McAvoy v. Jennings

• Decision Date: 25 September 1906
• Citation: 87 P. 53,44 Wash. 79
• Parties: McAVOY v. JENNINGS.
• Court: Washington Supreme Court

87 P. 53

44 Wash. 79

McAVOY v. JENNINGS.

Supreme Court of Washington

September 25, 1906

Appeal from Superior Court, King County; R. B. Albertson, Judge.

Action by C. E. McAvoy against the Harkins Company and I. H Jennings, garnishee. From a judgment for plaintiff, the garnishee appeals. Reversed.

Gray &amp Stern, for appellant.

John W. Roberts, for respondent.

DUNBAR, J.

On November 19, 1903, M. J. Harkins, I. W. Harkins, and E. E Harkins, copartners under the firm name of the Harkins Company, executed with I. H. Jennings, the appellant herein a certain agreement in writing. This agreement was to the effect that the Harkinses had been carrying on a general grocery business, and had incurred debts which were enumerated in a list of creditors attached to the agreement, stating that, desiring to pay off such debts, they turned over their property to Jennings on the condition that he should collect the book accounts, sell the property and, after deducting the expenses of such business, apply the proceeds remaining equally and ratably among the list of creditors, with this provision: 'Provided, however, that each creditor, before being entitled to receive his pro rata under the terms of this agreement, shall deliver to the party of the second part a release of all claims against the said parties of the first part.' This agreement in full may be found in the case of McAvoy v. Jennings, 39 Wash. 109, 81 P. 77. The instrument was signed, sealed, and executed by the Harkins Company and by Jennings, and the list of creditors for whose benefit the transfer was made was attached. Immediately upon the execution of this agreement, Jennings took possession of the assets mentioned therein, sold the tangible property, and proceeded with the collection of the book accounts. The American Savings Bank & Trust Company was one of the creditors included in the list attached to the trust deed. After the transfer to Jennings had been made, the bank assigned its claim to McAvoy, the respondent herein, who commenced an action in the superior court of King county to reduce the claim to judgment against the members of the Harkins Company. In that action McAvoy caused Jennings to be summoned as garnishee. Jennings answered, denying any indebtedness to the defendants, or the possession of any property belonging to them; but, by way of further and explanatory answer, set forth fully the trust deed and all other facts above recited, and showed that, at the time of the service of the writ of garnishment upon him, he had in his hand the sum of $850, which he was prepared to pro rata among the creditors in accordance with the terms and conditions of the written agreement, and asked for a discharge. The plaintiff filed an affidavit controverting the answer of the garnishee, in which he admitted all the affirmative facts recited by the garnishee, but alleged that the transaction between the Harkins Company and Jennings was fraudulent and void as to creditors, because it was without consideration and because there had been no compliance with the 'sales-in-bulk' law. The controverting affidavit further denied that the transfer was made with the consent of all the creditors, or that the plaintiff or his assignor had knowledge of, or consented to, or ratified, the transfer; alleged that the transfer was made to hinder, delay, and defraud creditors; and prayed that the garnishee be held upon his answer, and that judgment be rendered against him in favor of plaintiff. Upon this issue a trial was had before the court, but there was no testimony advanced which it is necessary to consider; so that the case must be determined upon the character of the written agreement itself. The court decided in favor of plaintiff and against the garnishee for the full amount of plaintiff's judgment against the original defendants. From the judgment entered against the garnishee defendant, this appeal is prosecuted.

Without setting up the findings of fact and conclusions of law, we will proceed at once to discuss the legal propositions involved. It is contended by the appellant that, inasmuch as there is no allegation in the controverting affidavit of the respondent, and no proof offered to show that the defendants the Harkins Company were insolvent at the time this trust deed was made, the appellant will not be heard to assail the validity of the deed. And unquestionably that has been the uniform holding of this court. This was decided in Wagner v. Law, 3 Wash. St. 500, 28 P. 1109, 29 P. 927, 15 L. R A. 784, 28 Am. St. Rep. 56, in which the court quoted approvingly from Pearson v. Maxfield, 51 Iowa, 76, 50 N.W. 77, where it was said: 'If at the time of the issuance of the execution, the execution debtor had other property out of which the execution could have been satisfied, plaintiff should have levied upon such property instead of upon the property in question, which could be effectually reached only through the aid of a court of equity.' This court added: 'Of course, if it is necessary to prove insolvency it is necessary to allege it, as the defendant has a right to prepare his defense with reference to the allegations of the complaint, * * * we decide that this kind of an action cannot be sustained without an allegation and proof that there was no other property of the judgment debtor at the time of the conveyance out of which the creditor could satisfy his judgment or claim, and that, therefore, the complaint does not state facts sufficient to constitute a cause of action.' See, also, Hamilton Brown Shoe Co. v. Adams, 5 Wash. 333, 32 P. 92, where it was said by this court: 'If this is to be regarded as an action to set aside a fraudulent conveyance, the complaint is plainly insufficient, for it is...