Cargill & Dennis v. Kountze Bros. , 86 Tex. 386 ( 1894 )

GAINES, Associate Justice.

This suit was brought by Kountze Brothers, alleging themselves to be creditors of Cargill & Dennis, to compel the latter to make discovery of their assets.

After stating that the plaintiffs had obtained a judgment against the defendants for $1054; that they had sued out executions which had been returned “no property found,” and that they had caused an abstract of the judgment to be filed in the office of the clerk of the County Court of Harris County, so as to secure a lien upon the real estate of defendants in that county, they proceed in their petition to make the following allegations: “And your petitioners represent, that shortly before the recovery of said judgment against Cargill & Dennis, they, the said Cargill & Dennis, were, and for several years previous thereto had been and are now, engaged in divers money making and speculating enterprises and transactions; and your petitioners are informed and believe that in course of such business pursuits of the said Frank Cargill and E. L. Dennis, divers persons became indebted to them to a large amount, and that the defendants, Cargill & Dennis, have at the time of filing this, your petitioners’ bill of complaint, debts due to them, and for which they hold divers securities and evidences, to a large amount, and have divers goods, wares, and merchandise or other articles of personal property which belong to them or in which they are in some way beneficially interested, and that they have equitable interests and things in action of some kind or nature, which might or ought to be applied to the payment of your petitioners’ said judgment against them, the defendants, Cargill & Dennis.

“And your petitioners further represent, that'the defendants, Frank Cargill and E. L. Dennis, more especially E. L. Dennis, are owners of or in some way or manner beneficially interested in some real estate in this or some other State or Territory, or some chattels real of some name or kind, or in some contract or agreement relating to real estate, or rents or issues and profits of some real estate; and also, that the defendants are the owners of or in some way or manner beneficially interested in the stock of some company, incorporated or unincorporated, or in the profits of some company or copartnership; and also, that they have in their possession at the time of the filing of this, your petitioners’ bill of complaint, some money or bank bills; or that they have money deposited in some bank or elsewhere to their credit; or that they have money or securities for the payment of money held by some other person, in trust or otherwise, for their benefit. And if the defendants, Frank Cargill and E. L. Dennis, have made any sale or assignment of their property or effects, or any part thereof, your petitioners expressly charge that they believe that such sale, transfer, or assignment is merely colorable, and made with the view of protecting the property or effects of the defendants so assigned, and placing the same beyond the reach of your petitioners’ said judgment, and to enable the defendants to control and enjoy the same and tile avails thereof, and that it would so appear if the defendants, Frank Car-gill and Edward L. Dennis, would state and set forth when and to whom such sale, transfer, or assignment was made, and what was the amount in value of the property and effects assigned, sold, or transferred, and whát were the terms and conditions upon which such sale, transfer, or assignment was made, and what disposition had been made of the property or effects so sold, transferred, or assigned, and in whose possession the sarnie is now, or what has been done with the avails thereof.

“And your petitioners claim a full discovery and complete disclosure of all such property and effects and things in action belonging to the defendants, Cargill and Dennis; and all trusts whereby any property, debts, or other effects are held for the use and benefit of the defendants, Frank Cargill and Edward L. Dennis; and of every sale, transfer, or assignment which defendants have made of their property, debts, of other effects; and of the person or persons to whom such assignment, sale, or transfer has been made; the amount and value of the property, debts, or effects so assigned, sold, or transferred, and the trusts or other conditions upon which said sale or assignment or transfer was made; and all the facts and circumstances relating thereto; and particularly what is the situation of the property, debts, or other effects assigned or transferred a]t the time of the filing of this, your petitioners’ bill of complaint.

“And your petitioners further represent, that they have reason to believe, and so charge the fact to be, that the defendants have property, debts, and other equitable interests, things in actions or effects of the value of more than $1054, interests and costs, exclusive of all prior just claims thereon, and which your petitioners have been unable to reach by execution on said judgment against said defendants, Cargill & Dennis,; and that this, your petitioners’ bill of complaint, is not exhibited by collusion with the defendants or with any other person; or for the purpose of protecting the property or effects of the defendants, Frank Cargill and Edward L. Dennis, against the claim of other creditors, but for the sole and only purpose of compelling payment and satisfaction of the judgment so as aforesaid recovered by your petitioners against the defendants, Frank Cargill and Edward L. Dennis.’’ Í

The petition concludes with a prayer that each of the defendants be required to disclose under oath all their assets of every description whatever, and that they also be required to answer certain special interrogatories which are set out therein.

