Kyes v. Merrill Furniture Co.

• Decision Date: 07 January 1896
• Citation: 92 Wis. 32,65 N.W. 735
• Parties: KYES v. MERRILL FURNITURE CO. ET AL.
• Court: Wisconsin Supreme Court

92 Wis. 32

65 N.W. 735

KYES

v.MERRILL FURNITURE CO. ET AL.

Supreme Court of Wisconsin.

Jan. 7, 1896.

Appeal from circuit court, Lincoln county; Charles V. Bardeen, Judge.

Action by H. A. Kyes, as assignee for the benefit of creditors of the Merrill Furniture Company, against the Merrill Furniture Company and others, to set aside certain notes and mortgages and a conveyance of the mortgaged premises. From an order sustaining a demurrer to the complaint, plaintiff appeals. Affirmed.

The complaint alleges that the defendant the Merrill Furniture Company is a domestic corporation; that on November 7, 1893, it made a voluntary assignment for the benefit of its creditors to the plaintiff; that previously to the making of such assignment, on June 1, 1893, the officers of the corporation had executed, in the name of the corporation, four several mortgages, to secure several bona fide debts, aggregating nearly $8,000, due to several of its creditors, upon its factory and real estate, of the value of $15,000; that this comprised the major part of the property,--all except its stock of furniture then on hand and its book accounts, which were afterwards sold by the assignee for $2,000; that the mortgages were executed by the president and secretary of the corporation, who were its only stockholders and directors, without any previous resolution of the directors authorizing their execution; that the corporation was then insolvent, and had practically ceased from doing business,--all of which was known to the mortgagees; that the mortgages were duly recorded; that the mortgagees duly proved their claims in the assignment proceedings; that the assignee subsequently made an arrangement or compromise with the mortgagees, whereby the mortgaged premises were conveyed to their trustee in full satisfaction of their debts, and the mortgages were satisfied; that this conveyance to the mortgagees was made by the assignee under a mistake, believing that the mortgages and the notes secured thereby were valid securities. The Packard Machinery Company is a judgment creditor of the defendant corporation, wholly unsecured, who is aggrieved by the disposition which the assignee made of the mortgaged property. It prosecutes this action, in the assignee's name, for its own benefit, and for the benefit of all other creditors of the defendant corporation who are in like situation. The other defendants are the mortgagees in the several mortgages. The complaint demands a judgment vacating and setting aside the several notes and mortgages and the assignee's conveyance of the mortgaged premises. The defendants demurred to the complaint. The court sustained the demurrer. The plaintiff appeals.O'Neill & Marsh and A. L. Sanborn, for appellant.

Curtis & Reid, John Van Hecke, and Robinson & Geiger, for respondents.

NEWMAN, J. (after stating the facts).

It may be (probably is) the law that an assignee for the benefit of creditors may maintain an action in equity to set aside a settlement with or conveyance to a creditor which has been induced by fraud, or by a mistake of fact. In such a transaction the assignee represents the assignor, and not the creditor, and is, in law, the owner of the estate which has been impaired by the fraud or mistake. Probably, in such a case, the circuit court could require the...