Red River Val. Nat. Bank of Fargo v. Freeman

• Decision Date: 03 June 1890
• Citation: 46 N.W. 36,1 N.D. 196
• Parties: Red River Val. Nat. Bank of Fargo v. Freeman.
• Court: North Dakota Supreme Court

1 N.D. 196

46 N.W. 36

Red River Val. Nat. Bank of Fargo

v.Freeman.

Supreme Court of North Dakota.

June 3, 1890.

Syllabus by the Court.

1. Under the statute regulating assignments for the benefit of creditors, defendant in due form made a voluntary assignment of all of his property for the benefit of his creditors, “except such property only as is exempt by law from attachment and execution, as provided by sections 323, 324, and 325 of the Code of Civil Procedure.” In proper time defendant filed a duly-verified inventory, showing a schedule of his property claimed by him as absolutely exempt under section 323, Id.; also a schedule of his personal property, valued at $1,499.77, claimed as additional exemptions under section 324, Id.; and a final schedule of all of his property not claimed as exempt property. Held, that such assignment was not prima facie fraudulent in law, under section 2023 of the Civil Code; nor void on its face, as against non-assenting creditors, under subdivision 3, § 2030, Id. Held, further, that a debtor making such assignment, who claims additional exemptions of personal property to an amount not exceeding $1,500 in value, is entitled to such exemptions; and, when the debtor's duly-verified inventory embraces a schedule of such additional exemptions, that such inventory and schedule, in the absence of fraud, is sufficient, prima facie, as a claim by the debtor of such additional exemptions. Held, further, that under the statute regulating such assignments all property not exempt from execution passes to the assignee, and that it becomes his duty, as assignee, to follow and take into his possession all of the debtor's non-exempt property, not voluntarily turned over to him by the assignor. Such voluntary assignment creates a trust, and district courts, sitting as courts of equity, have, under the statute, and by virtue of their inherent powers, jurisdiction over the subject-matter of the trust; and such courts will, on proper application, put forth their equity powers to aid the administration of the trust. Held, further, that, in the absence of actual fraud, attachment will not lie against an assignor, for the sole reason that in making an assignment for the benefit of creditors he reserves all of his property “exempt from execution.”

2. An order vacating an attachment is an appealable order.

Appeal from district court, Cass county; William B. McConnell, Judge.

Appeal from an order vacating an attachment.Francis & Southard and Stone, Newman & Resser, for appellant. B. F. Spaulding and A. C. Davis, for respondent.

Wallin, J.

