Hahn v. Salmon

• Decision Date: 18 July 1884
• Citation: 20 F. 801
• Parties: HAHN v. SALMON and others.
• Court: U.S. District Court — District of Oregon

20 F. 801

HAHN v. SALMON and others.

United States Circuit Court, D. Oregon.

July 18, 1884

M. W Fechheimer, for plaintiff.

Joseph Simon, for defendants.

DEADY J.

This suit is brought by the plaintiff, a citizen of California against the defendants A. Salmon and L. Bettman, citizens of Oregon, to have declared void and set aside an assignment made by the former to the latter, on March 1, 1884, with intent to hinder and delay, cheat and defraud, the plaintiff and others, his San Francisco creditors. By section 1 of the act of October 18, 1878 (Sess. Laws, 36,) entitled "An act to secure creditors a just division of the estates of debtors who convey to assignees for the benefit of creditors," it is provided that "no assignment of property by an insolvent, or in contemplation of insolvency, for the benefit of creditors, shall be valid, unless it be made for the benefit of all his creditors in proportion to the amount of their respective claims; and such assignment shall have the effect to discharge any and all attachments on which judgment shall not have been taken at the date of such assignment." Provision is made in the act for the administration of the debtor's estate by the assignee, and the distribution of the proceeds ratably among his creditors. And, in the discharge of this duty, section 13 provides that he "shall have as full power and authority to dispose of all estate, real and personal, assigned, as the debtor had at the time of assignment, and to sue for and recover, in the name of such assignee, everything belonging or pertaining to said estate, and generally do whatever the debtor might have done in the premises." The act also provides that the assignment must be in writing, and acknowledged and recorded as a conveyance of real property, and have annexed to it a sworn inventory of the debtor's assets and liabilities; but the same shall not be declared fraudulent or void for want of such inventory. The assent of the creditors to the assignment is to be presumed; and the same "shall vest in the assignee the title to any other property belonging to the debtor at the time of making the assignment." Section 15 declares 'there is urgent need' of a law for "the equal distribution of assets among creditors," and therefore the act shall go into effect at once.

From the bill it appears that on and before February 14, 1884, the defendant Salmon was indebted to sundry firms and partnerships, composed of citizens of California, doing business in San Francisco, in divers sums amounting in the aggregate to $29,205.40, for goods, wares, and merchandise sold and delivered to said defendant between January 1, 1882, and February 1, 1884, among which firms was Kahn Bros. & Co., composed of the plaintiff and E. Kahn, to whom $8,098.20 of said sum was due, which debts were, on February 14, 1884, duly sold and assigned by said several firms and partnerships to the plaintiff, who is now the owner of the same; that on said last-mentioned day the defendant Salmon was the owner and in the possession of a stock of dry and fancy goods in the store numbered 69 and 71 Morrison street, Portland, of the value of $27,000, and the fixtures therein, of the value of $500, and was indebted to Fleischner, Mayer & Co., and others, doing business in Portland, in the sum of $6,690.37, and was insolvent; that being so indebted and insolvent, and intending and contriving to prevent an 'equal' and 'just' division of his property among his creditors, and to cheat and defraud, hinder and delay, his creditors not doing business in Portland, and to perpetrate and commit a fraud upon the act aforesaid, the defendant caused and procured the debts due said Fleischner, Mayer & Co., and other Portland creditors, as aforesaid, to be assigned to Ivan R. Dawson, and an action to be brought thereon by said Dawson, wherein he at once voluntarily appeared and confessed judgment for the amount claimed, and also caused and procured an execution to issue thereon, and the same to be levied on the stock of goods aforesaid, and about $25,000 worth thereof to be sold thereon to said Portland creditors in satisfaction of said judgment and execution,-- the said sale being made in pursuance of an understanding between the said defendant Salmon and said Portland creditors, to the effect that the latter would bid in said goods and take them into and retain them in their possession, so as to aid said defendant in compelling the plaintiff to compromise his demands for a sum much less than their face, and then return them to said defendant and allow him to commence business therewith.

