Rodgers v. Boise Ass'n of Credit Men, Ltd.

• Decision Date: 28 February 1921
• Citation: 196 P. 213,33 Idaho 513
• Parties: C. B. ROGERS, Appellant, v. BOISE ASSOCIATION OF CREDIT MEN, LTD., a Corporation, Respondent
• Court: Idaho Supreme Court

196 P. 213

33 Idaho 513

C. B. ROGERS, Appellant, v. BOISE ASSOCIATION OF CREDIT MEN, LTD., a Corporation, Respondent

Supreme Court of Idaho

February 28, 1921

ASSIGNMENT FOR BENEFIT OF CREDITORS-INTENT TO PREFER OR DEFRAUD-CONTINUANCE OF BUSINESS-TIME OF SALE-CONSIDERATION-RESIDUE TO ASSIGNOR.

1. A voluntary assignment for benefit of creditors is valid.

2. Intent to delay or defraud creditors is a question of fact. The mere fact that a transfer prefers certain creditors does not avoid it under C. S., sec. 5433.

3. Provisions authorizing the assignee to continue the business and delay sale of the assets, until they can be wisely and prudently reduced to money, do not invalidate such assignment.

4. The payment of the debts and administration of the trust for that purpose is sufficient consideration.

5. A provision for payment of the balance to the assignors after payment of all the debts does not invalidate the assignment.

APPEAL from the District Court of the Seventh Judicial District, for Canyon County. Hon. Ed. L. Bryan, Judge.

Action to set aside assignment for benefit of creditors. Judgment for defendant. Affirmed.

Judgment affirmed. Costs awarded to respondent.

R. E Haynes and Thompson & Bicknell, for Appellant.

The trust deed is void because it shows on its face that it was a transfer of all property with the intent to delay this plaintiff and other creditors in the collection of their claims. (California Cons. Min. Co. v. Manley, 10 Idaho 786, 81 P. 50; Potter v. McDowell, 31 Mo. 62; Belford v. Crane, 16 N.J. Eq. 265, 84 Am. Dec. 155; Cole v. Tyler, 65 N.Y. 73; Hunters v. Waite, 3 Gratt. (Va.) 32; Patten v. Casey, 57 Mo. 118; 2 Bigelow on Fraud, 376; Thomson v. Crane, 73 F. 327; Schaible v. Ardner, 98 Mich. 70, 56 N.W. 1105.)

If the conveyance hinders and delays creditors, it is fraudulent in law, irrespective of the motive of the grantor. (24 Am. Dig Cent. ed., Fraudulent Conveyances, 30.)

The trust deed in question was void on its face because there was no sufficient consideration. (Cal. Cons. Min. Co. v. Manley, supra.) Said trust deed is void because it clearly shows that the parties thereto were attempting to place the property beyond the reach of creditors for a period of three years, for the purpose of giving the grantors an opportunity during that time to compromise and settle with their creditors. (Gere v. Murray, 6 Minn. 305; May v. Walker, 35 Minn. 196, 28 N.W. 252; Rochester v. Sullivan, 2 Ariz. 75, 11 P. 58; Burrill on Assignments, sec. 214; Bump, Fraud. Conv. 412; Bennett v. Ellison, 23 Minn. 242.)

This trust deed was void for the reason that it dictated to the creditors the terms upon which they should receive benefits under it. (Banning v. Sibley, 3 Minn. 389; Truitt v. Caldwell, 3 Minn. 364 (Gil. 257), 74 Am. Dec. 764.)

Givens & Barnes, for Respondent.

An insolvent debtor may prefer one creditor over another, and such transaction is not void. (24 Cent. Dig. 385, 392; Victor v. Glover, 17 Wash. 37, 48 P. 788, 40 L. R. A. 297; Daniels v. P. Brewing & Malting Co., 86 Wash. 416, 150 P. 609; McAvoy v. Jennings, 44 Wash. 79, 87 P. 53; In re Mann, 32 Minn. 60, 19 N.W. 347; Parkinson Bros. Co. v. Figel, 24 Cal.App. 701, 142 P. 135; Scholle v. Finnell, 167 Cal. 90, 138 P. 746.)

The payment in part or in whole of a pre-existing debt is sufficient consideration to support a conveyance giving certain creditors a preference. (Saunderson v. Broadwell, 82 Cal. 132, 23 P. 36; Wood v. Franks, 67 Cal. 32, 7 P. 50; Smith-McCord Dry Goods Co. v. John B. Farwell Co., 6 Okla. 318, 50 P. 149.)

An assignment to a trustee is as good as one made direct to the creditors. (20 Cyc. 582, note 99; Heath v. Wilson, 139 Cal. 366, 73 P. 182; Butler v. Sanger, 4 Tex. Civ. 411, 23 S.W. 487; Crothers v. Busch, 153 Mo. 606, 55 S.W. 149; Mansur & Tibbetts Imp. Co. v. Ritchie, 159 Mo. 213, 60 S.W. 87; Pogue v. Rowe, 236 Ill. 157, 86 N.E. 207; In re Farrell, 176 F. 505, 100 C. C. A. 63; Torlina v. Trorlicht, 6 N.M. 54, 27 P. 794, citing cases; Ontario Bank v. Hurst, 103 F. 231, 43 C. C. A. 193; Geer v. Traders' Bank of Canada, 132 Mich. 215, 93 N.W. 437; Maloney & Co. v. Gonhue, 152 Mich. 325, 116 N.W. 436; Lucy v. Freeman, 93 Minn. 274, 101 N.W. 167.)

