McPike v. Atwell

The opinion of the court was delivered by Johnston, J.: i. Attachment, charged^ proof. [148] 2. Assignment; evidence n°t attachment. 3 Braua when not presumed. [147] In the affidavit filed by plaintiffs for the purpose of obtaining an order of attachment, several grounds were stated, but in the trial of the motion to dissolve the attachment the only one apparently relied upon was that the defendant “ had assigned, removed and disposed of his property, or a part thereof, with the intent to defraud, hinder and delay his creditors.” When the defendant moved to discharge the attachment, he filed a counter affidavit denying the charges of fraud made by the plaintiffs. The burden was then upon the plaintiffs to sustain the allegations 0f fraud which they had made, and if they failed to do so by a preponderance of testimony, the court rightfully discharged the attachment. As mentioned in the foregoing statement, the only proof offered to sustain the charge was the deed of assignment made by the defendant, together with the accompanying papers filed therewith and referred to therein. Nothing was offered tending to show bad faith on the part of the defendant, nor was there any attempt to prove that the assignment was made by the defendant for the purpose of defrauding, hindering or delaying his creditors, unless such intent is shown upon the face of the conveyance. It is claimed to be fraudulent and void by reason of defective execution, and because it contains provisions not in accordance with the statute relating to assignments. It should be remembered, however, that the validity of the assignment was not the question before the court, but it was rather whether such assignment was executed in bad faith. To sustain the charge made [148] and uphold the attachment there must have been an actúa]; personal intent to defraud, hinder or delay the ' _. . creditors ox the assignor. Ihe assignment may ^ ;nformal} an¿ may contain provisions which are not in compliance with the statute, and which would render it invalid; but if it was made in good faith, and without any actual intent to defraud, hinder or delay creditors, it is not alone sufficient to sustain the attachment. Of course an assignment might contain provisions which would be so clearly inconsistent with honesty of purpose as would upon its face show actual moral fraud, and which would support an at-tachment obtained on that ground; but we cannot presume frau(j from the provisions of an assignment unless such provisions are clearly inconsistent with honesty and fair dealing. In a case much like the one at bar this court has said: “It must be remembered that the material question in this case is - simply whether the attachment is valid, and that all questions with reference to the assignment arise only incidentally. This case is wholly unlike a case where an execution, with regard to the regularity and validity of which there is no question, or a case where an order of attachment, with regard to the regularity and validity of which there is no question, is levied upon property which is claimed by some person other than the defendant in the execution or the attachment proceedings, and claimed by him by virtue of an assignment made to him by such defendant of the property in question in trust for the benefit of creditors. In such a case the validity of the assignment arises fairly and squai’ely. In a case like this, however, the assignment can be used only for the purpose of tending to prove or disprove the good faith or the fraud of the defendant in making the assignment. If he made it for the purpose of defrauding his creditors, then it tends to uphold the attachment; but if he made it in good faith, it does not so tend to uphold the attachment, although possibly for some technical reason it may be void. The assignment may be void in this case, and yet the plaintiffs may not be entitled to their attachment.” (Harris v. Capell, 28 Kas. 120, 121. See also Milliken v. Dart, 26 Hun, 24.) The first objection to the deed of assignment is, that the [149] certificate of acknowledgment is defective and insufficient in not stating that the person making the acknowledgment was the same person who executed the instrument. This is purely technical, and however it may affect the instrument as between the assignee and the creditors of the assignor, it certainly does not of itself disclose any bad faith on the part of the assignor in making the deed. It is next claimed that a fraudulent intention is shown in the preamble of the deed of assignment, which recites that one purpose of the conveyance is to prevent an undue sacrifice of the property assigned; and we are cited to the case of The German Insurance Bank v. Nunes, 80 Ky. 334, as being in point, and as holding a like statement in an assignment, to be an evidence of bad faith on the part of the assignor. We do not think the case is applicable here. There the validity of the deed was directly in issue. It contained a statement that the assets of the assignor were largely in excess of his liabilities, and the avowed purpose of the conveyance was to prevent a sacrifice of the property and to leave a residue to the debtor; thus showing that the assignor was not insolvent, .and that his purpose was not to secure as much as possible to the creditors, but, on the contrary, to obstruct the creditors in the enforcement of their legal remedies in order that the debtor might be benefited. In this case, the deed shows the defendant to be unable to pay his debts in full, and coupled with the statement that he desires “to prevent an undue sacrifice of his property.” It is specifically stated that he is desirous of securing to all his creditors the possession of all his property, and he therefore conveyed the same to the assignee in trust for the benefit of creditors alone. No restriction was imposed upon the assignee in the disposition of the property, nor was there anything in the language of the deed, as in the Kentucky case, which showed a reservation of any interest in the assignor, or that he looked forward to a return of any residue from the proceeds of the sale of the property. Such a reservation might indicate that the real intent of the assignor was not to devote his property to the payment of his debts, but rather to hinder and [150] delay the enforcement of payment. But in the connection in which the objectionable phrase is used in the deed in this case, we may fairly infer that the purpose of the assignor was to preserve his property from waste through litigation for the sole benefit of his creditors, and that the same should be distributed in accordance with their respective rights. When we read the provisions of the instrument together, we find nothing in the one objected to which warrants the inference of fraudulent intent — nothing necessarily inconsistent with honesty and fair dealing. Another evidence of dishonesty of purpose is said to be apparent on the face of the instrument in the alleged preference of a creditor. It is doubtful whether any preference was actually intended or made in the deed of assignment. The claim of the creditor referred to was one shown in the assignment to be secured by a chattel mortgage. If the chattel mortgage was made in good faith, and there is no evidence to the contrary, the law would prefer the claim thus secured independent of any of the provisions of the assignment, to the extent of the property mortgaged; and we do not think the instrument can be fairly interpreted as intending any preference beyond what the law would make under the terms of the mortgage. The objectionable provision may be treated as a notice to the assignee of an existing lien on the property conveyed, and certainly we cannot see that it discloses a dishonest motive on the part of the assignor. Even if the provision objected to was treated as a preference, a fraudulent intent is not necessarily inferable therefrom. While in the case of a voluntary assignment a preference would probably operate to defeat the instrument, (Tootle, Hosea & Co. v. Coldwell, 30 Kas. 134,) yet so far as the attachment proceeding is concerned, no dishonest motive is necessarily to be imputed to a preference, for under the law a debtor in failing circumstances may prefer creditors, providing it is done in good faith. Other objections are made to the form and language of the conveyance, and on account of the informal and unusual provisions incorporated therein it is justly open to criticism. [151] Possibly some of these defects might operate to defeat the assignment if its validity was directly attacked, but in none of them do we see an apparent intent of the assignor to hinder, delay or defraud his creditors. No circumstances outside of the deed, nor any word or act of the defendant, prior or subsequent to the assignment, are shown in support of the claim of fraudulent intention. We can only look at the face of the ■deed, and if it admits of a construction consistent with good faith, it should be so interpreted rather than to impute dishonesty to the assignor in its execution. The order and judgment of the district court will be affirmed. "Valentine, J., concurring. Horton, C. J.: As to the second subdivision of the syllabus, I do not agree as applied to the facts of this case, nor do I assent to all said in the opinion.