On the 11th day of March, 1890, defendant, under the statute regulating assignments, made a general assignment for the benefit of his creditors, and made, executed, and delivered to one Edward R. Sherburne, as his assignee, a written instrument of assignment in due form, in which instrument said Sherburne joined. On the same day the said instrument was duly filed and recorded. The writing purported to convey, and did convey, to the assignee all of the assignor's property, real and personal, in trust for his creditors, without any preference or reservation whatever, “except such property only as is exempt by law from attachment and execution, as provided by sections 323, 324, and 325 of the Code of Civil Procedure.” Within the time limited by statute, the defendant duly filed an inventory of his property, embracing a schedule of the property which was conveyed in trust to the assignee; also a schedule of certain property claimed and conceded to be absolutely exempt by statute from seizure and sale on legal process; and a final schedule of other personal property of the defendant, which was itemized and valued by him at the sum of $1,499.77, which last-mentioned property was not assigned, but was reserved and claimed by defendant as exempt property, under the statute exempting additional personal property to an amount not exceeding $1,500 in value. To the inventory was added an affidavit made by the defendant, stating “that said inventory and schedules are in all respects just and true, according to the best of his knowledge and belief.” The assignee qualified in due time and took possession of the property conveyed to him in trust. On March 29, 1890, all the property in question, except that absolutely exempt, was seized by the sheriff of Cass county under a warrant of attachment issued at the instance of the plaintiff. The only ground of the attachment is stated in the affidavit as follows: “And that said defendant has assigned and disposed of his property with the intent to defraud his creditors.” On April 1, 1890, the defendant, joining with the assignee, moved in the district court to vacate said attachment. The motion was granted, and said court, on the same day, by its order, directed the sheriff to release the property. An exception was allowed to the order vacating the attachment, and the order is assigned as error in this court. Upon the hearing of the motion to vacate the attachment, counsel filed a stipulation, embracing the agreed facts upon which the motion was heard and determined. The stipulation contained a narrative of the principal features of defendant's assignment for the benefit of his creditors. The facts concerning the same are not controverted, and have already been stated in substance. It is admitted that the assignment proceeding furnishes the only foundation for the attachment. Plaintiff's counsel have not claimed that the record contains any evidence whatever of a fraudulent intent, or actual fraud, on defendant's part in making his assignment. Nor is it claimed that the defendant or the assignee has omitted any act or formality required by the statute regulating such assignments. Plaintiff's only claim and contention is that the assignment is made void in law and upon its face, because it in terms reserves to the debtor's use a portion of his property before the debts are paid, viz., personal property of the value of $1,499.77, which the defendant schedules and reserves in his inventory as exempt under the statute awarding additional exemptions to the amount of $1,500. In support of this claim, plaintiff cites subdivision 3, § 4663, Comp. Laws; section 4656, Id. In other words, plaintiff's position is that, where an insolvent debtor makes a voluntary assignment for the benefit of his creditors, under the statute providing for such assignments, he is not entitled to the additional exemptions secured by statute to an execution or attachment debtor. Plaintiff's counsel relies upon the statutes regulating exemptions in favor of the debtor where his property is seized under legal process, and calls attention to the fact that in such cases the debtor is required to take certain steps prescribed by statute in order to secure his exemptions. Under the statute, such debtor must list all of his property under oath, and it must be appraised by a board of three appraisers, and then the exemptions must be selected by the debtor. And counsel argue that, inasmuch as the machinery for securing exemptions to an execution or attachment debtor is wholly wanting in the statute providing for voluntary assignments, it necessarily follows that the exemptions themselves do not exist in such cases.

We think the position taken by counsel is untenable. To sustain such a view of the law would involve an extremely harsh, as well as very narrow, construction of a statute which in its essential characteristics is highly beneficial, and one which has uniformly received a liberal construction at the hands of the courts. It is true that the statute providing for voluntary assignments for the benefit of creditors does not itself attempt to grant to debtors specific exemptions; but, on the contrary, the statute every where takes for granted and assumes that certain of the debtor's property is already exempt, and beyond the reach of any creditor, by force of other statutes. But the statute regulating assignments repeatedly makes reference to the debtor's exemptions, and carefully guards such exemptions. “Property exempt from execution” does not “pass to the assignee” where the instrument of assignment is silent concerning the same; much less, therefore, will such property pass where it is expressly reserved in the instrument. Comp. Laws, § 4677.

Section 5128, Id., embraces a clear expression of the legislative will, to the effect that debtors shall not be stripped of all their property, but at their election may hold, in addition to absolute exemptions, $1,500 worth of personal property as against creditors. The ordinary mode whereby the creditor lays hands on the property of the debtor is by attachment or execution, and in cases of such seizures of the debtor's effects the legislature has been careful to guard and hedge about the debtor's exempt property in such a way that it will be secured to him and his family. In cases of voluntary assignments, no such scrupulous care has been evinced. It was not anticipated by the law-makers that, in a case where the debtor without fraud voluntarily turns over to his creditors, for equal division among them, all of his property, reserving only such property as the law has placed beyond the reach of creditors, many safeguards were necessary to protect exemptions, and hence but few were provided. But the assignment law not only recognizes the debtor's right to reserve property assumed to be exempt from execution, (subdivision 3, § 4663, Id.,) but goes further, and requires the assignor to embrace in a sworn inventory a list of...