BROWN v. DRAKE, receiver

Supreme Court of Georgia1897-05-07

101 Ga. 130

Summary · law.co

Holding. The judgment is reversed. A receiver properly appointed by a competent court and authorized to collect claims may prosecute suits without demonstrating the legal necessity for the receivership, and a defendant cannot defend on technical grounds regarding the receivership; additionally, the trial court erred in striking pleadings that alleged potential valid defenses without determining whether the defendant would necessarily rely on improper parol evidence to establish them.

The Farmers' Co-operative Manufacturing Company, through its court-appointed receiver R. H. Drake, sued W. J. Brown in justice's court to collect on a promissory note for $100 described as a stock subscription. Brown appealed to superior court and challenged Drake's standing to prosecute the action, arguing the receiver had failed to demonstrate legal necessity for his appointment. The court rejected this challenge, holding that once a receiver is properly appointed by a court of competent jurisdiction and authorized to collect company claims, the defendant cannot attack the suit on technical grounds relating to the wisdom or necessity of the receivership.

Brown raised several defenses, including that the company guaranteed a 25 percent dividend (never paid), agreed to cancel the note if he declined the stock (which he did), obtained the note through fraud and misrepresentation, and that the actual consideration was a separate business arrangement involving cottonseed meal and fertilizer sales that the company breached. The trial judge struck all these defensive pleas. Brown also sought to file an additional plea asserting complete lack of consideration, which the court refused to allow.

The appellate court found the trial judge likely believed Brown was attempting to modify the written note through parol evidence, which would be improper. However, the court held that Brown's allegations, if proven by written evidence, could constitute valid defenses, and he should not have been summarily prevented from attempting to establish them. The court emphasized that the sufficiency of pleadings cannot be judged by the likelihood of successfully proving them.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Standing and authority of a court-appointed receiver to prosecute claims
Whether defendant must challenge necessity of receiver appointment
Propriety of striking pleadings that allege potential defenses
Distinction between invalid parol modification and permissible written evidence of defenses
Standards for testing legal sufficiency of pleadings

Procedural posture

The case was originally brought in justice's court by the company against Brown on a promissory note, then appealed to superior court where the receiver continued the action, and subsequently appealed to this court.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Lumpkin, P. J.

As originally instituted, this was a suit in a justice’s court, brought by the Farmers’ Co-operative Manufacturing Company against W. J. Brown as maker of a promissory note for $100, bearing interest from maturity, in which it was recited that this amount was the maker’s “ subscription to the stock, at par, of said Farmers’ Co-operative Manufacturing Company.” The case was appealed to the superior court, and in that court the action was prosecuted by R. H. Drake, as the duly appointed receiver of that company.

As evidence of his right to prosecute this suit, Drake introduced a certified copy of an order of Spalding superior court, dated December 20, 1892, which was passed after the action was commenced in the justice’s court, appointing him receiver for the Farmers’ Co-operative Manufacturing Company; a certified copy of his bond as such; and a certified copy of an order of Spalding superior court, dated March 3, 1893, authorizing him as such receiver to institute suits for the purpose of collecting claims due the company. , It was insisted before this court that he should have gone further and shown that there was a legal necessity for his appointment; that merely proving his appointment by a court of competent jurisdiction would not suffice; but that it was incumbent upon him to show he “ was appointed at the instance of creditors of the company, and that it was necessary to collect the subscriptions to stock in order to pay the debts of the company.” We do not think this point was well taken. With the legal necessity for the appointment of a receiver, the defendant had no concern. If, as was affirmatively shown, the receiver was appointed by a court of competent jurisdiction and was authorized to collect claims due the company, the result of the suit would operate as an effectual bar to any future action which might be brought by the company in its own behalf or at the instance of creditors. To whatever rights either had in the premises, the receiver succeeded ; and the defendant could not defend the action on the technical ground that his appointment was ill-advised and unnecessary, even were this true in point of fact.

The defendant pleaded not indebted; that the company had agreed to guarantee a dividend of 25 per cent.- on the stock, which had never been paid, and had further agreed to cancel the note sued on, if defendant notified the company before the note matured of his election not to take stock in the enterprise, which he did, and no certificate of stock was ever issued to him; that “ said note was obtained through fraud and misrepresentations,” and there had been a total failure of consideration, etc., etc. He also set up an agreement between himself and the company, under the terms of which the latter was to furnish him cottonseed meal and hulls in exchange for cottonseed, and to sell him farm-fertilizers, at a named price, with a view to his establishing an agency and making a profit thereon, which agreement was the real consideration of the note sued on, but with which the company had refused to com ply, and he had in consequence sustained loss. The pleas of the defendant setting up these various grounds of defense were stricken by the court, to which action exception is taken ; and complaint is also made that the court refused to allow him to file a plea alleging that “the note sued on was given without any consideration whatever. ”

It may be that the trial judge proceeded upon the idea that the defendant, in so far as he alleged that his promise was conditional only and founded upon a consideration different from that recited in the note, was attempting to engraft upon a written contract stipulations not therein expressed, and thus to vary its terms by parol. This the defendant would not, of course, be permitted to do. Wyche v. Winship, 13 Ga. 208 ; Griswold v. Scott, Ibid. 210; Pitts v. Allen, 72 Ga. 69 ; Allen v. Young, 62 Ga. 617, followed in Patterson v. Ramspeck & Green, 81 Ga. 808. But it can not be arbitrarily assumed that such was the defendant’s purpose, or that he would have been unable to establish his defenses by competent written evidence. As he alleged in his pleas matters which, if sustained by such proof, would constitute a good defense to the action, and it does not appear from the pleas themselves that he depended for their establishment upon parol evidence, they should not have been stricken. However grave a doubt may be entertained as to the ability of a party to prove by competent evidence what he alleges, he should not be summarily cut off from an opportunity to do so. The probability or improbability of his being able to legally prove his case or defense as laid can not serve as a test for determining the legal sufficiency of his pleadings.

Judgment reversed.

All the Justices concurring.