Camp v. Thompson
| Decision Date | 11 July 1878 |
| Citation | 25 Minn. 175 |
| Parties | George A. Camp and others v. Nathaniel R. Thompson and another |
| Court | Minnesota Supreme Court |
[Syllabus Material] [Syllabus Material]
Action for the wrongful taking and conversion of a large quantity of lumber belonging to the plaintiffs. Defence that the lumber was taken from the possession of one Clark by the defendant Thompson, as sheriff of the county of Hennepin, under a writ of attachment duly issued in an action brought against Clark by the State National Bank, the other defendant herein; that the lumber was the property of Clark, who, being insolvent had transferred it to plaintiffs with intent to defraud his creditors, and that plaintiffs received the transfer with knowledge of such intent of Clark, and with intent on their part to aid him in effecting such fraud. At the trial in the district court for Hennepin county, before Young, J., the plaintiff had a verdict; a new trial was refused, and the defendants appealed.
Order affirmed.
Smith & Hale, for appellants.
The bill of sale and Exhibit C did not constitute a mortgage for Clark retained no interest in the property, but only in the proceeds after paying plaintiffs' debt, expenses of sale, insurance, ground-rent, etc. Had the parties intended merely to secure plaintiffs and not to defraud other creditors, they would have done so by a mortgage, in which case other creditors of Clark would not have been hindered, for they could have levied on the property subject to the mortgage debt. But the bill of sale, Exhibit B, was absolute in form, and was put on record, and thus it was held out to the world that plaintiffs were absolute owners of the property. And even as between them and Clark, they were unlimited as to the manner and terms and time of making sales. Exhibit C was not recorded, and the trust for Clark in the balance of the proceeds was as secret as if it had not been put into writing. Clark had the same benefit from the lumber that he would have had, if disposing of it himself, while it remained perfectly secure from his other creditors. Such a transaction -- a bill of sale with a secret trust -- is void under Gen. St. c. 41, § 14, and is fraudulent at common law, because the bill of sale holds out false colors, it is evidence to prove the contract to be different from what it really was, and is calculated and may be used to deceive creditors; and the law presumes that one who buys goods of a person in debt, and takes evidence of the contract which is in its nature false, intends to use it for purposes of deception. Parker v. Pattee, 4 N.H. 176; and see Coburn v. Pickering, 3 N.H. 415; Bryant v. Young, 21 Ala. 264; Chenery v. Palmer, 6 Cal. 119; Halcombe v. Ray, 1 Ired. 340; McCulloch v. Hutchinson, 7 Watts 434. That the reservation in Clark's favor made the transaction void, see Maberry v. Shisler, 1 Harrington 349; Green v. Trieber, 3 Md. 11; Goodrich v. Downs, 6 Hill. 438; Barney v. Griffin, 2 N.Y. 365; Lansing v. Woodworth, 1 Sandf. Ch. 43; Berry v. Riley, 2 Barb. 307; Strong v. Skinner, 4 Barb. 546; Dana v. Lull, 17 Vt. 390; Truitt v. Caldwell, 3 Minn. 257 (364;) Banning v. Sibley, 3 Minn. 282 (389.) The true interpretation of the statute against trusts reserved in conveyances of chattels is found in Goodrich v. Downs, 6 Hill. 438; the lax construction given in Curtis v. Leavitt, 15 N.Y. 9, destroys its effect.
The court erred in its instruction that if the property was of no greater value than the consideration paid, or if Clark was solvent at the time, the transaction was not fraudulent. It matters not whether the surplus be large or small. The reservation to Clark of an interest in the surplus shows that a surplus was contemplated, and the reservation to Clark was a fraud on his creditors which was consummated when the instrument containing the reservation was delivered. Leitch v. Hollister, 4 N.Y. 211; and see Goodrich v. Downs, 6 Hill 438; Barney v. Griffin, 2 N.Y. 365; Dana v. Lull, 17 Vt. 390.
