National Bank of Republic v. George M. Scott & Co.

• Citation: 18 Utah 400,55 P. 374
• Parties: NATIONAL BANK OF THE REPUBLIC v. GEORGE M. SCOTT & CO. ET AL
• Decision Date: 13 December 1898
• Court: Supreme Court of Utah

55 P. 374

18 Utah 400

NATIONAL BANK OF THE REPUBLIC v. GEORGE M. SCOTT & CO. ET AL

Supreme Court of Utah

December 13, 1898

Appeal from the District Court, Salt Lake County, Hon. Ogden Hiles Judge.

Action in equity to set aside a deed of assignment by George M Scott & Co., a corporation, to Hugh Anderson as assignee upon the ground of fraud. From a judgment for defendants plaintiff appeals.

Affirmed.

Messrs. Booth, Lee & Gray and Messrs. Dey & Street for appellant.

The assignment is fraudulent and void as to appellant and other unpreferred creditors because it was made with intent to hinder, delay and defraud them, in that, by certain indebtedness guaranteed by George M. Scott & Co., personally, is preferred. Godley v. Capon, 72 Ills., 11; Rich v. Hathaway, 18 Ills., 548; Mercantile Co. v. Co-op. Inst., 12 Utah 213; Wyeth M. & M. Co. v. James S. B. Co., 15 Utah 110; Singer v. Copper Co., 53 P. 1024.

The trial judge was of the opinion that the effect of the Co-op. case 12 Utah 213, had been destroyed by the new assignment law, R. S., Sec. 84 et. seq. The statute referred to and section 87 designates certain cases in which the assignment is void. It is not limited to the specific grounds stated. It does not purport to repeal the statute of frauds so called, found in Sections 2474 and 2464 Revised Statutes.

Statutes regulating assignments have not taken those instruments out of the statute of frauds or abrogated any of the grounds upon which the statutes have been held fraudulent and void by the courts. Vernon v. Upson, 60 Wis. 418-422-3; State v. Rose, (N. D.) 58 N. W., 514; Wright v. Lee, (S. D.) 55 N. W., 931, 936; Farmers v. Coffan, (Dak.) 29 N. W., 12; Lisher v. Getman, 28 Minn. 93; May v. Walker, (Minn.) 28 N. W., 252; Houghne v. City, (Or.) 62 F. 1006; Dawson v. Coffin, 12 Or. 513; Mosconi v. Buerchinel, (Col.) 43 P. 912; Rinchey v. Striker, 28 N.Y. 45; Rylan v. Roy, (N.Y.) 59 F. 784; Bolty v. Egan, (Mo.) 34 F. 445; Kendall v. Bishop, 76 Mich. 634; Lehman v. Ryan, (Iowa) 31 F. 636; Burrows v. Lehndorff, 8 la., 96; Bradley v. Bailey, (la.) 64 N. W., 758; Rothschild v. Harbrook, (la.) 65 F. 283; Mathews v. Ott, 87 Wis. 399; Jones v. McCornick, 82 F. 295; Adler v. Ecker, 2 Fed., 126; Lapp v. Van Norman, 19 F. 406; James v. Bank, 12 R. I., 460.

This court has from early time applied the statute of frauds to assignments. Beus v. Shaughnessy, 2 Utah 492; Sprecht v. Parsons, 7 Ib. 107; Smith v. Sipperly, 9 Ib. 267; Coblentz v. Mer. Co., 10 Ib. 96; Mer. Co. v. Co-op. 12 Ib. 237.

However, if the law be as pronounced by the trial judge we contend that the appellant has brought this case within two of the specified grounds in Section 87 R. S. The debt was exclusively that of Scott, for which the corporation is not liable. Emly v. Lyle, 15 East, 7; 1st Lind on Part. Sec. 361, et seq.; Farmer's Bank v. Bayles, 35 Mo. 428; Ketchum v. Durkee, 1 Hoff. Chap. 540-3.

That the preferring of such a debt renders the assignment fraudulent has been expressly decided in: Mer. Co. v. Co-op. 12 Utah 213; Willis v. Bruner, 60 Wis. 622; Powers v. Paper Co. 60 Ib. 23.

It was error to exclude the evidence offered tending to prove the amount Scott was indebted to the insolvent company at the time of the loan from the insurance company and down to the time of the execution of the assignment. See Schroeder v. Young, 161 U.S. 334, 345.

Messrs. Dickson, Ellis & Ellis, for Geo. M. Scott & Co., and Messrs. Bennett, Harkness, Howat, Bradley & Richards, for Hugh Anderson, assignee.

We believe the questions arising in this case are controlled by the statute recently enacted by our legislature. Rev. Stat., p. 107.

But while we contend that the statute controls and that the assignment is clearly valid within the provisions of the statute we as strongly contend that it is not void or voidable under the common law.

That an insolvent corporation may assign all its property for the benefit of its creditors and may prefer one creditor over another as its directors see fit if there is no fraud. Wyeth v. James etc. Co., 15 Utah 110.

That fraud of the assignor in the management or disposition of his property prior to the assignment, not participated in by the assignee or the creditors benefitted by the assignment does not vitiate or in any way affect the assignment. That fraud to vitiate or affect the assignment must inhere in and be a part of the deed of assignment, see: Petit v. Parsons, 9 Utah 223. Coblentz v. Driver Mercantile Co., 10 Utah 96.

