Henney Buggy Co. v. Ashenfelter

Normal, O. J. In 1893 one George R. Fouke was engaged in various lines of business in Liberty, Gage county, this state. In that year he failed, his liabilities being far in excess of his assets. Tie sold practically all of his personal property to the Henney Buggy Company, one of his creditors, the consideration for such sale being the cancellation of his debt to it, amounting to over $1,800, and the payment to him by it of the difference between the amount of such debt and the agreed value of the property, such difference being $300. Fouke was then placed in possession of said property, consisting of stocks of goods of different character, as an employee of the company, and a former employee of his was appointed its general agent in the management and disposition of the same. After this sale, some of the other creditors of Fouke attached a portion of said goods; others obtained judgments against him, and levied executions upon the goods, the value of the goods so levied on being, according to the agreement of the parties hereto, $1,000. The goods so levied on were, while in the hands of the officer holding such writs, replevied by said Henney Buggy Company, it claiming title to them by virtue of said salo to it by Fouke. The defendant officer answered, setting-up the fact that he held said goods by virtue of levies under said writs, and that the sale by Fouke to the buggy company was fraudulent and void as to the other creditors of Fouke. On this issue the case was tried in the lower court, resulting in a verdict and judgment in favor of the defendant officer, and said buggy company comes to this court by petition in error from such judgment. There are over 150 errors assigned in the petition in error, not all of them, however, being urged in the brief of counsel. We shall notice such errors as are urged in the brief, so far as they may affect this decision, it being; understood that others not noticed would not in anywise alter the conclusions arrived at by the court. [3] It will be observed that in tbe sale of this property by Fouke to tbe Henney Buggy Company a greater amount of goods was sold than sufficed to satisfy tbe debt of Fouke to it, tbe difference being paid by it to Fouke in cash. It is a well established principle of law that a debtor may prefer a creditor, and that sucb preference is not fraudulent, even though sucb creditor bas knowledge of an intent on tbe part of sucb debtor to binder, delay or defraud bis other creditors, so long as sucb creditor takes only sufficient goods to satisfy tbe debt, or tbe. value of which is not appreciably greater than tbe amount of sucb debt, and does not participate in sucb fraudulent intent. But, does a different rule obtain when, in a case like tbis, tbe creditor takes more goods than are sufficient to liquidate tbe debt, paying tbe difference between their value and tbe debt in cash? We are of tbe opinion that another rule does apply; that a creditor who purchases tbe whole of bis debtor’s goods— said debtor being in failing circumstances — paying tbe difference between tbe amount of tbe debt and tbe fair value of tbe goods in cash, occupies tbe same position as would a purchaser not a creditor; and that if sucb purchasing creditor knows, or bas sucb knowledge as would induce an ordinarily prudent person to inquire into facts which would lead to knowledge that sucb debtor is attempting to defraud bis other creditors by sucb sale, or to binder and delay them in tbe collection of their debts, sucb a sale is void as to sucb creditors. Sucb was tbe bolding of tbis court in tbe case of Switz v. Bruce, 16 Nebr., 463; and it seems to us that it is consonant with sound reason. It should be remembered that tbe rule that permits failing debtors to prefer creditors is not a general rule in itself, but is an exception to a more general rule, which is, that where a debtor in failing circumstances sells bis goods with tbe intent to binder, delay or defraud bis creditors, and tbe purchaser bas knowledge thereof, or is advised of sufficient facts to put a person of ordinary prudence upon inquiry which would [4] lead to sucdi knowledge, such sale is fraudulent and void, whether such purchaser participates in such fraudulent intent or not. An examination of the record in this case discloses the fact that the Henney Buggy Company, through its agents, at the time the so-called sale was made to it by Fouke, had knowledge that such sale by him to it would inevitably have the effect to hinder and delay his other creditors in the collection of their debts, and that such sale to it, resulting in the cancellation of his debt to it, would prevent other of his creditors from collecting their debts, and would thus deprive them of their rights; hence we must conclude that on the undisputed facts, in fact upon evidence brought out by said plaintiff itself, such sale was fraudulent and void as to his other creditors. It is claimed by plaintiff that this case falls within the rule of Sunday Creek Coal Co. v. Burnham, 52 Nebr., 364. In that case the creditor had taken from the debtor, in full satisfaction of his debt, property of a value not materially or appreciably greater than the amount of the debt, and this court decided that, under such state of facts, the validity of the sale was not affected by the existence of knowledge on the part of such creditor of an intent on the part of the debtor to defraud his other creditors, provided such creditor did not participate in such intent. This is doubtless the rule, or rather an exception to the general rule, as hereinbefore stated. But a different principle applies where the creditor not only receives from the debtor goods equal to the amount of the debt, but goes farther and voluntarily takes an amount of property greater in value than suffices to satisfy the debt, paying to such debtor the difference in money, at the same time having knowledge, or being in position to obtain knowledge, that such transaction would result in a fraud upon the other creditors. To the extent of the payment of the difference between the debt and the value of the goocLs, such creditor becomes a voluntary purchaser, and must be governed by the'rule of [5] law applicable to such. If a part of such transaction is tainted with fraud, and is indivisible from the remainder (which is the case here), the whole transaction is tainted with fraud. Numerous exceptions are taken to instructions given by the court below. Such objections are principally to those which announce a rule not materially differing from that hereinbefore stated, and we think that in none of them was any error perpetrated. To other instructions objections are urged that they are not sufficiently specific. If the instructions were open to these objections, counsel had ample opportunity to obviate such defects by proffering instructions which he may have deemed more definite, but as he failed so to do, such objections must be deemed to have been waived. There are also numerous objections urged to questions propounded to said Fouke on his cross-examination, he having been called as a witness on behalf of plaintiff. Such objections are mainly to a class of questions asked him relative to the value of the property sold by him to said buggy company. Such questions took a wide range; but much latitude is permissible when a party to an alleged fraudulent transaction is upon the stand, and is being cross-examined by the opposite party. Further, as the sale by Fouke to the buggy company was, on the undisputed facts, fraudulent as to his other creditors, and therefore void, we fail to see how the evidence adduced could injuriously affect the plaintiff; hence, we are of opinion that no error could have accrued to it on the introduction of this testimony. A careful examination of the record in the other respects complained of by plaintiff convinces the court that no prejudicial error occurred on the trial, for which reason the judgment of the lower court is Affirmed.