Holmberg v. Dean

The opinion of the court was delivered by Horton, C. J.: ^o^theacucm; maybeBhown This was an action to recover the possession of certain goods alleged to be the property of the plaintiff, as assignee of S. P. Lindgren, under the provisions of the act regulating voluntary assignments for the benefit of creditors, approved March 3d, 1868, and alleged to have been wrongfully taken and detained by the defendant in error, J. R. Dean. The answer consisted of a general denial. On the trial the defendants introduced evidence that the goods were the property of Lindgren; that they had been seized under attachments and executions against him by Dean, as sheriff, and that the assignment to plaintiff in error was fraudulent and void. To the introduction of this evidence, the plaintiff objected, on the ground that the facts tending to prove bad faith and collusion between the parties had not been pleaded; and he now assigns the admission of this character of evidence as error. We do not think the point well taken. It is true that under the practice in many of the states a defendant cannot, under a general denial, introduce testimony that the plaintiff’s title is fraudulent and void, but under our code the action of replevin is for the wrongful detention. That is the main <luest10n In issue. Under the general denial, the defendants could show that the plaintiff was not entitled to the immediate possession of the property, and this they could do by showing that the sheriff was entitled to the exclusive possession of the property. Under their general denial, they could show that the sheriff did not wrongfully detain the property, and this they could do by showing that he rightfully detained it. If the deed of assignment was fraudulent and void, then the plaintiff had no claim or interest in the property and was not entitled to the possession thereof, as assignee. So, if this fact could be established by evidence of extrinsic circumstances, it fully disproved any wrongful detention on the part of Dean, and clearly proved that he rightfully detained the goods so held by him, on process against Lindgren. (Leroy v. McConnell, 8 Kas. 273; Wilson v. Fuller, 9 Kas. 176; Bailey v. Bayne, 20 Kas. 657; Yandle v. Crane, 13 Kas. 344.) ^ Assignee; when anVafshonesty may be shown. Another assignment of error is) that the court erred in permitting the defendants to assail the assignment as fraudulent, by offering evidence that the assignee was insolJ ° ° vent, and his character for honesty and fair dealpac|_ This evidence was admissible. While the power to select and appoint his own assignee is one which our statute of 1868 allowed to every debtor contemplating a disposition of his property, this power is not to be exercised arbitrarily and without a proper reference to the interests of the creditors. Hence, if the assignee be so deficient in business capacity or standing, in pecuniary responsibility or character for integrity, that a prudent man, honestly looking to the interest of the creditors alone, would not likely select him as a proper person for the performance of the trust, then his selection will furnish an inference, more or less strong, according to the circumstances, that the assignor in making the selection was actuated by some other motive than the desire to promote the interest of creditors; in other words, an inference of intent to hinder, delay, or defraud his creditors. If the assignment was made with this intent, the transaction was fraudulent. (Burrill on Assignments, 66; Angell v. Rosenbury, 12 Mich. 241.) It is contended by counsel for the plaintiff that, as the assignee is required to execute a bond with securities, the doctrine above stated ought not to prevail in this state. In this case the assignment and all the proceedings had thereunder took place prior to the adoption of the supplemental act of March 1st, 1876. (Laws of 1876, ch. 101, p.202.) And the mere fact that the assignee is compelled to give a bond that he will faithfully execute the trust confined to him does not relieve the assignor from the exercise'; of prudence in making his selection. A bond is some protection, and perhaps the fact that the assignee is insolvent, if otherwise suitable and competent within our statute, might not be sufficient evidence to declare an assignment fraudulent; yet an action on a bond would be a very unsatisfactory way for a creditor to obtain his portion of a trust fund. Indeed, if a creditor knew or believed he would be compelled to resort to litigation with an assignee to recover the demands allowed him, he would be more apt to seek a compromise or assent to such a settlement as the debtor might choose to offer, than if he was assured from the responsibility and high character of the assignee that the trust would be promptly and honestly discharged. Under the supplemental act of 1876, which empowers the creditors to select an assignee and authorizes the judge of the district court to appoint a receiver to take and hold possession of the property assigned, where the assignee is not responsible for the amount of the property, the evidence so received, if not absolutely inadmissible, would have but little weight or force in proving an assignment fraudulent. Under the act prior to this amendment in 1876, the evidence was clearly competent. Debtorfuiiy soimake assignment, wien. Further assignment of error is alleged in the direction of the court, that persons in a solvent condition cannot make an assignment. As thus stated, the instruction was too general, and might have been misleading, had it not been limited, and explained by the court to the effect, “that if Lindgren, when the assignment, was made, was in possession of means of any kind with which or out of which he could himself at once discharge all his liabilities in full, or out of which his creditors could collect all their debts by legal process, then he was not insolvent to that degree that would warrant his making an assignment and preventing his creditors from collecting their debts by the ordinary process of law.” In other words, the jury were directed, that “a debtor cannot lawfully husband his property through the medium, of an assignment for his own benefit to the delay of his creditors.” To prevent the abuse of the right, and avoid an assignmeut being made a convenient engine of fraud, the law does not permit a debtor, who beijevjng himself fully solvent, and actually having resources sufficient, either of cash or of property, to satisfy all his creditors in full, to assign his property, and thereby withdraw it from attachments and executions of creditors, with the motive to obtain a compromise, or to procure an extension of time so as to save a larger surplus to himself. As explained and limited, the direction of the court was not sufficiently prejudicial to the plaintiff to cause'a reversal of the judgment. As the jury returned special findings that the assignment of Lindgren to Holmberg was made with the intent to gain time, and to hinder and delay creditors; and when the assignment was made, that Lindgren had means and property, not exempt by law, sufficient to discharge all his liabilities in full, and out of which his creditors could have collected all their debts by legal process, the other instructions of the court, criticised by counsel, need not be commented upon, as they could not have injuriously affected the plaintiff. We have examined all the other questions raised by counsel, but do not think any special comments are required thereon. The judgment of the district court must be affirmed. All the Justices concurring.