6 Colo. App. 467 | Colo. Ct. App. | 1895
delivered the opinion of the court.
The Hanson Produce Company brought suit by attachment against The Durango Meat & Produce Company. Judgment by default was taken. In the attachment proceedings appellant was garnished and answered each interrogatory in the negative. The answer was traversed bjr the plaintiff and trial had to the court, without a jury, on the following agreed statement of facts.
“First. That The Durango Meat & Produce Company,-on and prior to the 5th day of July, 1893, was a corporation, existing under the laws of the state of Colorado, and the same as to the plaintiff, The Hanson Produce Company. That on and prior to the 5th day of July, 1893, The Durango
Upon which the court made the following finding and caused judgment to be entered:
“And it being shown to the court that The Hanson Produce Company is plaintiff in attachment against The Durango Meat & Produce Company, and that the said George E. West was garnisheed to secure the claim of the said The Hanson Produce Company against the said The Durango Meat & Produce Company; and that judgment was heretofore rendered in favor of the said The Hanson Produce Company against the said The Durango Meat & Produce Company for the sum of $376.90, and costs, amounting to $7.77^, and the court further finding the facts to be as stated in said stipulation, it is whereupon ordered, adjudged and decreed that the said transfer of personal property by the said The Durango Meat & Produce Company to the said George E. West be held fraudulent and void to the said The Hanson Produce Company. And the said The Durango Meat & Produce Company, for the use of the said The Hanson Produce Company, do have and recover of the said George E. West, garnishee, the sum of $376.90, and the costs of said garnishment proceedings to be taxed at $7.77|-, and hereof let execution issue. To which finding and order and judg ment of the court the said garnishee then and there excepts and prays an appeal to the court of appeals of the state of Colorado, which appeal is granted by the court and appeal
From which an appeal was prosecuted to this court.
The facts being conceded and fully stated, the questions presented are purely legal. The errors assigned, and under the circumstances all that could be assigned, although six in number, may be consolidated into one, — that the court erred in applying the law to the facts, and in consequence the judgment was erroneous.
It having been conceded and agreed that the two promissory notes executed by the officers of the Meat & Produce Company, Wingate, Ambold and Wainwright, were given for a corporate debt, and that the money was borrowed by the corporation and that the individuals named “ became security for it,” the case is very much simplified. The only questions to be determined are, first, whether, under the facts as stated, the company could legally turn over the entire assets in payment of the bank debt to the exclusion of other creditors; second, the relation appellant West bore to the respective parties. For upon the determination of the latter question depends the correctness of his answer as garnishee.
I. Counsel for appellee ably contends that the assets of a corporation are a trust fund in the hand's of the corporation for the payment of its debts when the corporation is insolvent, and many authorities are cited in support of it. There is no question in regard to the correctness of the legal proposition. The only question is what it means. Although aggregate and made up of many individuals, it materially simplifies its legal status by regarding it for all business purposes as a person, subject to the same laws and disabilities, while the officers as trustees manage its affairs, supposedly, for the benefit of its stockholders. If solvent, the interest of stockholders is the surplus remaining after payment of the corporate debts. What is meant by the principle, although enunciated in many different shapes, is that primarily the
It is conceded that the corporation was insolvent at the time of the transfer of its assets to appellant. Although such was the fact, it was continuing in business,' administering its own affairs, in the possession of its property. The property' was not “in custodia legisP Such being the fact, its right to dispose of the property or transfer it to a bona fide creditor in payment of its debts has been clearly established in this state by the decisions of both the supreme court and this court so frequently that a citation of the cases is unnecessary ; and the same has been declared to be the law in all states where, as in this, there is 'no statute restricting the right. It is legally a matter of no importance whether it is the disposition of a part or all of the assets, whether for the benefit of all pro rata, or discriminating against all save the creditor favored and preferred.
The debt being honest and the transfer being made in good faith for the payment, without collusion and with no secret trust for the benefit of the grantors, the transaction is valid. It is stipulated that the entire property transferred to appellant was insufficient to pay the bank. Consequently, the question of a resulting trust for the benefit of the grantors is not involved.
After having stipulated “ that the money was borrowed by the company and these parties became security for it,” counsel for. appellee, in argument, fall into error by regarding the debt as that of the indorsers or sureties. They say, “ But we fail to find in appellant’s brief authorities sustaining prefer
II. The assets of the debtor being personal property, to be converted into money to pay the bank debt, appellant was selected as trustee to take the property and the title to it, convert it into money and pay the proceeds to the bank. It was a trust for a specific purpose. The only duty he owed the assignor was to realize all he could by the sale and pay it to the bank; the duty he owed the bank was to account for and pay the money by him received; and, it being conceded that the property was insufficient to discharge the debt, consequently that there would be no surplus or balance to be returned to the assignor, he was fully justified and legally right in his answers to the interrogatories in the process of garnishment.
It is a well settled law that unless the debtor has funds in the hands of the garnishee or some demand he could enforce against him, the creditor cannot succeed by a process of garnishment. The creditor can only be subrogated to the rights
It is evident that the court misconceived the law controlling the case, and held the assignment void. Otherwise there could have been no judgment.
The judgment must be reversed and cause remanded.
Reversed.