Martin Browne Co. v. Morris

Springer, C. J. (after stating the facts). The assignment of error involved the validity of the deed of signment. The plaintiff below, the Martin-Brown Comp: and the interpleaders M. J. McKinney, the Ft. Worth Cl Company, and Frank Herman & Co., filed a demurrer to interplea of Lee Cruce, on the_ ground that the deed oi signment of Morris & Nunn, under which he claimed the tached property, was void on its fape. The deed of as. ment is as follows: “Know all men by these presents, we, J. G. Morris and E. O. Nunn, composing the firr Morris & Nunn, of Ardmore, Indian Territory, for an consideration of the sum of one dollar to us in hand pal Lee Cruce, and the further consideration hereinafter tioned, have this day sold, conveyed, and delivered unt said Lee Cruce the following'described property, to wit: that certain stock of goods, wares, and merchandise, fixtures situated in the storehouse and wareroom now pied by us as a place of business on the north side of street, in the town of Ardmore, I. T., consisting oi goods, groceries, hats, caps, boots, queensware, clot] hardware, woodenware, fixtures, etc.; also, six cases o: goods now in the Gulf, Colorado and Santa Fe Railroa' depot, at Ardmore, consigned to us. This deed is giv< trust for the following purpose: I desire the sai' Cruce to pay, of the proceeds of said property, a n $600.00, due J. A. Mays 30 days after the 20th day o: gust, 1892; also a note of $800.00, due to said J. A. M: days after August 20th, 1.892, next, to pay R. L. B: man a debt of $2,475; next, to pay what I owe Tom Su Mrs. Mattie Dobbings, and-Webb; next to pay t| mainder that I owe to said J. A. Mays; next to pay Ballard-BurnettHat Co. what we owe them; the restj paid to our other creditors, according to their claims, said Lee Cruce is to be controlled in the management ar of said property by the assignment laws now in force [511] ian Territory. O. E. Nunn. J. C. Morris.” The trial rt overruled this demurrer, holding that the deed on face was valid. Counsel for appellants cite section 305 of Mansfield’s est of the Laws of Arkansas, put in force in the Indian ritory by act of congress, which provides “that in all s in which any person shall make an assignment of any perty, whether real, personal, mixed, or choses in action the payment of debts, before the assignee shall bo en-sd to the possession, sell or in any manner manage or ¡rol any property so assigned, he shall be required to in the office of the clerk of the court exercising equity diction a full and complete inventory and description of property, and also make and execute a bond to the : of Arkansas in double the estimated value of the prop-assigned.” This statute is, as counsel contend, manda- and contains an explicit direction that the assignee not be entitled to sell, or in any manner manage or con-any property so assigned, until he shall have filed the titory and bond required. Counsel insist that a deed h permits the assignee to sell or in any manner control ssigned property before he files a bond and inventory avenes this statute, and is void, and the words in the which declare that the assignors “have sold, conveyed, elivered” the stock of goods to the assignee render eed void on its face. Counsel for appellants contend y this provision in the deed of assignment the posses-f the stock of goods was transferred to the assignee oment the deed was executed, and before the filing of |ventory and bond as required by the statute; that the if the filing of a bond and inventory is excluded by the [terms of the instrument; and that the execution of the [and the possession of the property by the assignee ¡simultaneous acts. The words used were such as were ed to pass the title from the assignors to the assignee, [512] The deed must have been executed before the assignee coi file a bond and an inventory. While the law requires tl the bond and inventory should be filed before actual poss sion should be taken, yet a deed passing title must be ecuted in the first instance. The words in the deed ££h sold, conveyed, and delivered” do not necessarily imply t the actual possession of the property was delivered to assignee. The word “delivered” is sometimes used to mi a transfer of title, and at other times a transfer of pos; sion. Tied. Sales, § 92; 1 Benj. Sales, p. 231 et seq. where a word admits of two constructions, that interj tation should be given to it which will render the insi ment legal and operative, rather than that which will ren it illegal and void. Grover vs Wakeman, 11 Wend. The overruling of the demurrer to the interplea of Cruce did not prejudice the plaintiffs. It only left the qu ion of the transfer of actual possession of the goods to determined as a matter of fact by evidence. If plain could • prove that actual possession of the goods taken by the assignee before filing a bond and invent this would invalidate the deed of assignment. If it sh' appear from the evidence that actual possession was taken by the assignee prior to filing bond and invent the rights of the-interpleader and of the preferred cred: would have been prejudiced by sustaining