Weeks v. Prescott

The opinion of the court was delivered by Royce, J. It is claimed that the goods sought to be recovered for in this action were purchased by B. F. Weeks at a judicial — 70 — sale, and hence that no change of possession was required, to protect them from attachment by the creditors of the former owners. The U. S. statute, approved June 22, 1874, amendatory of the bankruptcy act of 1867, under which the composition proceedings, referred to in the report, were instituted, and carried on, provides that in all cases of bankruptcy, then or to be thereafter pending, by or against any person, whether an adjudication in bankruptcy shall have been had or not, the creditors of such bankrupt may in the manner prescribed by that statute, by resolution, accept such proposition of compromise, as the bankrupt has submitted to them for their action, and such resolution, when approved by the court and recorded, is made binding upon the creditors and the bankrupt. After any such resolution has been recorded, the court has no other right of control over the assets of the bankrupt than to see that they are disposed of for the benefit of the creditors, in order that they may realize the amount agreed to be paid them by the compromise resolution. The compromise resolution in this case provided that the bankrupts might sell, assign, pledge or mortgage, any and all of their assets for the purpose of raising the twenty-five per cent, which was to be paid to the creditors. By the adoption of the resolution the creditors waived or surrendered whatever right they had to have the assets disposed of by the court, and conferred that right upon the bankimpts, so that the sale made by the bankrupts to B. E. Weeks, was made by them as owners, and under the right given by the resolution, and not as officers of, or under any authority of the court. It was not in any legal sense a judicial sale, and its validity, as against attaching creditors of the parties making it, is governed by the same rules that would control, if no proceedings in bankruptcy had been pending. The first question to be considered, as affecting the validity of the plaintiff’s title to the goods declared for, is as to the legality of the sale of the goods by G. H. & J. M. Weeks to B. P. Weeks. The referee has found that that sale was for a full consideration ; and when B. P. Weeks paid the money for the goods he supposed it was to be used in paying the creditors the twenty-five per cent, agreed to be paid by the compromise resolution; and that the — 71 — debts of G. H. & J. M. would all be extinguished. The sale, then, not being fraudulent in fact, was it fraudulent in law ? This depends" upon whether there was such a possession taken and retained by the vendee, that he could maintain his title against an attaching creditor of the vendor. It has been invariably held in this State that such possession must be open, notorious, and exclusive ; and that where the possession taken was wanting in any of those requisites, the property remained liable to attachment by the creditors of the vendor, notwithstanding the bona fides of the transaction between the vendor and vendee. The rule was founded in public policy, and was designed to prevent secret and collusive transfers of property, and the procurement of credit upon an apparent ownership. In all the reported cases, it has been steadfastly adhered to, and the contention has been whether the evidence in the cases that have arisen has brought them within that rule. The possession taken, must be open, and notorious ;— that is, it must be apparent, and such as would indicate to an observer a change of ownership ; and the fact, as to who is controlling and managing the property, is important to be considered in determining that question. The possession must be exclusive. If the possession is a joint one by the vendor and vendee, it is not such a possession by the vendee as the law requires. Was there such a possession taken and retained by B. E. Weeks ? It is found that the goods had been moved from the store which had been used by G. H. & J. M., into the store where they were at the time the attachment was made, before they were purchased by B. F. Weeks; and it does not appear that the title or right of possession of that store had ever been transferred to B. E. Weeks. He never saw the goods after his purchase, or assumed any personal control over them. G. H., assisted by the plaintiff, commenced selling the goods and replenishing the stock as the trade required, and conducted the business of the store substantially in the same manner that it had been conducted by G. H., before the sale to B. E. was made. There is no fact found that would indicate to an observer judging from appearances that there had been any change in the ownership of the goods. As far as the apparent ownership was available to G. H. as a means — 72 — of procuring credit, it was just as available after the sale as before ; and the fact, that he was acting as the agent of B. F. in what he did, taken in connection with his previous ownership of the property and the other facts which have been alluded to, does not aid the title of B. F. against the claim made that it was fraudulent in law. The parties do not