Batten v. Smith , 62 Wis. 92 ( 1885 )

Cassoday, J.

The statute requiring the assignor to make and file, in the office of the clerk, “ a correct inventory of his assets, and a list of his creditors,” within ten days after the execution of the assignment, is peremptory, and a failure to so make and file avoids the assignment. Sec. 1697, R. S.; Haben v. Harshaw, 59 Wis. 410. But the same section and the same decision declare, in effect, that no mistake made in the inventory or list filed shall invalidate the assignment or affect the right of any creditor. The word “ mistake ” is not confined to inaccurately stating or describing any of the several items actually mentioned in the list or inventory, but may cover mistakes of omission as well. Farwell v. Gundry, 52 Wis. 268; Smith v. Bowen, 61 Wis. 258. In the first of those cases the assignor wholly omitted from his inventory the land on which he resided in a village, notwithstanding it comprised more than one fourth of an acre, under the supposition that he was entitled to forty acres as exempt; but the court held that the word “mistake,” in the statute, included mistakes of law, even where all the facts were known to the assignor at the time of making the assignment. In the- second, certain creditors were inadvertently omitted from the list, but the assignment was upheld. The obvious purpose of requiring the assignor to file such list of creditors was to enable the- assignee to give the notice to creditors prescribed in sec. 1698, R. S. Mather v. McMillan, 60 Wis. 546.

The fact that such list is not conclusive upon the assignee nor any creditor, but may be contested by either, as provided in sec. 1699, pretty clearly shows that such assignment is not necessarily invalidated by reason of an improper claim being innocently and by mistake included in such list. This is strengthened by the construction put upon the word “such,” as used in the last clause of sec. 1697, by this court in Steinlein v. Halstead, 52 Wis. 291, and also by what is said in Mather v. McMillan, supra. So the obvious purpose of requiring the assignor to file “ a correct inventory of his assets” was not only to give to the assignee and creditors the requisite information and description of the property assigned, but also to prevent the assignor from defrauding his creditors by concealing or secretly withholding from the assignee any portion of his property. Ibid. In other ■words, it was to prevent fraud or bad faith as against creditors, and secure a faithful execution of the trust. Here the two judgments attached, certain lands, and other property claimed by the plaintiff to belong to the defendants, were omitted from the original inventory; but that was soon followed by supplemental and verified inventories, stating, in. effect, that they were so omitted by mistake, and explaining why.

The traverse put in issue the alleged fraudulent intent of the defendants in making the transfer, and upon that issue the plaintiff had the burden of proving, not merely the belief, or the good reason for the belief, of the existence of such fraudulent intent, but the existence, in fact, of such intent to defraud in making such transfer. Davidson v. Hackett, 49 Wis. 186. Without going into, details, it is enough to say that we find no evidence of any intentional omission of any property from the inventory, nor any evidence that in making the assignment the defendants intended to defraud any of their creditors. Especially must we so hold, in view of the recent amendments to the statutes enlarging the rights and powers of assignees, and prohibit- ■ ing the debtor from giving preferences in such cases. While the law authorized a failing debtor to prefer some of his creditors at the expense of others, either by way of sale, special transfer, or a general assignment for the benefit of creditors, and left the assignee as the mere representative of the debtor, without giving him the right to acquire such property as the debtor had fraudulently .conveyed or transferred prior to the assignment, as was held in Estabrook v. Messersmith, 18 Wis. 545, and Hawks v. Pritzlaff, 51 Wis. 160, there was much more reason for holding a stringent rule of construction than there is since the recent amendments. Now the assignee represents the rights and interests of the creditors of the assignor making the assignment, as-against all transfers and conveyances which would be held fraudulent or void as to creditors; and such assignee is expressly given all the rights which such creditors would have to bring and maintain an action to avoid such fraudulent conveyances and transfers. Ch. 170, Laws of 1882; Vernon v. Upson, 60 Wis. 422. So the more recent act not only avoids every assignment giving a preference, except for the wages of laborers earned within six months prior to the assignment, but also avoids all preferences acquired within sixty days before the assignment, by virtue of the levy under a judgment confessed by the assignor, or by a judgment entered on his judgment note, or by any sale, mortgage, hypothecation, lien, or other security, made, given, or executed by the assignor in contemplation of making such assignment or of insolvency; provided the person benefited thereby, or receiving the same, knew, or had reasonable cause to believe, such debtor insolvent. In addition, the same act expressly declares that “ the assignee in such assignment shall possess all the powers thereunder necessary to institute any action or proceeding to set aside and avoid any levy, sale, mortgage, hypothecation, lien, or other security named ” therein. Ch. 349, Laws of 1883.

Thus, under the law as it now stands, an assignee for the benefit of creditors stands in very much the same attitude and is possessed of quite similar powers to, an assignee in bankruptcy under the act of Congress of 1867. By these two recent enactments, the legislature have manifested the purpose of upholding general assignments so made for the benefit of all the creditors of the assignor, and to prevent all indirect methods of obtaining any preference through the active agency of the debtor at any time during the sixty days immediately preceding the assignment, and to enable the assignee, as the representative of such creditors, to avoid such illegal transfers, and to recover back for their benefit the property so fraudulently disposed of by the assignor.

The transfers of the safe to the father-in-law, and other property to other parties, alleged to have been made by the defendants in fraud of their creditors just prior to making the assignment, instead of having the effect of avoiding the assignment, were, by virtue of these recent enactments, avoidable under the assignment. Nor would the omission of the property so fraudulently transferred, from the inventory, invalidate the assignment under sec. 1697. Assuming that such transfers were in fact fraudulent, yet the title to the property transferred absolutely passed from the assignors, who thereby lost all right of reclaiming the same and hence were powerless thereafter to again transfer or even assign the property for the benefit of their creditors. This being so, they had no more right to include such property in their inventory than they had to include the property of any stranger. True, the assignee appointed by the debtors is in duty bound under the assignment to avoid such prior fraudulent transfers, yet, in doing so, he in no sense represents the debtors; on the contrary, he, under the authority expressly given to him by the enactments in question, represents the defrauded creditors.

Thus it appears that instead of the assignment being made with the intent to defraud creditors, it was made by repentant debtors to obviate the consummation of their own frauds as against their own creditors, and. to secure an equal distribution of all their property, and such as they had’ fraudulently transferred, among all their creditors, including the plaintiff. Such an assignment, to secure such equal distribution among all their creditors, was certainly fair, equitable, and beneficent in its purpose, and its element of equality would seem to preclude all possibility of its being made with the intent to defraud any of such creditors.

The question presented, therefore, is. whether the property assigned, and such as had been so fraudulently transferred prior to the assignment, shall be thus equally distributed among all the creditors, including the plaintiff, or the plaintiff be allowed to have a preference over the other creditors by virtue of his attachment. Upon this question the equities are all one way, and we are unable to find any valid reason for disturbing the findings of the trial court.

The inventory filed describes parts of two lots in a village as the homestead of the defendant R. S. Smith, and claims the same as exempt. Such homestead, of course, is specifically exempted by the statute, and there is no imperative obligation upon the debtor to make any selection of it. Secs. 2083, 2984, R. S. Besides, as it could not be conveyed without the signature of the wife, it certainly could not be assigned by the husband alone, for the benefit of his creditors. Sec. 2203, R. S. There seems to be no other feature of the exemption clause in the assignment, not fully covered by the opinion in Bates v. Simmons, ante, p. 69, filed herewith. See, also, First Nat. Bank v. Hackett, 61 Wis. 335.

By the Court.— The order of the circuit court is affirmed.

LyoN, J., took no part.