the demu: Hence the trial court, in overruling the demurrer, save' rights of all parties, and'secured a determination of case upon its merits, rather than a technical miscarriag| justice. The second assignment of error by counsel for aj lants is to the effect that £ £ the court erred in holding Mays and Bridgeman were not partners with the defenJ Morris & Nunn. ” The case at bar was tried by the coil jury having been waived. At the request of the appelij [513] trial court filed its conclusions of law and fact, which, re as follows. “(1) That on the 28th day of September, )2, Morris & Nunn executed a deed of assignment to Lee uce for the benefit of their creditors. (2) That they pre-red J. A. Mays and R. L. Bridgman and other creditors aid deed of assignment. (3) That J. A. Mays and R. L. idgeman were not partners in the mercantile concern of rris &Nunn. (4) That Morris &Nunn, in making the deed issignment, undertook to prefer certain fraudulent claims 'avor of Mays and Bridgeman, and the said deed of as-ament was made to defraud their creditors. (5 ) That } Cruce, assignee, did not participate in, or have any •wledge of, the fraud of Morris & Nunn at the time of execution and delivery of the deed of assignment. (6) it Martin-Brown Company sued out writs of attachment inst Morris & Nunn, and caused the' same to be levied n the property in the hands of the assignee, and he has pleaded herein, and claimed the property for the benefit e creditors of Morris & Nunn. Conclusions of law: (1) It the assignment is a valid assignment, and conveyed [property to Lee Cruce in trust for the benefit of credi-of the defendants. (2) That the attachment is sustained ed out. (3) That the attachment sued out in 'this case t to be dissolved in so far as it affects property in the s of the interpleader, and that the interpleader Lee e ought to recover herein. ” Finding of fact by trial court— Orn-clusiveness. It will thus be seen that the court found, as a matter let,- that Mays and Bridgeman were not partners in the pantile concern of Morris & Nunn. In determining |ers of fact, appellate courts regard the findings of fact íe trial judge in the same light as the findings of a jury, ferial court, a jury having been waived, was the judge of [acts, and, with competent evidence on both sides, had lame right to determine them as is accorded to a jury. [514] We could not disturb the finding without violation, not onlj of past precedents, but of sound general principles. Bell vs Welch, 38 Ark. 144. ‘ ‘ The court who heard the evidencB and who had an opportunity to test the credit to be given the witnesses, who testified in the case, from their mannl when testifying, as well as .n what they said, is more cor petent to decide correctly than we would likely be.” Dickerson vs Johnson, 24 Ark. 253; Lehnen vs Dickson, 148 S. 72, 13 Sup. Ct. 481; Lancaster vs Collins, 115 U. S. 222, Sup. Ct. 33. Counsel for appellants, in their reply briq concede the proposition “ that the finding of a trial judge ■ a question of fact, where the evidence is conflicting, wot have about the same weight as a verdict of a jury; but this case, ” they contend, ‘ ‘ there is no conflict in the tes mony by which the partnership is proven; it is all one wa;j It is true, as contended by counsel, that the question as whether a partnership existed was a mixed one of law fact; but the burden of proving the partnership alleged on the appellants. The trial court found, as a matter | fact, that there was not sufficient evidence to establish alleged partnership. Counsel for appellants, in their fij brief, set forth a synopsis of the testimony upon whj they rely to establish this fact. The testimony of McKinney, among others, is given,and much stress is ll upon her statements. But she states that “the mercanj business was opened up in the name of Morris & Nunn,I Ardmore, but that Bridgman was the manager of the cern, aud bought all the goods. ” There appears to be | testimony in the record which tends to show that Brie man’s position was other than as stated, viz. “manager! the concern. ” In fact, the testimony of the other witne^ fully corroborates Mrs. McKinney’s statement that Brie man was the manager of the firm of Morris & Nunn; that| was acting for the firm,, and not as a member of it. McKinney further testified that Bridgeman and MorriJ [515] :unn and J. A. Mays told her “that Mays was interested in íe firm; that be had furnished money to buy goods with; ad that he was to have half of the profits. ” This was erely hearsay, except as to what Mays said. None of lose parties so testified in court. Neither persons men-oned as having made this statement were called as wit-isses in the case. As before stated, the burden of proving e alleged partnership was on the appellants. If they tose to rest their case upon mere hearsay testimony, the urt had the right, and it was its duty, to disregard such stimony. The fact that Mays may have made this state-¡nt as to himself could only be competent in so far as it is an admission by him against his interest. He was a eferred creditor in the deed of assignment to Lee Cruce, d it was to