Sweet, Dempster & Co. v. Scherber , 1890 Ill. App. LEXIS 670 ( 1891 )

Lacey, P. J.

We will first consider the rights of Hunecke Bros, to preferment, to the- extent of their claim of goods shipped to Gebke and not accepted by him, amounting to §442.68. It seems to us clear that neither of the executions could get any lien on those goods, simply for the reason that they were in the care of Gebke. The latter claimed no title to them, and had never accepted them or mixed them with his other goods, for sale. He was exercising no acts of ownership over them. An execution creditor gets no greater interest in the property in the hands of the execution debtor than he himself had. He had no property in these goods save a mere possession, nor ever claimed to have any, nor exercised any acts of ownership over them. The deed of assignment conveys only the interest of the assignor and no more. The assignee simply succeeds to the assignor’s title. The same rule would apply to the supposed bill of sale although that seems to have been superseded in these proceedings and merged into the assignment. It therefore follows that the proceeds of these goods should be returned to Hnnecke Bros., without cost or expense to them. Mot belonging to Gebke he would not be entitled to exemptions out of them, nor would they be liable to pay his taxes, having been taken and held wrongfully by the assignee. Hnnecke Bros, should be charged no cost in respect to the litigation concerning them.

We will next consider the effect and purport of the sup- . posed bill of sale executed by Gebke to Sweet, Dempster etal. , First. As to its validity as a bill of sale.

Second. As to its bearing and effect upon the subsequent deed of assignment executed by Gebke, under the statute, to Scherber, on the 3rd of August, 1889.

Third. The effect of the bill of sale and the assignment on the alleged prior liens of the various executions in question.

In regard to the first proposition, independent of the Insolvent Debtor’s Act of 1887, and the assignment under it, the bill of sale could hardly be regarded as fraudulent as against the execution creditors. It is not exactly certain whether the transaction between Fuller, as the attorney of a portion of the non-execution creditors, and Gebke, the debtor, on the 1st of August, 1889, should be regarded as a sale of the goods to those creditors absolutely for $3,000, or whether it should be regarded as a mere assignment and transfer of the goods to the creditors by Gebke in the nature of a pledge of these goods, accompanied by delivery of possession to the extent of their value; neither is it necessary for us, for the purposes of the decision of this case, to determine that question. We are, however, inclined to think that it could hardly be regarded as an absolute sale. A portion of the proposed purchasers were not present, knew noth'ng about the transaction and gave no consent to it, and could not have agreed to give $3,000 in cash for the stock of goods and the small amount of real estate belonging to Gebke, which it has developed by the sales of the assignee was not worth near that amount, and when the claims of the different creditors did not exceed $2,300. There was no balance paid, nor agreed to be paid, for this property by Fuller, or his clients, nor any receipt given for the satisfaction of the different claims. It was a matter fixed up in great haste between Fuller and Gebke to secure those claims ahead of the claims of Wagg & Co. and the People’s National Bank, which thay feared were about to be entered up into judgments and executions issued thereon and levied on the goods. We are inclined to think that the bill 'of sale was really nothing more than an equitable mortgage in fact, nor can we see anything in the evidence that would indicate that there was any intention to cover up the property in order to hinder and delay the collections of the proposed judgments. The amounts of some of the claims represented by Fuller were not even known to them at the time. The intention seemed to be to prefer the claims represented by Fuller, to the other claims, and it was known that there would be nothing left after paying them off. • The intention rather seemed to be by the bill of sale to give a preference, and not to defraud the other claims. This, under the common law, without reference to the statute concerning insolvent debtors, a debtor had a right to do. He could use up his entire property, even when he was insolvent, and all parties knew it, in payment of a portion of his debts, to the exclusion of another portion, if done bona fide and under circumstances free from fraud. Each of the creditors in this case, those represented by Fuller, and those subsequently procuring judgments, were scrambling to see who would secure his debt first; it was feared there was not enough property to pay all. But in another sense we are inclined to think that the action of Fuller and Gebke in regard to the bill of sale and transfer of the goods, was a clear case of fraud as against the assignment law. We think that Gebke, in view of his insolvency, which he appears to have well understood, had made up his mind to make an assignment for the benefit of his creditors, or a portion of them; without a doubt, he made his mind up to that effect before these transactions were ended, for he did make an assignment to Scherber on the 3d day of August, 1889, under which these goods are being administered.

We are clear that the creditors represented in the hill of sale can have no preference as against other creditors, for the reason that they were in collusion with Gebke in trying to procure a preference by the bill of sale, when Gebke was in the act of disposing of his entire property for the benefit of a portion of his creditors. The law is, that if a creditor in collusion with the debtor secures a preference by taking an assignment or sale of the debtor’s property, prior to the deed of assignment, and when the debtor has the intention of making such assignment, such preference will be held void under the Voluntary Assignment Act. Preston v. Spaulding, 120 Ill. 208; Hanford Oil Co. v. First National Bank, 126 Ill. 584; Hide & Leather National Bank v. Rohm, 126 Ill. 461.

