67 Wis. 373 | Wis. | 1886
The following opinion was filed May 15, 1886:
These two cases were submitted together on the same facts. Suit was brought by the plaintiffs severally against the McDonald Manufacturing Company and others, on claims for borrowed money of over $10,000 each, which occurred before the recording of the trust deed hereafter mentioned, and the garnishee summons was served on the 10th day of July, 1884. Judgments were rendered in the suits, in the first, August 2, and in the other, December 27,1884. The garnishee answered on the 30th day of July, 1884, generally, that he had no money in his hands belonging to the defendants, and that he held the property of said company by virtue of a trust deed to him as trustee, dated December 1, 1883, acknowledged January 14, 1884, and recorded and delivered March 15,1884. Issue was taken upon said answer, and a trial had on evidence in August, 1885.
It will be seen that the sole purpose, stated in the deed, of the issue of these bonds, was to, sell or hypothecate them to raise money “ to provide an increase of working capital called for by an increasing business.” “ It is declared to be a part of the contract upon wTkich said bonds are sold cmd put upon the market” etc. On the face of the deed and that part of the resolution copied into it, there is no other purpose apparent or expressed than to raise means to be used in carrying on the business, by selling the bonds for cash in the market. This would appear to be a fair and legitimate transaction of a sohent manufacturing corporation, beneficial to itself and its creditors. But a part of the resolution was not copied into the deed, viz.: “ That the present issue of bonds, of the amount* of $50,000, be called in or paid up, and that the $100,000 above provided for shall be issued in their place.” This, of course, has reference to the issue of $50,000 of bonds in 1819, and discloses quite a different purpose for at least half of the $100,000 of bonds than that appearing in the trust deed, and it appears that this part of the resolution was carried out by passing over $50,000 of the bonds to take up that amount issued in 1819 and outstanding to the holders thereof. This trust deed is attacked for being fraudulent and void as to the plaintiffs and other creditors of the corporation,, and that was the real issue on the answer of the garnishee.
When the remaining bonds were disposed of by the company does not very clearly appear. There is no evidence that any of the bonds except one was ever sold for cash or part cash. They were delivered to divers creditors as security or in payment of their claims, and some of them, over $10,000 in amount, were delivered to officers of the corporation as collateral security for money that had been advanced previously by them for the company, and $14,000 in amount of the bonds were delivered by order of the directors to divers creditors on the 9th day of July, the day when the trustee took possession of the property under the trust deed. On the 10th day of July, 1884, the day the garnishee summons was served, the directors had a meeting and passed a resolution ratifying and confirming the delivery of bonds Nos. 58 to 100 inclusive, to various parties and as collateral security to creditors, and on the same day the stockholder's held a meeting and. made the same ratification thereof. It is quite probable that few, if any, of the $50,000 of the bonds remaining after taking up the old $50,000 of bonds, were negotiated or delivered to any one before the 1st day of April, 1884, the time when the first semi-annual interest became due, for default in the payment of which the trustee took possession of the property.
It appears from the trial balance that all that instalment of interest had been paid on all the bonds except the sum of $604.85, before July 9, 1884. In November, 1884, the trastee made out written requests for him to take such measures as he deemed best in managing the property in
The object and purpose of the suit appear in the prayer for relief, which is that he, the trustee, may be decreed to be in rightful possession of the property, and that he may continue to have the exclusive possession and management of the same, and pay off the bonds, and manage the property in such manner as he may see fit for the best interest of the bondholders; that he may sell, assign, or dispose of the same to the best advantage of the trust, procure insurance, loan money, and pledge the property, and pay all
Was it not the intention and the design of the giving of the trust deed that the trustee should so continue to conduct the business, so long as it was deemed best by the directors and officers of the corporation, and has not the result so far answered fully their expectation? Why did the corporation prescribe such terms of default upon failure to pay the first semi-annual interest of April 1, 1884, when it was not probable, if possible, that such interest would or could be paid? Was it not probable that at-least $50,000 of the bonds could or would not be sold in market for cash by that time, less than one month after the trust deed took effect by delivery to the trustee ? The default occurred and was taken advantage of before many, if not most, of that portion of the bonds were even distributed among favored
If the directors arid officers of the company and the trustees are presumed to have intended the consequences of their own acts and conduct, commencing from the tim,e the trust deed was delivered and continuing down to the trial of this case, then such acts and conduct were consistent with no other design or intention than to hinder, delay, and defraud their creditors in giving the trust deed, and such intent was most conclusively proven and beyond any reasonable doubt. That the creditors were so hindered, delayed, and defrauded by such acts and conduct there can be
We cannot resist the conclusion that the whole scheme was devised and carried out with the purpose and intent to hold off, hinder, delay, and defraud the creditors representing the great bulk of the company’s indebtedness, while continuing the business, and that scheme is unusually transparent. The studied formality and apparent fairness and legitimate character of the trust deed on its face, by wrhicli the bonds of the corporation were to be placed upon .the market to raise funds with which to continue the business or enlarge it, cannot rescue the transaction from the surrounding circumstances and subsequent conduct of the parties, so clearly indicating its fraudulent intent.
