Albright v. Texas, Santa Fe & Northern Railroad

Collier, J. It is stated in the original bill and repeated in the amended bill, that on the judgment recovered by Albright there was issued on November 24, 1885, an execution, and that afterward on January 13, 1886, the sheriff made a return of nulla bona, and that there was a similar return on the execution issued on the Marshall judgment. The sheriff’s return on the Albright execution of January 13, 1886, shows “that after diligent search I am unable to find any property of the defendant in my county subject to execution, and T further certify on the fourth day of December, 1885, in my county, I served a written notice as garnishee, together with a copy of execution upon one Lehman Spiegelberg,” etc., etc. There was no return of nulla bona shown on the Marshall execution. The record also shows that a venditioni exponas apon the Albright execution, issued out of the district court on June 6, 1887, for the sale of certain property levied on as the property of the defendant company on January 27, 1887, being two locomotives, a number of cars, timber, ties and other things, that on June 22, 1887, the sheriff advertised said property for sale on July 11, 1887, but received notice from the president of defendant company that the property did not belong to it, but to the Southern Trust Company; he postponed sale notifying plaintiff’s counsel, that he demanded an indemnifying bond, and it not being furnished the sheriff made public proclamation, that the sale of the said property would not take place. It is not shown that anything further was done with said execution, nor that anything was done with the garnishment served under the first execution. CuñpafdAsÚbscripUpon the rehearing which was granted, the whole case was again elaborately argued, the solicitor for appellant urging strenuously and with great zeal, that the decision already rendered in this cause holding that unpaid subscriptions for stock are in equity a fund, for the benefit of creditors, though conceded by him in his brief on the first hearing, is not the law since the decision of Hollins v. Brierfield Coal & Iron Co., 150 U. S. 381. We think the construction counsel seeks to put upon this decision, viz.: That it is a modification if not an absolute reversal of prior decisions of the United States supreme court is not tenable; and his brief in the paragraph quoted by us in our former decision is still, we believe, a correct exposition of the law on this subject. Referring, however, to the additional statement of facts above set forth, it appears, that as to the Marshall judgment there has not been even an execution issued, and of course no return of nulla bona. Unless the garnishment served upon the execution prevents, it may be said that there was a return in January, 1886, of nulla bona upon the execution on the Albright judgment. But it also appears that a year later another execution issued upon the Albright judgment, and that there was property levied on apparently largely exceeding in value the amount of the judgment, and that no sale was made of the same, because it was claimed by the president of defendant company, to be property not belonging to it. The sheriff declined to proceed with the sale thereof, because of refusal on plaintiff’s part to give an indemnifying bond. cfudDgmem: eíeSuUanb:onaurnof It is urged by counsel for appellees, that whether the statement of the president of defendant company, that the property levied on was not .its property was true or false, so far as this case is concerned it was a statement binding said company, and that said return, containing said statement, was equivalent to a return of nulla bona. If it had appeared in the sheriff’s return, that after diligent .search he had been unable to find any other property of defendant, this conclusion or presumption might possibly arise, but no such statement appears, and strictly it would have to be held, that allegations of the bill and amended bill as to there being returns of nulla bona upon executions of said judgments'or either of them, are not proven. While counsel for appellees contended in his oral argument, that return of nulla bona was merely one of the means of showing insolvency, so that the right of the creditor of a corporation to sue for unpaid subscriptions on stock would accrue, yet in his brief on the rehearing he contends as to the time the statute of limitations began to run, and supports his contention with much authority, that the creditor must have obtained judgment against the corporation, with a return of nulla bona, before he can sue the stockholders. Thus in Taylor v. Bowker, 111 U. S. 110, the court holds that under the Maine statute the creditor could not file his bill until execution was returned nulla bona. The rule as to this is plainly stated in National Tube Works Co. v. Ballou, 146 U. S. 523, in which it is said that: “Where it is sought by equitable process to reach equitable interests of a debtor, the bill unless OTHERWISE PROVIDED BY STATUTE, must Set forth a judgment in the jurisdiction where the suit is brought, the