Nussbaum & Dannenberg v. Heilbron

Bleckley, Justice. 1. According to the charges of the bill, the father had no capital, and the son no character. The man withoui character carried on business in the name, and upon the credit, of the man without capital. Of course, this was holding out the latter as owner of the business; and if he was not owner in fact, such holding out was a false pretense and a fraud. There would be an estoppel upon the son to deny ownership by the father, in so far as credit in the business was extended to the father. If the creditors sustain loss-by’reason of trusting to the apparent ownership of the father, the son is liable at law for the fraud committed upon them in falsely holding out the father as owner. If the father co-operated in the fraud, he also is estopped, and when sued at law upon the notes and accounts, would not be permitted to defeat a recovery by denying his relation of principal to the son as agent. The credit was extended to the father; and under the facts alleged in the bill the creditors are secure of obtaining judgment at law against him. In case judgment is obtained against the father, the assets of the business will be liable to satisfy it; for the son will not be heard to say that they did not belong to the father. In case a recovery is had against the son for his fraud, it will be to the interest of the creditors making such recovery that the assets should be treated as the property of the son, for as his propei'ty they will be liable to satisfy the recovery. As yet, there has been no attempt to recover a judgment at law against the father. The complainants have neither established their demand against him, nor have they been defeated in an effort to do so on the score that the business was not his and the son had no authority to charge him with debts. It may be that he will set up no such defense, and should he not, or should it b.e set up and prove unfounded, the complainants will obtain judgment against the very person to whom the credit was given. But it is urged that with such a judgment, the com [316] plain ants con Id not get their money because the son has fraudulently bought out the assets from the father, or pretends to have bought, and has appropriated them to his own use, and the father has no other property. Such a fraud as this cannot stand against legal process, any more than it can stand in a court of equity. It the assets can be found and are of a nature to be seized, they can.be taken under execution in the hands of the son. If they cannot be found, or are not of a nature to be seized, the sou can be sued at law for trading upon the credit of his father, and then buying out, or pretending to buy out, the assets for the purpose of defeating, or of hindering and delaying the creditors, and for appropriating the assets to his own use to their injury. In any and every view of the case, it is best that the complainants first go forward to obtain a judgment at law against the father as their debtor. Having done that (and under the charges of the bill there is no obstacle to their doing it) they will be in a condition to sue the son for a fraudulent disposition of the assets ; and, if need be, to go into equity to reach them. The charge in the bill that the son is proceeding to obtain a fraudulent judgment at law against the father makes no difference. If the son is not a real, but only a pretended creditor of the father, the real creditors will be no more bound by such a judgment than they are by the claim of a debt without a judgment establishing it. A real creditor cannot prevent a pretended one from suing and obtaining judgment; he can only combat the judgment, and prevent it from being used to his injury. To proceed regularly, and in order, may require a little more time than to lump matters and pounce down upon both these defendants at once; but it is well to avoid confusion even at the expense of some delay. Indeed, if both defendants are liable together for their combined frauds, and I think they are, the remedy is at law, and there need be no resort to ■ equity. As to concurrent jurisdiction in cases of fraud, see 58 Oa., 11. 2. The allegations of the bill as to discovery are not suffi [317] cient to give jurisdiction to a court of equity for this purpose. There is no charge that the complainants cannot prove their case, or some material part of it, without the discovery prayed for. It does not appear that discovery is necessary, but only that it is desirable and may be useful. There was no error in sustaining the demurrer and dismissing the bill. Cited by counsel: Code, §§3081, 3173; 58 Ga., 11; 43 Ib, 278 ; 45 Ib., 204. Judgment affirmed.