That where a director in an insolvent corporation voted with other directors in making an assignment preferring another corporation in which he and his wife owned a large amount of stock, but where his vote was not necessary to carry the resolution making the preferences and where there was no actual fraudulent intent, the preference of the corporation in which the director of the insolvent corporation was a stockholder, did not void or affect the assignment or the preference, see: Colorado Fuel & Iron Co. v. Hardware Co., 50 P. 628. The statute Sec. 87 R. S. says: "An assignment for the benefit of creditors is void against any creditor not assenting thereto in the following cases (specification of cases.)" The well known maxim of the law Expressio unius est exclusio alterius, applies, and excludes every other cause than those specified as a ground upon which the assignment itself may be assailed and avoided. North Point, etc., Co. v. Canal Co., 14 Utah 155; Eastman v. Gurrey, 14 Utah 168.

In which cases the application of the maxim above quoted was made by the court, that, applied to this case, excludes any grounds of attack upon an assignment so as to render it void except those specified in the statute.

The following cases further support our contention: Pelt v. Pelt, 19 Wis. 193, 196; Durousseau v. United States, 6 Cranch, 312; Smith v. Stevens, 10 Wall., 321; Miller v. Miller, 44 Pa. St., 170; Fowler v. Scully, 72 Pa. St., 456, 461; Perkins v. Thornburgh, 10 Cal. 190; Dubuque v. Dubuque, 7 Iowa, 262, 276; Potter Dwarris St., 674, 775; Sutherland on St. Con., Secs. 325-327.

There was no evidence of fraudulent intent in preferring the notes upon which Mr. Scott was guarantor. He was, it is true, bound by the terms of his guaranty but he was under no moral obligations to pay the notes. They were not his debts. Brandt on Suretyship & Guaranty, Sec. 94.

Such a preference does not as a matter of law void an assignment. Colorado Iron & Fuel Co. v. Hardware Co., supra; Sanford Fork & Tool Co. v. Howe, Brown & Co., 157 U.S. 313.

The court did not err in permitting the directors to testify to their good intent in making the assignment. Wilson v. Clark, (Ind.) 27 N.E. 310; Campbell v. Holland, (Neb.) 35 N.W. 871; Garden v. Woodward, (Kan.) 25 P. 199; Love v. Tomlinson, (Col.) 29 P. 666; Bedell v. Chase, 34 N.Y. 386; Ditman v. Weiss, (Tex.) 31 S.W. 67.

Messrs. Varian & Varian, attorneys for California Powder Works, intervenor.

Appellant specifies the preferring of debts "upon which its president was liable as surety" as error, basing it upon the simple fact of the preference without reference to the intent or good faith. We submit this contention cannot be maintained under the statute. The question is one of actual intent all the time. Wagner v. Zeighler Mo. 31 S.W. 28; Gould v. Little Rock Co. 52 F. 685; Ganett v. Plow Co. la. 29 N.W. 395; Buel v. Buckingham, 16 Ia. 284; Smith v. Skeary, 47 Conn. 47.

The court was justified in admitting evidence of the intent in giving the preferences. Covert v. Richards, 38 Mich. 363; Matthews v. Poultney, 33 Barb. 127; Seymour v. Wilson, 14 N.Y. 568.

ZANE, C. J. BARTCH, J., concurs in result. MINER, J., concurs.

OPINION

ZANE, C. J.

This is an equity cause to set aside a deed of assignment made by George M. Scott & Co., a corporation, to Hugh Anderson. A number of facts were alleged in the complaint upon which the plaintiff relied as showing fraud. The defendants answered, denying essential elements alleged in the complaint and fraud in fact or in law. The lower court heard the evidence, made findings of fact, heard arguments of counsel, and stated its conclusions of law, and entered a decree dismissing the cause. From this decree the plaintiff has appealed.

It appears that on January 29, 1898, George M. Scott & Co., a corporation, made a deed of assignment for the benefit of its creditors to Hugh Anderson; that all of its four directors voted for the resolution in pursuance of which the deed was executed; that the same was ratified at a meeting of all the stockholders by a unanimous vote; and that Scott owned less than one-half of the stock.

The indebtedness of George M. Scott & Co. was divided into three classes, and preferred in that order. Those of the first class amounted to $ 30,400.50, evidenced by five promissory notes, due to as many payees, and all indorsed by George M. Scott. He being a director, it is claimed these preferments rendered the deed fraudulent. It does not appear from the evidence the preferment was made with the intention to delay, hinder, or defraud the creditors of the company or other person. No actual fraud was proven. That being so, the fact that Scott voted with three other directors to prefer these notes upon which he was indorser did not render the deed fraudulent in law. The same result would have happened had he voted against the resolution and deed or had not voted at all. This court has so held in the case of Wells, Fargo & Co. v. George M. Scott &amp Co., (decided at the present term) 55 P. 81, and in Colorado Fuel & Iron Co. v. Western Hardware Co., (Utah) 50 P. 628. In the second preferred class was a note for $ 40,000, signed by George M. Scott, but described in the deed as the note of George M. Scott & Co. ...