Sabin v. Anderson

• Decision Date: 31 July 1897
• Citation: 31 Or. 487,49 P. 870
• Parties: SABIN v. ANDERSON et al.
• Court: Oregon Supreme Court

49 P. 870

31 Or. 487

SABIN v. ANDERSON et al.

Supreme Court of Oregon

July 31, 1897

Appeal from circuit court, Umatilla county; Stephen A. Lowell Judge.

Suit by R.L. Sabin against William Anderson and others. From a decree for plaintiff, defendants appeal. Affirmed.

R.J. Slater, for appellants.

W.F Butcher, for respondent.

WOLVERTON J.

In February, 1889, the defendants, William Anderson and D.B Watson, were partners, and engaged in the mercantile business at Adams in Umatilla county, Or. About that time Watson sold his interest in the business, including the accounts, to Anderson, who assumed the payment of the firm's indebtedness, and continued the business until the early part of June, and in the meantime contracted other indebtedness. On July 5th the plaintiff, to whom had been assigned the claims of creditors of Anderson & Watson and of Anderson individually, began action against them, in which writs of attachment were issued, and notices of garnishment served upon L.D. Lively and J.H. Bently, two of the defendants herein, who were doing a banking business as partners under the firm name of the Umatilla County Bank. Proceedings under the garnishment were three times set in operation to require them to answer touching any property of Anderson and Anderson & Watson in their hands subject to garnishment but were as many times dismissed upon their motion, and in neither instance did they come to trial upon the merits. The final dismissal was effected June 10, 1893, and four days thereafter judgments were given and entered against defendants in said actions, upon which executions were duly issued, and returned nulla bona, and it is alleged that all defendants are insolvent except Lively, who has property consisting of real estate and bank stock acquired largely with the proceeds of certain promissory notes transferred by Anderson to the Umatilla County Bank in fraud of plaintiff's assignors. This suit was instituted January 15, 1894, and the court below found that Lively & Bently had collected the notes, and were trustees of the funds derived therefrom, and entered a personal decree against them for the amount thereof, with accrued interest from the date of the collection. From this decree the defendants appeal.

The proof clearly discloses and establishes the following facts: Prior to June 18 and 24, 1889, Anderson was the owner of a large number of accounts, including those purchased from the firm of Anderson & Watson, for many of which he procured from the debtors their negotiable promissory notes. On June 18th Anderson went with a number of these notes, aggregating $5,289.02, to the Umatilla County Bank, and it was then and there agreed between him and the proprietors of the bank that the bank should collect the notes, and account to Anderson for the proceeds thereof on November 20, 1889, or for the notes, if any remained uncollected, for which services it was to receive a commission of 5 per cent. upon the amount collected.

The bank, however, by its cashier, J.H. Bently, gave Anderson the ordinary cash certificate of deposit for a sum equivalent to said amount, negotiable in form, and made payable to the order of himself on the date last named. It was further agreed that this certificate should not be negotiated by Anderson, or, if he should negotiate it, that he should explain to the purchaser the real transaction and agreement between him and the bank touching the deposit and collection of the notes, and the manner in which the certificate should be redeemed by the bank. On the 24th day of June, Anderson deposited with the bank another lot of notes aggregating $1,190.20, upon like conditions, and for which a like certificate was issued. Subsequently, but prior to the maturity of the certificates, the bank, becoming alarmed lest Anderson should transfer them to a bona fide holder, sent an agent to purchase them apparently for one E. De Peat, but in reality for itself, for which purpose the funds of the bank were used. The first certificate was secured November 16th, for which the bank paid Anderson $2,150, and the second December 5th, for $650. The testimony shows beyond peradventure that Anderson, at the time of the deposit of these notes with the bank, placed them there under the conditions above delineated for the purpose of concealing them and putting them beyond the reach of his creditors. It was stoutly contended, however, that the bank, or its proprietors, Lively & Bently, did not share with Anderson in such purpose, and that the transaction upon their part was bona fide, and without knowledge of the insolvency of Anderson & Watson, or of the purpose or intent of the said Anderson in seeking and entering into such an arrangement or agreement with the bank. But we think Lively & Bently were particeps criminis with Anderson in the scheme to defraud his creditors. They allege in their answer that Anderson sold the notes to the bank, and that the bank gave the cash certificates of deposit as a consideration for their purchase. Mr. Lively, however, virtually admits by his testimony that the certificates did not express the real nature of the transaction. Soon after their issuance he endeavored to have them replaced by another, which he testified contained these words: "All unpaid notes indorsed by Anderson to be turned in as cash on this certificate when presented for payment," and assigned as a reason for his solicitude in securing the exchange that be, since the transaction, learned that Anderson had become insolvent, and hence that his indorsements upon the notes sold to the bank were of no value; and further explained that, "as all the unpaid notes should be turned in as cash, and they--the certificates of deposit--being transferable, and he not being responsible, we thought it better." He claims that the bank relied upon Anderson's indorsement to make it whole for any notes that should prove to be uncollectible, but the fact is that none of the notes, although many of them fell due prior to the maturity of the certificates, were ever protested for nonpayment, so as to hold Anderson, and no attempt of the kind was ever made, so far as the testimony discloses. These transactions are not altogether in harmony with the idea of a direct purchase of the notes by the bank. But beyond this the plaintiff produced and put in evidence a copy of the certificate with which Mr. Lively endeavored to replace those first issued. Omitting date and signature, it is as follows, to wit: "William Anderson has deposited in this bank sixty-four hundred and seventy-nine & 23/100 dollars in notes for collection, payable to the order of himself on return of this certificate, properly indorsed, Nov. 20th, '89; all unpaid notes to be turned in as cash on this certificate when it is presented for collection. Not subject to check." And this is in accord with the real transaction as it was evidently understood between the parties, and as Bently admitted it to be prior to his severance of his relations with the firm of Lively & Bently. So we take it that the transfer of these notes to the bank was made by Anderson for the purpose of concealing and placing them beyond the reach of his creditors, and thereby to defraud them, and that Messrs. Lively & Bently were cognizant of his purpose, and participated in the scheme with intent to aid and assist him in its full accomplishment.

Two defenses are interposed. The first is that Lively & Bently were bona fide purchasers of the notes for value, without notice of Anderson's intended fraud, and this we have disposed of upon the evidence; and the second is that plaintiff has an adequate remedy at law by way of attachment and hence that he...