Morton v. Grafflin

Irving, J., delivered the opinion of the Court. This is an appeal from an order of the Circuit Court of Baltimore City, sustaining a demurrer to the appellant’s ⁵⁵⁴ bill in equity, and the decree afterwards dismissing the bill. The appellant who is a resident of the city and State of New York, charges, that a certain Walter E. Lawton is indebted to him in the sum of $57,129.70; that Lawton prior to March 15th, 1887, was a resident of Spuvtin Duyvil of the State of New York, and is now at some place to the plaintiff unknown, but is not a resident of the State of Maryland, .nor within the jurisdiction of Maryland Courts. The bill further charges that the plaintiff has sued out of the Superior Court of Baltimore City, a writ of attachment against Lawton as a non-resident of Maryland for the debt alleged to be due him, and has caused it to be laid in the hands of John, C. Grafflin (the appellee,) as garnishee “of all the property, assets and money belonging to Walter E. Lawton;” and avers that the garnishee has in his hands “certain property belonging to the said Walter E. Lawton as follows, to wit: Upwards of four thousand shares of the capital stock of the Navassa Phosphate Company, and upwards of six hundred shares of the Rasin Fertilizer Company, together with other shares of the capital stock of other corporations, and other personal property;” which personal property the plaintiff avers and charges that John C. Grafflin the appellee claims to hold as security for an original debt on bond for one hundred and fifty thousand dollars, which with interest accrued he claims now to amount to over one hundred and sixty thousand dollars.

The plaintiff further charges, that the bond of Lawton to Grafflin was executed on the fifth of July, 1884, and was made payable three years after date, with interest from date ; and that on the same day a mortgage on certain real estate in Bergen County, New Jersey, was executed and delivered to Grafflin to secure the aforesaid debt; and that this mortgage to Grafflin was not recorded in the office of the clerk of the County of Bergen in the State of New Jersey, until the 18th of ⁵⁵⁵ March, 1887, but that Grafflin claims this mortgage to be a valid and subsisting lien on the property it mortgages; and that his claim is wholly unsatisfied. The bill then charges that the land embraced in the mortgage is more than sufficient to pay “ the amount, if any, that may be due under the said mortgage, and all costs incurred in foreclosing the said mortgage.” The bill also states, that Lawton has disposed of the equity of redemption in the New Jersey property so mortgaged to Grafflin, and rhat he has received no security for his debt beyond the promissory notes mentioned in the attachment proceedings, and that there is no other property he could have levied upon under the attachment. It then prays, 1st, for an injunction restraining the garnishee from disposing of any of the assets in his hands ; 2ndly, for a receiver to take possession of the assets and property in Grafflin’s hands, and to hold the same subject to the order of the Court; and thirdly that Grafflin be required to bring into Court the shares of the stock of the several corporations which he has in his hands, and other property, that the same may be held by the Court until Grafflin shall have proved what balance is due him, if any, or that he may he ordered by the Court to foreclose his mortgage in New Jersey, “or elect to release the other securities held by him ; ” and that the securities attached may be held until such mortgage proceedings are had and account of his debt and balance due him is taken, or until he makes the election asked for ; and 4thly, for “such other and further relief as in equity his case may require.” Order of publication is prayed against Walter E. Lawton, and subpoena for John O. Grafflin. An order to show cause was issued Grafflin. who appeared and demurred to the bill.

The demurrer is to the whole bill, and for grounds of demurrer the appellee insists that such case is not made by the bill as entitles the plaintiff to the relief sought, and that he has complete remedy at law. ⁵⁵⁶ It is hardly necessary, at this day, to cite authorities for the statement that only facts well pleaded are admitted by the demurrer. Miller vs. Balto. County Marble Company, 52 Md., 643 . As this was a bill for injunction and receiver, it was imperatively necessary, that the written documents upon which the relief was prayed should have accompanied the bill, or proper excuse be made for their non-production.

