Barr v. Church

Cassoday, J. It is undisputed that Merlin IT. Church is the son of the garnishee, Cyrus Church; that he got married in 1880, but continued to live in a part óf his father’s house in the town of Walworth; that' in 1882 Merlin took his father’s farm of 240 acres, on which they lived, to'work on shares, and continued to run the same; that there was a building on the farm for setting milk and raising cream; that January 26, 1886; Merlin and one Peterson, as proprietors, started a manufactory of cream into butter thereon, upon what is known as the “ divide plan,” under an agreement to continue for one year; that Merlin and his father, as owners of the products of the farm, with others in the vicinity, became patrons of that factory, and as such elected Cyrus treasurer; that the products of the sales of that factory were deposited in the Harvard Bank and the Citizens’ Bank in the name of Cyrus; that Merlin checked them out as required, in the name of his father; that about. January 26, 1887, Merlin bought out Peterson, and ran the [386] factory in bis own name, and on an entirely different plan, by buying the cream and manufacturing and selling the products as bis own; that the father thereupon ceased to be treasurer, or to have any connection with the factory, except that he and Merlin, as owners of the products of the farm, with others in the vicinity, were its patrons; that about the same time, and early in 1887, Merlin became the owner of two other like factories,— one in the town of Linn, about eight miles from his father’s, and the other at Relavan; that each of these three factories, having its own -patrons, was run entirely separate and independent of the others, except that Merlin continued, as previously, to deposit moneys, in the name of his father, in both the Harvard Bank and the bank of E. Latimer & Go. at Relavan, until the forepart of August, 1888; that during the said period one R. M. Grillis was running a similar and rival factory just south of the state line; that February 9,1888, Merlin sublet his father’s farm to G-uttschaw; that soon after Merlin began to run behind financially, and borrowed money from his father and from the banks on notes signed by his father, so that August 7, 1888, Merlin was indebted to his father for money borrowed and liabilities to the amount of $4,450; that, in pursuance of a demand made by his father a few days before, Merlin on that day paid on such indebtedness $2,393.73 by way of a bill of sale of personal property on the farm, $347.20 by way of an assignment of his interest in said lease, and $600 by way of the conveyance of his equity of redemption in forty acres of land, leaving a balance still due his father of $1,109.07; that on August 10, 1888, Merlin, by an instrument in writing, sold and transferred to said R. M. Gillis the factory in Linn, and a lease of the ground, and. also certain tools and personal property in the Walworth factory, for $2,000; that Gillis paid therefor $500 cash, and gave one note due March 1, 1889, for $1,000, and another note due September 1, 1889, for $500; that said transfer in writing contained [387] • provisions to the effect that Gillis was to have the making and earnings derived from the Linn factory after August 1, 1888, together with the butter and cheese on hand from that date, subject to the dividends to patrons on said butter and cheese; that Gillis was to take possession of the Linn factory August 15, 1888; that Gillis was to have the use and net profits of the Walworth factory until January 1, 1889, without charge, and until that time continue to conduct the business therein as his own, in the name of Merlin,- by paying for all milk and cream delivered after August 15, 1888, and Gillis was to furnish funds to pay for all labor and expenses incurred, and for all milk and cream, when due; that said Merlin therein agreed, with certain exceptions, to refrain from again engaging in such business for a period of twenty years; that such management of the Walworth factory by Merlin for the use and benefit of Gillis until January 1, 1889, was'to remain and-be kept strictly secret1 and confidential; that August 15,1888, Gillis, in pursuance of the transfer to him, took full possession of the Linn factory, with all the product of the August milk of its patrons; that on the same day Merlin settled with a large number of such patrons of the Linn factory, including the plaintiff, for milk which they had delivered during the previous months of June and July, by giving to them, respectively, checks for the amount on the Citizens’ Bank, signed by himself alone, and payable ten days from that date; that at the time of giving said checks he informed such patrons, including the plaintiff, that he had sold the Linn factory to Gillis, who was to have the product from August 1, 1888; that seventeen of these checks so given-form the basis of this action against.Merlin; that August 18,1888, Merlin offered to sell or discount to Gillis the two notes he then held against him, amounting to $1,500, for $1,200, but was unable to do so; that thereupon, and on the same day, he transferred the same to his father, upon his said indebtedness, at the agreed price of $1,000; that [388] Merlin then owed other parties to the amount of about $3,500, and had nothing with which to pay them; that more than a year prior to the commencement of this action the father had paid up all of such outstanding notes which he had thus signed with or for the benefit of Merlin. The genuineness of the indebtedness from Merlin to his father is conceded. It is the undisputed law of this state that an insolvent debtor may refrain from making a general assignment for the benefit of his creditors, and in good faith pay some of them in preference to others. While such law remains, it must be expected that such insolvents will prefer their relatives and friends rather than others. A careful reading of the testimony in this case convinces us that the payment of the father by the son was made in good faith, and with no intent to hinder, delay, or defraud other creditors. True, the paying of one creditor by an insolvent debtor may result in leaving him without means to pay or secure others, but such incidental hindering or delaying does not come under the condemnation of the statute. The findings of the trial court seem to be based upon some misapprehensions. Counsel for the plaintiff concede that the property transferred and conveyed from the son to the father, August 7, 1888, was of the agreed value in the aggregate of only $3,340.90, instead of $3,450, as found by the court. There is no evidence to sustain the finding to the effect that any of the claims or demands upon which the judgment herein agaihst Merlin is based accrued in August, 1888; but, on the contrary, it clearly appears that they all accrued prior to that time. The evidence does not sustain the findings to the effect that the Walworth factory and the Linn factory were operated as one joint business enterprise, otherwise than as stated, or that the same patrons delivered their milk to both factories, or that Merlin expected to redeem the property transferred to his father up to the time of his failure, or that any of the persons who held the claims upon which said judgment is [389] based had been deceived into giving such credit by reason of Merlin’s remaining in possession of either of said factories after they were so transferred. The retention of the possession of the Walworth factory was manifestly for the convenience and benefit of Gillis, and the retention of the possession of the Linn factory appears to have been for the mere convenience of the parties, since Gillis was to have all as of August 1, 1888. Had the plaintiff’s claims accrued during such possession and subsequent to such transfer, there might be some ground for sustaining the judgment. The mere fact that the bank account had been kept in the name of the father does not tend to show that any of such transfers were fraudulent. Had the action been brought for the purpose of charging the father as one of the proprietors of the business, then such evidence might have been of some significance. It is unfortunate that the other creditors of Merlin were unable to get their pay; but, after a careful reading of the testimony, we are forced to the conclusion that the evidence does not warrant the finding that he made the payments to his father, mentioned, with the intent to hinder, delay, or defraud his creditors; much less that the garnishee participated in any such fraudulent intent. The law applicable to the facts and in support of our conclusions has been so often and so recently enunciated by this court as to require no further discussion here. First Nat. Bank v. Bertschy, 52 Wis. 438; Mehlhop v. Pettibone, 54 Wis. 652; Erdall v. Atwood, 79 Wis. 1; Second Nat. Bank v. Merrill, 81 Wis. 142, 151; Bannister v. Phelps, 81 Wis. 256. By the Court.— The judgment of the circuit court is reversed, and the cause is remanded with directions to render judgment in favor of the garnishee and against the plaintiff. WiNslow and Penney, JJ., took no part.