Tabor v. Bank of Leadville

35 Colo. 1

• Court: Supreme Court of Colorado
• Decided: September 15, 1905
• Docket: No. 5017; No. 2567 C. A.
• Status: Published

Opinion

Mr. Justice Campbell

delivered the opinion of the court.

1. This action was against a bank organized, as a corporation, under the laws of this state. Its business, so long as the same was prosecuted, was carried on exclusively in Lake county, Colorado. This action was begun in the district court of Arapahoe county. The service of summons was made upon one of the bank’s stockholders who was found in Arapahoe county. On the day of service or the one next succeeding this stockholder in such capacity employed a lawyer 'to represent the bank in the action, and this lawyer immediately entered into a stipulation with plaintiff’s counsel which amounted to a compromise judgment against defendant for $54,412. The garnishee here claims that this judgment was void, and for that reason alone he should be discharged as garnishee, even though he have assets of defendant in his possession. It is said, first, that the service of process upon a stockholder, in the circumstances, was invalid; and, second, that as the result of a corrupt bargain with plaintiff the stockholder was induced to' come from his own home into Arapahoe county for the express purpose- of having summons served upon him, and that, as the result of a like corrupt contract with the plaintiff, he wrongfully secured the stipulation to he- made by the attorney for the entry of the judgment.

Plaintiff denies these charges, but we do not propose to consider them, if for no other reason than that the judgment is palpably void on other grounds. The service of the summons was made upon the stockholder as such; and in that capacity, wdthont any authority from the president or cashier' or any officer or director or authorized agent of the bank, he proceeded to employ counsel for the bank and directed him to stipulate for judgment. A mere stockholder of a corporation is not its agent, and cannot bind it by his own acts or by the acts of the attorney whom he employs. — Union G. M. Co. v. R. M. Bank, 2 Colo. 565; 10 Cyc. 760, 936.

But the plaintiff says that, in the very action, the court which rendered the judgment on the stipulation had authority to- determine and as a matter of law did favorably pass upon the authority of the attorney to make such a stipulation and give his consent in the name of the bank for the entry of the judgment, and such declaration is conclusive upon the garnishee. Our court of appeals in Everett v. Conn. Mut. L. Ins. Co., 4 Colo. App. 509, held that it is necessary for a plaintiff to obtain a valid judgment against the principal defendant in order to charge the garnishee-; and it is further therein held, in accordance with what we consider to be the law, that the garnishee at his peril is bound to assert all jurisdictional defenses in order to- protect himself in case suit is brought against him by his original creditor. The assertion of such defenses by a garnishee is not a collateral attack upon the judgment against the defendant. It is a direct attack which he is permitted to make in the action in which he is sought to he held, and if he neglects to assert jurisdictional defects in the judgment against his creditor which are known to him he does so at his peril, and a judgment rendered against him as a result of a failure to assert them will he no protection to him in case the defendant subsequently brings action against him upon the same demand.

The garnishee therefore in this action is in a position to and he did assert the jurisdictional defect in the judgment obtained against the defendant in this action. He was aware of it, and so pleaded it. Since a stockholder has no. inherent authority to act as agent of his corporation or to employ counsel to stipulate for judgment against it, and it appearing here that the stockholder had no special authority from the bank either to employ counsel, or by himself or through the attorney to confess judgment, we hold that the judgment entered upon the stipulation is, as against the defendant and this garnishee, entirely void. For this reason also the judgment below discharging the garnishee may be upheld. — 9 Enc. Pl. & Pr. 810 et seq.; McPhee v. Gomer, 6 Colo. App. 461.

2. But there is another reason, based upon the merits, why the garnishee should not be held. The receivership proceeding in which an award to. the present garnishee was made, of the same sum which plaintiff claims here was declared void by this court.—Jones v. Bank of Leadville, 10 Colo. 464. "We may concede, for our present purpose, that the allowance therein made to the receiver (garnishee here) was also void. It may be that the assignment by the bank to> Trimble was voidable, and that, he took no steps thereunder. The garnishee, it is true, relies in part upon allowances in his favor in the proceedings referred to. He also, insists on his demand against defendant for compensation and disbursement, irrespective of the former judgment therefor in his favor. We shall assume but not decide that the plaintiff in this action is not bound or affected by the assignment or by any order or judgment in Trimble’s favor made in the receivership or in the Jones or Breene cases. We therefore proceed with this case as though the garnishee had in his possession when served with process in this action $24,123.68 which belonged to the defendant unaffected by any previous allowance. .

By section 130 of the attachment and garnishment act of the Civil Code the garnishee is. allowed to retain or deduct out of the property or credits of the defendant in his hands, all demands against the defendant of which he could have availed himself had he n’ot been summoned as garnishee, and this court has ruled that the garnishee may plead as a defense or set-off whatever he might have pleaded were the suit directly against him by his own creditor.—Sauer v. Town of Nevadaville, 14 Colo. 54. In the opinion in that case was cited with approval § 462 of Drake on Attachments, where the learned author says that under no circumstances shall a garnishee, by the operation of the proceedings against him, be placed in any worse condition than he would'be if the defendant’s claim against him were enforced by the defendant himself.

See also 14 Am. & Eng. Ency. of Law (2d ed.) 845 et seq. This is the rule in the absence of fraud, and no question of fraud is here involved.

