Case Name: Excelsior Mill Company, Respondent, vs. Hanover, Garnishee, Appellant
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1899-02-21
Citations: 102 Wis. 309
Docket Number: 
Parties: Excelsior Mill Company, Respondent, vs. Hanover, Garnishee, Appellant.
Judges: Rardeeet, J., took no part.
Reporter: Wisconsin Reports
Volume: 102
Pages: 309–323

Head Matter:
Excelsior Mill Company, Respondent, vs. Hanover, Garnishee, Appellant.
February 3
February 21, 1899.
Garnishment: Partnership assets: Fmidulent conveyances.
1. The mortgagee in a chattel mortgage of firm property given to secure a bona fide debt owing to him by the partners individually, is not subject to garnishment by the firm creditors after he has sold the property and applied the proceeds upon the debt, even if the mortgage was fraudulent as to such creditors.
2. MaeShall, J., is of the opinion that a conveyance of firm assets by the members of an insolvent partnership, to pay the individual indebtedness of one of its members, and without any other purpose, is not void as to partnership creditors.
Appeal from a judgment of the circuit court for Lincoln county: Chas. Y: Babdeeh, Circuit Judge.
Reversed.
On December 18, 1896, Frederick A. and Clarence G. Hanover, copartners, being insolvent and without expectation of working out of said insolvency, mortgaged their entire partnership stock in trade to the garnishee defendant, Henry D. Hcmover, to secure the note of Clarence G. Hanover to said Henry J). Hanover, the condition being that “ said mortgagor shall pay to said mortgagee the sum of one thousand dollars, according to the terms of a certain promissory note executed by the said E. A. Hanover, June 14,1895, to said Henry D. Hanover, payable one year after date, with interest at seven per cent, per annum, which said note was given as a renewal of a note of similar terms and in the same amount, executed and delivered between the same parties about a year prior thereto, and was given to secure a loan made to said Frederick A. Hanover and Clarence G. Hanover, and was used and invested by them in the business of the firm of E. A. Hanover & Son.”
There is some evidence that in June, 1896, E. A. and Clarence G-., as a firm, assumed partnership liability for the debt evidenced by said note. The court, however, negatives such promise or assumption in his finding. The note evidenced a debt originally incurred by both partners in 1893, but not as a firm. At the time of making said mortgage the firm were indebted to the plaintiff in the sum of about $550 for merchandise purchased for partnership purposes. The garnishee, within a few days after the making of said mortgage, and before the commencement of this suit, foreclosed the same, and sold the stock of merchandise, realizing therefrom the sum of $1,003.28, which he indorsed upon his note. The plaintiff, having obtained judgment and issued execution, garnished Hewry D. Hanover in aid' thereof. The circuit court held the garnishee liable for the proceeds of the mortgaged property, and rendered judgment against him therefor, from which judgment the garnishee appeals.
For the appellant there was a brief by Van HeeJce <& Smart, and oral argument by E. M. Smart.
For the respondent there was a brief by CwrUs, Reid <& Smith, and oral argument by A. H. Reid.
To the point that an insolvent partnership cannot mortgage its entire assets to secure a private debt of an individual partner large enough to absorb such assets, they cited Cridb v. Morse, 77 Wis. 322; Willis v. Brerrm&r, 60 Wis. 622; Bates, Partnership, §§ 566, 829; Whelan v. Sham, 115 Cal. 326; Ciarle v. Patterson, 158 Mass. 388; Cron v. Cron's Rotate, 56 Mich. 8; Forsyth v. Woods, 11 Wall. 484; Keith v. Armst/r'ong, 65 Wis. 225; Powers v. La/rge, 69 Wis. 621; Vernon v. TIpson, 60 Wis. 418; Bulger v. Rosa, 119 N. T. 459; Peyser v. Myers, 135 N. T. 599; Wilson v. Rolertson, 21 N. Y. 587; Menagh v. Whitwell, 52 N. Y. 146; Jaclcson Banlc v. Durfey, 72 Miss. 971, and cases cited; Wiggins v. Blaclcshea/r, 24 S. W. Rep. 918; Bannister v. Miller, 54 N. J. Eq. 121; Hillilcer v. Francisco, 65 Mo. 598; In re Cray's Estate, 111 N. Y. 404; Winner v. Kuehn, 97 Wis. 394; In re Weston, 12 Met. 1; Twrner v. Jay- cox, 40 1ST. Y. 470; FrankUn 8. B. Co. v. Henderson, 86 Mcl. 452; Boosv. Ma/rion, 129 N. Y. 536; Baretlettv. Meyer-Sehmidt ■ G. Co. 45 S. V. Rep. 1063; Erb v. West, 19 So. Rep. 829.

Opinion:
Dodge, J.
There were vigorously argued in this case several important questions relating to the rights of the firm creditors against partnership assets when attempted to he applied to private debts of the partners, which, however, it is wholly unnecessary- to consider. Here, the partnership property had all been sold to bona fide purchasers for value before the garnishment, and the money proceeds thereof had, with consent of both partners, been applied in part payment of the bona fide private debt secured by the mortgage, and had been mingled with other moneys.
The cases of Spitz v. Tripp, 86 Wis. 25, 28; Jones v. Kosing, 92 Wis. 55; and Salter v. Bank of Eau Claire, 97 Wis. 84, have fully settled the rule for this court, that whether or not a transfer of property be fraudulent, if that property has been entirely disposed of, and the proceeds are not in any way held in trust for the debtor, but have been applied under his direction or to his debts, garnishment cannot be sustained against even the fraudulent transferee of such property.
In Spitz v. Tripp, supra, the court, speaking by Cassodat, J., said: " Under this statute, Tripp cannot be held liable, as garnishee, for any property, moneys, credits, or effects belonging to the principal debtor, which had passed out of his possession or control more than three months prior to the service of the garnishee summons upon him. Had Tripp been garnished by the plaintiffs at any time between July 26, 1892, and September 10, 1892, then the validity of the mortgage, and Tripp's right to hold possession of the goods, would have been involved, and might have been determined. La Crosse Nat. Bank v. Wilson, 74 Wis. 398; Edwards v. Roepke, 74 Wis. 575. But, upon the facts of this case, it is immaterial whether the mortgage was valid or invalid, or such possession lawful or unlawful, as against J. L. Tabor's other creditors, since none of them during that time proceeded against the property or Tripp as garnishee."
In Jones v. Kosing, supra, the court, speaking by Marshall, J., said: " Kosing having sold his interest in the property, and parted with possession and control of it, and applied the proceeds in the payment of Adolph Keller's debt to him, before service of the garnishee summons, he cannot be held as garnishee, whether the mortgage and bill of sale were valid or invalid, or his possession was lawful or unlawful, as against the other creditors of Adolph Keller."
The distinction between levying upon the property itself, and attempting to reach the proceeds after the property has. been disposed of, is also pointed out in Powers v. Large, 69 Wis. 621, and Coover's Appeal, 29 Pa. St. 9.
Garnishment, while in many respects serving the purpose of a creditor's bill, is nevertheless limited by the statute. It reaches only property or effects belonging to the debtor in the hands of the garnishee, or indebtedness from the latter to the former, neither of which existed at the time of the garnishment in this case, and as a result the appellant could not be held liable on that process.
By the GowL — Judgment reversed, and cause remanded with directions to enter judgment in favor of the garnishee defendant.
Rardeeet, J., took no part.