The issue of bonds and mortgaging the property and franchises of railroad companies and other quasi public corporations to secure them, are regulated by statute, and such private business corporations do not come within the law or the reason of such regulations. The personal property and franchises of such private corporations are not treated as ¡real estate or fixtures; and property not in esse, or to be acquired in future, does not pass by mortgage or trust deed to secure indebtedness any more than that of a private or natural person or partnership. This trust deed, therefore, so far as .it conveys as such security the personal property of the corporation, should have been filed as a chattel mortgage, and as to future-acquired property it was void. Comstock v. Scales, 7 Wis. 159.
.The holding that this trust deed is void, as having been
But it is needless to cite authorities m a case like this, where the inference of the fraudulent intent must be drawn from the facts, if at all. The question of such intent is one of fact for the jury, and we do not think that a jury would require the authority of reported cases to find from the facts of this case that the trust deed was made with the intent to hinder, delay, and defraud the creditors not provided, for by it. Holding, as we do, that the trust deed was made
It is claimed that there are certain equities in favor of the holders of the $50,000 of the bonds secured by said trust deed and taken in lieu of the $50,000 of bonds issued in 1819 by said corporation, and of the trustee for moneys borrowed by him or secured by his indorsement or guaranty, and which went into the business or property of the corporation during
The able and learned counsel of the respondent contends that, “ in a court of legal jurisdiction, garnishment is a legal proceeding, and consequently the defendant’s right to the fund garnished must be a legal one. If the debt or liability sought to be charged by garnishment must be determined in an equitable proceeding before its existence and quantity or value can be ascertained, like the garnishment of an individual partner’s interest in an unsettled partnership account, then in such case the proceeding by garnishment is not the proper remedy.” By sec. 2766, ch. 12,5, R. S., on “ Garnishment,” “ the court shall render such judgment in all cases as shall be just to all parties“ adjudge the conveyance, transfer, or delivery to the sheriff, etc., of any real estate or personal property disclosed, or by judgment pass the title thereto.”
This language would seem to confer a wide equitable jurisdiction in a case of garnishment. But in sec. 2768 the jurisdiction in just such a case as this is conferred as follows: “Any property, moneys, credits, and effects held by a conveyance or title void as to the creditors of the defendant, shall be embraced in such liability” to the plaintiff, to the amount of the property, moneys, credits, and effects in his possession or under his control, belonging to the defendant, as defined in the preceding part of the section. This places the question beyond all doubt. But it appears to be the general rule in garnishment that the garnishee may be ex-
The findings of the circuit court are consistent only with the finding that the trust deed was valid, and, in our view of the case, such findings are erroneous.
By the Court.— The judgments of the circuit court are reversed, and the causes remanded with direction to find the trust deed void as to the plaintiffs and other creditors attacking the same, in accordance with this opinion, and for further proceedings according to Mw.
Upon a motion for a rehearing there was a brief for the respondent by E. S. Bragg and Joshua Stark. They urged, inter alia, that the case did not require that the trust deed in question be -held void in toio, and that a judgment setting it aside absolute^ would be erroneous and unjust. Even if the purpose of the corporation was to hinder, delay, and
For the appellants it was argued, in reply, that the garnishee having rested his claim of title on the deed of December 1, 1883, must abide by the issue thus made; and the deed of 1879 is therefore not involved in this action. The deed of 1883 was fraudulent upon its face, and all persons claiming under it necessarily took with full notice. Wait on Fraud, Oonv. sees. 9, 10, 376.
The motion was denied December 14, 1886.