Cummings v. Fearey

Campbell, J. This controversy has already been before us, as reported in 41 Mich. 376, in which the present defendants were plaintiffs. There is very little in the present record which was not in the former one, and most of the questions now presented are of minor importance. One legal question, however, stands at the threshold of the case, on which some doubts have arisen. By § 6504 of the Compiled Laws of 1871 it is declared [40] that “every garnishee shall be allowed to deduct from the property in his hands all his demand against the principal defendant, of which he could have availed himself if he had not been garnished, whether by set-off at the trial or upon execution, and shall be liable for the balance only after adjustment of mutual demands.” This, it is insisted, exempts the garnishees in the present case from responsibility, because it is conceded they got no more property than would have paid their debt. It has been found in the present case, as a necessary result of the verdict, that plaintiffs in error got possession of the fund in controversy under a chattel mortgage which, though good as between the parties, was a fraud upon the defendants in error. Upon its illegal character there is no room for dispute. It and its predecessors had been kept from record intentionally, and the mortgagor had been enabled to keep up his credit and obtain goods from other creditors, who were deceived as to his standing, under a continued course of concealment. By § 6498, as mentioned in our former decision, it is provided that a garnishee may be held for property conveyed to him in fraud of creditors, even though the conveyance is valid against the principal debtor himself. We think this provision must be construed with the other, and that § 6504, which allows a garnishee to retain property enough to satisfy his demand, only refers to property which he has received rightfully, and which his debtor would own and could recover from him if there had been no garnishment. As against the garnishing creditor, the garnishee holding under fraud is a wrong-doer, and his possession is not a rightful possession. By any other construction, a mortgagee holding by fraud is in as good a condition as an honest mortgagee. The law does not vitiate his mortgage merely when there is no consideration. The defect is that, although there may be a full consideration, yet it has been used to injure and deceive other creditors. We do not think the entire garnishee statute, especially when coupled with the statute [41] against frauds, will allow tlie construction claimed by plaintiffs in error for § 6504. Upon the several questions of evidence on which errors are alleged, we think the court was justified in admitting testimony concerning the antecedents of the dealings between Nellis and plaintiffs in error, and their agents, as well as concerning the transactions from first to last regarding the property and its disposal. ¥e have found nothing that can be deemed impertinent. We also think that parties dealing in such a manner as to defraud creditors, and having no preference by legal proceedings, cannot go behind the judgments recovered against Nellis to inquire into the dates on which debts matured. If they had been creditors having liens under legal process, on which they sought priority, a question would be presented which is not presented here. We think that on the testimony as submitted to the jury the instructions concerning the nature and validity of their holding and. disposal of the property were presented fairly and justly, and that there are no errors in any of those instructions. If there was any testimony authorizing a claim that they did not act in pursuance of their mortgage interests, it was left to the jury. We do not feel sure that there was much room for such an assertion.. It is not material, in our opinion, whether defendants in error could have replevied the last shipments of goods. They have not done so, and if they choose to look to these garnishees for these as goods of Nellis, they may lose other rights by doing so, but the garnishees cannot repudiate the ownership which they have asserted by seizing them. The judgment must be affirmed with costs. Marston, C. J. and Cooley, J. concurred.