seem to have attempted to 'make any change in the possession of the goods, or to have thought that any such change was necessary; and the explanation of their conduct may be ascertained from the fact found, that B. F. supposed that the money he paid for the goods was to be appropriated to the payment of the debts of the vendors, and that thereby their debts would all be extinguished, — making it unnecessary to anticipate and provide against any attachment of the property by creditors of the vendors. The possession of B. F. was at best but a joint possession with the previous owners; so that the possession of B. F. was not such as the law requires to enable him to maintain his title to the goods against attachments of the same by creditors of the previous owners. The cases that are referred to in Roberts’ Digest under the title of “ Validity of Sales against Creditors,” are full authority for this holding. This brings us to a consideration of the title of the plaintiff. G. H. Weeks, as agent of B. F., and by virtue of the general authority that he had to sell the goods, made a sale of them to the plaintiff on the 15th day of January, 1877. The transaction of the sale is found to have been fraudulent as between G. H. Weeks and the plaintiff; but if that fact would not invalidate the sale, and conceding that the plaintiff by virtue of it acquired all the title that B. F. had, can he maintain his title as against the defendants ? B. F. by virtue of his purchase acquired a title subject to be defeated by a determination that it was fraudulent in law; the plaintiff by his purchase acquired that title; so that the goods were as much subject to attachment after they were purchased by the plaintiff as they were before the sale to him, unless he took such possession of them that his purchase would not be fraudulent in law. Do the facts found show that the plaintiff’s possession of — 73 — the goods was open, notorious, and exclusive ? The fact that the plaintiff took a lease of the store tends to show that it was, but is not conclusive. Where the purchaser of personal property acquires the title to the land upon which it is situate, he is considered so far in possession as to obviate any necessity for its removal to any other place; but where he permits the former owner to remain upon the premises, and control and manage the property as he did before making the sale, the acquisition of the title, and the constructive notice given by the record, have never been held sufficient to protect the property from attachment by the creditors of the vendor. The taking a transfer of the policy of insurance was a transaction between the parties to the policy and the plaintiff, and would not indicate to any one else that the property had been transferred to the plaintiff. 'So the opening of books of account by the plaintiff in his own name, and the purchasing goods, and having them sent in his name, tend to show that his possession was sufficient. But the facts, that the apparent possession to common observers did not indicate a different possession of the goods, after the sale from that which, had been had of them before, except in the particulars before named; that G. H. Weeks continued in the control and management of the goods apparently as before the sale; that the plaintiff continued to board in the family of his father as before; and that the goods remained in the same store, in our judgment outweigh all the facts relied upon by the plaintiff to' show that he had a title to the goods, as against this attaching creditor. The defendants had the right to attach the goods that were sold by G. H. Weeks as the agent of B. E. Weeks to the plaintiff. The after-acquired goods the defendants had no right to take. The sale toB. E. Weeks, as we have seen, was not fraudulent in fact, so that he had the right to dispose of the goods, and receive and hold the avails. B. F. Weeks has so far affirmed the sale, made by his agent to the plaintiff, that he is estopped from claiming that the plaintiff did not have the same rights after the sale to him, so that the avails for goods sold by the plaintiff would belong to him, and if he purchased goods with such avails, the — 74 — goods so purchased would belong to him, and were not subject to attachment by the creditors of G. H. & J. M. Weeks, even though they were intermingled, as the referee has found, with the goods that once belonged to G. H. & J. M. Weeks. If the sale to B. E. Weeks had been fraudulent in fact, probably a different rule would have prevailed. The referee should have found the fact whether the sales made to B. E. Weeks and the plaintiff were fraudulent in law or not; but instead of that, he has reported the facts found by him, which constitute the evidence upon which the fact must be found. Neither party has expressed a wish to have the report recommitted for any further findings, and we have concluded to dispose of the case upon the report as submitted. The result is, that the pro forma judgment is reversed, and judgment for the plaintiff for $610.50, and interest thereon since June 1st, 1879, as a part of his damages and his costs. The claim of the plaintiff on account of interruption of his business and loss of credit is wholly disallowed.