The trial court sustained a demurrer to the petition and dismissed the suit. The plaintiff having sued out a writ of error, the Court of Civil Appeals reversed the judgment and remanded the cause. The case came to us upon a writ of error from this court to the Court of Civil Appeals. Opinion.—We are of the opinion that the District Court was correct, and that the Court of Civil Appeals erred in its ruling.

Broad expressions of eminent text writers would seem to sanction this proceeding. We think, however, the propositions announced by them are not supported by the cases cited, except in a restricted sense. Mr. Freemen, in enumerating 1: the objects which maybe accomplished by proceedings in equity to obtain satisfaction of a judgment at law,” says: “ 1. A full and complete discovery may be obtained of all the defendant’s assets, and when discovered they may be compelled to contribute to the payment of the plaintiff’s judgment.” 2 Freem. on Ex., sec. 424. A review of the cases cited by the learned author will show that none of them can be held a precedent for a general bill of discovery like tnat under consideration.

The first is Creswell v. Smith, 8 Lea, 688. Its nature is shown by the following quotation from the opinion: “ The bill must therefore be regarded as filed against the defendant Smith alone, and the question is, can it, in this view, be maintained ? The question is a new one in this State, so far as I know, and merits, as I think, a very careful consideration. It will be observed that it is not a bill for the purpose merely of compelling the defendant to discover generally whether he owns property, money, or effects for the payment of his debts, in the nature of a ‘ fishing bill.’ It is true there is a prayer that the defendant be required to discover whether he owns any property or stock or choses in action of •any character; but the stating part of the bill points out specificially the property about which the discovery is specially sought, and states circum.stantially the information upon which it is charged that the defendant owns the property. If the right to discovery and relief in this particular property can be maintained, then that the prayer of the bill is too broad would not be material. We think the prayer is too broad, but that part should be rejected.” The opinion then proceeds to hold, that the jurisdiction of the court to entertain the bill should be upheld as to the property specifically pointed out, by virtue of the authority conferred by the statute of the State.

Carter v. Hampton’s Administrators, 77 Virginia, 631, was a bill brought by the creditor of a decedent against the administrators and heirs, to compel a discovery of assets belonging to the estate. Thomas v. Adams, 30 Illinois, 37, and Clark v. Webb, 2 H. & M., 8, are cases of the same character. It is well established, that such a bill may be maintained, as we shall hereafter show.

Gordon v. Lowell, 21 Maine, 251, was a suit to set aside a fraudulent conveyance of certain property specifically described, and to subject it to the payment of the complainant’s debt.

Love v. Getsinger, 3 Halsted Chancery, 191, was a bill filed under the provisions of the New York statute.

Miers v. Zanesville, etc., Company, 11 Ohio, 273, was a proceeding against a corporation for the discovery of assets, and specifically pointed out the assets in reference to which the discovery was sought. Among other things, it sought to subject unpaid subscriptions to the capital stock to complainant’s debt, which is a well recognized ground for equitable-interference.

Cadwallader v. The Granville Society, 11 Ohio, 278, was a suit to subject the defendant’s interest in a specific tract of land, upon the ground that the interest was equitable and not subject to sale under execution.

Goss v. Lester, 1 Wisconsin, 43, was an action to set aside fraudulent-conveyances.

Hocker v. Robson, 8 Rhode Island, 141, was a bill filed by certain-creditors against the assignees of their debtor, to recover a surplus of assets in their hands, and for an account. It gives no countenance to the proceeding in the present case.

Hendricks v. Robinson, 2 Johnson Chancery, 283, was a suit to set aside-certain fraudulent conveyances specifically described. We fail to see that Kimberly v. Sells, 3 Johnson Chancery, 467, also cited by Mr. Freeman, has any application whatever to the doctrine announced by him.

In Boden v. Dellon, 1 Atkinson, 289, the bill was filed by the assignee of a bankrupt, suspected of having concealed his assets, against himself and certain relatives, to compel a discovery. The case involved both fraud and trust, and the proceeding was probably specially authorized by statute. The report of the case is very meagre.

The case of Leroy v. Rogers, 3 Paige Chancery, 234, would be authority in support of the petition in the present case, were it not for the fact that at that time the statutes of New York expressly authorized the proceeding. A careful reading of the opinion will show that it involved the construction of a statute.