No copy of the New Jersey mortgage was filed with the bill, arid no evidence of the plaintiff’s demand against Lawton. It is incidentally stated', that there are promissory notes for the indebtedness which are filed in the attachment proceedings; but the attachment proceedings, (or copies of them,) are not made part of the bill, nor are the proceedings so referred to as to make them part of the bill. Reliance, in this particular, is placed on the Act of 1884, ch. 23, as applicable to Baltimore City cases. This Act relieves from the necessity of producing a transcript of the record of any other Baltimore City Court in evidence, and allows the production of the docket and record hooks as evidence, and gives them the same effect as evidence as transcripts under seal.

As-evidence such records are undoubtedly admissible; but in a bill for injunction, such charges should be made as showed an effectual levy to have been made, and at least the proceedings should' have been so referred to as to-make them a part of the bill, and enable them to be easily found. Whilst these defects would justify refusal of preliminary injunction, they and the want, of other ’parties, could be cured by amendment, and if when amended in these particulars a proper case would have been made for the intervention of a Court of equity, it would have been proper to retain the bill and allow the amendments to be made. The theory of the appellant is, that by his attachment and levy thereunder, he has acquired a lien on the stocks of his debtor, in the hands of the garnishee, subject to the ⁵⁵⁷ garnishee’s prior lien, which is set out; hut that he cannot make his lien available without the aid of a Court of equity, lie claims that the principle established in Alcock vs. Harris, 10 G. & J., 226 , applies. He relies on 11th sec. of Art. 10 of the Code, which says “ any kind of property or credits of the defendant in the plaintiff’s own hands, or in the hands of any one else, may be attached,” in connection with the Act of 1868, ch. 471, sec. 198, which will be considered presently.

Section 199, of 1868, directs how such attachment shall be executed, and requires the sheriff to leave with the president or other chief officer of' the corporation, or leave at their place of business, a statement in writing of this levy on the stock of the defendant, and the purpose for which it is made, and the officer making the service is required to return a copy of such notice with his writ. Upon such notice the corporation is required upon demand of the sheriff to furnish him with the number of the shares and' amount of stock standing in the defendant’s name on the books of the corporation; and the refusal of the corporation to comply is made punishable. The corporations being the debtors for the stock standing in stockholders’ names, the law provides for their notification. They are in fact intended to be parties defendant.

So far as this bill discloses, none of these legal requirements were complied with ; nor are the corporations made defendants as was necessary, if the Court acquired any jurisdiction by virtue of the attachment, to condemn the stock by its judgment and thereby render it liable to sale. And if the attaching Court did not get jurisdiction to render judgment, the Chancery Court would have none on the subject. If the levy was made in accordance with the provisions of the statute, and the corporations were notified, then these defects in the allegations of the bill, and the want of proper and necessary parties could be cured by amend ⁵⁵⁸ ment, if the law allows pledged stock, as this is, to be the subject of attachment. Section 198, of the Act of 1868, ch. 471, makes the interest of a defendant in the capital stock of a corporation, the subject of execution or attachment only when the writ issues by way of execution on a judgment or decree; but it was contended by appellant’s counsel, that section 11, of Art. 10, of the Code is broad enough to embrace an attachment upon original process such as this is.

Whether such would be. a proper construction of the law is immaterial, as the Act of 1886, ch. 287, repealing, amending and enacting in new form section 198, expressly includes “proceedings by attachment on original process.” This Act of 1886, was not alluded to in the argument or in the briefs of counsel, but was overlooked, and attention has been called to it since. As its provisions must exercise a controlling effect upon this decision, we quote the proviso which has been added, after including attachments on original process with judgments and decrees: "Provided, that all executions or attachments levied or laid upon the shares or interest of any defendant in the capital, joint stock, or debts of a corporation standing on its books in his name, shall only affect the interest which such defendant had in such capital, joint stock, or debts at the time of levying such execution or attachment, and shall not in any way affect the right, title or interest acquired by any bona fide purchaser or pledgee for value to or in the capital, joint stock or debts of such corporation standing on its books in the name of such defendant, by a sale or pledge thereof by such defendant by a delivery of the certificate representing such capital, joint stock or debts, with a power of attorney to transfer the same made prior to the levying of such execution or attachment, and that nothing contained in the succeeding sections of this Act shall be construed to apply tp any such capital, joint stock or debts so sold or pledged, or to prohibit or prevent any such corporation or purchaser or pledgee from trans ⁵⁵⁹ ferring the said capital, joint stock or debts represented by such certificate upon the books of the corporation, in the same manner and to the same effect as if no such execution or attachment had been levied.” The object of this proviso is very obvious. It intended to enable, and does enable, the corporation to make an effectual transfer on its books of the stock held by a bona fide pledgee notwithstanding the attachment. It evidently contemplates that the levy is to be made in their hands as the debtor for the stock, and to protect the corporation from liability because of the same, if the same has been bona fide sold or pledged before the attachment laid; for in such case it expressly authorizes the completion of the transfer on the corporation books “ in the same manner and to the same effect as if no attachment had been laid.” In such case, clearly there could be no judgment against the corporation, and the plaintiff in such attachment must fail in his suit.