issuing of an execution thereon and its return unsatisfied, or must make allegations showing that it was impossible to obtain such a judgment in any court within such jurisdiction." The point of there being no return of nulla bona was not directly involved in National Tube Works Co. v. Ballou, supra, as the suit was upon a foreign judgment, and was dismissed upon demurrer, because there was no averment of any judgment or effort to obtain one, or that it was impossible to obtain one, but in the discussion of the case the above doctrine was laid down, and for its support Taylor v. Bowker, supra, and numerous other decisions were cited. In Terry v. Anderson, 95 U. S. 628, one of the cases cited in National Tube Works Co. v. Ballou, supra, it is said by the court that “ordinarily a creditor must put his demand in judgment against his debtor and exhaust his remedies at law before he can proceed in equity to subject choses in action to its payment, and to this rule, however, there áre some exceptions." In the case of Jones v. Green, 1 Wall. 330, there was a bill by judgment creditors to subject property held in secret trust, it being alleged that the debtor was insolvent. There was a decree in favor of complainants, and it was held, that the objection that it was not shown that complainants had attempted to enforce their remedy at law was fatal to the relief prayed. The bill alleges that executions were issued upon the judgments of complainants, and were returned unsatisfied, but no proof on this subject was produced at the hearing. This is precisely the situation as to the Marshall judgment, as no execution whatever is shown to have issued, and the only question as to the Albright judgment is whether there is a sufficient return showing nulla bona. Jones v. Green, supra, went up from the territory of Nebraska, and it seems in harmony with National Tube Works Co. v. Ballou, supra, in the principle annoijncecl by the latter that unless otherwise provided by statute there must be judgment, and return of the same unsatisfied. We have examined with care the ■authorities, which counsel for appellees cite in support of the contention, that the return of nulla bona is not essential to the giving of these plaintiffs a standing in a court of equity, and notice them as follows: The case of Terry v. Tubman, 92 U. S. 160, shows that a demurrer was filed to the plea of the statute of limitations framed upon the statute in force in the state of Gleorgia, the demurrer proceeding upon the idea, that the plea was bad inasmuch as it merely alleged the notorious insolvency of the corporation, as a starting point of the statute, and the demurrer was overruled distinctly upon the ground that such an allegation was at least the equivalent of what was alleged in the bill about insolvency of the same corporation, and that the demurrer cut back to the first error in pleading. The inference in this decision is rather against than in favor of appellees’ contention. The case of Camden v. Doremus, 3 How. 533, was a suit upon a guaranty, and the court’s holding was based solely upon a construction of the words “use of reasonable and due diligence” found in the contract of guaranty, and' is in no sense an authority on this question. The case of Reynolds v. Douglass, 12 Pet. 497, is more nearly in point, as there it is held that in an action at law against a guarantor, the insolvency of the principal debtor need not be proved by record evidence, but it should not be construed as militating against what in the cases herein cited, is stated to be the rule governing creditors, who pursue equitable interests of a debtor after judgment obtained. The only cases counsel refers us to as seeming directly in point, are Tabb v. Williams, 4 Jones Eq. (N. C.) 352, and Hough v. Cress, Id., and there it is. stated that relief ought to be had -whenever by an execution and return of nulla bona or otherwise it appears, etc., but in the first place these cases seem to conflict with the supreme court of the United States, an'd in the second place, the bill in this case claims relief simply upon the ground of a return of nulla bona, and not upon any other ground as showing insolvency. For these reasons which are more elaborately considered, than in our former opinion, we think the conclusion we arrived at was erroneous, and that the judgment of the lower court should be reversed. As to the extent this reversal goes is a matter we will proceed to discuss. Certainly it should be reversed as to the appellants Lehman Spiegelberg and Bernard Seligman, and it remains to be considered what should be done as to the defendants and appellants Gilder-sleeve, Martinez and Ortiz y Salazar. The record shows “leave to amend bill filed to correspond with proofs taken, and that defendants are required to answer said amended bill within twenty days from the time of service of copy of .same, and that said cause be set down for hearing as soon as same is at issue on the amended pleadings.” The amended bill was filed on June 30,.1892, and notice thereof and order allowing it to" be filed and be answered in twenty days after service