his interest to sustain the assignment. Hence was competent to prove his admissions as to his interest the partnership. But all the other facts established in case show this interest in the case was not the interest a partner. The trial court doubtless considered the testi-ny of Mrs. McKinney in view of the deep feeling which must have had against Morris and Nunn, one of whom killed her husband, and gave it such weight as under the circumstances it was entitled to have. It is true, as .tended by counsel for appellants, that the question as to [ether the partnership existed or not was a mixed one of and fact; yet, in order to sustain an assignment of error [account of the finding of fact by the court on this point, its ruling on the law applicable to such facts, it should ear that the evidence conclusively established facts eh proved the alleged partnership. If the record dis-ed such a state of acts, the finding that no partnership ted would be reversible error; but the record fails to dis-e such facts as would in law constitute a partnership, as appellants allege existed. Allegation of partnership — Burden of proof. statute of Arkansas of notriCnfoTCe97' The third assignment of error was as follows: “ Th| court erred in holding that the interpleader, Lee Cruce did not have any knowledge of the fraud of defendant! Morris & Nunn at the time the deed of assignment wa executed, and in sustaining the deed of assignment be cause of the want of such knowledge.” This assignment error embraces two propositions: First,- that Lee Cruce, tl assignee, did not have any knowledge of the fraud of tl assignors at the time the deed was executed; second, that tl court erred in sustaining the deed because of the want such knowledge. The first proposition is one of fact, ar the finding of-the trial court will not be reviewed by th| court, for the reasons already stated in this opinion. Tl second proposition is one of law, and will be carefully co| sidered. Counsel for appellants call attention to the faj that the legislature of Arkansas, by an act approved Marq 31, 1887, provided that “any assignment for the benefit creditors may be contested or attacked for fraud by ail creditor, and proof of fraud on the part of the assignor shfj be sufficient to invalidate the assignment whether the signee knew ib or not”; and counsel contend that this act lates to ‘ ‘the pleadings and practice and forms of proced ings in civil actions, ” and it was therefore put in force in t| Indian Territory by the act of congress approved March 1889, which established the United States court in the dian Territory. We do not agree with counsel as to tl contention. The act of the Arkansas legislature of Mar 31, 1887, does not relate to practice, pleadings, or forms procedure. It is positive and- affirmative legislation, changes an important rule of decision in Arkansas; - butj has never been put in force in the Indian Territory. Counsel for appellants do not contend that Lee Crul the assignee, at the time he accepted the deed of assil ment, actually participated in the fraudulent conspiracy! [517] he assignors, or that he actually knew that the debts pre-erred in said deed of assignment in favor of Mays and Iridgeman were fictitious and fraudulent; yet they allege hat, at the time he accepted the assignment, he was aware such suspicious facts and circumstances surrounding the xecution of the same, and occurring at the time, as should ave aroused his suspicions, and that such facts were well ilculated to arouse the suspicions of an ordinarily prudent erson, and cause him to investigate and ascertain whether not said assignment was made in good faith and for an onest purpose. Hence counsel submit their fourth as-gnment of error, which is as follows: ‘‘The court erred in fusing to submit additional conclusions of fact, as re-lested by the plaintiff, as to whether or not, at the time ie deed of assignment was executed and delivered to the signee, Lee Cruce, he was aware of such facts and cir-imstances surrounding the execution of the deed of as-gnment as would have arroused the suspicions of an or-narily prudent man as to the fraudulent character of the signment, and whether or not, by the exercise of ordiny diligence, under the circumstances, he should have scovered the fraud.” Counsel for appellants in their ief, make the following statement: “We do not claim ¡at Lee Cruce had positive knowledge of the fraud of the ¡signors at the time he drew the assignment and accepted position of assignee, but we do insist that he had full jd adequate means of knowing of the fraud: that he had ¡sitive knowledge of such suspicious facts and circum-,nces and badges of fraud as should have aroused his sus-;ions and quickened his senses to a discovery of the nd; that the atmosphere in which the assignment was ¡íceived and executed was so impregnated with crime and ,ud that the law will impute to him a knowledge of what .an of ordinary sense and prudence, with his eyes open, 1st have discovered. What were the circumstances sur» [518] rounding the execution of the deed? What notice did Lé Cruce have of suspicious facts and circumstances