Even though the business is continued, the provision does not make the assignment or transfer void or illegal. (Rochester v. Sullivan, 2 Ariz. 75, 11 P. 58; Wells-Stone Merc. Co. v. Grover, 7 N.D. 460, 75 N.W. 911, 41 L. R. A. 252; Robbins v. Butcher, 104 N.Y. 575, 11 N.E. 272; Bagley v. Bowe, 105 N.Y. 171, 59 Am. Rep. 488, 11 N.E. 386.)

The assignment in the case at bar defines and limits the discretion allowed the trustee sufficiently to bring it within the rule and authorize the court in sustaining the assignment. (Dorr v. Schmidt, 38 Fla. 354, 21 So. 279; Moore v. Blum (Tex. Civ.), 40 S.W. 511; Parlin etc. Co. v. Hanson, 21 Tex. Civ. 401, 53 S.W. 62; Wilhoit v. Lyons, 98 Cal. 409, 33 P. 325; Silsby v. Strong, 38 Ore. 36, 62 P. 633.)

In the absence of collusion or fraud, an insolvent corporation is not prohibited from preferring certain creditors over others. (Bump, Fraudulent Conveyances, 2d ed., p. 187; Currie v. Bowman, 25 Ore. 364, 35 P. 848; Pettengill v. Blackman, 30 Idaho 241, 164 P. 358; Bates v. Papesh, 30 Idaho 529, 166 P. 270.)

MCCARTHY, J. Budge, Dunn and Lee, JJ., concur. Rice, C. J., disqualified.

OPINION

MCCARTHY, J.

In December, 1914, C. H. Sargent and Mary H. Burnett, copartners under the firm name of the Fruitland Mercantile Company, or Sargent & Burnett, were in financial difficulty and unable to pay their debts. On December 28th they made an assignment for the benefit of all creditors to the respondent covering their property both copartnership and individual, real and personal. The assignment was recorded in the county in which the real estate is situated on January 13, 1915.

The following is a resume of its provisions so far as they are called in question in this case. The property conveyed is held in trust to reduce such property to money as soon as the same can wisely, prudently and properly be done, using the said trustee's best judgment therein. The trustee has the right to complete the manufacture of the stock and materials now on hand in process of manufacture, and procure, manufacture and use such stock and materials and employ such labor as shall in its opinion be necessary and proper for the economical and faithful administration of the trust herein . . . . or as it shall be requested by the beneficiaries. . . . The trustee is to pay, satisfy and discharge from the proceeds thereof, after deducting all necessary costs . . . . and after paying all claims which are entitled to preference under existing laws, all other debts of the said copartnership and of the said copartners equitably and ratably. The trustee is to pay any balance remaining to the said Sargent & Burnett, to be held and disposed of by them as if this conveyance had not been made. If the said Sargent & Burnett make any arrangement within three years from date with their creditors, whereby they are released from all liability to them, or three-fourths of said creditors cease to be so interested, or otherwise consent that said property shall be conveyed to the said debtors, then the trustee shall reconvey the property then in its hands. No person shall be entitled to payment under said assignment except such as are at the date thereof creditors of the firm or of one of the copartners, and shall within thirty days from such date notify the trustee in writing of the amount and character of the claim, and furnish a specification of the items if requested by the trustee. The trustee shall distribute the moneys ratably among the creditors in discharge of their debts by such installments and at such times as the trustee shall think satisfactory, and pay the surplus, if any, to the copartners. It shall be lawful for the trustee to postpone the sale and collection of any part of the premises for such time as is consistent with reducing the same to money as soon as this can wisely and prudently be done. The trustee may carry on the business which the copartners have heretofore carried on, and for that purpose make advances out of the premises subject to the trust and as it shall deem fit.

Sixty-four creditors with claims aggregating $ 29,054.06 consented to its terms and filed their claims with the assignee. The appellant had a claim against the copartnership, based on a note executed in 1913, which fell due in August, 1914, and was renewed for one year. On June 12, 1916, appellant obtained a judgment against the said copartnership in the district court for Canyon county in the sum of $ 5,955.90. Execution issued and was returned unsatisfied. Following the execution of the assignment, respondent went into possession of the real and personal property and proceeded to administer the trust. On September 15, 1916, appellant commenced this action. In this complaint he alleges that the copartnership is insolvent and has no property from which he can collect his judgment; that the assignment was without consideration and made with intent to delay and defraud him, and prays that the transfer be declared fraudulent and void, that his judgment be declared a lien on the property transferred and be satisfied by a sale thereof. Respondent in its answer denies any lack of consideration or any intent to delay or defraud appellant, and sets up that appellant has been guilty of laches. The trial court found that the assignment was supported by a sufficient consideration, that there was no intent to delay or defraud appellant, and that appellant had been guilty of laches; concluded that the assignment was valid and entered judgment for respondent. From this judgment an appeal is taken....