It is not disputed that Clark was financially embarassed at the time of the transaction. He could not pay his debts as they became due, and, being a manufacturer and dealer in lumber, this condition was that of insolvency, within the established meaning of that term in reference to merchants, traders and manufacturers; and the court erred in refusing the defendants' request to give this definition of insolvency, and in charging them that if Clark "had in his own name, subject to be levied on by execution, sufficient property to pay all his debts," he was solvent. But whether he was solvent or not is immaterial. A transfer of goods made with intent to hinder, delay or defraud creditors, is void as against existing creditors of the person making it, without regard to his solvency. The jury might have found that the transfer was made with one or more of these three intents, and yet, under the instruction of the court, they would be bound to find for the plaintiffs, unless they also believed that Clark was insolvent, within the definition given by the court, at the time the transfer was made. But the validity of the transaction depended solely on the existence of an intent to hinder, delay or defraud creditors, and not upon whether a remedy was or was not open to the creditors by resort to Clark's other property. Wakeman v. Grover, 4 Paige 23; S.C. Grover v. Wakeman, 1 Wend. 187; Hyslop v. Clarke, 14 John. 458; Halsey v. Whitney, 4 Mason 206; Green v. Trieber, 3 Md. 11.
The court erred in leaving the question of intent to the jury at all. It should have determined, from the writings themselves, what the intent was; Greenleaf v. Edes, 2 Minn. 226 (264;) Truitt v. Caldwell, 3 Minn. 257 (364;) Burt v. McKinstry, 4 Minn. 146 (204;) Filley v. Register, 4 Minn. 296 (391;) Mower v. Hanford, 6 Minn. 372 (535;) and should have instructed them that the transfer was fraudulent.
Bradley & Morrison, for respondents.
The transfer was of but a part of the debtor's property, and was largely for a present consideration. He then had other property, subject to execution, largely in excess of his debts. In such a case a reservation of the surplus to the debtor, after payment of the particular debt, does not avoid the transfer. Wilkes v. Ferris, 5 John. 335; Leitch v. Hollister, 4 N.Y. 211; Nicholson v. Leavitt, 6 N.Y. 516; Curtis v. Leavitt, 15 N.Y. 9, 204; Beck v. Burdett, 1 Paige 305. In Truitt v. Caldwell, 3 Minn. 257 (364,) the transfer was an assignment of all the debtor's property for benefit of creditors. In other cases cited by defendants the transfers were made by insolvents.
The transaction was not a conveyance in trust for Clark. Goodrich v. Downs, 6 Hill 438, is not in point, and the dictum in that case, relied on by defendants, was distinctly overruled in Curtis v. Leavitt, 15 N.Y. 9, 114, cited and approved in Truitt v. Caldwell, 3 Minn. 257 (364,) and directly sustained in Vose v. Stickney, 19 Minn. 367. The question is not an open one in this state.
The principal question in this case is whether certain lumber was conveyed by one Clark to the plaintiffs, with intent to hinder, delay or defraud creditors. It appeared that, in September, 1875, Clark entered into a contract (Exhibit A) with plaintiffs, whereby he purchased the right to cut logs upon their land at an agreed stumpage, and, to secure the payment thereof, and of such sums as might be expended by plaintiffs in relation to the logs, it was agreed that the title to the logs should remain in plaintiffs until the money due them on account thereof should be paid. The contract further provided that in case Clark did not pay for the logs by a given time, he might saw them, and deliver to plaintiffs, for their security, the lumber made therefrom and from other logs, to a specified amount. The testimony in the case went to show that, pursuant to the contract, Clark sawed a part of the logs, and delivered to plaintiffs the lumber in controversy; that he stopped delivering lumber in October, 1876; that at that time, his indebtedness to plaintiffs for stumpage and advances was over $ 12,000; that being desirous of procuring more money, he made a bill of sale (Exhibit B) of the lumber to plaintiffs, receiving from them the paper, Exhibit C, and money sufficient to make up, with stumpage and previous advances, $ 13,000, and supplies to the amount of $ 1,500, in all $ 14,500, and that he also received from plaintiffs a transfer of all the unmanufactured logs held by them as security under Exhibit A, and which were of the value of about $ 5,000. ...
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