Benham v. Ham

• Decision Date: 26 October 1892
• Parties: BENHAM ET AL. v. HAM ET AL.
• Court: Washington Supreme Court

31 P. 459

5 Wash. 128

BENHAM ET AL. v. HAM ET AL.

Supreme Court of Washington

October 26, 1892

Appeal from superior court, Spokane county; JAMES Z. MOORE, Judge.

Bill by Lucius T. Benham and Thomas S. Griffith against David T. Ham Wallace Doty, and James G. White to have set aside as fraudulent an assignment for the benefit of creditors, made by Doty to White, and a chattel mortgage by Doty to Ham. The court decreed that the assignment was valid, but that the mortgage was void, from which plaintiffs and defendant Ham appeal. Reversed, and decree for defendant ordered.

Jay H. Adams and Jones &amp Voorhees, for defendant David T. Ham, submit that a lien by attachment will not support a creditors' bill, citing Thurber v Blanck, 50 N.Y. 80; Martin v. Michael, 23 Mo 50; Weil v. Lankins, 3 Neb. 384; Weinland v. Cochran, 9 Neb. 480, 4 N.W. 67; Tennent v. Battey, 18 Kan. 324; Brooks v. Stone, 19 How. Pr. 395; Melville v. Brown, 16 N. J. Law, 364; Bigelow v. Andress, 31 Ill. 322; Reubens v. Joel, 13 N.Y. 488; Crippen v. Hudson, Id. 161; Goembel v. Arnett, 100 Ill. 34; Crowell v. Horack, (Neb.) 12 N.W. 99; Talbott v. Randall, (N. M.) 5 P. Rep. 533; Stewart v. Fagan, 2 Woods, 215; McMinn v. Whelan, 27 Cal. 315; Jones v. Green, 1 Wall. 330; Wiggins v. Armstrong, 2 Johns. Ch. 144; Brinkerhoff v. Brown, 4 Johns. Ch. 671; Lawton v. Levy, 2 Edw. Ch. 197; Ex parte Boyd, 105 U.S. 653; Griffin v. Nitcher, 57 Me. 270; 1 Jones, Liens, § 12; 3 Pom. Eq. Jur. § 1415. Second. Under no established rule of contractual construction can the mortgage and deed of assignment in this case be held to operate as a single contract. Warren v. His Creditors, (Wash.) 28 P. 257; Garretson v. Brown, 26 N. J. Law, 425; Gage v. Parry, (Iowa,) 29 N.W. 824; Sweetser v. Camp, (Mich.) 29 N.W. 506; Root v. Potter, (Mich.) 26 N.W. 682; Farwell v. Jones, (Iowa,) 19 N.W. 241; Nelson v. Gary, (Neb.) 19 N.W. 630; Bank v. Sanchez, 131 Ill. 330, 23 N.E. 405; Hier v. Kaufman, 134 Ill. 218, 25 N.E. 517; Gilbert v. McCorkle, 110 Ind. 215, 11 N.E. 296; Weber v. Mick, 131 Ill. 520, 23 N.E. 646; New v. Sailors, 114 Ind. 407, 16 N.E. 609; Etheridge v. Sperry, 139 U.S. 266, 11 S.Ct. 565; Clark v. Hyman,55 Iowa, 14, 7 N.W. 386; Haven v. Low, 2 N. H. 13; Holbrook v. Baker, 5 Greenl. 309; Frankhouser v. Ellett, 22 Kan. 127; Roundy v. Converse, 71 Wis. 524, 37 N.W. 811; Whitson v. Griffis, 39 Kan. 211, 17 P. 801; Murray v. McNealy, 86 Ala. 234, 5 So. Rep. 565; Peabody v. Landon, 61 Vt. 318, 17 A. 781; Rindskopf v. Vaughan, 40 F. Rep. 394; Stevens v. Breen, (Wis.) 44 N.W. 645; Rosenberg v. Thompson, (Ky.) 8 S.W. Rep. 895; Hughes v. Cory, 20 Iowa, 399; Argall v. Seymour, 48 F. Rep. 548; McKay v. Shotwell, (Dak.) 50 N.W. 622.

