Court Opinion

ID: 7944746
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:19:01.662269+00
Date Added: 2024-06-11T16:33:40.896142
License: Public Domain

Montgomery, J.
(dissenting). November 6, 1905, the plaintiff obtained against the principal defendant a judgment injustice’s court for $158.63 damages and costs. December 1, 1905, he caused a garnishee summons to be served upon the public schools of the city of Escanaba, returnable December 13, 1905. On the return day of the summons the public schools filed its disclosure in writing, with the justice, from which it appeared that it was indebted to the defendant Leonard Gonhue in the sum of $542, and that at the time of the service of the writ of garnishment the firm of Norton Brothers held an order on the garnishee defendant from Leonard Gonhue for the sum of $542. Afterwards the notice required by law was served upon Thomas E. Norton, one of the claimants, Charles H. Norton, the other member of the partnership, being a nonresident of the State of Michigan.
The claimants appeared before the justice and the case was tried February 15, 1906. The plaintiff there declared verbally on the common counts in assumpsit, and speci*339ally for money had and received for plaintiff’s use. The claimants pleaded the general issue verbally, and gave notice that thé moneys due Leonard Gonhue, the judgment debtor, from the public schools, had been, prior to the service of the writ of garnishment, assigned to Norton Brothers, the claimants above named. The case was tried before a jury in justice’s court and the plaintiff won, whereupon the claimants appealed to the circuit court. Leave was granted to the I. Stephenson Company, Herman Salinsky, Coleman Nee, Frank Bacon, A. Baum, William Andrews, and Earl Gonhue to intervene as claimants to the fund in controversy and then in the custody of the court, and this was done, and they became therefrom parties claimant with Norton Brothers to the fund. These were all the parties, with the exception of C. A. Johnson, to secure the payment of whose claims the order was given as herein mentioned.
On the trial of the case attorneys for both the plaintiff and the claimants requested the court to direct a verdict. The court directed a verdict in favor of the plaintiff. It appeared without dispute that on the 4th of November, 1905, the principal defendant gave an order directed to the public schools to pay to Norton Brothers the sum of $542. This was presented to the secretary of the board of education before the writ of garnishment was issued or served. The order was given for the full sum due from the board of education to Leonard Gonhue. While the order was absolute on its face, it was given by. Gonhue for the purpose of paying the claim of Norton Brothers, amounting to $43.13, with the intent that Norton Brothers should pay the other claims for labor and material furnished and money borrowed by Gonhue in performing a contract with the public schools of Escanaba for repairing the Franklin school building. The total of these claims amounts to $576.18.
Thomas E. Norton, one of the claimants, testified that the order on the school board was given to him on the 4th of November, 1905; that at the time Gonhue gave him the order the arrangement was that he, Norton, was *340to collect this money and pay himself and the creditors who had furnished lumber and material on the building, and Gonhue was to furnish him with a list of creditors and the amounts as soon as he could get them together. This was done about one week afterwards. The principal defendant, Gonhue, testified to the same purport. It also appeared that defendant Gonhue was indebted to parties other than those named in this agreement in the sum of about $700, viz., $158.63 to plaintiff, $260 to Carl Johnson, $258 to the Stegath Lumber Company, and $72 to Patek Brothers. The only other property which he is shown to have had was an equity in a piece of real estate worth less than $200.
It was the contention of the plaintiff, and .the circuit judge so held, that the transaction between Gonhue and Norton Brothers amounted to an assignment for the benefit of creditors, and, so holding, instructed a verdict for the plaintiff. The claimants moved the court for a judgment non obstante veredicto, based upon the claim that the court was in error in holding that the transaction amounted to a common-law assignment, and upon the further claim that there is no statutory provision for trying in justice’s court an issue attacking the title to property, and that for this reason the claimants were entitled to a judgment notwithstanding the verdict.
The statute, 1 Comp. Laws, § 1017, provides that after service of process upon a claimant the defendant or defendants so notified shall be considered as defendants in place and stead of the garnishee, and an issue may be formed between the plaintiff and such defendants in the same manner as provided in section relating to trials in garnishment proceedings; it being provided that the issue may be tried by the justice or a jury and such judgment shall be rendered between the parties as shall be just.
The claimants on this appeal contend that the only issue that can be tried was such an issue as might be tried if the defendant Gonhue had brought suit against the public schools of Escanaba for the recovery of this money; that *341the garnishment only secured to the plaintiff the interest of Gonhue in the property subject to the valid claims upon it. We think this is not a true construction of the statute.
The real question for determination was whether the money in the hands of the public schools of Escanaba was subject to the claims of the plaintiff as creditor.. The statute might have properly left the case to proceed against the public schools of Escanaba, and have put upon that corporation the duty of showing a valid transfer of the indebtedness from Gonhue to the present claimants. In that proceeding of necessity the validity of the transfer would have been involved. In place of this, the statute has provided that the claimants may be cited in and given their day in court. The question to be determined still remains as before: Whether there is a fund in the hands of the garnishee defendant which should be subject to be reached by defendant’s creditors.
