Lindsay v. Guy

Taylok, J.

This is an appeal by the garnishee, Guy, in an action against him as such garnishee. The original action was between the respondents as plaintiffs and Peter Scherer as defendant. Guy, the garnishee, by his answer shows that he is the general assignee of Scherer, holding the property of said Scherer by virtue of an assignment made by him for the benefit of his creditors. And he also shows by his answer that two other creditors of said Scherer had attached the goods assigned to him by said Scherer upon two attachments issued in two separate actions brought by creditors of Scherer against him. The respondents claim —First, that the assignment by Scherer to Guy, the appellant, is void upon its face; and, second, that if not void upon its face it is void for actual fraud on the part of Scherer in making the same. It is said by the learned counsel for the respondents that the assignment'is void on its face because it prefers certain creditors of Scherer, and directs the payment of their claims in the first instance out of the proceeds of the property assigned, and makes no provision for the payment of the other creditors of Scherer, but directs the assignee, after the payment of such preferred creditors, to return the residue of the assigned property, if there be any, to the assignor. We do not think that is the true construction of the assignment. The assignment first provides in apt terms for the payment of the claims of certain preferred creditors in full, and then proceeds as follows:' “ Lastly, after the payment of all the costs and charges and expenses attending the execution of the trust hereby created, and the payment and discharge in full of the lawful debts owing by the said party of the first part of any and every kind and description, if any portion of the proceeds of said sales and collections shall remain in the hands or control of the party of the second part,” etc., then such proceeds so remaining in his hands shall be returned to the assignor. We think this language very clearly shows that there was. no intention on the part of the assignor to exclude his creditors not named as preferred creditors from a participation in the proceeds of the assigned property, if any should remain in the hands of the assignee after the payment of those preferred. Any other construction would be against the clear meaning of the language used.

It is said that because the assignment does not direct that the creditor's shall be paid pro rata in case there be not enough of the proceeds of the assigned property to pay them in full, it is void in law. We think not. If there be not enough to pay in full the creditors, either preferred or general, the law imposes the duty upon the assignee to pay them pro rata, unless otherwise directed by the express terms of the assignment. The assignment having divided the creditors into two classes and preferred the first class, that class is to be first paid in full if there be sufiicient proceeds for that purpose, and if not, to pay that class pro rata, and if there be any funds left after the payment of this class in full, then the other creditors are to be paid pro rata if there be a lack of funds to pay them in full.

It is urged that the assignment is void in law because the officer to whom the bond of the assignee was delivered, did not, at the time it was delivered to him, certify that he was satisfied that the property of the sureties, being within this state, rvas worth in the aggregate the sum specified in said bond. See sec. 1694, E. S. 1878. The statute does not in terms require any such certificate to be made by the officer, and, having received the bond and caused the same to be filed with the assignment as required by law, we must presume that the officer was satisfied of that fact. Churchill v. Whipple, 41 Wis., 611; Klauber v. Charlton, 45 Wis., 603; Ball v. Bowe, 49 Wis., 495; Fuller v. Hasbrouck, 46 Mich., 78. It not appearing in this case that the sureties to the bond were insufficient, we think the assignment was not void for the want of the certificate of the officer, and if the certificate of the officer that he was satisfied as stated in the statute ought to be indorsed upon the bond, the defect might be cured by such indorsement after the bond had been filed, in order to uphold the assignment. We-hold that upon its face the assignment was not void in law on account of any informality in the same or in the bond of the assignee.

The learned counsel for the respondents have made a very able argument upon the question whether the assignment was void for fraud in fact on the part of the assignor. The whole strength of this argument is based upon the allegation that, at and before the time of the assignment by Scherer, he was a partner in business with one William Stephens, and that by the assignment he has ignored said partnership and preferred said Stephens for pretended claims against the assignor, which claims could not be sustained as claims against Scherer, if such partnership did in fact exist. A large portion of the preferred claims of Stephens is for services performed by him in and about the business of the alleged partnership.

There is no question made that Scherer has not transferred to his assignee all the property owned by him which is not exempt from execution, nor that said assignee has not, by virtue of his assignment, taken possession of all the property belonging to the alleged partnership. The creditors of Scherer cannot be prejudiced by this assignment, by any possible claim on the part of Stephens that such assignment by one partner of the partnership assets for the benefit of creditors could not bind the other partner, nor the creditors of the partnership; for the reason that if Stephens accepts his position as an individual creditor of Scherer, under the assignment, he will be estopped from hereafter alleging that the assigned assets were the assets of the supposed firm of Scherer & Stephens; and, further, this record shows that all the debts contracted by this supposed firm were contracted on the individual credit of Scherer, and some of such claims have been prosecuted to judgment against said Scherer alone. It is quite improbable, therefore, that there should be any party who could hereafter successfully call in question the right of Scherer to make the assignment of the supposed partnership assets, if there were in fact any such partnership.

