Irvine v. Dean

McAlistee, J. Complainant filed this hill for the purpose of rescinding a sale of certain bank •■stock which he had purchased from the defendant, Dean, and to recover back the purchase-money, upon the ground of fraud in the sale. -It appears from the record that, on September 10, 1891, the defendant, Dean, who, at that time, was the cashier of the Bank of Lewisburg, sold to complainant, Irvine, ten shares of the capital stock of said hank — the individual property of said Dean. Complainant paid Dean for the ten shares of stock the sum of -$1,250. As already stated, Dean was at that time ■cashier of the bank, and had formerly been its book-keeper, and was perfectly familiar with the •condition and internal workings of said institution. Complainant, Irvine, knew comparatively nothing of the business of said hank, and relied implicitly upon the good faith of Dean. The latter represented to Irvine that the stock was paying from "twenty to thirty per cent, annually, and was, therefore, very valuable. The stock proved to he worthless. On October 21, 1891 — a little more than one month after the stock was purchased — the hank failed, and made a general assignment for the ben — 348 — efit of its creditors. On October 24 — three days after the assignment — complainant filed this bill against the trustees of said bank, making Dean a party by publication. The bill alleges fraud, misrepresentation, and concealment on the part of Dean respecting the value of the stock. Writs of attachment and garnishment issued, and were served on the trustees of the bank, attaching all choses in action and effects of Dean in the possession of the bank; including a deposit of $631 to the credit of Dean, also certain notes amounting to $500 due from the defendant, Dabney, to Dean, and, likewise, a piano in the hands of defendant, Hayes. Pending the proceedings, one Willard Merriam, of Kansas, intervened by petition, and asserted a claim, to the Dabney notes. The Chancellor, upon the pleadings and proof, decreed a rescission of the sale of the stock, and pronounced a decree in favor of the complainant for $1,279.30, amount of the purchase-money, with interest, and ordered that the piano attached in the cause be subjected to the satisfaction of the decree. The Chancellor, however, was of opinion that complainant had not effectually impounded any indebtedness of the Bank of Lewisburg to defendant,Dean, or funds in the hands of the trustees of said bank, and was therefore entitled to no relief in that respect. The Court further decreed that petitioner, Merriam, had established his title to the Dabney notes, and was entitled to all of said notes in the hands of the Clerk. Complainant, — 349 — Irvine, 'appealed from so much of said decree as denied satisfaction of his decree out of the Dab-ney notes and the hank deposit to the credit of Dean, amounting to $631. The first error assigned is that the Chancellor .should have subjected the Dean deposit to the satisfaction of complainant’s decree. It is insisted there was no error in this, for the reason that the hank was not a party to the bill and attachment proceedings under which it was sought to reach the indebtedness by depbsit from the bank to Dean, and compel the bank to pay this debt to Irvine. The bill alleges that Dean had a deposit of $600 in bank, and the Court held that no der cree could be rendered against the hank for this deposit, because the bank had not been made a party to the hill. It is insisted by appellants that it was not necessary to make the bank a. party; that it was sufficient to make the trustees under the assignment parties; that the deed of assignment conveyed to the trustees all the assets of the hank, and necessarily included the deposits, and that such was the intention of the hank in making the assignment. We are of opinion that complainant, by virtue of his garnishment attachment served upon the trustees of the hank, fixed a lieu upon Dean’s deposit, and whatever^ amount may he due Dean in the distribution of' the assets of the bank may be subjected to the payment of complainant’s decree. We are further of opinion that while the — 350 — bank would bave been a proper party, it was not a necessary party, since the trustees are the representatives of the bank, and hold the fund sought to be reached by the garnishment.' It appears that the trustees answered that they did not hold any deposit, as alleged, subject to attachment until a settlement should be had of Beau’s account with the Bank of Lewisburg. This, answer was, of course, not conclusive, and the proof shows that, at the date of the service of the garnishment, the trustees, as the representatives of the bank, were indebted to Dean, on account of his deposit, in the sum of $681, and, at that time, Bean was not indebted to the bank, by account, note, or judgment. It is, however, insisted on behalf of the trustees that Bean was guilty of gross mismanagement of the affairs of the bank, in discounting worthless paper, in reckless investment of the bank’s money, and other acts of misfeasance and malfeasance in office as cashier of said bank. The trustees claim that Bean is liable to the bank for an alleged sum of $5,000, on account of mismanagement, and they claim the right to hold this deposit as partial indemnity to the bank. There was no debt due the baük by account, note, or judgment at the date of the service of the garnishment, and a set-off against this deposit, on account of Bean’s mismanagement of the affairs of the bank, cannot be maintained. The claim of the trustees is unascertained and unliquidated, and — 351 — is the subject-matter of future litigation between the bank and Dean. The next assignment is that the Dabney notes should have been subjected to the payment of complainant’s decree. It is insisted that the transfer of these notes from Dean to Merriam was merely colorable, and for the purpose of defeating complainant in the collection of bis debt. These notes were executed on October 11, 1891, by Dab-ney to Dean for the purchase of lots lying in Lewisburg. As already stated, Merriam filed bis petition in these proceedings, claiming the Dabney notes bad been transferred to him. The deposition of Dean was taken, who proves that these notes • were transferred in good faith to Merriam, in part payment of an interest purchased by the former in an insurance agency in Kansas City, and 'at a time anterior to the filing of the bill in this case. While there are some circumstances surrounding this transfer calculated to awaken suspicion, there is no evidence of fraud. The burden of proof to establish fraud in the transfer devolves upon the complainant. It is insisted, however, that the petition o*f Merriam, setting up title to these notes, does not waive an answer under oath, that complainants, in their answer to this petition, deny every material' averment in respect to the transfer of- the notes, and that the answer is sworn to. The insistence is that the sworn answer to a petition is equivalent to two witnesses, or to one witness with cor — 352 — roborating circumstances. It suffices to say that tbis' rule of chancery practice is only applicable to bill and answer, and has never been applied to a simple petition. There was, then, no proof upon which the Chancellor could have subjected the Dabney notes to the payment of complainant’s decree, and the decree, in this respect, is affirmed. But, in respect to the deposit of Dean, the Court holds that complainant, by service of his attachment by garnishment upon the assignees of the bank, fixed a lien upon Dean’s interest in that deposit, and complainant will be entitled to recover whatever amount is due Dean on the settlement of the trust assignment. The decree of the Chancellor in this respect is reversed, and in all other respects affirmed.