Patterson v. Lee-Clarke-Andreesen Hardware Company

• Decision Date: 19 April 1898
• Citation: Patterson v. Lee-Clarke-Andreesen Hardware Company, 52 P. 1085, 7 Wyo. 401 (Wyo. 1898)
• Parties: PATTERSON, ASSIGNEE, v. LEE-CLARKE-ANDREESEN HARDWARE COMPANY
• Court: Wyoming Supreme Court

52 P. 1085

7 Wyo. 401

PATTERSON, ASSIGNEE, v. LEE-CLARKE-ANDREESEN HARDWARE COMPANY

Supreme Court of Wyoming

April 19, 1898

Commenced in district court April 10, 1897.

ERROR to the District Court for Converse County. HON. CHARLES W BRAMEL, Judge of the Second District, presiding.

The case is fully stated in the opinion.

Affirmed.

Charles F. Maurer, for plaintiff in error. (Chester B. Bradley, of counsel.)

Both by our statute, and the decisions of courts, the mortgagor was insolvent when the mortgage was given; as he was in embarrassed and failing circumstances, and unable to pay his debts from his own means as they became due. (L. 1890, Ch 51, Sec. 1; Burrill on Assignments, pp. 98, 99; De Ruyter v. Trustees, 3 N.Y. 238; Curtis v. Leavitt, 15 id., 200; Leitch v. Hollister, 4 id., 215; Herrick v. Borst, 4 Hill, 650; Toff v. Martin, 13 Wall., 40; Sacre v. Lobree, 23 P. 1088; Wager v. Hall, 16 Wall., 599; Washburn v. Huntington, 21 P. 305; Bell v. Ellis, 33 Cal. 620.) Whether defendant, the mortgagee, knew of Hubbard's insolvency or not, as the transfer was out of the usual course of the mortgagor's business, defendant was required to investigate, and if it had done so, the information would have disclosed insolvency. (Ohleoyer v. Bunce, 4 P. 549; Godfrey v. Miller, 22 P. 290; Chavalier v. Commins, 39 id., 929.) Actual fraud is not necessarily involved. Legal fraud will render it void as against the insolvent laws. (Mathews v. Chaboya, 44 P. 169; Tapscott v. Lyon, 37 id., 225; Schlitz v. Childs, 68 N.W. 65; McCandlen v. Hazen, 67 id., 256; 49 P. 723; 38 A. 940.)

F. H. Harvey, for defendant in error.

That the petition does not state a cause of action may be raised for the first time in the appellate court. (Parker v. Bond, 5 Mont. 1; Caldwell v. Ruddy, 2 Idaho 5; Holt v. Pearson, 12 Utah 63; Taylor v. Johnson, 113 Ind. 164.) An assignee for the benefit of creditors at common law can not institute suit to set aside a fraudulent transfer made by the debtor prior to the assignment, and under statutes authorizing him to do so, he is given such right only as the representative of the creditors. He can not then succeed unless the creditors could. The petition is based upon constructive fraud only. At common law the creditors could not sue to set aside such a transfer. A transfer, fraudulent in fact, may be set aside pursuant to Sec. 15 of the assignment law, but the petition does not charge fraud in fact. Moreover, under Sec. 15, the court or judge must be satisfied by affidavit of the fraud before action is brought, and this must be alleged in the petition. (Seibert v. Milligan, 110 Ind. 106.) Under Sec. 27 a cause of action is not stated, because it does not appear that the property came into the possession of the defendant. A petition by an assignee to recover assigned property is bad on demurrer if it does not contain a copy of the deed of assignment. (82 Ind. 61; 65 id., 234; 60 id., 235; 101 id., 486.) The petition does not allege the "indexing" of the assignment. The authority of the assignee is derived from the statute. (42 P. 50 (Colo.).) An assignment of error is abandoned if not referred to in appellant's brief. (Syndicate Imp. Co. v. Bradley, 43 P. 79.) "Objected to" is not a sufficient exception; the grounds must be given. (46 P. 879; 8 S.W. 210.) In order that the chattel mortgage should have been given "in fraud of the insolvent laws of this State," it must have been executed by the mortgagor with a specific intention in his mind at that time of subsequently making a general assignment for the benefit of the rest of his creditors. His deliberate and conscious purpose must have been to secure the defendant in full, and afterward assign the rest of his property for the benefit of the rest of his creditors. (Hayden v. Allyn, 55 Conn. 280; Simmons Hardware Co. v. Haufman, 8 S.W. 284; Abbott v. Shepard, 142 Mass. 17.)

KNIGHT, JUSTICE. POTTER, C. J., and CORN, J., concur.

OPINION

KNIGHT, JUSTICE.