The object of the attachment is to condemn the property and subject it to sale. Where a credit is attached the judgment becomes a personal judgment against the garnishee owing the debt, and such judgment is a credit to him pro tanto as against his creditor ; but where the condemnation is of the property the judgment is in rem, and it is sold. In this case the stock being alleged to be pledged, cannot, under the statute, be condemned, unless it is held in fraud, which is not alleged. In such case neither corporation nor pledgee is restrained by the attachment from transferring the same.

The Court by the attachment gets no control over the stock, and if the attaching Court does not, a Court of equity cannot take it away from the bona fide pledgee in the face of the statute and put it in the hands of a receiver, as is asked by the bill. As a rule of law, Drake on Attachment, sec. 244, says: Stock in a corporation is not attachable except by express statute ; and that when the statute allows it, the authority only extends to cor ⁵⁶⁰ porations existing in the State, and not to stock of those ■outside the State—-manifestly for the reason the corporation is the debtor. In this case it is not alleged that these corporations whose stock is sought to be reached are resident corporations. In all cases when allowed by statute its provisions must be substantially followed. 2 Wade an Attachment, sec. 408.

It is hard to perceive how a lien has been acquired by the levy which is alleged. In Moore & Co. vs. Gennett & Co., 2 Tenn. Ch., 375, in a very analogous case, it was held that no lien was acquired. This section, 198, as it now stands, says expressly that “nothing contained in the succeeding sections of this Act shall be construed to apply to any such capital, joint stock or debts so sold or pledged.” The succeeding sections regulate the method of the sheriff’s making the levy, giving the notice thereof, and procuring the data from which to make the schedule that he is to return to the Court.

Thus, in the case of an attachment ordered against stock bona fide pledged, the very means of making an effectual levy is taken away by declaring the sections relating thereto shall not be construed to apply. As the stock therefore cannot be described and scheduled, it must follow that no lien can be acquired by the simple laying the same in the hands of a pledgee, who is not the simple custodian of it, but holds it for the payment of his debt due from the owner of it. In this case there is no allegation or contention that the stock sought to be attached is more than enough to satisfy G-rafflin’s claim and lien thereon. So that there is no interest of Lawton that could be affected, except his equity of redemption, and what that is it is impossible to know, from the impossibility of getting a schedule of the same.

It is said in Adams on Equity, page 271, that the only remedy of a subsequent lien-holdér as against one who is paramount, is to redeem and tack it to his debt— because the junior incumbrancer has no claim or equity ⁵⁶¹ against the paramount incumbrancer. No proffer to redeem is alleged, but the prayer is that Grafflin may be compelled to foreclose the New Jersey mortgage or elect between it aud the property in his hands as additional security. The case of Post vs. Mackall, 3 Bland, 515 , clearly decides that a creditor situated as Grafflin will not be sent out of the State to enforce a lien for the purpose of leaving property here on which ho has a lien, for the benefit of other creditors who have a lien on the property within the State. And if it will not do it for creditors who havo a lien, a fortiori, it will not do so for a creditor who has acquired no lien.

The doctrine of Post vs. Mackall has also been maintained in Denham vs. Williams, 39 Ga., 319 , and Lewis, Trustee vs.