Marks, Rothenberg & Co. v. Bradley

• Decision Date: 14 December 1891
• Citation: 10 So. 922,69 Miss. 1
• Parties: MARKS, ROTHENBERG & CO. ET AL. v. N. H. & R. L. BRADLEY ET AL
• Court: Mississippi Supreme Court

10 So. 922

69 Miss. 1

MARKS, ROTHENBERG & CO. ET AL. v. N. H. & R. L. BRADLEY ET AL

Supreme Court of Mississippi

December 14, 1891

FROM the chancery court of Madison county, HON. H. C. CONN Chancellor.

The opinion states the facts.

Reversed and remanded.

Brame &amp Alexander, for appellants.

1. The proceeds of the insurance belonged to the firm. The partner had no right to the money because he held the legal title of the building. Insurance is a personal contract, and the money is not the proceeds of the property. The non-insured, whether mortgagee, creditor, owner, or other person, has no claim to it, either legal or equitable. Bernheim v. Beer, 56 Miss. 149; Carpenter v. Ins. Co., 16 Pet., 495; Nippes' Appeal, 75 Pa. 472; Smith v. Ratcliff, 66 Miss. 683. Accordingly, the withholding from the assignee of the insurance money was a reservation that avoids the assignment.

2. The preference of taxes on the lands of the partners was a devotion of firm assets by an insolvent firm for the benefit of a partner, and was a fraud on partnership creditors, Such a transaction is everywhere condemned as fraudulent. The cases in our court relied on by appellee were not cases of voluntary assignments for creditors by insolvents. See 2 Bigelow on Fraud, 320; Burrill on Assignments, 275, 276; Bump on Fraud. Con., 381.

3. It cannot avail the assignors to show an actual honest intent. The intent of the statute of frauds is not a personal or corrupt intent, but has a technical meaning. Where the necessary effect of an act is to delay creditors, the law imputes a fraudulent intent. 2 Bigelow on Fraud, 83; Wait's Fraud. Con., 9. The question of actual or personal intent arises only in regard to acts naturally innocent. 2 Bigelow on Fraud, 371, 374, 381. The fact that the act deemed fraudulent does not appear on the face of the deed, but appears in evidence, does not change this rule. Ib., 387. This case does not involve the matter of an unintentional or accidental insertion of a debt not really due, or the law which would govern in such a case.

Nugent & Mc Willie, on the same side.

1. There was no debt due to Harding, either as tax-collector or otherwise. Taxes on land are not debts, but merely charges upon the property. Cooley on Taxation, 13; Code 1880, § 470. If it was a debt, it was not the debt of the partnership. Harding had neither paid nor undertaken to pay the taxes on these lands. The firm had refused to pay his draft for the taxes, and the lands were advertised for sale. The sheriff, in collecting the taxes, is a mere ministerial officer, and has no right to collect otherwise than in money. If the taxes constituted a debt, and the firm had, in fact undertaken to pay it, and if Harding looked to the firm, the preference was still one that avoids the assignment, for the debt remained that of the individual members of the firm. The application of firm assets to pay individual debts avoids the assignment.

We have no fault to find with the decisions of our court relied on by appellee. They were cases of sales or transactions in due course of business. Here there was a voluntary assignment by an insolvent partnership. It is true, the equity of firm creditors is derivative from the equity of the partners, and that the equity is upheld only in cases of administration of the assets of a partnership; but, in an assignment like this, the partners, by their own act, undertake to administer their assets with reference to their insolvency, and the equities of firm creditors must be respected. In addition to the text-books, see Wilson v. Robertson, 19 How. Pr., 355; 61 Ib., 73; 2 Keyes, 102; 2 Daley, 42; 3 Biss., 125 ; 60 Wis. 418, 622.

The taxes could not be preferred in favor of the separate panthers. Clearly, then, a preference could not be given to a stranger for the same debt. Goddard v. Hapgood, 60 Am. Dec. (Vt.), 275.

2. The insurance money belonged to the firm. It effected the insurance' paid the premiums, made proof of loss, and collected the money. It deposited the money in the bank as its own and checked it our. The fact that the firm had deceived the insurance company cannot make the money that of the partner. The contract of insurance was entirely independent of ownership. Bernheim v. Beer, 56 Miss. 149; Smith v. Ratcliff, 66 Ib., 683.

The retention of this money, which purported to pass by the assignment, will avoid it, regardless of the actual intent or honest belief of the grantors. Intention is not the subject of inquiry. Baum v. Pierce, 67 Miss. 700.

H. Peyton and E. E. Baldwin, on the same side.

Calhoon & Green, for appellees.

