Kendell v. Bishop

• Decision Date: 18 October 1889
• Citation: 76 Mich. 634,43 N.W. 645
• Court: Michigan Supreme Court
• Parties: KENDELL v. BISHOP, SHERIFF.

43 N.W. 645

76 Mich. 634

KENDELL v. BISHOP, SHERIFF.

Supreme Court of Michigan

October 18, 1889

Error to circuit court, Kent county; WILLIAM E. GROVE, Judge.

Action by Eugene M. Kendell against Loomis K. Bishop, sheriff. Judgment for plaintiff, and defendant brings error.

CAMPBELL J.

Defendant as sheriff of Kent county, levied on the machinery, fixtures, and stock, finished and unfinished, and personal property, of the Sherwood Manufacturing Company, so far as remaining in the factory, under attachments for debts to the amount of $938.47, on the 8th of June, 1888, and plaintiff replevied them. The only question in the case is whether, as against creditors of the attachment debtor, the arrangement under which Kendell held the property was valid. He set up his claim under a document in writing, executed by the president and treasurer of the manufacturing company on the 4th of April, 1888, which is claimed to have been lawfully authorized by a vote of the board of directors on April 3d. On that day the board authorized a chattel mortgage of the entire assets to be made to Kendell to secure certain claims, and Kendell relies on the instrument made as no more than a valid chattel mortgage. Defendant attacks its validity as not being a chattel mortgage properly so called, but a transfer in trust, which is in fact not only a trust for the benefit of the grantor, and so void as against creditors, but is also an assignment of all the assets for the benefit of preferred creditors, and of no others. It is not urged that there was any dishonest purpose immediately intended to defraud which would amount to fraud in fact. The fraud set up is what would, if illegal, become so without necessary reference to any consciously wrong designs, as contrary to law, and therefore constructively fraudulent. The debts were honest, and the parties are admitted to be honest holders of them. But defendant representing attaching creditors, insists they had no right to put the property in Mr. Kendell's hands, as the record shows was attempted. It is evident from the record that this corporation was practically insolvent. But no steps had been taken against it as an insolvent corporation; and it was held in Town v. Bank, 2 Doug. (Mich.) 530, that a corporation may assign on the same terms as a private person. It must follow that an assignment will be void against creditors in the same way. It is also well settled that whether an instrument is a general assignment depends on its character, and not on the name which parties see fit to give it; and in the present case we must look to all the facts as found. The debts provided for being valid debts, no question arises concerning them, except so far as one is raised on the right to provide preferences for corporation officers; but there seems to be no reason why one honest creditor should be on a worse footing than another, and we do not find in our law any such distinction. We are therefore remitted to an examination of the legal quality of the dealings.

It is claimed on both sides that whatever power existed in the president and treasurer to make the instrument in question was derived from the resolution of the board of directors of April 3, 1888. The form of this is material. "It was moved by Mr. Drury, and supported by Mr. Jenks, that in view of the unsatisfactory condition of the finances of the company, and to secure the National City Bank of Grand Rapids, Michigan, and Samuel B. Jenks and Eugene M. Kendell as holders of commercial paper and notes of this company, and all debts for labor which are now or may hereafter become due, a chattel mortgage be immediately executed and delivered by the proper officers of the Sherwood Manufacturing Company to Eugene M. Kendell, as trustee, for the National City Bank of Grand Rapids, Michigan, Samuel B. Jenks, and Eugene M. Kendell, as holders of said notes, and all persons in the employ of this company, or who may hereafter be employed by this company, to cover and include and convey all the personal property, of whatsoever kind or nature, now belonging to and owned by the said Sherwood Manufacturing Company, and all assets of said company; said chattel mortgage to cover and include all goods, stock, and material that may from time to time be purchased by said company in the regular prosecution of its business; and reserving to said company in said mortgage the right to sell its goods and manufactures in the ordinary course of its business." At this time most of the preferred indebtedness was not due, and it was to mature at different times, running into June following. The so-called mortgage, executed April 4th, is to this effect: Reciting, first, indebtedness...