DUNBAR, J.

The first question that presents itself in this case is, is it necessary to reduce a claim to judgment, issue an execution and secure a return of nulla bona made thereon, to support a creditors' bill, or is an attachment lien a sufficient basis for such an action? Many cases have been cited both by appellant and respondents on this proposition, and from an investigation of the cases it must be conceded that the weight of opinion, considering both the old cases and the new, sustains the doctrine that the claimant must press his claim to judgment, send out his execution, and show a fruitless search for property before he can appeal to a court of equity to set aside a fraudulent conveyance. But we are satisfied that the trend of modern decision is the other way. At all events, the decisions of courts are so conflicting that this court feels justified in adopting that rule which seems to it best calculated to protect the interests of bona fide creditors from fraudulent transactions. We think no good purpose can be subserved by compelling a creditor to await his judgment, but that the effect will be to aid dishonest debtors in fraudulently disposing of their property. And especially, in view of the language used by the supreme court of the territory in Arms Co. v. Swarts, 2 Wash. T. 412, 7 P. 859, and Thompson v. Caton, 3 Wash. T. 31, 13 P. 185, we fell justified in now deciding that, where a lien has been obtained by attachment, on the property in controversy, and it appears by bill that the debtor is insolvent, and the issuing of an execution would be of no practical utility, the obtaining of the judgment, and the issuance of an execution thereon, is not a necessary prerequisite to equitable interference.

The next question to be considered involves the validity of the mortgage. The mortgage from Doty to Ham was executed on Friday, November 13th, and the assignment of Doty to White was executed the following Monday, to wit, November 16th. The court below held that the assignment was valid, but that the mortgage was void. It is contended by appellant that under the circumstances of this case, as shown by the proof, the mortgage to Ham and the assignment to White should be considered together, and, being so construed, they should both be held to be void, as being contrary to the statutes against preferences; and many cases are cited by both appellant and respondents, respectively, in support of and opposed to this doctrine. If the contention of the appellant on this proposition be true, the judgment of the court cannot be sustained, either on reason or authority for, if the instruments are to be construed together, it plainly follows that, if the mortgage is void, the assignment is void also. Neither can be held to be void, excepting on the theory that the two together comprised a general scheme to prevent an equal distribution of the estate among the creditors; and, of course, it logically follows that, being construed together, they must stand or fall together. We have carefully examined all the authorities cited on this proposition, and do not think that even many of the authorities cited by appellant sustain his contention in their application to this particular case. In Berger v. Verrelmann, (N. Y.) 27 N.E. 1065, which was one of the strongest cases cited by appellant, the court seems to have felt itself bound by the findings of the lower court. The contention of the judgment creditor in that case was that the lower court did not find as a fact that the assignors confessed the judgment in contemplation of making a general assignment as a part thereof, and for the purpose of preferring the creditor in that case, and that the confession of judgment, the execution, and levy were made in fraud for the general assignment, but that the trial judge stated such fact as a conclusion of law. And the appellate court said: "This contention is not well founded, for it is well settled that, though a 'finding of fact' be called a 'conclusion of law,' and improperly classified as such, in the decision signed it will, for the purpose of upholding the judgment, be given the same effect as though embraced within, and designated as one of, the findings of fact." Of course, if the court accepted these findings of fact, it could not do otherwise than hold the transactions to be fraudulent. It is, after all, a question of intention; a question of the bona fides of the transaction. If it is shown to be a fact that the instruments were intended to be a part of one transaction, then, of course, they must be construed together, no matter whether they were executed on the same day or on different days; and it must be determined from the circumstances surrounding each particular case whether or not it falls within the rule. It is an undisputed proposition of law that the creditor has a right to secure the payment of his debts, even to the extent of absorbing all the estate of his debtor, and to the exclusion of the claims of all other creditors. This is nothing more than the exercise of good business judgment and prudence, and no presumption of fraud will attach by reason of the exercise of this right, simply because a short...