of copy thereof was served on “C. H. Gildersleeve for himself and E. A. Fiske solicitor for defendants in the said cause” on June 14, 1892. There is nothing showing that Martinez or Ortiz y Salazar was given notice either personally or through their solicitor, unless notice to Gildersleeve, which on its face was restricted to him personally, can be considered notice to them. Neither Martinez, Ortiz y Salazar nor Gildersleeve answered the amended bill though the final decree recites that Gildersleeve did. As to Martinez and Ortiz y Salazar the final decree recites a failure to answer and that the amended bill “be taken as confessed” as to them and defendant company. Neither is there anything in the record- that notice of the filing of the amended bill was given to defendant company. The amended bill differs from the original bill in that it sets forth more at length the alleged transactions of the charter subscribers in subscribing for stock, and failing to pay cash required for organization, but putting up checks never intended to be presented for payment instead. hearing: decree as°tocdrfend°aiySed but not answering-: proof. It appears, therefore, that in the order giving leave to file the amended bill two things were required: (1) That it was to correspond with the proofs already taken; and (2) that defendants were to be served with notice of the amended bill before the cause -could come to a hearing. If what we have already said in this opinion as to complainants’ failure to show a return of nulla bona be true, it would seem that the amended bill, inasmuch as it merely repeats the allegations of the original bill on this subject, does not conform to the proofs taken, and if Martinez and Ortiz y Salazar had no notice of the filling thereof, they ought not to be bound by complainants’ act with respect to the amended bill. That leave in effect authorized the complainants to set forth in apt language by their amended bill the. necessary averments which were justified by the proofs already submitted. A reply to this may be, however, that so far as Martinez and Ortiz y Salazar are concerned they had established by the decree pro eonfesso upon the original bill the fact that there had been a return of nulla bona, though the same cau not be said as to Grildersleeve. As to Gildersleeve we think the matter may-be disposed of by saying, that he either answered or he did not answer. If he answered as the final decree recites, there is the same infirmity in proof as to him, as against Spiegelberg and Seligman. If he did not answer there should have been a decree pro confesso, and none was taken. It is held in Pegg v. Davis, 2 Blackf. (Ind.) 281, that if any particular claim be not answered a decree may be taken pro tanto as confessed, and that if complainant instead of so doing bring the case to a hearing, he can only be entitled to relief in this regard by proving it. This decision presupposes the necessity of taking a decree pro confesso upon the whole bill, or proving the case. It has been held in Shields v. Bryan, 3 Bibb. (Ky.) 525, that a decree can not be taken against a defendant not answering unless default has been taken, and in Carmen v. Watson, 1 How. (Miss.) that where one of the codefendants did not answer a decree against him without taking the bill pro confesso was irregular and should be set aside. failure to serve As to the defendants Martinez and Ortiz y Salazar, we find it stated that after an order to take the bill pro confesso has been obtained, it can not be amended even to tlie extent or connecting a clerical error without vitiating the proceedings. 1 Danl. Ch. Pr., sec. 522. And in Harris v. Dietrich, 29 Mich. 366, that if a bill is materially amended when the defendant fails to appear, the decree pro confesso taken on the same day and without serving process, 'is irregular and sufficient grounds for opening it, and granting a rehearing. As enforcing the idea that in the absence of a decree pro confesso the complainant must prove his case, it is stated to be at the election of complainant to take a decree pro confesso, when the cause shall be proceeded in ex parte, etc. Rule 14 of Equity Rules. Unless it is within the province of this court to enter a final decree against the defendants Martinez and Ortiz y Salazar upon the original bill, it is diffi•cult to see how any such decree may be entered against them at all. We think it should be held that appellees stand before the district court, and now stand before this court, asking relief not upon the original but only upon the amended bill, and it not appearing that Martinez or Ortiz y Salazar have ever had any day in court as to the amended bill the decree against them thereon can not stand. Wherefore it is considered and ordered that the judgment heretofore rendered by this court, affirming the decree of the district court be, and the same is upon this rehearing, set aside, and the cause is reversed with directions to the district court to vacate in conformity with this opinion the decree entered in the district court, with costs in behalf of appellants to be taxed. Laughlin, J., concurs.