Page images
PDF
EPUB

because said transfer was a mere fraudulent scheme to deprive the plaintiff of his rights against said property. But he had no distinctive right against any other than the guilty res respectively; certainly no lien upon all the property of the owners prior to a judgment in personam in admiralty, or upon execution levied subsequent to judg ment at common law. It is true that under exceptional circumstances courts of equity have lent their aid to creditors at large, and generally when the property sought to be charged was already in the custody of the court by force of a trust, receivership, etc.

The case of Garrison v. Memphis Ins. Co. 19 How. 312, can hardly be considered as fully sustaining the plaintiff's proposition, although, from the imperfect statement of that case, it would seem to be held that because an insurer is in equity subrogated to the rights of the insured, he may before judgment at law proceed to enforce his demand against the owners of a vessel. The cases cited in that opinion do not go to the length here claimed; for the court only insists upon the rule whereby the insurer, subrogated to the rights of the insured, may enforce the lien on a judgment recovered by the insured, and “may apply to equity whenever an impediment exists to the exercise of his legal remedy in the name of the assured." To those familiar with the common-law practice then prevailing to a large extent, the true meaning of that expression by the court is clear. In that case there were 11 contracts of affreightment dependent on the construction each was to receive the disaster being one and the same-and, to avoid multiplicity of suits, embraced in one bill.

In Case v. Beauregard, 99 U. S. 119; S. C. 101 U. S. 688, a fuller exposition of equitable principles is given. The same case was twice before the United States supreme court, substantially, and the views expressed in 101 U. S. 688, are especially instructive. The first bill was dismissed because, as the court says, "it was not averred that judgment at law had ever been recovered against the partnership for the debt, and that an execution had been issued thereon and returned fruitless." It then proceeds to state under what circumstances a creditor may, without judgment and execution previously had, pursue his demand in equity. Taking the most liberal of the rules stated in that case, as exceptions to the general proposition, the case before the court will not fall strictly within any of them; for each must be considered in the light of the equitable circumstances upon which it depends.

It must be admitted that some of the views expressed in that opinion go very far towards sustaining the plaintiff's proposition, yet cannot be held to go expressly to the extent here claimed, as covering claims at large not dependent on the same testimony or transactions. The plaintiff's demands by subrogation are for two distinct causes of action against the Babbage Transportation Company. It is charged that Lowery was president and principal stockholder of said company. As such officer and stockholder no cause of action existed against him personally. Why, then, should he be made a party defendant to this suit? It is said that by force of the Missouri statute he could in given contingencies be compelled to respond, to a certain extent at least, to the demands against the corporation. But is this a proceeding to enforce a supposed liability against him as a stockholder? and, if so, why is not the same done pursuant to the Missouri statute, so that he may be compelled to respond individually to plaintiff's demand? But the bill is based on another theory to which he is not a necessary or proper party; otherwise a decree would have to be rendered against him individually. He is not charged with insolvency; nor are any of the facts averred whereby he would become personally liable for the debts of the Babbage Transportation Company. If he were, the proceedings at law against him would be full and adequate under the Missouri statute. The extended theory of the bill is that there are outstanding demands against the Babbage Transportation Company not reduced to judgment nor supported by a lien; that in that condition of affairs that company transferred all its property without consideration, and therefore fraudulently, as against existing creditors, to the other corporation, with full knowledge on the part of the latter that there were such outstanding demands; that the only means of enforcing those demands is to compel the latter company to hold the property thus received by it subject to such demands when established. The peculiarities of the law concerning the formation and dissolution of corporations under the Missouri statutes provoked a sharp comment from Justice Miller a few years ago, so far as they were designed to affect proceedings in admiralty. His remarks might have been properly extended to other proceedings. The case before the court is illustrative. A corporation having incurred liabilities, is dissolved, practically, by transferring all its property to another corporation, formed possibly for the very purpose of leaving the creditors of the former (creditors at large) without any adequate means of realizing their just dues. There is too much of this,

as judicial experience has shown. The change of organization is too often a mere change of name, designed solely to defeat the rights of creditors. The corporation has one name to-day, and to escape its liabilities goes through the form of a new organization and takes a new corporate name, with a transfer of all the assets of the old corporation. Should that contrivance succeed? Should not a court of equity hold the new answerable for the old to the extent of assets received? Such is the purpose of this bill. Mr. Lowery is an unnecessary party, but the allegations are sufficient to hold both of the corporations to answer. If the new corporation knew, as charged, that the demands against the old were outstanding, and with that knowledge received all the property of the old corporation without consideration, why should it not be held to have acquired that property cum onere? Will not a court of equity cut through such formal contrivances, so as to prevent the success of a scheme which operates a fraud, whether so intended or not? Such seems to be the scope of the decisions by the United States supreme court.