at th time?” As before stated, a jury was waived in this case and it was tried by the court. The court was requested 1 find specially upon the facts and the law, which was don< The facts proved on this point were as follows: “(4) Thi Morris & Nunn, in making the deed of assignment, unde took to prefer certain fraudulent claims in favor of Ma; and Bridgeman, and the said deed of assignment was ma< to defraud their creditors. (5) That Lee Cruce, as assigne did not participate in, nor have any knowledge of, the frai of Morris & Nunn at the time of the execution and delive: of the deed of assignment. ” After the court had announc these findings of fact, counsel for appellants requested t further finding of fact indicated in their fourth assignme of error, above quoted. Counsel for appellees insist tb the fifth finding of fact by the court, supra, “complete disposes of the contention of the appellants.” If Lee Cru< the assignee, did not have any knowledge of the fraud the assignors at the time the assignment was made, found by the trial court, this finding may have been rega: ed by the court as sufficiently responsive to the special quest for a further finding of fact as to require no additio or more specific finding. The facts were all before the coi and it weighed and passed upon all of the evidence in case. This court will not review the findings of the coH on questions of fact unless it should clearly appear that H court making such findings was actuated by prejudiceH passion. Counsel for appellants, in their first brief, givH synoposis of such facts from the record as, in their opiniH ought “to charge Lee Cruce with a knowledge of the frjfl that surrounded him when he accepted the assignmeiH We have carefully examined this evidence, so set fortbffl appellants’ brief, and presume it is stated as favorably H them as the facts will warrant. We will not recapituH [519] ie facts. The most pertinent fact stated is to the effect íat, on the day before the assignment, it appeared npon in-estigation that the firm of Morris & Nunn was solvent; but, in íe deed of assignment the preferred claims of Mays and Bridg-.an were large enough to consume the entire assets. Lee ruc¿ testified that his impression was that the firm was in ood circumstances. On the next day the facts disclosed in the ed show that the firm was insolvent. Is the fact that a ercantile firm, which was supposed to be solvent, is found )on investigation to be insolvent, such a circumstance as .ould have aroused the suspicions of an ordinarily prud-d man as to the fraudulent character of the assignment? ie mere fact of unforeseen insolvency is not, in our opin- , a fact which would arouse the suspicions of ordinarily udent persons as to the integrity of the insolvents. After refully examining the synopsis of the evidence on this int submitted by appellants in their brief, we are of the inion that it does not show that Lee Cruce, at the time the ed of assignment was executed, had any knowledge of the tud of Morris & Nunn, or any knowledge of facts or - cir-mstances sufficient to arouse his suspicions as to the budulent character of the deed. Not being in possession such knowledge at that time, it was not incumbent on , before he could accept the trust imposed upon him by deed, to institute an investigation to ascertain whether not the assignment was made in good faith and for an uest purpose. Before he would be required to institute ;h an investigation, it must appear from the evidence ,t, at the time of the execution of assignment, he was in session of some fact or circumstance which of itself sug-kted the fraud. The rule on the subject of constructive lice is thus clearly stated by the supreme court of the lited States: “ When a person has not actual notice, he ?ht not to be treated as if he had notice, unless the cir-ístances are such as enable the court to say, not only [520] that he might have acquired, but also that he ought to ha' acquired, it but for his gross negligence in the conduct the business in question. The question, then, when it sought to affect a purchaser with constructive notice, is r whether he had the means of obtaining, and might, by prr ent caution, have obtained, the knowledge in question, b| whether not obtaining, was an act of gross or culpable na ligence.” Wilson vs Wall, 6 Wall. 91. The deed of assigl ment in the case at bar is merely a preference of crédito: and, as such, it should not be rendered invalid as to bo fide creditors by any design on the part of the assignors cheat, hinder, or delay their other creditors, unless that ( sign was known by the assignee, and participated in by hi or that he was in possession, at the time of the assignme: of some fact or circumstance so clearly indicative of fra as to have made it his duty to institute an investigation ascertain the bona fides of the transaction. Facts necessary to arouse suspicions ot When as-signee put on notice. [520] The other assignments of error in this case are to ' effect th at the court erred in refusing to order the money the hands of the court to be paid out in the satisfaction the claims of the appellants. It