an attachment against the property of the debtor where: First. He has sold, conveyed, or otherwise disposed of his property, or suffered or permitted it to be sold, with the fraudulent intent to cheat or defraud his creditors, or to hinder or delay them in the collection of their debts.”

The affidavit of Deo Frank, as agent of H. B. Claflin Company, upon which their attachment was issued, states, “that the defendant is a non-resident of the State of Arkansas, and that it has fraudulently disposed of its property, with the fraudulent intent to hinder and delay its creditors.”

It appears from the evidence -in the case that there was no g'round for the attachment of appellee. Had the Holmes Dry Good's Company interposed a defense, and made this proof, the attachment would doubtless have been discharged, and judgment would have gone against H. B. Clafiin Company as to the debts not due when the suit was brought and the attachment by H. B. Clafiin Company was issued. Cox v. Dawson, 2 Wash. 381 (26 Pac. Rep. 973).

Where the statute provides for suit upon a debt not due, upon the ground that the defendant has fraudulently disposed of his property with the fraudulent intent to hinder or delay his creditors (upon which ground alone an attachment upon a debt not due is allowed by statute in this state), can junior attaching creditors intervene and show by proof that there was no ground for the attachment, and have the senior attachment postponed to their lien ?

Perhaps most of the cases maintaining the right of junior attaching creditors, upon their intervention, to have a senior attachment lien postponed, when the senior attachment is issued upon a debt not due, have been determined in states where there is no statute authoris-ing attachments for a debt not due. Most of the cases base the right upon the ground of constructive fraud by the junior attaching creditor in obtaining an attachment upon a debt not due, when he has no ground for it, and the attempting to secure a prior lien and preference, when he is not entitled to it. Some say only that the prior attachment in such case is void, and seem to place it upon the ground that the prior attachment at the time it is issued is not authorised by law.

We think that,- upon reason and authority, an attachment issued upon a debt not due may be avoided by a junior attaching creditor, and postponed to his attachment lien, where there is no. statute authorizing the issuance of an attachment for a debt not due; and it seems that there ought to be no difference where the statute authorizes the attachment for a debt not due, upon particular circumstances or conditions which are alleged as grounds for the attachment, but which, in fact, are shown to be false. It is only where such circumstances or conditions exist that an attachment is allowed by law. If it be true that an attachment issued upon a debt not due can be avoided or postponed at the instance of a bona fide attaching creditor, it is not important, in the opinion of some members of the court, whether we say that the reason why it can be done is because the senior attachment is void, as against the junior, because it is not authorized by law, or because it is constructively or leg'ally fraudulent. The same end is reached, by whatever name we give the means by which it is reached.

But a majority of the court are of the opinion that the suing out of their attachment by the appellee, H. B. Claflin Company, upon the ground that the Holmes Dry Goods Company had fraudulently disposed of its property wdth the fraudulent intent to hinder and delay its creditors, -when there was proof that such allegation was in fact false, and that there was no ground for the attachment, was such a violation of law as amounted to a constructive fraud, as against the "junior attaching creditors, and would, if permitted to stand, give the appellees an unfair, inequitable, and unjust advantage over such in-terveners, to which they are not entitled.

By reason of such fraud the appellee must be postponed, as to all its debts not due when its attachment was sued out, to the interveners, in the distribution of the proceeds of the attached property in the hamds of the sheriff, and it is so ordered.

Thé decree is reversed, and the cause is remanded, with directions to enter a decree for the appellants, and for father proceedings not inconsistent with this opinion.