Kneeland v. Cowles

Hubbei/l, 0. J. Several points were decided in this case, which I shall consider in their order. 1. The service of the garnishee process was regular and valid. It is not necessary, under the present statute, to attach the rights or credits of the principal debtor, in the hands of a garnishee. It is enough, if the officer cannot attach property and get possession thereof, that he shall “serve the writ and affidavit upon such person, by giving him a copy thereof, with a written notice that he appear in court at the return of such writ.” R. S., ch. 112, sec. 32. Nor was it necessary that the garnishee should answer before judgment against the defendants in the principal suit. It is true, the court acquired jurisdiction in the principal case solely through the garnishee proceeding. But when the garnishees had been served with the writ, affidavit and notice, their liability had been fixed; and [320] although the evidence of property in their hands may not have been given until after judgment against the principals, the fact existed, and that was sufficient. This is the application of an ordinary principle. The return of an officer to a writ of summons, personally served, may not be'filed in court until after judgment; but if service has in fact been made, the court acquired jurisdiction, and the return may be made afterwards. 2. The assignment to the plaintiffs in error was not within the act relating to insolvent debtors. Sec. 13, p. 173, Stat. 1839. That statute applied only to debtors seeking a discharge from their debts under the assignment, and did not preclude assignments giving preferences, when no discharge was sought. It does not appear, from the authorities cited, that the courts of Massachusetts held otherwise. The case of Perry v. Holden, 22 Pick., 269, was an attempted assignment under the statute. The court held that a mortgage previously executed by the assign- or, by which he had given a preference to creditors, was a part of the same transaction with the assignment, and that both were void. Fairbanks et al. v. Haynes et al., 23 Pick., 323, was a similar case. But there, the' mortgage being a separate transaction, and no collusion being shown with the assignees, the assignment was sustained, though it was intimated that “ the debtors would lose the privilege of obtaining their discharge.” Henshaw et al. v. Sumner, id., 446, decides simply, that certain instruments, executed by an insolvent debtor, were not assignments in trust, and hence were valid. The other cases to which this court is referred came no nearer to deciding the point claimed by the counsel of the defendants in error, to-wit: that during the existence of the statute of 1839, no assignment could be made by any debtor, securing preferences among his creditors. I leave this branch of the case by citing one clause from the opinion of Chief Justice Shaw, in Perry v. Holden, supra, showing his opinion of the design of the statute in question. In setting forth what the avowed purpose of the statute was, and after commenting upon the first principal provision, [321] he adds : “ The other provision, founded on the same principle of equity and policy, is, that the debtor shall have no benefit of his discharge, ií he has in contemplation of an assignment, made any payment, or made any conveyance of his property, with a view to give any creditor a preference.” 3. The assignment was not on its face void, as to creditors. The provision that “ the balance of the stock, if any there be, be paid over to the said J. & D. W. Holden pro rata, or to their creditors, as the said James Kneeland & Co. may see fit’,” presented a question of intent for a jury. It was not necessarily a provision for the use of the assignors. The clause might conceal a fraud, and it might not; but the court was bound to presume an honest purpose and to give the instrument such a construction as would sustain it, rather than defeat it, unless the fraudulent intent was made to appear, as a matter of fact. There is nothing in Goodrich v. Downs, 6 Hill, 438, which conflicts with this view of the case. There, an absolute and unconditional provision was made, for the use of the assignor. The assignment declared “ that if any surplus remained after paying the debts specified, it should be paid over to the assignor, his heirs and assigns.” By the terms of the instrument, the purpose was clear and express ; and there was no question of intent for the jury. In all such cases, notwithstanding the statute (sec. 4, ch. 77) making “the question of fraudulent intent a question of fact,” and not of law, the question becomes one of construction only, and this court would hold, as did the court of New York, that it must be passed upon as a question of law. But a majority of the members of this court take a still further view of this branch of the case. The conditional provision for the benefit of the Holdens, in the assignment, is claimed to vitiate the instrument under sec. 1, p. 163 of the Stat. of 1839, which is copied from the statutes of New York, and is as follows : “All deeds of gift, all conveyances, and all transfers or assignments, verbal or written, of any goods, chattels or things in action, made in trust, for the use of the person making the same, shall [322] be void, as against the creditors, existing or subsequent, of such person.” If the general terms here employed are to be construed literally, they embrace solvent as well as insolvent persons; and no man would be safe, however large his means or limited his liabilities, in transferring any portion of his personal property, in trust for his own use. Every such transfer would be fraudulent and void by express statute, whatever might be the motive or the purpose to be accomplished. The plaintiffs below seemed to suppose this the proper construction of the statute, and furnished no evidence of the insolvency of the Holdens at the time of making their assignment, if such fact existed. A majority of the court are of the opinion that the restriction must be confined to persons in fact insolvent, or in failing circumstances, unless in cases where actual fraud is shown. And it may be remarked that all the authorities adduced upon this point, present instances of assignment by failing debtors. The courts of New York have been sharp hunters of fraud ; but in no discovered instance have they ventured to declare all assignments of property fraudulent and void, simply because made in trust for the use of the person making the same. And, this court holds that unless some taint of fraud lurks in the transaction; in other words, unless it appears as a matter of fact, that the transfer is made to hinder and delay creditors, or that, in some other respect, it is at variance with entire honesty and fair dealing, it may stand under the statute. Whenever the fact of insolvency on the part of the debtor appears in evidence, an assignment by him, with reservation for his own use, must be held void by the court, as necessarily calculated to injure creditors, by giving to the debtor an unreasonable control 'over and use of his property. 4. It is'deemed unnecessary, in view of the other points decided, to express an opinion upon the general question raised by the plaintiffs in error, of the constitutionality of the statute relating to garnishee. Whether or not the garnishee himself [323] may be entitled in all cases to a trial by jury, it is clear that the defendants in error, who were plaintiffs below, were secured that right in this case, by R. S., ch. 112, sec. 86. And if they had designed to raise a question of fraudulent intent, and not to rely on the fraud as a question of -law, they should have caused an issue to be made up, and taken a trial in the circuit court. Such being the views of this court, the judgment of the circuit court, proceeding upon the ground of illegality of the assignment to James Kneeland & Co., is erroneous. There is nothing before us to shake the validity of that assignment. But the plaintiffs below, by their garnishee proceedings, have fixed in the hands of the assignees whatever surplus may remain after paying the specified debts. For this they are entitled to judgment in that court. The judgment of the circuit court must be reversed with costs, and the case sent back for further proceedings.