Hyde v. Frey

28 F. 819 | U.S. Circuit Court for the District of Indiana | 1886

Woods, J.

Upon the hearing of the exceptions to the original report, a reference to the master was ordered, the opinion of the court being expressed in this wise:

“The gist of the complaint is that, with fraudulent intent towards his creditors, Maag was carrying on business in the name of his wife, using her name as a colorable device to conceal the true ownership of the business. This is a question of faet, upon which the master has not found explicitly, nor by satisfactory implication. His conclusion seems to rest on the proposition, of the correctness of which, within proper limits, there can be no doubt, that a wife may do a separate business, upon credit, and may employ her husband to manage that business. Rut there is this essential qualification: it must be done in good faith; it must really be her business, and her name must not be used for the purpose of enabling him to employ his- timo and energies in the accumulation of property, to be held beyond tlio reach of his creditors. If a wife has a business of her own, based upon her own property oilier own credit, she may employ her husband to conduct that business; but, if she has nothing with which to do business, — no capital,'except the husband’s skill and energy, and such credit as is given because tlie business is to be managed by him,--the situation, to say the least, invokes a close scrutiny into the good faith of the pretense that the business is hers. The case is therefore re-referred to the master to consider, and to report a finding upon the question of fact stated above; counsel to be further heard if they shall desire it.”

The question presented upon the last report is one of mixed law and fact, but the evidentiary facts reported are of such character as to admit, as it seems to me, of but one conclusion, — the opposite of that reported. In support of the master, counsel for respondents have cited Burdge v. Bolin, (Ind.) 6 N. E. Rep. 140; Cooper v. Ham, 49 Ind. 393; Scott v. Hudson, 86 Ind. 288; McLean v. Hess, (Ind.) 7 N. E. Rep. 567; Hoot v. Sorrell, 11 Ala. 386; Corning v. Fowler, 24 Iowa, 584, [see Hamilton v. Lightner, (Iowa,) 5 N. W. Rep. 689;] White v. Hildreth, 32 Vt. 265; Webster v. Hildreth, 33 Vt. 457; Voorhees v. Bonesteel, 16 Wall. 16; Aldridge v. Muirhead, 101 U. S. 397.

While these cases afford illustrations of the proposition that, undor statutes which permit a married woman to have a separate property, to make contracts and to do business as a feme sole, she may avail herself of the services and agency of her husband in the conduct of her business, or in the management of her property, “without necessarily subjecting it, or the profits arising from his management, to the claims of his creditors,” (Aldridge v. Muirhead, supra,) they are all consistent with, and some of them explicitly state or suggest, the correlative proposition that an insolvent debtor may not use his wife’s name as a mere device to cover and keep from his creditors the assets and profits of a mercantile business which is in trutli his own.

Counsel for the respondents lay stress upon the testimony of the merchants who furnished the goods with which the Evansville store was opened, to the effect that they gave eredit to Mrs. Maag; insisting that she became the owner of tlie goods so obtained, and thereby was enabled to enter upon a lawful business, in the conduct of which she had a right to use her husband’s service and skill. But this is a begging of the question. If she was acting in good faith, the conclusion follows that the business was hers; but if her object, was to cover his business under her name, it was not her business, but his, and his creditors are entitled to their remedy accordingly.

The question is not to whom the merchants supposed they were giving credit, but whose in truth was the business. The answer to this question depends, not upon the belief of merchants in respect to whom they gave credit, but upon the conduct and intention of the correspondents Maag. If their design was unlawful as against Maag’s prior creditors, the belief or intention of merchants of whom goods were obtained could not affect the character of the business, though it might afford reason for so framing the decree as to protect their interests. It is clear enough, however, that whatever credit was obtained, in so far as it rested upon any personal trust or confidence, was given to him.

The bill is framed upon the theory that the complainants are entitled to reach only whatever surplus there may be after paying the demands of the creditors of this enterprise; and the master has reported the surplus to be ten thousand to fifteen thousand dollars. The property consists of goods in stock, and real estate worth, over incumbrances, $2,000. Considering the probable expenses of a disposition of the property by a receiver, the court estimates the net surplus'at $7,500; and if this sum, or the real estate and $5,500, shall be turned over or secured to the complainants within 10 days, it will be deemed a discharge of the complainants’ demands, as against the property sought to be reached in this case, and a receiver will not be-' appointed; but in default thereof a receiver will be appointed; and in the mean time the defendants are enjoined from incumbering, disposing of, or selling any of the property, except in the ordinary course of sales at retail, at fair and customary prices, the proceeds of sales to be deposited in bank, from day to day, and kept there until the further order of the court.