Carson v. Hawley
| Decision Date | 08 January 1901 |
| Docket Number | 12,274 - (100) |
| Parties | C. N. CARSON v. R. J. HAWLEY |
| Court | Minnesota Supreme Court |
Action in the district court for Pine county against defendant as sheriff of said county to recover $5,000 damages for conversion. The case was tried before Crosby, J., and a jury which rendered a verdict in favor of plaintiff for $102. From an order denying a motion for a new trial, plaintiff appealed. Reversed.
Fraudulent Conveyance.
A scheme by an insolvent debtor and a preferred creditor to dispose of the entire stock of such debtor, to put the purchase price into a homestead for the benefit of the debtor, and fraudulently apply the balance to pay the creditor, is not legally justifiable, so far, at least, as the preferred creditor is concerned.
Fraud -- Inadequacy of Price.
While a creditor has the right to purchase the entire stock of his debtor according to honest business methods, gross inadequacy of price paid by such creditor is a badge of fraud, and may furnish reasonable grounds of suspicion of the good faith of such transaction, the proper weight of which is a question of fact, to be settled in the usual way.
Evidence of Conspiracy.
When there has been evidence tending to show a conspiracy to execute a fraudulent design between a debtor and his creditor that would hinder and delay other creditors, the acts of the conspirators, properly confined to the details and execution of such scheme, in the absence of each other, are admissible against all.
Statements of Conspirators.
Where such individual acts in the execution of the common design are material, the statements in connection therewith of any party thereto, characterizing such acts, are also admissible in evidence as to all.
Witness -- Production of All Accounts, Books, etc.
A witness, in response to a subpoena, cannot be required to produce all his books, papers, and checks for a substantial period of time, in response to an omnibus demand for the same in such subpoena, and a refusal to comply with such a demand does not furnish evidence that can be properly used against the party refusing to do so on the trial of an action.
Trial -- Evidence -- Exception -- Review.
When in the progress of a trial, the court has received or excluded evidence, to which ruling a definite exception had been interposed, it is not necessary for the party claiming injury by such ruling to renew and continue such exceptions to evidence of the same character, from the same witness, in reasonable connection therewith, to avail himself of the alleged error upon review in this court.
Clapp & Macartney, for appellant.
A conveyance is not fraudulent as against creditors which prefers creditors. Smith v. Deidrick, 30 Minn. 60; Berry v. O'Connor, 33 Minn. 29; Bannon v. Bowler, 34 Minn. 416; Dow v. Sutphin, 47 Minn. 479. The intent to move upon the farm and establish thereby a homestead exemption so that the property could not be reached by his creditors was not such a fraudulent intent on the part of Crittenden as would avoid this sale. King v. Gotz, 70 Cal. 236; Fitzell v. Leaky, 72 Cal. 477; McCracken v. Harris, 54 Cal. 81; Sullivan v. Hendrickson, 54 Cal. 258; Hawthorne v. Smith, 3 Nev. 182; North v. Shearn, 15 Tex. 174; Chase v. Swayne, 88 Tex. 218; Finn v. Krut, 13 Tex. Civ. App. 36; Bell v. Beazley, 18 Tex. Civ. App. 639; Jacoby v. Parkland D. Co., 41 Minn. 227; Horton v. Kelly, 40 Minn. 193; Miller v. McCarty, 47 Minn. 321; Blake v. Boisjoli, 51 Minn. 296. It was insinuated on the trial that the alleged "conspiracy" was one whereby R.P. Smith & Sons Co. through plaintiff were to purchase the goods, pay their own debt out of the price, and pay the balance over to Crittenden. While there is no evidence of any such thing, if it had been true it would not have avoided this sale. Francis v. Rankin, 84 Ill. 169; Dudley v. Danforth, 61 N.Y. 626; Knower v. Central, 124 N.Y. 552.
Acts or declarations of the vendor, made or done after the sale, can never be introduced for the purpose of defeating it or impeaching his vendee's title. Burt v. McKinstry, 4 Minn. 146 (204); Derby v. Gallup, 5 Minn. 85 (119); Scott v. King, 7 Minn. 401 (494).
Mere inadequacy of consideration is not per se fraudulent unless so gross as to shock the moral sense. Jaeger v. Kelley, 52 N.Y. 274; McFadden v. Mitchell, 54 Cal. 628; Shay v. Wheeler, 69 Mich. 254; Mathews v. Reinhardt, 149 Ill. 635; Bierne v. Ray, 37 W.Va. 571; Fuller v. Brewster, 53 Md. 358; Motley v. Sawyer, 38 Me. 68; Doughten v. Gray, 10 N.J.Eq. 323, 330; Sherman v. Hogland, 73 Ind. 472, 477.
Palmer & Beek and McLaughlin & Boyesen, for respondent.