Mr. Pomeroy says: “ Creditors’ suits were therefore permitted to be brought in those instances where the relief by execution at common law was ineffectual; as for the discovery of assets,” etc. 3 Pome. Eq. Jur., sec. 1415. In support of this proposition some of the authorities already reviewed are cited. The additional authorities we will now proceed to-consider.

Hadden v. Spader, 20 Johnson, 554 (same case under name of Spader v. Davis, 5 Johnson Chancery, 280), was a suit by judgment creditors-against their debtors and the assignee of a stock of goods alleged to have been fraudulently transferred to him by such creditors, to subject the-goods or their proceeds to the payment of the judgment. A discovery was prayed, and answers having been filed, the case was discussed and determined upon the question of the right to subject the proceeds of the-property to the payment of the debt.

Bay State Iron Company v. Goodall, 39 New Hampshire, 223, was a case like the present. But it is apparent from the opinion that there was-a statute of the State of New Hampshire which authorized the proceeding, although the court say the remedy exists in equity without the statute. The main authority cited to support the last proposition is Leroy v. Rogers, supra, which we have seen was a proceeding under the Revised Statutes of the State of New York.

In Trego v. Skinner, 42 Maryland, 427, the complainant, a judgment, creditor, sought to subject real estate alleged to have been paid for by their debtor, and to have been conveyed to his wife, to the satisfaction of their judgment. A discovery was also prayed as to other assets fraudulently concealed by the debtor and by a firm of which he was a member. The court held that a demurrer to the bill was properly overruled. The bill was certainly good in part, and the decision of the court was correct. The expressions in the opinion show that the court were also of the opinion that the bill was good as to the discovery, but for this they cite no authority.

In Bispliam’s Equity, page 572, in speaking of creditors’ bills, it is said: ‘1 They may also be made use of for the purpose of obtaining discovery of the debtor’s property.” The only case cited in support of the text is Newman v. Willetts, 52 Illinois, 98, which was merely a proceeding to set aside a fraudulent conveyance of certain real estate belonging to the debtor, and to subject it to the payment of complainant’s debt.

In the latest edition of Story’s Commentaries on Equity Jurisprudence, it is to be noted that the editor, in a note, says, “ that a creditor who has exhausted his remedy at law may maintain a bill for discovery of assets and relief.” 2 Story Eq. Jur., 13 ed., sec. 1493, note b; citing 44 N. H., 541. We have already seen that the remedy was authorized by the statutes of New Hampshire. The text of the work, so far as we have been able to see, does not lay down that doctrine; and it is a little remarkable-that if the Court of Chancery had authority to entertain a bill by a judgment creditor merely to discover the assets of his debtor, that so important a doctrine should have escaped the scrutiny of that able and learned commentator.

Turning to the English authorities, we find in Spence’s Equitable Jurisprudence of the Court of Chancery a section upon the subject of “Suits in Chancery by Creditors,” in which the author says: “The jurisdiction of the ecclesiastical court being, as before mentioned, defective in the case of creditors, rendered it necessary to resort to the Court of Chancery, which court required not only the executor or administator to swear to his accounts, but supplying the defects of the ecclesiastical law, allowed the creditor to contest it. The court also decreed payment of the debt, where there were assets, and which the Court of Chancery by its process for obtaining discovery was enabled effectually to ascertain. Suits of this description and proceedings upon them are found in the •calendars from the reign of Edward VI downward. The court was necessarily resorted to in order to recover merely equitable demands, as when .a creditor sought to enforce an equitable security not giving any legal title, and in which therefore there was no remedy at law, or when the debtor had conveyed or devised his property in special trust for the payment of his debts.” 2 Spencer’s Eq. Jur., 580.

In Adams’ Equity also, the doctrine of the right of the creditor of an estate to file a bill in the Court of Chancery to compel the executor or administrator to disclose the assets is distinctly recognized. Adams’ Eq., 257.

But neither of these authors anywhere recognize the right of a judgment creditor to compel his debtor by a bill of discovery to make a disclosure of the property owned by him. We have been cited to no English •case in which the Court of Chancery ever exercised such a jurisdiction, and we have found none. And it may be doubted if there be any well considered case in the American courts in which a discovery of that character has been compelled, in the absence of a statute conferring the authority. I

Every original bill in equity, according to the practice of the Court of Chancery, is a bill of discovery. Story on Eq. Plead., sec. 311. They are usually bills of discovery and relief; that is to say, they pray the court to grant some relief, and as an aid thereto, they seek to purge the conscience of the defendant in order to establish some fact necessary to be proved as a basis for the decree.