appears from the evide: that, after the attachment was run, the interpleaders, parties to this case, recovered, by writs of replevin, property attached, which was claimed by them, and t there remained thereafter goods invoiced at $2,450, which sold for only $1,850, which is the amount now in hands of the court. Appellants insist that the proceeds! this property were intended by Morris & Nunp to be appt to the payment of the fictitious and fraudulent claims | Mays and Bridgeman; and that “the fraud of Morris Nunn in preferring these fictitious debts was discovered | exposed solely by the diligence and at the expense of plaintiff and the interpleaders M. J. McKinney, Ft. Wc China Co., and Frank Herman & Co.; and that Lee Crl did not suspect the fraudulent character of these debts ul [521] 0 first trial of this case, many months after the deed of as-fnment was executed. ” The case of Bank vs Hofheimer, Fed. 13, is cited by appellants to sustain the doctrine at creditors who have successfully attacked the assign-snt on the ground that it preferred fictitious debts should rewarded for their diligence by having appropriated to 5 satisfaction of their claims the property, or its proceeds, signed by the debtor to be appropriated to the payment the fictitious debts. This contention is not without merit, recognizes the fact that the diligent creditor is in a better sition than one who is indifferent as to his right. In the :e at bar, the creditors, other than the appellants, have íe nothing except to file their claims with the assignee, ay are not represented by counsel, and have incurred no tense to the litigation. If 'this assignment should be sus-íed in toto, none of the preferred creditors will receive a t, except Mays and Bridgeman, whose claims have been nd by the trial court to be fictitious and fraudulent. 3 is sustained in part, so as to exclude their claims, all b will be realized will go to the other preferred creditors. ) have done nothing to protect their interests, who are iding aloof, and watching the contest, and who will ap-r on the legal arena after the appellants have succeeded exposing and defeating the fictitious and fraudulent ns of Mays and Bridgman. Then they will step ford in the shoes of the assignee, and ask the court to tax costs of the litigation to the appellants, and to award proceeds in the hands of the court, which have been res-by the appellants from the grasp of fraudulent creditors, ie payment of their preferred claims under the deed of jnment. If this be the law in such cases, the judgment ie trial court should at least be so modified as to tax the 3 of litigation and a reasonable ‘ fee to be paid to the •neys of appellants against the assignee, to be paid out .e proceeds in the hands of the court, before distribu* [522] tion of the funds is made to the preferred creditors, wh claims are ascertained to be just. It seems that the aut' ities are conflicting on this point. Burrill, Assignm. 165, § 117, cites the decision on the subject, and conclude; follows: “The question whether provisions in the assi ment for the payment of a fictitious debt will invalidate entire assignment, or whether the instrument will be tained for the benefit of creditors who have not participa| in the fraud, has given rise to conflicting decisions. It be seen from the cases referred to in the notes that the ponderance of authorities seem to be in favor of the opi: that the assignment will be held good as to all debts are bona fide; and this rule would undoubtedly preval those states where provisions is made by statute for tes the validity of claims presented to the assignee for pay: under the assignment. ’ ’ In the case of Hemstead vs Johnston, 18, Ark. 137, the supreme court of Arkansas held: it be assumed that they [the debts] were simulated, the of trust would, nevertheless, be valid as to the other b ficiaries, unless it had been shown that they were priv; the insertion of the simulated claims for fraudulent poses.” There i@ no contention in the case at bar that preferred creditors, whose claims were just, were privj the insertion in the deed of assignment of the fictitious fraudulent claims of Mays and Bridgeman. They) chargeable with nothing except want of diligence and difference as to their own interests. Accepting the elusion reached in Burrill on Assignments, which seem| be sustained by the supreme court of Arkansas in the of Hemstead vs Johnston, supra, whose decisions, ifl binding, are at least very persuasive upon this court, w<| of the opinion that the judgment of the court should bd firmed in so far as it sustains the assignment, and holds) the claims of Mays and Bridgeman are fictitious and fra lent, but that it be reversed in so far as it taxes the [523] inst the appellants. The ease is therefore remanded, h directions to tax the costs and a reasonable fee for the rnneys of the appellants, to be fixed by the trial court, kinst the assignee, to be paid out of the funds in the Lds of the court, and to render judgment for assignee for remainder of said funds. Clayton and Thomas, JJ., concur. Townsend, J., being present, did not participate.