Conlee Lumber Co. v. Ripon Lumber & Manufacturing Co.

Cassoday, J. The only issue for trial, and the only issue tried, was whether, by the assignment, the defendant assigned, conveyed, or disposed of its property with intent to defraud its creditors. If the assignment was made with such intent, then the attachment should have been sustained. If it was not made with such intent, then the attachment was properly dissolved, even if the assignment — 486 — was for some other reason void in law. A mere unsuccessful attempt to make a general assignment for the benefit of all the debtor’s creditors evinces no intent to defraud such creditors. Batten v. Smith, 62 Wis. 92; First Nat. Bank v. Rosenfeld, ante, p. 292. The statute gave ten days after the execution of the assignment within which to complete the same by filing a correct inventory of assets and a list of creditors, as required. Sec. 1697, R. S. When so completed by the filing of such inventory and list, they relate back to the time of the execution of the assignment, and constitute a part of it. For some purposes, at least, the inventory and list may be read with the assignment .as together constituting one paper in law. Bates v. Simmons, 62 Wis. 69. When an assignment is thus completed within the prescribed time, and otherwise valid, it cannot be defeated nor frustrated by the seizure of the goods assigned, intermediate the assignment and such filing. It is claimed that the assignment was void because it gave preferences to certain creditors to be subsequently named by the assignor in a schedule to be annexed. This is said to have reserved to the assignor, for an indefinite period, the right to give any preferences it might choose. Such indefinite right of selection among creditors would be a strained construction. The two classes to be included in Schedule 0 according to the assignment were together to contain a correct list of all of the defendant’s creditors, and hence, by the statute cited, was required to be filed within ten days after the execution of the assignment. Since the preferred creditors were to be named in class Ho. 1 of that schedule which was to be filed within ten days, it is evident they were to be specifically named therein before the expiration of that time. Of course, a failure to so file within the time prescribed would avoid the assignment. Batten v. Smith, 62 Wis. 95; Haben v. Harshaw, 59 Wis. 410. — 487 — But such mere failure would evince no intent to defraud creditors, and hence furnish no ground for an attachment. First Nat. Bank v. Rosenfeld, supra. The statute made every assignment void which gave “ any preference to one creditor over another creditor, except for the wages of laborers, servants, and employees earned within six months prior thereto.” Ch. 349, Laws of 1883. Manifestly, an intention to prefer debts owing by the defendant for such wages was proper and legitimate under that statute. An intention to prefer any other class of creditors would have been contrary to law, and hence avoid the assignment. Lang v. Simmons, 64 Wis. 525. Assuming that such intention to give such illegal preferences would be an intent to defraud creditors, and hence ground for an attachment, must we conclusively presume that, at the time of making this assignment, the defendant intended to include in class Mo. 1 of said Schedule C creditors which it had no legal right to prefer, instead of confining it to such creditors as it had a legal right to prefer? We find no authority for indulging in such a presumption. We think that, in the absence of evidence to the contrary, the inference should be that, in making the assignment, the defendant’s intention was to comply with the law, rather than to violate the law. This brings us to the question whether this assignment gave any unlawful preference. The $114.66 preferred to D. Clough is objected to. It appears that, a long time prior to the assignment, the defendant bought a horse of him for $125, on credit; that he, at the time, worked for the defendant, and continued to work for it right along until about the time of the assignment; that the defendant had, from time to time, made payments to Clough, which were charged to him generally, without anything being said as to the application of the payments. By applying the payments as fast as made upon — 488 — the horse until that was paid for, the preferred balance' would be for services rendered in the employment of the defendant within six months prior to making the assignment. IVe think the payments should be regarded in law as having been so applied. In any event, such application did not evince an intent to defraud. The mere fact that Clough was a director of the defendant and counseled as to making the assignment,, did not preclude him from being-preferred for such services. Spencer "Whiting was employed by the defendant as a drayman, and the preference of $43.04, given to him for such services, clearly came within the rule. J. W. "Welcome is a preferred creditor for $119.74, balance due on his salary. He was at first vice-president of the defendant, and then became manager at a salary of $800 a year. He was an active business man, pat his whole time in the business, took charge of selling lumber and measuring out and piling it, and all that. His being a stockholder and a manager on a salary’did not prevent him from being an employee for wages within the meaning- of the act. If the words “ servants ” or “ employees,” in the clause of the act quoted, mean nothing more nor different than the word “ laborers ” therein, then they are extremely tautological, and a useless repetition. It seems to us that the three words were used for the purpose of extending- and broadening the exception made in the statute. Especially should this be so under the liberal rules adopted by this court for the purpose of upholding assignments for the benefit of creditors under our recent statutes. Most of the cases cited on this point by the learned counsel for the plaintiff are distinguishable. If any of them are in conflict with this decision, we decline to follow them. Fx-om the facts stated, it may be fairly inf ex-red that Welcome came within the exception of the statute quoted. A. M. Laning was a stockholder, and treasurer at a .salary — 489 — of $1,000, to December 2, 1884. Then he resigned, and sold his stock to Stone, but continued to work for the defendant, as a sort of foreman in the mill, at the same salary. On the day the assignment was made he took back his stock from Stone, and was made secretary, and participated in making the assignment, and is preferred to the amount of $149.08 for the balance due him on such salary. This apparently accrued during the time he was not an officer. There is nothibg warranting the conclusion that the claim is fictitious, nor that it is an improper claim to be preferred upon the principles already stated. Among the preferred claims is an item of $73.10 to H. J. Goodall, for balance due on account for blacksmithing. lie was a carnage-maker and blacksmith, and had shops of his own in Eipon, and did work from time to time for the defendant,— manufacturing knives and other things. The defendant furnished its own stock, steel, etc., for the manufacture of such knives and other things; so that the charge was really for the labor bestowed upon the materials. Goodall furnished materials for some small lots of bolts, two inches long; but in making long bolts and other things the defendant always furnished the iron. The claim seems to have been, substantially, for services rendered. The case is, as we think, distinguishable from Lang v. Simmons, supra. The claim, so preferred, was found, on investigation, to improperly include such services for the months of June and July, 1884, and that the true amount of such services rendered during the six months named in the statute was only $50. Including the whole appears to have been a mere inadvertence or mistake, and should not, therefore, invalidate the assignment. Batten v. Smith, supra. Certainly it does not evince an intent to defraud creditors. We discover no sufficient evidence to warrant the conclusion that there was any misapplication of funds by way of salary or otherwise. If, prior to making the assignment, — 490 — there was any such misapplication or fraudulent transfer, it would not have the effect of avoiding the assignment,— much less of authorizing an attachment of the assigned property, as frequently held by this court. Batten v. Smith, supra; Backhaus v. Sleeper, ante, p. 68. In such case the remedy would be by action on the part of the assignee. Ibid. If the assignee failed to proceed within the requisite time, then it was made lawful for any creditor of the assignor to prove his claim, and institute and prosecute to judgment any such suit in the name of the assignee and for his benefit. Ch. 292, Laws of 1885. There is nothing in the fact that Stone had been a stockholder and secretary of the company to incapacitate him from being assignee; especially after having resigned such office, and sold such stock. But even such want of capacity would not furnish ground for holding that the assignment was made with the intent to defraud creditors. Neither Stone nor the defendant’s president, Merrill, was among the preferred creditors. By the Court.— The order of the circuit court is affirmed.