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On February 15, 1884, the plaintiff commenced an action in this court against the defendant Salmon and one E. Salmon, as partners, under the name of 'A. Salmon,' to recover said sum of $29,205.40, and on the same day caused a summons and writ of attachment to issue therein, the former of which was then duly served on the defendant Salmon, while the latter was duly levied on said stock of goods and fixtures, which attachment is still in force, and prior in time and right to any other lien on said goods or fixtures, except the attachment lien on said goods in the action of Alex. Mayer v. A. Salmon, to recover $1,300.30, commenced on said February 15th, and levied on said goods prior to the attachment of the plaintiff. On March 1, 1884, said defendant Salmon, in furtherance of the unlawful and fraudulent scheme aforesaid, executed, and caused to be recorded and delivered to the defendant Bettman, a writing purporting to be an assignment under the act aforesaid, for the benefit of his creditors, which assignment, for the reasons stated, is alleged to be fraudulent, and to have been made and accepted in violation thereof. It is also alleged in the bill that the defendant Salmon, in furtherance of this scheme to hinder and delay, cheat and defraud, his San Francisco creditors, filed a false and frivolous answer to the complaint in the action brought by the plaintiff against him, in which he denied the indebtedness alleged therein, although he has since admitted the same in said assignment, and offered to pay it at the rate of 25 cents on the dollar; and that about the time said judgment was confessed, he assigned and transferred to one Bowman, without any consideration therefor, a horse and buggy, and all his 'good and collectible' accounts and choses in action.

A supplemental bill was filed, making said Alex. Mayer a party defendant to the suit, and alleging that since the filing of the original bill the 'attachment lien' in favor of said Mayer upon said goods has been 'extinguished,' but that he still claims some interest or right therein, wherefore he is made a party defendant; that since the commencement of this suit the plaintiff has become the assignee and owner of the claims and demands of sundry other creditors of the defendant, citizens of California, amounting to the sum of $117.52; and that he is now the owner and holder of all the unsatisfied claims and demands against said defendant Salmon, except the sum of $2,255.79, of which amount $1,300.38 is the claim of the defendant Mayer.

The bill prays for a final decree that the assignment to the defendant Bettman is fraudulent and void as to the plaintiff, and that in the mean time said defendant be restrained by injunction from interfering with or disposing of any of the property attached in the action at law.

The case was argued orally upon an application for a provisional injunction, as upon a demurrer to the bill which has since been filed by the defendants Salmon and Bettman, with an understanding that the briefs subsequently prepared and submitted should be considered as equally applicable to the motion and demurrer. And as it is admitted that if the demurrer is not sustained the injunction must issue, the case will be considered in this opinion as standing upon the demurrer to the bill. On the argument of the demurrer counsel for the defendants made the following points: (1) A creditor cannot maintain a suit to control the disposition of his debtor's property until he has reduced his claim to judgment; and (2) the assignee, under the act of 1878, has the sole right to impeach a conveyance made by the debtor which is fraudulent and void as to creditors.

Upon the first point, Pomeroy (3 Eq.Jur. § 1415) says, "the American courts have given directly conflicting answers;" and in a note to this section he collates these authorities pro and con as follows:

The decisions in New Jersey, New Hampshire, Texas, and California affirm the right of a creditor who has a lien by attachment to maintain a suit in equity to set aside a fraudulent judgment or conveyance affecting the property attached, and those in Maine, Kansas, Illinois, and Missouri deny the same; while the decisions in New York, as usual in such cases, are on all sides of the question. See Thurber v. Blanck, 50 N.Y. 80; M. & T. Bank of Jersey City v. Dakin, 51 N.Y. 519.

In case the creditor's claim has passed into judgment, it is admitted that equity will give him relief against a fraudulent conveyance or transaction of the debtor which hinders or impairs his right to enforce the same by subjecting the property of the latter to sale on execution; but if the relief is sought with reference to property not subject to levy and sale on execution, the creditor must also show that an execution issued and was returned nulla bona. Wiggins v. Armstrong, 2 Johns.Ch. 144; Brinckerhoff v. Brown, 4 Johns.Ch. 671; William v. Brown, Id. 682; McDermutt v. Strong, Id. 687.

The rule requiring the claim of the creditor to be established by judgment is based on the idea that a court of equity having no jurisdiction of the simple question A. owes B. or not, that fact must first be...