Davis v. Walker

Simrall, J., delivered the opinion of the court. At the April term, 1872, Samuel P. Walker, administrator of [662] Wyatt Moye, deceased, recovered judgment in an attachment suit against R. P. Sawyers for $7,762.15. The attachment had been served upon a large amount of property. On the 8th of October, 1872, the complainant, O. Davis, recovered judgment against Sawyers for $1,359. J. W. Harvey had also recovered judgment for $63.02, and Thomas Carson for $507.75; these last judgments are junior to Walker’s, but senior to Davis’. The foundation of the recovery by Walker, administrator, was the assignment and guaranty by Sawyers to Moye, the intestate of certain mortgage bonds, with interest coupons attached, of the Mobile and Ohio Railroad Company. The mortgage or deed in trust to secure these bonds and others of a like issue covers the railroad rolling stock and other property, and also the net income. These bonds are past due. It was agreed between Walker and Sawyers at the time the judgment was rendered, that Walker should retain these bonds and coupons, as collateral security (they exceed in amount Walker’s judgment) ; it was also agreed that proceedings under the judgment should be suspended for a year unless Sawyers requested execution of the judgment sooner. Prior to the expiration of the year, Walker sued out a venditioni exponas, and the sheriff advertised the property for sale. Prayer that a receiver may be appointed to take charge of the bonds and take steps for their collection or sale, and for general relief. The amended bill alleged that the agreement between Walker and Sawyers was made for the purpose of defrauding the complainant who was then a creditor of Sawyers; the property was to be bought in and held in secrect trust for Sawyers, so that complainant would be defeated of his debt. The additional prayer is, that complainant have priority over Walker’s judgment. After the amended bill was filed, a motion was made by the complainant for the appointment of a receiver. It does not appear what disposition, precisely, was made of the motion. It can be inferred from the recitals in the order entered that it was sustained, for the only action of the court upon the subject is what purports to be a modification of a previous order. [663] This modification was at the instance of Walker. The direction was, in substance, that a receiver be appointed to take charge of the bonds, and that he sell them in the best market, and for the best price to be had, and that he should apply the money to pay Walker’s judgment, and if there should not be enough to satisfy the judgment, then for any deficit, execution might go; in the meantime the injunction is retained. The bill is framed upon the grounds, first, that Walker has a security for his debt, besides the lien of his attachment and judgment, whilst the complainant has but one, therefore Walker should be required to obtain satisfaction of his judgment out of the security, in which the complainant has interest, so that he may apply the property, to which alone he can resort for his payment. In a proper case, a creditor who has a claim upon two funds, may be compelled to go against that one to which he has an exclusive right, leaving the other to a creditor, who can resort to it alone. The decree does no violence to that principle, but distinctly applies it for the benefit of the complainant. The complainant submits to the chancellor, among his alternative prayers, that the bonds and coupons may be sold (if he has not, on the facts stated, a preference), then the proceeds be paid on Walker’s judgment, and that he have execution only for the deficit. The complainant avers that Walker and Sawyers entered into a combination to sell the attached property, which was all the debtor had accessible to process, for a small price and have the title so controlled, as that Sawyers could enjoy some secret advantage in it. It cannot be controverted that Davis might well insist that the security held by Walker should first be exhausted, before he should proceed against the property, and since the complainant stated that the security exceeded Walker’s judgment, it would be proper to retain the injunction until it was ascertained what sum the bonds and coupons would produce. The appellant himself moved for the appointment of a receiver to take charge of these bonds and coupons. He cannot complain of so much of the orders as places the funds in the hands of a re [664] ceiver; nor can he complain of authority given the receiver, to realize upon the bonds and coupons; unless it be that he was instructed to sell, for cash, in the best market, rather than institute proceedings by suit to collect them. In administering the fund placed by Sawyers as indemnity with. Walker’s intestate, a court of equity ordinarily should conform to the plan agreed upon, as the mode of making the fund available. It would be exceedingly onerous, expensive and dilatory, to require the creditor, who held not exceeding seven or eight thousand dollars of bonds and coupons out of an issue of over a million of dollars, to proceed to a foreclosure of the deed of trust, when the understanding was that the bonds should be sold in the market. These bonds and coupons were of a class of stocks and securities intended for investment and for sale in open market. They have in money centres a sale value. They rest upon the footing (in this respect) very much, of government or municipal bonds. When, therefore, such securities are hypothecated as collateral security, especially in small amounts, it must be taken, that the creditor may realize upon them by sale and negotiation; and is not required to collect them by suit; such was the agreement in this case. There is no good objection to so much of the decretal order, as instructed Col. Stone to convert the securities into money by sale; that is as beneficial to Davis, the appellant, as to Walker. But the court acted prematurely in going farther, and upon the bill and exhibit alone, without answer or proof, assuming to make a final disposition of the money, the case was not in a condition for a final settlement of the rights of the parties. The bill developed enough to call for the appointment of a receiver and for a conversion of the fund into money, so as to be ready to meet the exigencies of a final decree. But the case was not in condition to demand a decision adversely to the complainant on the branch of itr setting up the fraudulent agreement and combination. It may be very difficult for the complainant to sustain the bill in that aspect of it. [665] Tbe agreement for delay was made six months before Davis obtained his judgment. The venditioni exponas was returnable to the April term, 1873 — the earliest term to which Davis could have made his first execution returnable. Walker was actually proceeding to sell on the 7th of April, when restrained. The complainant does not pretend that there is any fraud in Walker’s judgment, only that the parties had combined to make a sale, which they intended to result to the benefit of Sawyers. But perhaps if that were the only ground of equity, the scheme might be defeated by Davis appearing and bidding at the sale, and making the property bring a fair price. It is not the case of sale of property at low prices, produced by fraud, but an agreement (not executed) to endeavor to perpetrate a fraud, which, however, might be defeated in the measure indicated. On account of the state of the pleadings, we reverse so much of the decree as makes a final appropriation of the money to be produced by sale of the bonds and coupons. The residue of the decree is affirmed, so that the receiver may sell the bonds and coupons as directed. But he shall hold the proceeds subject to the further order of the court.