Gilbert Paper Co. v. Whiting Paper Co.

Dodge, J. The first question which presents itself is whether the money placed in Eritz’s hands, accompanied by the writing set forth in the statement of facts, remained the money of the principal defendant, subject to its control, direction, and recall, or whether it was so transferred to Eritz as an individual, distinct from the corporation, to hold for the benefit of the persons named as recipients, that they acquired rights therein as against him. This subject is considerably confused in respondent’s brief by the citation of numerous authorities declaring the right of revocation and recall to exist in the grantor of a fund or of property placed in the hands of another upon his agreement to do something for the benefit of third persons, until such third persons have accepted. Indeed he cites numerous cases requiring complete novation before a right of action arises against the new promisor. These authorities give but little aid in solving the question, for the nonsignificance of an acceptance by one for whose benefit a contract is made between two others may be considered fully settled in Wisconsin by the case of Tweeddale v. Tweeddale, 116 Wis. 517, 93 N. W. 440. Prior to that case there had been variant, if not conflicting, language in the decisions of this court as to the necessity of such an assent by the third person to a contract made for his benefit, in order to preclude the donor from revocation, and probably- upon no subject are both the declarations and holdings of other courts more in conflict. The rule of that case has since been followed in Security Nat. Bank v. St. Croix P. Co. 117. Wis. 211, 221, 94 N.W. 74; Peterson v. C. & N. W. R. Co. 119 Wis. 197, 204, 96 N. W. 532. Of course, if this money did not pass out of the corporation, [476] but was simply deposited with Fritz as one of its officers and agents, to be bandied according to the direction of his principal, there could be little doubt that any direction given was revocable until fully acted on. But we think the writing itself precludes this idea. The moneys were severed from the other moneys of the corporation. They were by that writing ■assigned vn trust, and were reduced to the same kind of possession as were all other moneys belonging to Fritz in his own right. We cannot doubt that the intention of the transaction was to put this $5,000 out of the possession, custody, and control of the corporation, and that the fact that Fritz happened to be secretary of the corporation is in no wise significant. The money was assigned to him, not deposited with him. After he collected the corporation’s check and deposited the money with his own bank, only he, and not the corporation, could demand it from the bank. We deem it plain that the title to the money became vested in him, and his obligations became such as resulted from the contract he made with reference thereto. Having reached the conclusion that the specific $5,000 in question had ceased to be the property of the principal defendant, but had become that of Mr. Fritz, accepted by him upon the terms expressed in the letter accompanying it, Ave are then confronted Avith the inquiry how far general creditors of the depositaries can reach it. In this connection there is a general rule that a creditor, can maintain garnishment only Avheré the principal debtor could maintain an action for the recovery of the money or property. This general rule is modified in favor of creditors when the money or property is held upon such trusts as constitute a fraud on creditors, or to be void as against them. On the one hand it is argued that by the acceptance of $5,000, accompanied by this Avriting, Fritz agreed, by clearest implication, to pay these several sums, respectively, to the persons named in the Avriting, and that the receipt of this sum of money is a valid and complete [477] consideration for such promise, and that thereby arose the exact situation dealt with in Tweeddale v. Tweeddale, supra, where one, for a valid consideration moving from another,, agrees to pay money to a third person, in which it is held that the last may, at his election, bring his action to enforce such promise, and that in the interval the transaction is so consummated in favor of the beneficiary that the original grantor of the property, or payor of the consideration, has no power of revocation. Clearly, if that were the situation, and it were free from fraud, no general creditor could maintain garnishment, for the person receiving the money or property and making the promise would neither be indebted to, nor hold any property of, such principal debtor. It is however, urged with much vigor that this instrument declares in express terms a trust, of which the several persons named in the writing are beneficiaries, and that they would have no right of action at law against Mr. Eritz, but must proceed in equity as for the enforcement of a trust. Whether this be so, where the only duty to be performed by a so-called trustee is payment of specific sums of money, is questioned, as also whether, even if suit must be in equity, that would constitute any valid distinction from the principle of the Tweeddale Case. We need not undertake to resolve such questions, however, for, if this be a trust for the several creditors named, the situation is controlled by the statute. It is now well settled that any transfer of property to a trustee upon a trust to distribute to creditors is an assignment for benefit of creditors, as that term is used in sec. 1694,, Stats. 1898, and is, by that statute rendered void unless accompanied by the various forinalities prescribed, which are wholly absent in the present transaction. Winner v. Hoyt, 66 Wis. 227, 28 N. W. 380; Cribb v. Hibbard, S. B. & Co. 77 Wis. 199, 209, 46 N. W. 168; Bugbee v. Lombard, 94 Wis. 326, 68 N. W. 958; Dahlman v. Greenwood, 99 Wis. 163, 74 N. W. 215; Sweet, D. & Co. v. Neff, 102 Wis. 485, [478] 78 N. W. 745; Kickbusch v. Corwith, 108 Wis. 634, 648, 85 N. W. 148. The present situation presents all tbe elements distinguishing an assignment for creditors under those decisions, if, as is suggested above, it is not a mere contract to pay specific sums to specified persons. Excluding that view, then we have a trustee, a trust with reference to property transferred by the debtor, and creditors as cestuis que trustent. The same •authorities also established the proposition that such assignment being void, the assigned property continued to belong to the assignor, at least so far as his creditors were concerned, and could be reached by attachment or garnishment. The trial court seemed to consider the rule of these cases obscured by Greene & B. Co. v. Remington, 72 Wis. 648, 39 N. W. 767, 40 N. W. 643, but needlessly, for that case presented neither trust nor trustee — merely a promise to pay certain sums to specific persons out of the agreed purchase price of property conveyed absolutely; a situation in no wise legally distinguishable from that considered in Tweeddale v. Tweeddale, which must be considered to overrule anything said or decided in the former case inconsistent with it. The rule of the above-cited void assignment for creditors cases would, of course, sustain the garnishment here, but for new legislation prohibiting such procedure. After the decision of most of those cases the legislature enacted: “No creditor shall in any case where a debtor has made or attempted to make an assignment for the benefit of creditors, or in case of insolvency of any debtor, by attachment, garnishment or otherwise obtain priority over other creditor’s upon such assignment being for any reason adjudged void.” Sec. 2, ch. 334, Laws of 1897. We can entertain no doubt that this legislation was aimed directly at the rule laid down in Winner v. Hoyt, supra, and following cases, that property attempted to be conveyed by a void voluntary assignment could be seized by any individual -creditor by attachment or garnishment. Indeed, its words [479] are too plain, to invite or permit attempt to construe it upon that subject. We can but enforce it. We are aware that in Duryea v. Muse, 117 Wis. 399, 94 N. W. 365, subsequent to 1897, a garnishment was sustained against the assignee under a void voluntary assignment upon authority of the earlier cases. The court did not, in its opinion, at all discuss or consider the force of this legislation of 1897. It did not expressly deny it effect. If, however, it did so by implication, in sustaining the garnishment notwithstanding such statute existed and was called to our attention in the briefs, that implied denial must be deemed overruled. The conclusion results that upon no theory as to the relations arising from the transfer of this sum of money which can be deduced from the writing defining those relations can the. money be subject to garnishment. By the Gowri. — Judgment reversed, and cause remanded with directions to dismiss the garnishee actions, and to order return to the garnishee, defendant Oscar M. Fritz, of the money by him deposited in court. Keewin, J., took no part.