But a bill for discovery merely does not pray a decree. It is brought in aid of a pending action at law, or of a suit at law to be brought in order to procure evidence.

Judge Story says: “The bill should set forth the particular matters to which the discovery is sought, for the other party is not bound tp make answer to vague and loose surmises. On this account, when a bill •of discovery was brought by an executrix, stating generally that a demand had been made upon her as executrix by the defendant, which shb had refused to pay, and he had sued her therefor; and that the executrix knew nothing of the demand of her own knowledge, but believed it to be unjust, because the defendant took no measures to liquidate it in the testator’s lifetime, and did not produce any vouchers; and that she could not, without a discovery of all the facts, safely proceed to a trial at law in the suit, and prayed a discovery; it was held, that the bill was baá and a mere fishing bill, amounting only to a statement that the executrix was sued at law, and did not show for what, and therefore asked a •discovery beforehand, although she had reason to conclude that the suit was upon some groundless pretense.” Story on Eq. Plead, sec. 325.

The petition in the present case, although it has the semblance of greaf, particularity, is .in effect as general as it is possible to make it. It seems to us to amount to no more than an allegation that the defendants have concealed or covered up somewhere some assets, legal or equitable, subject to be applied to the satisfaction of plaintiffs’ judgment, which they have been unable to discover.

The authorities we have considered indicate to our minds that such a proceeding was not allowable under the English equity practice. It is provided for by statute in many of our States, and many cases may be found where the jurisdiction was exercised by virtue of such statutes. Bills against executors for a discovery of assets and against assignees for account and discovery were frequently entertained in the Court of Chancery. These all involved a trust. In cases of fraudulent conveyances equity will extend its aid to the creditor by entertaining a bill against the proper parties, which points out the property and specifies the particulars in which the fraud consists, and will as in all other cases grant a discovery as ancillary to the action. In this case there is no trust—there is the simple relation of debtor and creditor. The bill alleges a surmise ■of fraud, but specifies none.

Cronin v. Gay, 20 Texas, 460, was a case somewhat like this. The court, in its opinion, characterized the proceeding as anomalous, and held that the suit could have been properly dismissed without motion or demurrer. The court also say: “ Our statute has prescribed a mode of discovery as auxiliary to a suit, but not as an independent remedy disconnected from a regular suit.” This remark was pertinent to the question before the court, if not indispensable to its decision.

In Love v. Keowne, 58 Texas, 191, Mr. Justice Bonner says: “Although a bill of discovery, technically so called and known in equity practice, is not known to our practice, yet we have a statute which is intended to answer the same purpose. * * * In Cronin v. Gay, 20 Texas, 460, it is decided, that the statute prescribes this mode of discovery as auxiliary to a regular suit, but not as an independent remedy disconnected from such suit.”

Our statutes have largely extended the legal remedies of judgment creditors, as recognized at common law.. Under execution they may levy upon and sell the interest of the defendant, whether legal or equitable, in both his real and personal property. They may subject by process of garnishment his choses in action and his shares in incorporated companies to the satisfaction of their judgment.

But we have held that equity will not aid the writ of garnishment. Noyes v. Brown, 75 Texas, 458.

In Price v. Brady, 21 Texas, 614, it was decided that promissory notes could only be subjected to the payment of a judgment by a writ of garnishment served upon the makers; that they could not be sold under execution, and that therefore an agent holding them for collection could not be made liable by the writ of garnishment. And it seems to us the general trend of our decisions is to confine creditors to their statutory remedies, and not to aid them in a court of equity, except in cases of trusts- and frauds.

Our courts will at the instance of a creditor set aside a fraudulent conveyance of a debtor, so as to subject the property to sale under execution, and to enable the creditors to realize at such sale a fair price. But-this court has never countenanced a proceeding to make the debtor apply his assets to the payment of a judgment against him, or to compel him to-disclose his assets, so that an exeention may be levied or a writ of garnishment served to reach them; and we are of opinion that in the absence-of a statute conferring authority for the proceeding, it should be held' that none exists. Many of the States have statutes authorizing bills of discovery in cases like the present. It is in the power of our Legislature to make such a law, and it must be left to its wisdom to determine whether or not it is proper to confer this inquisitorial power upon the courts óf the State.

For the reasons giyen, the judgment of the Court of Civil Appeals is, reversed and that of the District Court is affirmed.

Affirmed.

Delivered June 24, 1893.