Hamilton-Brown Shoe Co. v. Adams

• Decision Date: 07 December 1892
• Citation: 32 P. 92,5 Wash. 333
• Parties: HAMILTON-BROWN SHOE CO. v. ADAMS ET AL.
• Court: Washington Supreme Court

32 P. 92

5 Wash. 333

HAMILTON-BROWN SHOE CO. v. ADAMS ET AL.

Supreme Court of Washington

December 7, 1892

Appeal from superior court, Lewis county; Edward F. Hunter, Judge.

Action of attachment by the Hamilton-Brown Shoe Company against Adams, Hart & Co., in which J. H. Mallory intervened, and claimed the attached property as assignee of defendant for benefit of creditors. From a judgment for the intervener, and dissolving the attachment, plaintiff appeals. Affirmed.

Herren & Elliott, for appellant.

Leroy A. Palmer, Landrum & Landrum, and J. R. Buxton, for respondents.

DUNBAR, J.

On the 2d day of November, 1891, the respondents executed a deed of assignment purporting to be for the benefit of all their creditors, appointed J. H. Mallory assignee, and on the same day placed him in possession. On the 11th day of November 1891, the appellant, schedule creditor, commenced an action against respondents J. A. Adams, A. E. Hart, and G. L. Hart alleging the assignment, alleging the indebtedness, which is not disputed; alleging the fraud of the assignment, and the fraudulent transfers by the assignors of certain real estate deeded and conveyed just prior to the assignment, and the fraudulent execution of a certain chattel mortgage prior to the assignment; and praying (1) for judgment in the sum of $980.55, with interest; (2) that the said deeds mentioned be set aside, revoked, and held for naught; (3) that the said chattel mortgage be set aside, revoked, and canceled; and (4) that the said assignment be set aside, revoked, and canceled. At the same time the appellant sued out a writ of attachment and caused the same to be levied upon the property alleged to have been fraudulently conveyed, and upon the goods and merchandise in the possession of the assignee, Mallory, and took from his possession all the property which he held as such assignee. On the 21st day of November 1891, Mallory, the assignee, intervened in the action, and applied to the court for an order against the appellant to show cause why its attachment should not abate. The order was issued. The appellant set up and pleaded the fraud on the part of the assignors and assignee. The assignee replied denying the fraud, and alleging the bona fides of the assignment.

Upon the hearing the court sustained the petition, and dissolved the attachment as to the property in the hands of the assignee. After judgment the appellant appealed to this court, alleging as error the action of the court dissolving the attachment. Other errors were alleged in the notice of appeal, but this is the only revision asked for by the brief of the appellant.

If this is to be regarded as an action to set aside a fraudulent conveyance, the complaint is plainly insufficient; for it is neither based upon a return of nulla bona, nor an allegation that there was no other property out of which plaintiff's claim could be satisfied. Courts will not enter into an investigation of the merits or demerits of a conveyance, at the instance of any petitioner, until it appears that he has some interest in the determination of that question, and he cannot have any practical interest if the debtor has other property which will respond to his execution. His right is limited to the satisfaction of his claim. It does not extend to enforcing its satisfaction out of some particular property of the debtor. See Wagner v. Law, 3 Wash. St. 500, 28 P. 1109, and 29 P. 927.

But considering the complaint to be sufficient to sustain a judgment, the main question at issue here is, can property be taken from the possession of an assignee of an insolvent debtor by virtue of a writ of attachment? Or, in other words, is such property in custodia legis? It is broadly asserted by Wait, in his work on Fraudulent Conveyances, (section 316,) that it is not, for the alleged reason that the assignee is not an officer of the court, but is a trustee bound to account according to the terms of the instrument, and his authority depends upon the validity of the assignment, and is not conferred by the court. The cases cited by the learned author to sustain this declaration are Lehman v. Rosengarten, 23 F. Rep. 642, and Adler v. Ecker, 1 McCrary, 257. ^[1] Both of these cases were tried in federal courts, and involved, to a certain extent, a conflict of authority between the state and federal courts; and it is noticeable that the decision in Adler v. Ecker, which is a Minnesota case, is in direct conflict with the holdings of the supreme court of that state. Adler v. Ecker was decided in 1880, while in Bank v. Schranck, 44 N.W. 524, (decided in 1890,) the supreme court of Minnesota decided that "when the assignment is perfected, and to some extent, at least, prior thereto, its entire subject-matter,-all that is involved,-including the assigned estate, passes under the jurisdiction of the district court, ipso facto. Immediately, and without any further act, the assigned property is in the custody of the law." The court further said: "The correctness of this practice has never been questioned, and as a consequence it has not been decided, although it was held in Lord v. Meachem, 32 Minn. 66, 19 N.W. 346, the assignment being, in fact, valid, that the assignee could not be garnished, for several reasons; the insuperable one being that the assigned property was in custodia legis." And such, we think, has been the great weight of decision under statutes similar to ours. Of course it depends entirely upon the authority given by the statute to the court. It is conceded by all the cases that property in the hands of a receiver appointed by the court is property in the hands of the court, but it is claimed that the assignee derives all his power from the assignment, which, says Mr. Wait, is both a guide and measure of his duty. But the trouble with this theory is that the premises are misstated, or rather that the subject-matter of dispute is stated as a conclusion. An investigation of our particular statute convinces us that the assignee does not derive all his power from the assignment, and that it is not the exclusive guide and measure of his duty. It is true that he obtains, primarily, his authority to act from the deed of assignment. But the deed of assignment simply inaugurates the proceedings, and when the court obtains jurisdiction of the proceedings it obtains complete jurisdiction. Authority and control over the property are conferred by law upon the court. The insolvent yields to the jurisdiction of the court when he files his deed of assignment. From this time until the final settlement of...