On the twenty-second day of January, 1897, Phares C. Hubbard, who was at that time, and had been for several years prior thereto, the owner of and operating a merchandise (hardware) store, in Glenrock, Converse County, Wyoming, made an assignment for the benefit of his creditors to plaintiff J. F. Patterson, who, as such assignee, brought an action in the district court for said Converse County, on April 10, 1897, against defendant, the Lee-Clarke-Andreesen Hardware Company, a corporation organized and existing under the laws of the State of Nebraska, and in his petition said plaintiff alleged in substance:

First, That on the 19th day of January, 1897, said Phares C. Hubbard made and delivered a certain chattel mortgage for $ 435.82, upon his certain stock of hardware, to defendant, the Lee-Clarke-Andreesen Hardware Company, to secure the payment of said sum, a copy of said mortgage being attached to said petition and made a part thereof.

Second, That within twenty days subsequent to the making and delivery of said mortgage, said Phares C. Hubbard made a general assignment, according to law, of all his property not exempt by law to plaintiff Patterson, which assignment included the goods and merchandise covered by said chattel mortgage, and that such assignment was recorded in the manner and within the time required by law.

Third, That said Patterson as such assignee filed his bond, made oath, filed copy of inventory and appraisement, as required by law. Total value of property was appraised at $ 1,157.88, including property claimed by assignor as exempt under the law, being lots 9 and 10 in block 15, in said Glenrock, appraised at $ 725, and goods, chattels, and personal property appraised at $ 300. Then follows a list of such goods, chattels, and personal property, with a certificate of appraisers, setting the same aside to assignor Hubbard; then continuing in the following language:

"Petitioner avers that said Phares C. Hubbard, assignor, was, on January 19, A. D. 1897, and had been continuously for more than six months prior thereto, in embarrassed and failing circumstances, and insolvent and unable to pay his debts from his own means as they became due; that said sum so aforesaid secured by said chattel mortgage was an old account that had been incurred and had accrued and been due and payable for more than one year prior to the execution and delivery of said chattel mortgage; that said mortgagee, at the time of taking said mortgage, was well aware of said failing, embarrassed, and insolvent condition of said Phares C. Hubbard; and were well aware that said Phares C. Hubbard at and before said time of giving said chattel mortgage, was unable to pay his debts, and contemplated making an assignment of his said property for the benefit of all his creditors."

"Petitioner avers that said mortgagee hereinbefore mentioned well knowing the failing, embarrassed, and insolvent circumstances and condition of said Phares C. Hubbard, assignor aforesaid, and having reasonable cause to believe that said Phares C. Hubbard was insolvent, and with a view of fraudulently obtaining a preference of its said claim and account over other creditors, persuaded said Phares C. Hubbard to execute and deliver unto said mortgagee the said mortgage aforesaid for the express purpose of giving said mortgagee a prior lien upon said property, contrary to the laws of the State of Wyoming; that the said Phares C. Hubbard thereupon made and executed said chattel mortgage as hereinbefore stated, and delivered the same to said mortgagee with a view solely of giving said mortgagee a preference over other creditors of Phares C. Hubbard, which said mortgagee was then and there well aware of the same. That said state of insolvency continued up to and including the 22d day of January, A. D. 1897, at which time said assignment was made and recorded."

"Petitioner avers that the total actual value of the said property assigned, including the said property claimed as exempt by said assignor, is appraised at $ 617.71, which petitioner avers and believes is all the property belonging to assignor, not exempt by law, including real estate, personal property, accounts, and credits and stock. That petitioner has not delivered the said property claimed as exempt to said assignor.

"Petitioner, therefore, prays the court for an order declaring the said chattel mortgage aforesaid and described in Exhibit A null and void, and in fraud of the provisions of Chapter 51, Session Laws of Wyoming, A. D. 1890; petitioner further prays for an order for the delivery of said property claimed by assignor as exempt property, and enumerated in subdivision 3, of this application, to said assignor, and for such other and further order as is meet in the premises."

To the above petition both said Patterson as assignee, and said Hubbard as assignor, separately make oath; and to said petition defendant answered as follows:

"Comes now the defendant and in answer to the petition herein filed:

"Denies that Phares C. Hubbard was at the time of the execution of the mortgage referred to in the petition insolvent, or that he contemplated insolvency. Denies that the said Phares C. Hubbard executed said mortgage with a view of giving a preference to defendant. Denies that defendant at the time of the delivery of said mortgage knew or had reasonable cause to believe that said Phares C. Hubbard was insolvent, or that said mortgage was made in fraud of the provisions of the assignment law, or of any law of Wyoming."

Upon the issue so joined trial was had before the court, a jury having been waived, and the court found and gave judgment for the defendant for costs; and the necessary subsequent proceedings were had, and the case brought to this court upon proceedings in error.

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