Haben v. Harshaw
| Decision Date | 11 May 1880 |
| Parties | HABEN v. HARSHAW |
| Court | Wisconsin Supreme Court |
Argued April 26, 1880
APPEAL from the County Court of Winnebago County.
Replevin. The goods in controversy formed part of the stock in trade of F. X. Haben & Co., and are valued at about $ 75. Plaintiff claims them by virtue of a chattel mortgage from the firm. Defendant justifies as sheriff under an attachment sued out by certain creditors of said firm.
The members of this firm were F. X. Haben and his father-in-law James Nagle. The business of the firm was that of a retail grocery, Nagle furnishing most of the capital. He was an old man, incapable of active business, and lived with Haben. The store in which the business was carried on was owned by Mrs Haben. Plaintiff was a brother of F. X. Haben, and was engaged in the clothing trade. The indebtedness for which the mortgage was given to the plaintiff was for goods furnished to the family of F. X. Haben; for money loaned to him, and used, as he testified, in the business; and also for goods furnished upon orders of F. X. Haben, given in payment for work upon the store building, and for merchandise used by the firm. The account was kept, upon the plaintiff's books in the name of F. X. Haben.
On July 1, 1876, the firm, with the consent of both partners, gave to plaintiff its note for $ 300 to pay this account, which then amounted to that sum; and on June 1, 1878, a further account of the same kind having accrued, amounting to $ 109.25, again gave its note for the last named amount. On September 10 1878, both these notes were taken up, and a new note given for the sum of $ 409.25, payable one day after date, and secured by chattel mortgage on the entire partnership stock valued at $ 600; under which mortgage plaintiff took possession the same day.
Upon the trial, the plaintiff was allowed, against defendant's objection, to introduce certain evidence as to the manner in which the members of the firm lived, and how their necessary expenses of living were paid. The nature of this testimony is indicated in the opinion.
The court charged the jury that the firm of Haben & Co. had the right, with the knowledge and consent of all the members, to assume the individual debt of a partner, and that, except as against existing creditors of the firm, it would thereby become a valid firm obligation. It also charged, among other things, that, "under the law that exists now, it is not an evidence of fraud, that a man prefers one creditor to another."
There was a verdict and judgment for the plaintiff; and defendant appealed.
Judgment affirmed.
For the appellant there was a brief by Finch & Barber, and oral argument by C. W. Felker:
A copartnership has no right to transfer partnership property for the payment of the individual debt of one partner, to the exclusion of the firm creditors. Keith v. Fink, 47 Ill., 274; Wilson v. Robertson, 21 N. Y., 587; Kirby v. Schoonmaker, 3 Barb. Ch., 48. The fraud upon the creditors of the copartnership was committed, not when the notes were given, but when the chattel mortgage was executed, when the firm property was appropriated to pay the notes. At least, the entire business should have been regarded as one transaction, and, if any part of it was tainted with fraud, the whole was bad. Coolidge v. Melvin, 42 N. H., 510; Bump on Fraud. Conv., 470. The court in effect instructed the jury that the attachment plaintiffs could not attack the mortgage, because they were not creditors at the time the original notes were given. Such a rule would encourage and assist fraud. The true rule is, that an intent to defraud antecedent creditors is prima facie evidence of an intent to defraud subsequent creditors. Horn v. Volcano Co., 13 Cal., 62; Carpenter v. Roe, 10 N. Y., 227; Hurdt v. Courtenay, 4 Met. (Ky.), 139. Paying off one debt by contracting another is not getting out of debt. In such instances the subsequent creditors are subrogated to the rights of the creditors whose claims their means have been used to pay. Madden v. Day, 1 Bailey, 337; Mills v. Morris, Hoff. Ch., 419; Savage v. Murphy, 34 N. Y., 508; Holmes v. Penney, 3 K. & J., 90; Brown v. McDonald, 1 Hill's Ch., 297; Wilson v. Buchanan, 7 Gratt., 334; Churchill v. Wells, 7 Cold., 364. In this case the court not only held that the subsequent creditors could not attack the validity of the transfer, but assumed as a fact that the prior debts of the firm had been paid. 2. The charge of the court upon the subject of preferring creditors was erroneous. Although a debtor may make choice of the person whom he will pay, the very fact of preference may be considered by the jury in determining the question of good faith. The right must be exercised in such way as not to hinder and delay creditors. Stoddard v. Butler, 20 Wend., 507; Kilby v. Haggin, 3 J. J. Marsh., 208; Crowninshield v. Kittridge, 7 Met., 520; Bunn v. Ahl, 22 Pa. St., 387; Robinson v. Stewart, 10 N. Y., 189.
Moses Hooper, for the respondent:
If any fraud upon the creditors of F. X. Haben & Co. was intended or perpetrated, it was when the notes were first given to balance plaintiff's accounts. But there is no fact in the history of the matter indicating fraud. The accounts were really firm accounts. The family of F. X. Haben was really the firm, and the merchandizing and support of the family were all one joint operation of the firm. These notes of the firm having been duly given, there could be no constructive fraud in making a new firm note or mortgage to secure their payment. A creditor may lawfully seek preference. Ferguson v. Kumler, 11 Minn., 104; Keen v Kleckner, 42 Pa. St., 529; Lord v. Fisher, 19 Ind., 7; Wheaton v. Neville, 19 Cal., 41; Bump on Fraud. Conv., 217-21. But even if the accounts were private, the charge of the court that the firm had the...
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