Ames & Frost Co. v. Heslet

• Decision Date: 08 February 1897
• Parties: AMES & FROST CO. et al. v. HESLET et al.
• Court: Montana Supreme Court

47 P. 805

19 Mont. 188

AMES & FROST CO. et al. v. HESLET et al.

Supreme Court of Montana

February 8, 1897

Appeal from district court, Silver Bow county; J. J. McHatton Judge.

Action by the Ames & Frost Company and others against James K Heslet and others to set aside an assignment for the benefit of creditors of the J. Chauvin Northwestern Furniture Company. From a judgment for defendants, and from an order denying a motion for new trial, plaintiffs appeal. Affirmed.

The J Chauvin Northwestern Furniture Company, a corporation of Butte, Mont., being unable to pay its debts, and being threatened by W. A. Clark & Bro., one of its largest creditors, with an attachment suit, executed a general assignment for the benefit of its creditors, in which said W A. Clark & Bro. and several other creditors were preferred. Plaintiffs, as judgment creditors of the corporation, instituted an action to set aside this assignment. The following stipulation was entered into between the plaintiffs and defendants in the lower court: "It is agreed between the parties hereto that the question to be tried before the court is whether an insolvent corporation, under the law, can make an assignment of its entire property and assets, and in such an assignment prefer one creditor to another, under the facts hereinbefore recited. This is the only issue to be determined in this cause." Judgment was rendered for the defendants, and plaintiffs, appeal from the judgment and the order denying a motion for a new trial.

Forbis & Forbis and Bangs, Wood & Bangs, for appellants.

Corbett & Wellcome, for respondents.

BUCK J. (after stating the facts).

The determination of this appeal depends upon whether or not an insolvent corporation can make an assignment for the benefit of creditors, with preferences. Appellants' counsel insists that such an assignment is void. Their reasoning is substantially as follows: The assets of the corporation constitute a trust fund for its creditors, to which equitable liens at once attach in favor of each and every creditors upon insolvency. An insolvent corporation stands upon a different footing from an insolvent individual, because with insolvency the legal existence of the former is virtually at an end, while in the case of the latter he may subsequently accumulate property, and pay all his debts. They and the judges and text writers who support this view urge that it is most unjust and illogical to hold that such a corporation, by an assignment of its entire property,--an act which in itself prevents any resumption of business operations,--should be permitted to favor one lienholder at the expense of another. There are innumerable authorities replete with arguments for and against this contention, and it would be...