National Bank of the Republic v. George M. Scott & Co., 18 Utah 400

National Bank of the Republic v. George M. Scott & Co.

18 Utah 400 | Utah | 1898

Zane, C. J.

This is an equity cause to set aside a deed of assignment made by George M. Scott & Co., a corporation, to Hugh Anderson. A number of facts were alleged in the complaint upon which the plaintiff relied as showing fraud. The defendants answered, denying essential elements alleged in the complaint and fraud in fact or in law. The lower court heard the evidence, made findings of fact, heard arguments of counsel, and stated its conclusions of law, and entered a decree dismissing the cause. From this decree the plaintiff has appealed.

It appears that on January 29, 1898, George M. Scott & Co., a corporation, made a deed of assignment for the benefit of its creditors to Hugh Anderson; that all of its four directors voted for the resolution in pursuance of which the deed was executed; that the same was ratified at a meeting of all the stockholders by a unanimous vote; and that Scott owned less than one-half of the stock.

The indebtedness of George M. Scott & Co. was divided into three classes, and preferred in that order. Those of the first class amounted to $30,400.50, evidenced by five *406promissory notes, due to as many payees, and all indorsed by George M. Scott. He being a director, it is claimed these preferments rendered the deed fraudulent. It does not appear from the evidence the preferment was made with the intention to delay, hinder, or defraud the creditors of the company or other person. No actual fraud was proven. That being so, the fact that Scott voted with three other directors to prefer these notes upon which he was indorser did not render the deed fraudulent in law. The same result would have happened had he voted against the resolution and deed or had not voted at all. This court has so held in the case of Wells, Fargo & Co. v. George M. Scott & Co., (decided at the present term) 55 Pac. 81, and in Colorado Fuel & Iron Co. v. Western Hardware Co., (Utah) 50 Pac. 628. In the second preferred class was a note for $40,000, signed by George M. Scott, but described in the deed as the note of George M. Scott & Co. This money was placed to the credit of the company, and paid out on its checks and indebtedness. It appears that George M. Scott & Co. wanted to borrow the $40,000 from the Travelers’ Insurance Company, and, to accomplish the transaction, deeded to Scott one piece of real estate of the value of $15,000, and an undivided half interest in another of the value of $50,000, the other half being owned by Scott, and for the loan he gave his promissory note and a mortgage on both tracts or lots including his interest. It appears the transaction was made in the name of Scott, for the benefit of George M. Scott & Co., he having no personal interest in it and received no part of the money. In view of these facts, we must regard this as a loan to the company, and that it was indebtedness George M. Scott & Co. had a right to prefer. We so held in Wells, Fargo & Co. v. George M. Scott & Co., supra.

*407On the trial tbe plaintiff propounded certain questions tending to prove that George M. Scott had, prior to the assignment, misappropriated and diverted from George M. Scott & Cq., to his own use, or to the use of another company of which he was the principal stockholder, large sums of money, and that he was indebted to George M. Scott & Co. in a large sum at the time the $40,000 was borrowed and when the assignment was made. The fact that Scott wrongfully appropriated funds of the corporation, or that he was indebted to it, could not render the assignment fraudulent, unless the fraudulent diversion of the funds, or the indebtedness was fraudulent, and such fraud entered into the transaction constituting the assignment, and the assignee or one or more of the creditors knowingly participated in the fraud. The fraud must be so connected with the transaction as to taint the assignment. Pettit v. Parsons, 9 Utah, 223, 33 Pac. 1038. The fact that a stranger to, or agent of, a person, whether natural or artificial, has by deception, or by a betrayal of his trust, or otherwise, wrongfully obtained the property or money of another, cannot deprive him of the right to assign his property in good faith for the benefit of his creditors. The fact that a man has been cheated out of a portion of his property by a sharper does not prevent him from assigning what he has left, with any claim he may have against the rogue on account of the fraud, to an assignee for the benefit of his creditors. Such transactions cannot affect the assignee or creditors under the assignment. Nor can proof that Scott was indebted to George M. Scott & Co. at the time of, or subsequent to, the assignment, render the assignment invalid. The existence of such indebtedness could not affect the company’s right to assign its property and effects for the benefit of its creditors. In view of the other evidence in the case, the evidence ruled out was immaterial.

*408The plaintiff assigns as error the ruling of the court admitting the testimony of George M. Scott as to his intention in voting for the assignment in question. The plaintiff relied upon actual or intentional fraud, as well as constructive fraud or fraud in law. Actual fraud is equivalent to intentional fraud. An intention is a state of mind of which the mind must be cognizant, and the individual who has the intention can testify to it. It is a fact within his knowledge, and he is the only person who can testify to it directly. It is true that such state of mind or intention may be proved by what the individual may say and hy his actions and conduct. From his language and conduct the court or jury may infer the intent; but the witness who has the intent can testify directly to it. Whenever the intention of the witness in doing an act is competent, relevant, and material, he may testify to it, unless his language or conduct has been such as to induce a reasonable belief that he intended and meant something different from his true intent, and another or others have acted upon such belief under circumstances that will estop the witness from testifying to, and relying upon, his actual intent. In interpreting or construing a contract, the question is not what the parties to it actually meant, but what the language of the contract expresses,— not what their intention actually was, but the intention expressed in their contract. It was proper to inquire of Scott whether his intention in joining with the other directors was to hinder, delay, or defraud the creditors of the company in collecting their debts. He was not asked as to the intent expressed in the assignment, or as to an expressed intent, upon which the plaintiff or other person had acted. He was asked his motive in making the assignment, — whether it was made in good faith, for the benefit of the creditors of the company. This was proper, *409and the same inquiry might have been made of each of the directors. Seymour v. Wilson, 14 N. Y. 567; Mathews v. Poultney, 83 Barb. (Sup. Ct.) 127; Covert v. Rogers, 38 Mich. 363; Love v. Tomlinson, (Colo. App.) 29 Pac. 666; Campbell v. Holland (Neb.) 35 N. W. 872; Wilson v. Clark (Ind. App.) 27 N. E. 311.

Counsel for defendant urge that section 87, Rev. St. includes all the means and causes that can be urged for setting aside an assignment for the benefit of creditors; that no other reason than such as are mentioned in it can avail. The law as well as equity abhors fraud, and “the common law asserts as a general principle that there shall be no definition of fraud. The courts have never laid down as a general proposition what shall constitute fraud, or any rule beyond which they will not go, lest other means of avoiding equity should be found.” And we are not disposed to hold that section 87 of the Revised Statutes includes all the acts, omissions, and conceal-ments that may render an assignment voidable or void. "We are of the opinion that the legislature in that section did not intend to prescribe a limit beyond which courts may not go in considering and deciding upon the validity of such contracts. If it should appear, in any case, that other means or artifice was used amounting to fraud that ought to render an assignment void or voidable, the court should be at liberty to set it aside. The facts of this case appearing in the record do not authorize us to set aside the assignment in question for any of the reasons mentioned in the statute or recognized by the principles of equity. Other errors alleged in the record have been considered, but we do not deem it necessary to extend this opinion further. The judgment is affirmed, with costs to respondents.

Baetch J., concurs in result. Minee J., concurs.