If a debtor, knowing himself to be hopelessly insolvent and without sufficient property to pay all his indebtedness, conspires with a creditor and with others secretly and hurriedly to dispose of all his unexempt property, worth $7,000, for $2,575, or any sum which may be offered for it, for the purpose of preventing his other creditors from collecting their claims or any part thereof, and such conspiracy is carried into effect, this is a fraud on the debtor's unfavored creditors; and it matters not whether the proceeds of the sale are used to pay the claim of the preferred creditors, or held and secreted for the purpose of paying off a mortgage on a homestead, or both, or for any other purpose. Wait, Fraud. Conv. (3d Ed.) §§ 232, 234, 239, 376; Hanson v. Bean, 51 Minn. 546. An insolvent debtor has no right to give away any portion of his property with the deliberate intent of placing it temporarily or for all time beyond the reach of his creditors. Camp v. Thompson, 25 Minn. 175; Filley v. Register, 4 Minn. 296 (391); Lathrop v. Clayton, 45 Minn. 124; Fish v. McDonnell, 42 Minn. 519; Solberg v. Peterson, 27 Minn. 431; Fisher v. Shelver, 53 Wis. 498; Bickler v. Kendall, 66 Iowa 703; Bartles v. Gibson, 17 F. 293; Doughten v. Gray, 10 N.J.Eq. 323, 330; Craver v. Miller, 65 Pa. St. 456; Motley v. Sawyer, 38 Me. 68; Hudgins v. Kemp, 20 How. 45, 50; Jacoby v. Parkland D. Co., 41 Minn. 227; Haven v. Richardson, 5 N.H. 113, 127.
N. A. Crittenden, a merchant at Pine City, having a stock of merchandise, consisting of clothing, furnishing goods, boots, and shoes, of the value of $7,000, was hopelessly insolvent. Among his creditors was the R.P. Smith & Sons Company, of Chicago, which held a claim against him for $679 then overdue. A general agent of the Smith Company (J. P. McMannis) called upon the debtor to secure payment. Crittenden was unable to meet this demand, and McMannis, according to the testimony of Crittenden, then proposed that the latter should sell his entire stock to a purchaser whom the Smith Company would procure for him, when he could pay its claim, and, as suggested by McMannis, take up a mortgage of $2,000, which was then a lien upon a farm owned by Crittenden and wife (but not occupied by them), for the purpose of securing the same as a homestead. After this interview between Crittenden and McMannis, the latter left the Smith Company claim with an attorney, and returned to Chicago.
A day or two afterwards Edward E. Smith, the head of the Smith Company, telegraphed plaintiff, who lived at Knoxville, Illinois, to come to Chicago, as they had a business "proposition" or "opportunity" for him. Plaintiff answered in person, arriving in Chicago in the afternoon, where he remained three days, having several interviews with Smith. On the day of his arrival he called at the office of the Smith Company, and made an appointment for a meeting next morning, at which time he had an interview with McMannis, and whatever arrangements were made for future dealings with Crittenden, on plaintiff's claim, were conducted at that time. Plaintiff then obtained three cashier's checks, one of $2,000 and two of $300 each, from the Illinois Trust & Savings Bank, and on the night following left Chicago for Pine City. McMannis accompanied him on the train to St. Paul, where plaintiff left him to go to Pine City. Before plaintiff left St. Paul, McMannis gave him a symbolic memorandum, signed "C.A.N." (Crittenden's initials reversed), under which was drawn a line, and the name "Jones" written beneath. This was given for the purpose of introducing plaintiff to Crittenden.
On the arrival of plaintiff at Pine City, he called upon the attorney who held the claim of the Smith Company, and then went to the store of Crittenden, and, after a short conversation, handed him the "C.A.N." memorandum. A talk ensued relating to the purchase of the entire stock of the debtor. An invoice was taken that night, when the value of the stock was estimated at $5,700. Shortly afterwards the plaintiff offered Crittenden $2,575 in cash for the same. Crittenden haggled, and demanded more, but the plaintiff made this offer his ultimatum, and the trade was closed. The stock was turned over to plaintiff, who entered immediately into possession, made some slight additions to the value of about $100, and proceeded to sell the same at low prices, until December 1 following, when, upon a writ of attachment issued at the instance of an unpaid creditor of Crittenden, the sheriff seized the unsold portion of the merchandise remaining in the store, amounting to about $4,000, upon the claim that the sale from Crittenden to plaintiff was fraudulent as against his unpaid creditors.
This action is brought against the sheriff by plaintiff to recover the value of the goods so taken. The plaintiff recovered $102, the value of the attached property which he had placed in the stock after taking possession. By this verdict the sale was necessarily found to be fraudulent as against the attaching creditor, except as to the goods concededly owned by plaintiff. Plaintiff moved for a new...
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