Thompson v. Esty

• Citation: 69 N.H. 55,45 A. 566
• Parties: THOMPSON v. ESTY.
• Decision Date: 12 March 1897
• Court: Supreme Court of New Hampshire

45 A. 566

69 N.H. 55

THOMPSON

v. ESTY.

Supreme Court of New Hampshire. Belknap.

March 12, 1897.

Exceptions from Belknap county. Action by Edwin P. Thompson, assignee of the Laconia Manufacturing Company, insolvent, against William Esty. Judgment for plaintiff, and defendant excepts. Reversed, and Judgment rendered for defendant.

Trover, by the assignee in insolvency of the Laconia Manufacturing Company, for certain machinery. November 18, 1893, the company were engaged in the manufacture of knit goods, and rented of the defendant a part of the mill building which they occupied, and a portion of the machinery which they operated. Prior to that date the company had purchased other machinery for use in the business, and operated it in different rooms of the mill, intermingled with the leased machinery. The conversion alleged is of the machinery so purchased and used. Some of this machinery was of great weight, all of it was connected with shafting and in running order, and a portion of it was so framed in position as to have passed by a deed of the realty if the company had owned and conveyed the premises. November 18, 1893, the defendant made a loan of $4,000 to the company, and took a bill of sale of all their machinery and fixtures then in the mill. On the same date he leased the same machinery to the company for a term of six months, and agreed in writing to reconvey it at any time within six months, upon payment to him of the sum loaned, with interest. The defendant checked off the various pieces of machinery mentioned in the schedule of the bill of sale, for the purpose of taking possession, and instructed his employs in charge of his own machinery in the mill to care for and keep in repair the machinery in question. Otherwise the company had the same occupation and use of the machinery, and their manager had the same control of it, as before the sale and lease. It was not claimed by the plaintiff that there was any actual fraud in the transaction. January 29, 1894, the Laconia Manufacturing Company was petitioned into insolvency, and February 12, 1894, an assignee was appointed. Prior to the commencement of this suit, August 14, 1894, the defendant leased his mill and all the machinery therein to third parties and also sold a part of the machinery. By direction of the court, the jury returned a special verdict, finding that the machinery in controversy was demanded of the defendant by the assignee before suit was brought, that its market value was $4,207.62, and that the assignee consented to the lease of the property by the defendant. The defendant excepted to a denial of his motion for a nonsuit made at the close of the plaintiff's evidence, to a denial of his motion that a verdict be directed in his favor made upon the return of the special verdict, and to the order of the court that a general verdict be entered for the plaintiff for $4,207.62, with interest from the date of the writ.

E. A. & C. B. Hikkard, Prank M. Beckford, and Edwin H. Shannon, for plaintiff.

Jewett & Plummer, Jewell, Stone, Owen & Martin, and Isaac W. Smith, for defendant.

CARPENTER, C. J. In Coburn v. Pickering, 3 N. H. 415, it was held that any trust in favor of the vendor in a sale of chattels is a fraud with respect to creditors; that possession of the chattels retained by the vendor is always prima facie, and, if unexplained, conclusive, evidence of a secret trust; and that, when the fact appears that there was a trust, fraud is an inference of law, which the court is bound to pronounce in favor of judgment creditors. The doctrine of that case has been applied in numerous cases in this state, and it may be regarded as too firmly established in our jurisprudence to be reversed by judicial action. "It is unnecessary to cite authorities to the point that a sale of chattels is invalid as to creditors of the vendor when the property is allowed to remain in his use and possession." Doucet v. Richardson, 67 N. H. 186, 187, 29 Atl. 635. Though it is found or admitted that the vendee paid to the vendor the full value of the property, that no actual fraud was intended or committed, and that no creditor was misled, deceived, or injured in any respect by the transaction, the law pronounces it fraudulent and void. It is declared a fraud in law, "without any particular reference to its effect upon existing or subsequent creditors." Kendall v. Fitts, 22 N. H. 1, 7. It is a fraud, though "neither the dictionary nor morality would give it that name" (1 Pais. Cont. 281); and a creditor, by legal process, may seize the property for which the innocent vendee has paid an adequate consideration, and apply it in satisfaction of his debt. Neither the good faith of the parties, nor the entire absence of injury or inconvenience to others on account of the sale, is material. Indeed, if it could be shown that the insolvent debtor's attachable estate was increased in value by reason of his prudence, shrewdness, or good fortune in making the trade with the vendee, the evidence would be inadmissible. The vendee would still be deprived of his property, and both the debtor and his creditor would be benefited, thereby,— the debtor by the liquidation of his indebtedness, and the creditor by the collection of his claim.

