National Bank of Rondout v. Smith

This was a bill filed by the National Bank of Rondout, N. Y., against David R. Smith, in his own right and as surviving copartner of D. R. Smith & Co., E. P. Smith, Thomas R. McGahan, Daniel C. Stelling, Moses Brown, and others, composing the firm of M. Brown, Sons & Co., in the circuit court of the United States for the district of South Carolina, alleging that the bank recovered a judgment in that court December 15, 1887, against D. R. Smith, surviving copartner of D. R. Smith & Co., for the sum of $13,844.74 and costs of suit, 'and is entitled to recover against the said D. R. Smith, as surviving copartner of D. R. Smith & Co., and individually, and to be paid out of the property of said firm and out of the individual property of said David R. Smith, the above-named sum, with interest on the said debt.' It was then averred that April 27, 1885, judgment was recovered in said circuit court by default for $9,397.17 in favor of Daniel C. Stelling, a citizen of the state of Georgia, against the firm of D. R. Smith & Co., on service of process on D. R. Smith, and that on the same day judgment was rendered by default for $1,446.83 in favor of M. Brown, Sons & Co., citizens of Pennsylvania, against D. R. Smith & Co. on service of process on D. R. Smith; that executions were issued on these judgments and delivered to the United States marshal for the district of South Carolina, April 28, 1885, were levied April 30, 1885, and certain tracts of timber lands, and a steam sawmill, engines, boilers, etc., sold thereon, at about one-tenth the value of the property, to one Thomas R. McGahan, and a deed of conveyance made to him September 7, 1885; that immediately thereafter Mrs. E. P. Smith, the wife of D. R. Smith, was put in possession by McGahan, and has been using the property, and in the actual reception of the rents and profits thereon, in collusion with her husband and McGahan, from the day of the sale on execution to the time of the filing of the bill. The bill further alleged that the causes of action upon which the judgment in favor of Stelling purported to have been recovered were a note and eight drafts of D. R. Smith & Co., payable to the order of Claussen & Co., and indorsed by the payees in blank; that the record in Stelling's action did not show who composed the firm of Claussen & Co., or the citizen ship of the members of that firm, and that they were citizens of South Carolina; that the causes of action upon which the judgment in favor of M. Brown, Sons & Co. purported to have been recovered were a certain note and drafts of D. R. Smith & Co., payable to the order of E. Bates & Co., and by the latter indorsed, and that in that action the names of the members of Bates & Co. and their citizenship were not shown of record, but that they were citizens of South Carolina; that McGahan was a member of the firm of Bates & Co., and, on information, that they were the real owners of said note and drafts. The bill charged that jurisdiction in the circuit court of the United States for the district of South Carolina in the two actions in which these judgments were recovered was attempted to be obtained by plaintiffs in said actions by suppressing the fact that the payees in the notes and drafts were citizens of the same state as the makers thereof, and that judgments by default were suffered by D. R. Smith in favor of these plaintiffs by collusion with them, 'and with a view to the protection of the property of said D. R. Smith against his other creditors, and to defeat their just rights.' The bill prayed that the judgments, the sales thereunder, and the deed or deeds of the United States marshal be set aside and declared null and void; that a receiver be appointed; an account decreed; the property be sold, and the proceeds appelied to the payment of liens thereon according to their priority,-the unsecured creditors of D. R. Smith & Co. out of the balance, and the creditors of the individual partners out of their individual property; and for general relief.

A copy of the deed of the marshal was annexed to the bill as an exhibit, which recited the levy of both executions, the sales thereunder of certain tracts of land, buildings, and improvements ('except the steam sawmill, with engines, boilers, and all appurtenances belonging thereto, known as 'Smith's Mills") and conveyed said lands, etc., to McGahan.

Answers were filed to the bill by M. Brown, Sons & Co., Thomas R. McGahan, D. R. Smith, and E. P. Smith, and replications thereto. Defendant Daniel C. Stelling filed a general demurrer, which, having been heard, was sustained by the court, and complainant prayed an appeal to this court as set forth in the opinion. Citation was issued to all the defendants, returnable on the first Monday of May, 1891, and service accepted for McGahan, Stelling, D. R. and E. P. Smith, but not on behalf of the members of the firm of M. Brown, Sons & Co., and they were not served.

Theo. G. Barker, for appellant.

Henry A. M. Smith, for appellee.

Mr. Chief Justice FULLER, after stating the facts in the foregoing language, delivered the opinion of the court.