It is also suggested that, as the notice was served upon one of the two Norton brothers, the proceeding was without jurisdiction. But it appears that this question was raised only after four trials, and it appears also that the Norton brothers both appeared in justice’s court in answer to this citation.
The principal question is one which gave the circuit judge some trouble, and is not easily solved, in view of the numerous decisions in which language has been used implying rather than deciding the essentials of a common-law assignment.
The statute, 3 Comp. Laws, § 9539, provides that all assignments, commonly called common-law assignments for the benefit of creditors, shall be void unless the same shall be without preferences as between such creditors, and shall be of all the property of the assignee not exempt from execution.
The usual definition of an assignment for the benefit of creditors is: A voluntary transfer by a debtor of all or a *342part of his property to an assignee for the payment of debts. 3 Am. & Eng. Enc. Law (2d Ed.), p. 6.
If this definition be accepted as the correct one, it would appear that the mischief aimed at by the statute would not be met if it were confined in its application, as may have been implied in some cases, to those assignments which include all the property of the debtor. The statute above cited manifestly was intended to apply to assignments which included part of the debtor’s property as well as to those which include the whole, for one of the grounds for treating such assignments as void is the failure of the debtor to include all of his property not exempt from execution. It would hardly do to say that the provisions of the statute intended for the protection of creditors could be ayoided by an intentional breach of its terms in purposely omitting from the assignment some small part of the debtor’s property.
This statute has been before the court in many cases, and to attempt a review of all the decisions would be an almost endless undertaking. It can be taken as settled, however, that a transfer in payment of an indebtedness owing to one or more creditors of property received and accepted by them as such is not within the inhibition of the statute. Neither is a conveyance by way of mortgage, when given for the benefit of creditors, even though given to a trustee, a common-law assignment within this definition, so long as the debtor retains right of redemption, and so long as that is subject to levy by his creditors. So far the cases are in harmony and the rule is well settled. See, as illustrative, the cases of Risser v. Hoyt, 53 Mich., at page 210; Longley, Low & Alexander v. Hosiery Co., 128 Mich. 194.
Where, however, by an instrument of transfer, in whatever form, a debtor transfers to a trustee his estate, to be converted into cash and distributed to his creditors, the transfer not being accepted at the time by the creditor as a satisfaction of the indebtedness, the transaction cannot be treated as a liquidation and payment of in*343debtedness of the debtor, but it has all the characteristics of an assignment for the benefit of creditors. Kendall v. Bishop, 76 Mich. 634; Pettibone v. Byrne, 97 Mich. 85; Hill v. Mallory, 112 Mich. 387.
In the latter case Mr. Justice Grant stated the rule as follows:
“A debtor may prefer a creditor by a mortgage on all his property, or by a transfer of all his property in payment, when the value of the property is not so in excess of the debt as to raise a presumption of fraud. * * * ' But that is not this case. The creditors whose claims plaintiffs agreed to pay were not parties to the transaction. It was not binding upon them. There was no novation. They could not sue the plaintiffs. If they should not see fit to substitute plaintiffs as their creditors for Mr. Hill, their only remedy would be a suit at law against him, or by bill in equity to enforce the trust. The transfer was not for the sole purpose of paying the plaintiffs’ claim, but also to secure the payment of five other creditors. Plaintiffs took the property burdened with these obligations. If this is not a transfer for the benefit of creditors, for what is it ? It did not operate as a payment to five creditors, because they did not agree to it. If this conveyance had been made to a stranger, and it covered all the property of the debtor, in consideration that the vendee should pay certain creditors to the exclusion of others, it would amount to an assignment for the benefit of creditors, and be void under the statute. The effect of such a transaction cannot by avoided by saying that it was not intended as a common-law assignment.”
This language is particularly applicable to the instant case. In this case, as in that, there was no release of the debtor by the creditors in whose interests this transfer was made. The amounts payable to them were not even named at the time the transfer was made; the list was in fact made up after the garnishment was served in the case. The cases are not in principle distinguishable. '
Attention is called by appellants’ counsel to the case of Thompson v. Newland, 144 Mich. 595, which is said to he controlling in all its features. An examination of that case, however, will show that the question involved in *344this case appears not to have been at all considered. The claims of the defendant are stated to be, first, that the transfer to the plaintiff was void under section 9514, 3 Comp. Laws, which was not the section relating to common-law assignments, but that relating to conveyances in trust for the use of the person making the same. This claim was said to be entirely unfounded as the transaction was a sale whereby plaintiff acquired complete title to the property. It was next urged that the transaction was void under section 9533, 3 Comp. Laws, as made with intent to hinder, delay, and defraud creditors, but this issue, as was pointed out, was submitted to the jury and the verdict was found in plaintiff’s favor. There is nothing in the opinion to indicate that the question of the validity of the transfer as affected by section 9539 was in any way considered.
The other cases which are cited in counsel’s brief aré sufficiently distinguished by the references here made.
The judgment should be affirmed, with costs.