The garnishee’s liability in this action therefore is precisely what it would be were he defending against an action brought directly against him by the bank to recover upon the claim made here against him'by the plaintiff. It is the plaintiff’s contention-that because the receivership and assignment were void as to the bank’s creditors and because the possession of the bank’s property which Trimble took and all of his acts with reference thereto were under an invalid possession, he is not entitled to any compensation for his own services or for disbursements made by him in converting into money the bank’s property.

It is the law that where a receiver is appointed without authority by a court the court making the appointment has not the power and ought not to award him in that proceeding compensation for his services out of the trust property. It may be and has been conceded that neither in the receivership proceeding nor under the assignment could the court have made such allowances to Trimble. It is well set-tied — and the plaintiff so' concedes, but says the doctrine does not here apply — that in a proper action a receiver thus appointed may recover compensation for his services against the person responsible for his ap7 pointment.—German Nat. Bank v. Best, 32 Colo. 192. In perfect good faith, and under the advice of counsel and with the approval and order of the district court, and at the direct instance and upon the petition of the bank itself, Trimble took possession of its property and administered its affairs. So far as Ms rights are concerned, it makes no difference if the assignment and receivership were void. All of his acts with reference to the bank’s property were done at its instance and request and with its knowledge.

But plaintiff says that the meeting of the board of directors of the. bank at which were passed the resolutions requesting Trimble to act as receiver and assignee and to také possession thereunder and administer its assets was illegal in that all of the directors did not receive notice and all were not present and participating. Not only for this reason, but also because a receiver could not be appointed upon the petition of the bank itself, counsel say it follows as a matter of law that the hank itself was not responsible for and did not and conld not secure Trimble’s appointment. Let ns see what -are the facts

There were five directors of the bank, one of whom, tlie president, had permanently removed from and was not in the state at the time. The evidence tends to show that the other four had notice of and that three were present at and participated in the meeting. Three constituted a majority of the board, and of the three present one owned 490 of the 500 shares of the capital stock of the bank, and the other 10 shares were owned by the other two participating directors. In addition to this, not only did the officers and directors of the bank stand by without protest or objection, but on the contrary gave their consent and approbation while Trimble’proceeded for more than five years to give his services, employ counsel and clerical assistance in administering upon and collecting its assets. $45,140.93 which Trimble collected of the bank’s assets he turned over to the bank’s judgment creditors under a valid order of the court in an action to which the bank itself was a party, without any objection or protest on its part or that of its managing officers. Other indebtedness of the bank was also' paid by Trimble in the same way. In these circumstances therefore, especially since the bank has had the benefit of Trimble’s services, it should be held accountable for a reasonable compensation for his own services and his expenditures.

This is not a case where, under its charter, the bank was acting ultra vires. It may be and doubtless is true, and for the purposes of this case we have so assumed, that the bank did not through its officers properly exercise its power in securing the appointment of a receiver or in making the assignment. But undoubtedly the bank had the power to make an assigixment of its property for the benefit of creditors and to'give Trimble possession of its assets for such purpose. ’ Merely because it improperly exercised an undoubted power that it possessed does, not constitute its act ultra vires in the sense that it can escape, all liability therefor. Having apparently clothed Trimble, and as he believed, with the power to administer its assets, the bank, even though in the particular exercise of the power to that end it did not proceed regularly, must compensate him for his services, since it has reaped their benefits and must be held to have ratified the action.

This conclusion is clearly warranted by Jones v. Langhorne, 19 Colo. 206, particularly by the opinion on rehearing of Mr. Justice Elliott wherein he says, referring to the same void order of appointment as that involved here, that where it appears that the bank not only received but has hitherto retained the fruits of a void order it is held estopped to question the validity of the proceedings by which it obtained money.—5 Thompson on Corp., §§ 5975, 5978; Brice on Ultra Vires (3d ed.) 37 et seq.; 10 Cyc. 1068-1078.

In thus disposing of this case in favor of the garnishee upon two substantial grounds it has not been necessary to consider his plea of the statute of limitations and the offset asserted. It may be well to add that, in reciting as facts that which we think the record discloses, we have not overlooked plaintiff’s contention that they are not in all respects as we have expressed them. But the stipulation which was entered into by counsel and used upon the trial constitutes a part of the bill of exceptions which the plaintiff herself has pi'epared. It therefore is binding upon her, and, together with the evidence which was produced, which is also embodied in the bill, tends to show the facts to be as we have outlined them, and upholds the findings of the trial court upon which its judgment was founded.

The discussion of counsel as to the burden of proof we do not consider important, though the usual rule is that the burden of establishing the garnishee’s liability rests upon the plaintiff. But here the preponderance of the uncontradieted evidence is so clearly in the garnishee’s favor, not only as to1 the reasonableness of the amount claimed by him for allowances, but upon the other material issues in the case, that we deem the question of the burden of proof of no practical moment.

Because the plaintiff’s judgment against the defendant is as to this garnishee void, and upon the merits the garnishee is entitled as against the bank and alsa as against the plaintiff to retain for his compensation the money of the bank which he had in his hands, the judgment of the court below, which so determined, is affirmed. Affirmed.

Chief Justice Gabbert and Mr. Justice Bailey concur.