This court will not disturb the finding of the chancellor that there was no fraud in fact. The facts do not warrant the application of the doctrine of constructive fraud. Constructive fraud arises where the contradiction between the evidence and the act of the grantor is so palpable that he should not be permitted to deny or explain. It has no application where the ownership of money or goods is a matter of doubt, and the appropriation is made in good faith through a mistake of law. Even where fictitious debts are preferred, this court declines to vacate an assignment, but leaves it as a badge of fraud, unless the preference was deliberate and intentional. Craft v. Bloom, 59 Miss. 69.

The retention of the insurance money by N. H. & R. L. Bradley was neither actually nor constructively fraudulent. The insurance company waived the question of ownership, and before the assignment was made the firm had paid the insurance money to its owner. Both partners, so far as the record shows, were solvent. Creditors of the firm had no interest except to insist that all the partnership property went to the assignee. Creditors can have no higher right than the firm. Schmidlapp v. Currie, 55 Miss. 597; Fulton v. Hughes, 63 Ib., 65; Hyman v. Stadler, 63 Ib., 362; Hanover Bank v. Klein, 64 Ib., 141.

The question of the lack of inasurable interest had been waived by the company, and, as between the partners themselves, the money belonged to N. H. Bradley. His equitable claim was therefore complete, and, if so, the firm owed him the money and might well pay it. Title will not be inquired into with strictness in insurance policies. Phenix Ins. Co. v. Bowdre, 67 Miss. 620; Liverpool, etc., Ins. Co. v. McGuire, 52 Ib., 227.

The above reasoning, as to constructive fraud, applies to the Harding debt. Before contemplating the assignment the firm had become bound to pay this debt, and hence preferred it. At any rate, it believed the debt was due. Harding had extended credit to the firm by allowing the time for payment of the taxes to pass. He had a right to look to the firm, and did do so. The fact that he had another remedy, which he subsequently resorted to, could not make the preference fraudulent.

The intent of the statute of frauds is a question of fact. It makes no difference in what form the question may be presented. Thus, whether an instrument by its terms appropriates the property to the use of the debtor is a question of fact which the court passes upon. It is a finding of fact although by the court; and where such finding is based upon language of a written instrument it cannot be contradicted, and for this reason fraud so arising is termed fraud in law. In truth, it is fraud in fact. See Rowley v. Rice, 11 Met., 333; Jones v. Richardson, 10 Ib., 481; Moody v. Wright, 13 Ib., 17.

Where the intent must be shown by extrinsic evidence, it must be found by the jury from the facts. If the language of the instrument is doubtful, the court will presume the fact in favor of the validity of the deed. Richardson v. Marqueze, 59 Miss. 80; 64 Pa. 352. However found, fraudulent intent is a question of fact. The leading case on the doctrine is Clow v. Woods, 5 Serg. & R., 275. See also McBroom v. Rives, 1 Stew. (Ala.), 79; Shackelford v. Bank, 22 Ib., 238; Harris v. Sumner, 2 Pick. 133; Murray v. Riggs, 15 Johns., 571; 9 Ib., 339; 2 Starkie Ev., 617, note s; 15 Conn. 26; 7 Cowen, 304; Jones Chat. Mort., §§ 320-327.

Argued orally by C. H. Alexander and T. A. Mc Willie, for appellants, and by M. Green, for appellees.

OPINION

COOPER, J.

On the twenty-fifth day of February, 1891, N. H. & R. L. Bradley, a commercial firm, made an assignment of the partnership assets for the payment of partnership creditors, with preferences. The conveyance purports to convey all the partnership property. The present bill was exhibited by certain creditors of the firm, attacking the assignment as fraudulent. These facts are relied upon to invalidate it: Some weeks prior to the assignment the firm was indebted to James, Lawson & Gordon in about the sum of $ 4,000. These creditors held as collateral security certain notes and accounts, but were pressing for other security. In this condition of affairs it was agreed that Mrs. A. H. Bradley should execute her note to James, Lawson & Gordon, and secure the same by a mortgage of her farm, and that the firm of N. H. & R. L. Bradley should indorse the note. This was intended only as a temporary security, and Mrs. Bradley and her property were to be released as soon as other financial arrangements could be made by the firm. A few weeks after this the store of N. H. & R. L. Bradley, at Flora, with its contents, was destroyed by fire. The property was insured, and some $ 3,000 was collected from the insurance policies; and the firm, failing to make any satisfactory arrangements, determined to make an assignment.

About the twentieth of February R. L. Bradley drew from the bank in which it had been deposited the insurance money, and sent by express to A. H. Bradley the sum of $ 3,090. A. H. Bradley acting for his wife, went to James, Lawson & Gordon with the money and arranged with...