There may be many difficulties connected with the transfer of personal property, if such a view is to obtain, which difficulties, however, do not arise in this case. Here it is charged that the new corporation took all the property of the old without consideration, charged with full notice of plaintiff's demands, and therefore, as to this plaintiff, fraudulently. It may be that serious embarrassments will ensue, pending the litigation, if the lis pendens is to hang over the new corporation concerning its rights in the transferred property. Of course, it is answerable to plaintiff's demands only to the extent of the property received; and if any serious detriment as to the use or disposal of the same should arise, the court is open for such orders as may preserve the rights of the parties pending the litigation.

The attention of the court has been called to the Missouri statute, whose terms and procedure, it is considered, are inapplicable to the matters under consideration. The averments of the bill are sufficient, so far as the two corporations are concerned, but not sufficient as to Lowery. If any cause of action against him, personally, should arise, either through his connection with the respective corporations or otherwise, the plaintiff can then pursue whatever course at law or in equity may be proper; but such possibilities cannot justify the plaintiff in making him, or any other stockholder, a party defendant to the present proceeding.

The court decides that said Lowery is improperly joined as a defendant; and the demurrer will, to that extent, be sustained, and

overruled in all other respects. The plaintiff can dismiss as to Lowery; and, on doing so, the remaining defendants will have leave to answer within 15 days.

The doctrine as to multifariousness in this class of cases is well considered in Hayes v. Dayton, 18 Blatchf. 420.

HANNON, Executor, v. SOMMER.

(Circuit Court, D. Kansas. June, 1881.)

1. HOMESTEAD-STATUTORY CONSTRUCTION.

The constitution and statutes of Kansas provide that a homestead to the extent of 160 acres of farming land, occupied as a residence by the family of the owner, together with all improvements on the same, shall be exempted from forced sale under any process of law, and shall not be alienated without the joint consent of husband and wife when that relation exists. Held, that the latter clause necessarily implies that the homestead may be alienated by its owner if the relation of husband and wife does not exist.

2. POWER OF HUSBAND TO MORTGAGE HOMESTEAD AFTER DEATH OF WIFE.

The husband, after death of the wife, under the laws of Kansas, may alienate his interest in the homestead by deed absolute, or may mortgage the same subject to the right of occupancy of the premises as a homestead by the minor children, whose rights under the homestead law are not affected by the mortgage.

3. MORTGAGE-VALID LIEN.

Such a mortgage is not void from want of power in the husband to execute it, but is a valid lien on his undivided half, subject to the right of occupancy and use of the whole by the heirs.'

4. FORECLOSURE-DECREE.

In a suit for foreclosure of a mortgage of the homestead property made by a husband after the death of his wife, held, that plaintiff is entitled to a decree of foreclosure upon the interest of the respondent, subject to the homestead rights of the heirs, though the husband remains unmarried.

In Equity. Bill to foreclose mortgage.

The property mortgaged, 160 acres of farming land, was occupied as a homestead by the surviving husband and his minor children, his wife having died about a year before the date of the mortgage. The minor children were not made parties to the suit. The case was heard at the June term of 1879, and a reargument was directed on the questions: Is the mortgage void because the husband had no power to execute it? and, if so, is the plaintiff entitled to a decree of foreclosure while the husband remains unmarried and the children are minors?

On Reargument.

Mahan & Burtim, for complainant.

Hoffman & Pierce, for respondent.

MCCRARY, C. J. The constitution of the state of Kansas provides as follows, (article 15, § 9:)

"A homestead to the extent of 160 acres of farming land, or of one acre within the limits of an incorporated town or city occupied as residence by the family of the owner, together with all the improvements on the same, shall be exempted from forced sale under any process of law, and shall not be alienated without the joint consent of husband and wife when that relation exists; but no property shall be exempt from sale for taxes, or for the payment of obligations contracted for the purchase of said premises, or for the erection of improvements thereon: provided, the provisions of this section shall not apply to any process of law obtained by virtue of a lien given by consent of both husband and wife."

Substantially the same provision is embodied in the Statutes of Kansas, c. 38, § 1.

It is, of course, very clear that, under these provisions, the homestead cannot be alienated without the joint consent of husband and wife when that relation exists, and a mortgage executed by the one without the consent of the other would be void; but the question here is whether a mortgage upon such homestead is equally void if executed by the husband alone after the death of the wife. That the minor children have a right to the use and occupancy of the homestead, and that this right cannot be interfered with by the mortgagee, or any one claiming under him, whether through a foreclosure sale or otherwise, seems to be conceded. The only question is as to the right of complainant to a decree for the sale of the undivided half of the premises, subject to the right of the minor heirs to the use and occupancy of the premises, whatever the extent of that right may be.

It is the settled law of Kansas that the homestead may be alienated by the joint deed of husband and wife; and also that, in the case of the death of either, the survivor may subsequently alienate his or her interest, subject to the right of occupancy of the premises as a homestead by any members of the family entitled to such occupancy, and not joining in the conveyance. Dayton v. Donart, 22 Kan. 256; Gatton v. Tolley, Id. 678.

The respondent, therefore, might have sold, by deed absolute and unconditional, all his interest in the premises at the time he executed the mortgage, and the sale would have been valid as against all the world except the children, whose right under the homestead law would have remained the same precisely as if no sale had been made. It

« PreviousContinue »