Vernon v. Upson

• Decision Date: 15 May 1884
• Citation: 19 N.W. 400,60 Wis. 418
• Parties: VERNON AND ANOTHER v. UPSON, GARNISHEE, AND OTHERS.
• Court: Wisconsin Supreme Court

60 Wis. 418

19 N.W. 400

VERNON AND ANOTHER

v.UPSON, GARNISHEE, AND OTHERS.

Supreme Court of Wisconsin.

Filed May 15, 1884.

Appeal from county court, Milwaukee county.

Fenn & Williams were partners in business, and as such made a voluntary assignment of their firm property to the defendant Upson, for the benefit of their creditors. In such assignment the firm preferred two creditors. The plaintiffs were creditors of the firm. They brought an action on their demand, and proceeded by garnishee process against the assignee. The garnishee answered, denying liability, and the plaintiffs took issue on his answer. After the plaintiffs recovered judgment against Fenn & Williams on their demand, the issues on the garnishee answer was tried. The jury found specially that the persons named in the assignment as preferred creditors were not creditors of the firm, but only of one or the other of the individual partners. The jury also negatived the good faith of the assignors in making such preferences. The county court held that such preferences were fraudulent and void as against the firm creditors, but that otherwise the assignment was valid, and gave judgment accordingly. The plaintiffs appeal from the judgment.Finches, Lynde & Miller, for appellants, Samuel E. Vernon and another.

A. G. Weissert, for respondents, Edwin Upson, garnishee, and others.

LYON, J.

The assignment by Fenn & Williams to Upson, the garnishee, is not preserved in the record. Neither is the testimony upon which the special findings are based. But sufficient does appear to make it probable that the debts preferred were treated in the assignment as partnership debts. That they were the debts of the individual partners, and hence that they were fraudulently preferred, are, however, verities in the case. The sole question to be determined on this appeal is, do such fraudulent preferences vitiate the assignment as to the plaintiffs, who are creditors of the firm?

It is provided by statute that “every conveyance or assignment, in writing or otherwise, of any estate, or interest in lands, or in goods or things in action,or of any rents or profits issuing therefrom, and every charge upon lands, goods, or things in action, or upon the rents or profits thereof, made with the intent to hinder, delay, or defraud creditors or other persons of their lawful actions, damages, forfeitures, debts, or demands, and every bond or other evidence of debt given, action commenced, order or judgment suffered, with the like intent as against the person so hindered, delayed, or defrauded, shall be void.” Rev. St. p. 657, § 2320.

This assignment was made with intent to hinder, delay, or defraud the creditors of the firm of Fenn & Williams, the assignors, including the plaintiffs, because it contains fraudulent preferences, and that fact, of itself, shows such fraudulent intent. There is no doubt, therefore, that, if the above provision of the statute of frauds is applicable to the case, the assignment is void as to the plaintiffs or any other creditor of the firm who elects to assert its invalidity. The authorities to that effect, many of which are cited in the brief of counsel for the plaintiffs, are so numerous and uniform that this court, in Powers v. C. H. Hamilton Paper Co. 18 N. W. REP. 20, regarded the rule as settled and asserted, and applied it without discussion or citation of authority. That was a voluntary assignment by an insolvent corporation for the benefit of creditors, and certain debts owing by two of the stockholders were preferred therein. It is there said: “The facts stated in the complaint show that the assignment is fraudulent as against the unpreferred creditors of the corporation, (the plaintiff being one of them,) and is therefore invalid as against such creditors. It matters little whether it is absolutely void or only voidable. Surely, no more flagrant fraud upon creditors could be committed in a voluntary assignment made in view of insolvency, than to prefer debts owing by a third party, and provide for paying the same out of the insolvent estate before the creditors of the insolvent would be entitled to receive anything.”

The same principle was applied by this court at an early day to other provisions in such assignments. Thus an assignment which authorized the assignee to sell the assigned goods “on such terms” as he might deem advisable, was construed as an authority to the assignee to sell upon credit. It was held that this would necessarily operate to hinder and delay the creditors of the assignor, and hence that the assignment was void as to them. So, also, it was held that an assignment was fraudulent and void as against creditors which contained a clause attempting to reduce the liability of the assignee for the proper execution of his trust below his legal liability therefor. Hutchinson v. Lord, 1 Wis. 286;Keep v. Sanderson, 2 Wis. 42; S. C. 12 Wis. 352. The same principle was recognized in Norton v. Kearney, 10 Wis. 443, although the assignment there under consideration was held not to authorize the assignee to sell on credit.

If, under the statute of frauds, a fraudulent preference does not vitiate the whole assignment as to creditors attempted to be defrauded thereby, but only expunges such preference from it, leaving the balance of the assignment valid, the above cases were wrongly decided. For certainly the authority to the assignee to sell on credit, or the attempted restriction of his legal liability in the execution of his trust, may just as easily be expunged from the assignment as a fraudulent preference,...