12 Utah 411 | Utah | 1895
Each of the above-named plaintiffs obtained judgment against the defendants on the 1st day of September,' 1893, and instituted proceedings supplemental to execution against the defendants and H. V. Kice, D. C. McLaughlin, and E. C. Williamson; and the court, ordered them to appear before a referee . “ tó answer concerning property, moneys, rights, and credits of the said defendants, F. J. McLaughlin and O. C. Lockhart.” At the hearing before the referee,.
Later on, some of the creditors of the partnership commenced attachment proceedings, and the Symns Utah Grocer Company, one of the plaintiffs, attached a portion of the merchandise in the possession of the corporation. Thereupon the partners concluded, rather than involve the corporation in legal controversies with partnership creditors, that it would be better to make an assignment for the benefit of their creditors. The corporation was owing but a- few hundred dollars. So, acting upon the advice of their attorneys, the stockholders of the corporation, who were its directors, sold and transferred the merchandise to Lockhart and F. J. McLaughlin; and they immediately executed a deed of assignment conveying all their property, both real and personal, except such as was by the law exempt, to H. V. Bice, for the benefit of their creditors. The bank's claim, amounting to $12,500, was preferred. Immediately upon the assignment being made, representatives of various creditors went to Park City, and threatened to attach the goods in the hands of the assignee; but D. C. McLaughlin, — who had been in the meantime appointed receiver of the bank, upon the death of its assignee, — learning of this fact, insisted upon the assignee’s selling the merchandise to him, as the bank’s claim had been preferred. After some négotiations it was agreed that, if the bank would cancel its claim of $12,500, the assignee would convey the merchandise, valued at from twelve to fourteen thousand dollars, to the receiver. This arrangement was satisfactory to Lockhart and F. J. McLaughlin, and the goods were transferred to the receiver. The treasurer of the corporation, Lockhart, collected about $2,000 from persons to whom merchandise had been sold by the corporation, and at the time of the hearing had it in his possession. Pending the hearing the directors of
The referee made elaborate findings, and declared 'that the transfers made by the corporation and by the copart-ners were fraudulent and void, including the sale of the merchandise to the receiver of the bank, and also declared 'that said merchandise was subject to the claims of plaintiffs, and ordered that it should be sold to discharge their judgments. Orders were also made commanding the treasurer of the corporation to pay into court the $2,000 above referred to, and requiring Williamson to endorse and assign the stock of the building association to the United States marshal, by whom it was to be sold. The order further stated that the proceeds arising therefrom, together with the $2,000, should be applied to the satisfaction of plaintiffs’ judgments. The report and orders of the referee were adopted and approved by the court, and judgments duly entered in conformity therewith. Subsequently, upon motion of defendants, the judgments were set aside by the court; but later, upon plaintiffs’ application, the court found, after a submission of the testimony taken by the referee, that the $2,000 in the possession of Lockhart was the property of defendants, and that the stock of the building association was the property of Lockhart; also, that the merchandise conveyed to the receiver was the property of defendants. The court ordered the building stock held by Williamson to be sold, and the $2,000 to be applied in payment of plaintiffs’ judgments; and plaintiffs were authorized to commence suits against the receiver for the recovery of the merchan
The points involved in these cases are the same, and both were brought into this court on a joint record. They will therefore be considered together. The garnishees •contend that in supplemental proceedings the court is limited by the statute as to the order which it may enter, and that it was error, in such proceedings, to try the question as to the right of possession and title to property which was not acknowledged to belong to defendants, and that the judgments appealed from are void. Plaintiffs insist, that there are no conflicting claims, in good faith, to the property in question, and that there is no real but a simulated controversy regarding its ownership, and therefore •the court had jurisdiction to adjudge the property to belong to defendants, and order its application to the discharge of plaintiffs’ judgment, without compelling them to .litigate the questions involved in another action.