It is said in the first case above cited, in speaking of the Voluntary Assignment Act, as follows: “And we hold it is within the spirit and intent of the statute, that when the debtor has formed a determination to voluntarily dispose of his whole estate and has entered upon that determination, it is immaterial into how many parts the performance or execution of his determination may be broken; the law will regard all his acts, having for their object and effect the disposition of his estate, as parts of a single transaction; and on the execution of a formal assignment, it will, under the statute, draw to •it,-and the law will regard as embraced within its provisions, all prior acts having for their object and purpose the voluntary transfer or disposition of his estate to or for creditors; and if any preferences are shown to have been made or given by the debtor to one creditor over another in the disposition of his estate, full effect will be given the assignment, and such preferences will * * * be declared void and set aside in fraud of the statute.” The other cases above cited are equally emphatic on that point. If it he argued that at the time of the execution of the bill of sale, Gebke had not formed the intention of-making an assignment under the statnte, and that therefore the above doctrine would not apply to his case, we would reply that we are inclined to think the evidence, while not perfectly clear outside of the fact that he made the assignment within three days afterward, is, in connection with that fact, sufficient. As we understand the holding of the courts, all such acts of insolvency as made in this case, followed soon after by an assignment, are to be regarded as a unit and as one act, and it is not absolutely necessary that he should have the intention of making an assignment at the time of the first attempt at preference, but it is sufficient if it is followed by an intention and an assignment. In the case of Hide & Leather National Bank et al. v. Rehm, 126 Ill. supra, Judge Bailey, speaking for the court on a similar point, says: “ So long as he (the debtor) is clearly shown to have entered upon the disposition of his property for the benefit of his creditors at the time he made the judgment notes, the law will indulge in no refinements in order to fix the precise point of time at which he reached the determination to make a general assignment. All that was done will rather be viewed as parts of the same transaction, so as to make it immaterial whether the determination to make the assignment in fact preceded or followed the execution of the judgment notes.” We think, however, that Gebke had the idea of assignment in his mind at the time he went, to Fuller, and from his subsequent conduct thereafter, never gave it up. It can not be claimed that the creditors represented by Fuller were not in collusion with Gebke in attempting to secure this preference. Gebke sought out Fuller, who was paying no attention to those claims or attempting to secure them, and sought his advice and counsel, informing him of his insolvent condition. The assignment then, in this case, when made, related back to the date of the assignment or bill of sale, and will be treated the same as though the assignment had been made and the property taken possession of by the assignee at the date of the bill of sale, and as though this property had been in the assignee’s possession from the time Scherber took possession under such bill. This disposes óf the question of priority of the claimants under the bill of sale when viewed as an original questiun, without reference to their abandonment of such claim, if any, before the County Court. We will now consider the next question as to the effect of this assignment upon the rights of Wagg & Co. and other judgment creditors of Gebke.

It can not be claimed that the judgment creditors were in collusion with Gebke for the purpose of procuring a preference, for the evidence shows, rather, that they were in opposition to his wishes, at least in regard to Wagg & Co. after the signing of the power of attorney to them to confess judgment. They had a right, apparently, not being in collusion with Gebke, to take their judgments, even if they had notice of the intention of Gebke to make an assignment. Home National Bank v. Sanch, 131 Ill. 330.

But the question now arises, whether, in view of the fact that this-propertv was in the hands of Scherber under the supposed bill of sale and the subsequent assignment, the judgment creditors could acquire any lien. We think that under the law, by virtue of the assignee’s proceedings being held to relate back to the first possession of Scherber, that it would be too late to obtain a lien by their judgments. They had full notice of this possession, and their executions would be compelled to await all that might be done under it. Another view may be taken of the case as a question of equity. Had there been no subsequent assignment under the statute, Fuller’s clients, having possession of these goods, either as purchasers or as pledgees, could have held them as against the executions coming into the hands of the sheriff after possession taken. The judgment would have been subsequent to those claims. By the subsequent assignment, and in accordance with the assignment law, we have shown that the creditors named in the bill of sale must abandon any preference under that law, and the property in the hands of the assignee is not of sufficient value, if those claims were preferred, to pay them off. It is only by virtue of the statute of assignments requiring all claims to be paid pro rata, that the judgment creditors may be enabled to get anything. They must invoke the provisions of this statute to set aside the bill of sale in order to get a preference over those creditors and the other debtors. They can not make use of it as a sword to prevent an equal distribution, as it was designed to cause such distribution. The statute is remedial in its nature and should be liberally construed to remedy the evils sought to be remedied. Farwell v. Cohen, filed at Springfield, Ill, June 10, 1891, Supreme Court, Ill; Home National Bank v. Sanchez, supra.

The statute can not be made use of to annul its own provisions. We therefore hold the judgment creditors have no liens by virtue of their executions. We think the claim of Gebke for exemptions is provided for in the Assignment Act and also in the deed of assignment, and that he is entitled to them. The order in the court below will therefore be reversed and the cause remanded, with instructions to the court to render an order requiring the assignee to pay the claim of Hnnecke Bros, arising out of the shipment of goods which had not been accepted by Gebke, of §442.68, without any costs charged against them or the fund, made in litigating the same; next, that the sum of $386.50 be paid to Joseph F. Gebke as his claim for exemptions, without any cost being taxed against such exemptions; that the assignee next pay the costs and then the taxes, and that whatever remains of the estate he be directed to distribute pro rata on all the claims not above ordered to be paid especially, without priority or preference; and to make such distribution of the costs and expenses of administration as equity demands, not inconsistent with this opinion.

Order of distribution reversed and cause remanded with the above directions.

Reversed and remanded with directions.

Note.—This opinion is filed on a rehearing, and the case decided the same as in the former opinion of this court, 38 Ill. App. 578.