But it is said that if Scherer and Stephens were in fact partners, then, although there are no persons who now stand in a position to be preferred in the payment of their debts out of the partnership assets, yet the fact that the assignor has recognized Stephens’s claim for services while a partner as a debt against him individually, and has preferred such claim in the payment of his debts by the assignee, is conclusive evidence of a fraudulent intent on the part of Scherer in making the assignment, and that such fraudulent intent renders the assignment void as to all parties. It will be seen that this question of partnership or no partnership is not directly in question in this case. This is not a proceeding on the part of a creditor of the supposed firm to collect his debt out of the assets of the partnership, but is a proceeding on the part of a creditor of Scherer alone to subject his property, now in the hands of his assignee for the benefit of all his creditors, to the payment of his- individual debt.. And this question of partnership is brought in collaterally, and upon the fact of its existence' it is sought to base a charge of fraud against Scherer in making his assignment. Previous to the date of the assignment in question there was apparently no one who knew of the alleged partnership, and, so far as appears from this record, no debts were contracted on behalf of such partnership; all persons who dealt with what is now alleged to be a partnership^,,dealt with Scherer as the firm, and with him alone-. The-firm, never bad any credit, never contracted any debts, and, so far as appears from the record, no debts were contracted upon the supposition that such firm ever had any existence.

Under these circumstances, if the respondents now seek to avoid this assignment based upon the fact that such firm did in fact exist, and upon the fraudulent preference of a claim for. the services of one of the members of the firm, who, during its alleged existence, acted as its principal clerk and manager, they should, we think, be held to clear proof of the existence thereof, and no inference or presumption should be made in favor of the fact of a partnership. The existence of such firm was not made known to any one, no debts were ever contracted upon its credit, and if it is to be used now to destroy an assignment made for the benefit of the creditors of the person who has made himself individually liable for all debts contracted for the benefit of such supposed partnership by one who now alleges that he sold goods to said firm, but without knowledge of its existence, and gave credit alone to Scherer for the goods so sold, he ought to make a very clear case before calling upon a court to set aside an assignment made by the person to whom all persons dealing with the supposed firm gave credit in complete ignorance of its existence. After a careful examination of all the evidence found in the record we think the finding of the learned circuit judge, that there was an existing partnership between said Scherer and Stephens at and before the date of the assignment, is not sustained by the evidence. Both Scherer and Stephens swear positively that no partnership existed between them; and there are but two things connected with their transactions which tended to prove such partnership: First, the entries made by Stephens in the books kept by him for Scherer; and, second, the fact that the sign upon the store where the business was done, and the name in which it was done, was “ Scherer & Co.” Scherer explains why he adopted the style of “ Sche-rer & Co.” in carrying on this business, and there is certainly nothing improbable in his reasons given for using that name. All the facts previous to the assignment tend strongly to corroborate his statement that the “ & Co.” was not intended to represent any partner - in the business. All the evidence shows that those dealing with “ Scherer & Co.,” and who sold goods to “ Scherer & Co.,” supposed they were selling to Scherer alone, and either, took his individual notes for the goods so sold or gave credit to him alone. The fact of the use of the style “Scherer & Co.” has misled no one; and, so far as we can see from this record, all persons treating with* Scherer & Co. supposed it meant Scherer alone, and not Scherer and some one as his partner.

"We think the evidence of the use of the name is fully and clearly explained, and has misled no one to his prejudice, and should therefore have no weight in proving the existence of a partnership. But it is said that the entries in the books of Scherer by Stephens clearly establish the partnership. Upon this point Scherer testifies positively that he never saw such entries or heard that such entries had been made in his books until about a week before the trial. Stephens does not contradict him in this respect,'and testifies himself that he had no authority to make any entry in the books indicating that he was a partner in the business. The entry relied on was not signed by either of the parties, but was in the handwriting of Stephens. The fact that the entry relied on was not signed by either party is corroborative of the testimony of Scherer that he. did not authorize it to be made or know of its existence. Had there been-an agreement in fact that they should be partners in the business, it is quite probable that such entry would have been signed by both parties, or that it would have been signed by the party who did not make the same in his own handwriting. If the entry was made without the knowledge or assent of Scherer, it is unnecessary to cite authorities that such unauthorized entry by Stephens would not be proof of partnership which would have the slightest effect upon Scherer so far as he was concerned. It might tend to prove, as against Stephens, that he was a partner of Scherer, but it would not have the slightest tendency as against Scherer to prove him 'a partner of Stephens. The long list of authorities cited by the learned counsel for the appellant is conclusive upon this point.

We think the evidence fails to show that Scherer and Stephens were partners in business during the time the business was carried on in the name of “Scherer & Go.,” and consequently there is no evidence to establish any fraud in the claim of Stephens against Scherer for the amount of which he is a preferred creditor. There is nothing in the evidence which shows that there was any intent on the part of Scherer to defraud his creditors by making the assignment of his property to Guy, the appellant in this case; and for that reason the garnishee should have had judgment in his favor in the court below.

By the Oourt.— The judgment of the circuit court is reversed, and the cause remanded with directions to the circuit court to enter judgment in favor of the garnishee.