Farrington v. Sexton ( 1880 )

Campbell, J.

Farrington was sued as garnishee of James Nall, Jr., & Co. He claimed under an assignment to him for the benefit of creditors, and the plaintiffs below assailed it as void as against them. Upon the trial of the garnishee proceedings in the Detroit Superior Court, it was held void, for actual fraud. The case now comes before us on the single question whether there was any testimony on which that conclusion could lawfully be based.

It is suggested that although the court inspected the principal proceedings and based the finding on them, the failure to prove them separately is an objection to the validity of the finding. We think, however, that inasmuch as the right to proceed to the trial of the issue against the garnishee depends on the state of the principal cause, the court is at liberty to consider the record without proof. The whole record is connected, and it would be a vain and useless ceremony to introduce proof separately when it is all necessarily together before the same tribunal.

Upon the question of fraud we have no authority to pass, unless the court below had np testimony whatever tending to prove it. We think there was such testimony. It is not claimed Mr. Farrington was in any way to blame. The fraud was charged and found against the assignors. The assignment upon its face is assumed to be regular.

The testimony as acting on the mind of the judge of the Superior Court indicated that the assignment was made February 13, 1879, at which time the goods on hand inventoried at cost $55,011.68, and were appraised at $27,272.77; that in the early part of January, 1879, aside from other assets, the goods on hand inventoried at cost either $95,000 or about that amount less ten per cent., and were represented as worth a little over $95,000. The discrepancy between these amounts as fixed by the cost of the goods induced the court to conclude that a large amount of this property was fraudulently withheld from the assignee, and not reasonably accounted for. The testimony would justify such an inference if the court drew it, and it is always to be borne in mind that we have no power to determine to what extent such testimony as is given should satisfy the judgment of that court. It was for the judge to say whether an explanation, if given, convinced him of its fairness. There was an apparent occasion for more explanation than was given.

There was further testimony from which it was open to claim that the assets of the Nall Manufacturing Company belonged to the firm, and had been disposed of by collusion.

We need not go further. If these facts or any of them existed, the court did not go beyond the law in concluding that a considerable amount of property had been secretly and fraudulently kept back from the assignee and used for private purposes.

The only remaining question is whether such dealings are fraudulent in such a way as to vitiate the assignment. Upon this we think there is no ground for serious controversy.

A general assignee is not a bona fide purchaser, and there is no rule of law which exempts a general assignment from the consequences' of actual fraud that has any tendency to hinder, delay or defraud creditors. The only ground on which.such assignments are upheld is that the debtor has in good faith put all of' his assets into the hands of a trustee for the sole purpose of paying his lawful debts, ■ as far as the assets will go. It has always been held that it was fraud to intentionally withhold property which ought to be assigned.

In the present case the assignment is broad enough to cover any property which belonged to the assignors. But it does not authorize the assignee to take measures to set aside fraudulent transfers. As to those he stands in the shoes of his assignors. The creditors may attack them, as they are doing here, but the assignee takes only what the assignor owned, and no one can get relief against his own fraudulent conveyances. When parties secrete and cover up property, it is at least as likely that they may resort to fraudulent transfers as to their own possession.

It can make no difference in - practical effect; and it does not lessen either the character or extent of fraud, whether property is left out of the terms of an assignment, or put where the assignee and creditors will hot find it. The fraud consists in preventing the assignee and creditors from getting the benefit of it, and if that is the purpose it can make no difference, by what means it is carried out. Property may be honestly omitted, but property cannot be secretly and intentionally covered up and kept out of reach without palpable 'dishonesty.

It is therefore not important to conjecture by what devices or in what way the property was disposed of. It is enough to justify the judgment that it was misappropriated in any way, with a fraudulent purpose. And without a satisfactory explanation that purpose can be inferred if such is the impression made on the court from the whole case.

The judgment must be affirmed with costs.

Marston,. C. J., and Graves, J., concurred. Cooley, J. I have been unable to find any evidence of fraud in the record in this case.