Sections 3455, 3457, and 3458 of the Compiled Laws of Utah provide: “After the issuing or return of an execution against property of the judgment debtor, or of any one •of several debtors, in the same judgment, and upon proof by affidavit or otherwise, to the satisfaction of the judge, •that any person or corporation has property of such judg.ment debtor, or is indebted to him in an amount exceeding fifty dollars, the judge may, by an order require such' person or corporation, or any officer or member thereof, to appear at a specified time and place before him, or a referee appointed by .him, and answer concerning the same. The judge, or referee, may order any property of the judgment debtor not exempt from- execution, in the hands of .such debtor, or any other person, or due to the judgment debtor, to be applied towards the satisfaction of the judg-
How is it possible, in this summary way, without an opportunity to be heard, and in the absence of some of the parties, without issues, for the court or referee to determine the questions of fact which ought to be heard only in regular actions, and perhaps before a jury? It is clear from the record that “persons and corporations claimed an interest in the property adverse to the judgment debtors.” That being true, the court had no authority to determine the conflicting claims. And the rule is not different where the property is in the hands of the judgment debtor. The purpose of the statute referred to is to aid the judgment creditor in discovering property or assets'belonging to the judgment debtor, and to secure the application of the same to the satisfaction of his claim, without delay or an independent suit; and it would be a gross perversion of the statute to hold that in supplemental proceedings the court can exercise all the powers •of a court of equity, and pass upon questions of fact, the determination of which, under our system of jurisprudence, rests with a jury. Under a similar statute, the supreme court of Nevada state: “When these various sections are construed together, it seems perfectly plain that the judge or referee can only order property to be applied to the satisfaction of the judgment when the title thereto is clear and undisputed. * * * If there is any dispute as to the ownership of the property, or if the person proceeded against in good faith denies the debt, neither the judge nor the referee has any power or authority whatever, in these proceedings, to decide the disputed questions, and order the property delivered, or money adjudged to be due to be paid over,' in satisfaction of the judgment.” Hagerman v. Tong Lee, 12 Nev. 336. But we are referred
The facts before us do not bring these cases within this rule. While there are disclosures in the record before us which do not relieve the transactions from suspicions of legal, if not moral, fraud, yet we cannot say that the adverse claims to such property are mere pretenses. Of course, where it is clearly apparent to the court that there is a simulated controversy, and that there is absolutely no foundation for an adverse claim to the property in controversy, and. where the assertion of such a claim would be so clearly a pretense and evidence of fraud as to be tantamount to a disclaimer of interest, then the court can order its application to the judgment creditors’ demand. We adopted this statute from California, and the supreme court of that state, in construing its provisions, say: “Under a similar statute in New York, the same ruling was made in Town v. Insurance Co., 4 Bosw. 683, and the court held ‘that if property was in possession of the garnishee, claiming title to it, no matter how fraudulent the transfer, no order can be made to compel him to deliver the property, and therefore no question can be put to the debtor or a witness to discover or prove fraud. * * * The remedy of the creditor is by direct action against the fraudulent assignee, when the -good faith of the assignment is in issue.’ There can be no question but that this is the proper construction of the statute, and it results that when the garnishees explicitly denied, in their examination, their indebtedness to the judgment debtor,
But it is claimed by plaintiffs that there can be no dispute regarding the building Stock transferred by Lockhart to Williamson. We have no hesitancy in saying that the record seems to establish that the transfer was fraudulent; and it is held by many courts that an assignee has no interest in the property of the assignor previously conveyed, where it was fraudulently done. We do not desire to pass upon this question, or to determine what, if any, rights the assignee of Lockhart and McLaughlin has in this building stock. We think, whatever interests either of the parties to these proceedings may have therein, they should be determined in another form of action. If Lockhart had any interest in the stock at the time of executing the deed of assignment to Rice, such interest passed to the- assignee, providing the deed of assignment is valid; and the validity of this assignment, we think, cannot be determined in these supplemental proceedings.
Respondents contend that, even under the views herein announced, the judgment of the court as to the 82,000 in the hands of Lockhart was proper; that the stock of defendants in the corporation was assigned to the bank, but that prior to the general assignment by defendants this stock was assigned to plaintiffs, subject to the bank's claim, but that the receiver of the bank took the goods in full payment of defendant's-demands, and therefore they are entitled to the stock, and consequently to the money which is a dividend thereon.
There are two objections to this contention: First.