To one not profoundly versed in the science of law, the rule that in all cases the vendor's retention for his use of the possession of the chattels sold raises a conclusive presumption of fraud, to be declared by the court as a matter of law, would seem to afford a convenient and effective method by which creditors may accomplish a practical fraud upon innocent third parties. A strenuous effort to guard the interests of attaching creditors, announced as a rule of law, has resulted in depriving innocent purchasers of their property without a return of the purchase price. For no actual fault on their part they are often doubly punished, being compelled to sacrifice the consideration they paid for the property as well as the property itself. The reason assigned for this conclusive presumption of fraud, arising as a matter of law from the debtor's unexplained possession of the chattels, is that such a sale is void, not because any wrong in fact has been perpetrated,—not because the creditors have been injured in the slightest degree, or have been actually hindered or delayed, in the collection of their debts, by the debtor's conditioned sale of the property,—but because the form of the sale is such as might be convenient for perpetrating a fraud upon the debtor's creditors. Such sales "would afford a cover for innumerable frauds against creditors, if they were by law compelled to unravel each transaction and show actual fraud. It would rarely be in their power to do this in the most fraudulent cases. All would be contrived originally by the parties to the fraud to meet the attack, and the fraud would be carefully covered by fortresses impregnable by any evidence which it would be in the power of creditors to bring against them." Coburn v. Pickering, 3 N. H. 415, 428. "The reason why the law denounces as wanting in good faith and fraudulent a bill of sale purporting an absolute conveyance of property, but attended with a secret trust, is that it holds out false colors; that it is evidence to prove the contract to be different from what it is in reality; and is calculated to deceive and mislead creditors, and may be used for that purpose. And the law presumes that he who buys goods of a person in debt, and takes evidence of the contract which is in its nature false, intends to use it for the purpose of deception, and, to defeat that purpose, declares the contract to be void for that cause." Parker v. Pattee, 4 N. H. 176, 178. "It is because such trusts are calculated to deceive and embarrass creditors, because they are not things to which honest debtors can have any occasion to resort in sales of their property, and because they are the means which dishonest debtors commonly and ordinarily use to cheat their creditors, that the law does not permit a debtor to say that he used them for an honest purpose in any case." Winkley v. Hill, 9 N. H. 31, 33. In effect, the argument is that Insolvent debtors may sometimes resort to this method of disposing of their property in order to place it beyond the reach of their creditors; hence the law pronounces all such sales void in favor of attaching creditors.

If, from the nature of the transaction, it necessarily followed that the debtor's purpose was fraudulent, and that the vendee engaged to assist him in carrying it out, the legal conclusion or conclusive presumption that the conveyance was fraudulent and void would be supported by sound logic. It would not then be the finding of the fact of intention from evidence reasonably susceptible of more than one explanation. But, if it is conceded that the debtor may retain the possession and use of property which he has sold without intending to delay or hinder his creditors, a presumption of law, or a binding charge by the court to the jury, that he did so intend, and that the conveyance is therefore void, would seem to be an invasion of the province of the Jury. The presumption, 'though called one of law, is essentially one of fact. Formerly it was held that from the recent unexplained possession of stolen property the law presumed that the possessor was the thief, and the burden of proof was thereby shifted upon the respondent. But in State v. Hodge, 50 N. H. 510, this doctrine was repudiated, on the ground that the inference or presumption was one of fact for the jury, not of law for the court. The possession of stolen property may be evidence that the respondent stole it, as the possession by the vendor of the goods sold may be evidence that he had a purpose to conceal them from his creditors; but as the possession of property recently stolen is not inconsistent with innocence on the part of the possessor, and as the vendor's possession and use of...