Court Opinion

ID: 7932947
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:06:27.85312+00
Date Added: 2024-06-11T16:33:25.323823
License: Public Domain

Ohamplin, J.
I concur in the result reached by Mr. Justice Sherwood. I place iny conclusion upon the complainants’ case made by the bill. I do not decide that a defendant in an attachment suit may neglect to take the steps provided by statute to obtain a dissolution of the attachment, and afterwards file a bill to set aside the lien on the ground of fraud; nor do I think he may, after levy of the attachment, convey the property to a third person, so as to confer upon him an equitable right to contest the validity of the attachment lien.
*532In this case the complainants are trustees, and represent the interests of creditors. The estate is insolvent. They have no individual interests to subserve, and their assignors can receive no direct benefit from the suit. Of course, the more their creditors are paid the less they will be liable for after distribution, but the total of their liability will not be changed; for, if complainants succeed, they will owe Mrs. Rowe as much more as they will their other creditors less. It is the policy of the law in Michigan that all the creditors of an assigning debtor shall share equally, and without preference, in the assigned property. After the assignment was made, we held that the assignees could not employ the remedy provided by law to obtain a dissolution of an attachment wrongfully levied. If it be conceded that this attachment was levied without cause, the lien is unlawfully obtained, and the property should be distributed ratably among all the creditors. There is no other way in which the lien so obtained can be removed except through the interposition of a court of equity. To enforce the trust, and to prevent fraud, I think we may grant relief.
When the case was before us on the former occasion to review the order dissolving the attachment, no evidence was introduced to show that the plaintiff in that suit had any reason to believe that the defendants in that suit were about to dispose, or had disposed, of their property with intent to defraud their creditors. Mr. Rowe testified then that the affidavit for attachment was sworn to about noon, and the records were not examined, and he was not aware that the land where Mr. Kellogg’s home was had been deeded to his wife until he discovered it upon the record that afternoon. This conveyance, therefore, could not have induced the belief claimed in the affidavit. He did not testify at that time to any conversation with Mr. Kellogg in which he stated that they were going to make an assignment, and that the business would continue right on as usual. He does testify to *533such conversation in this ease. The conversation, if it occurred, was material, and it is somewhat singular that it should have been overlooked. Upon the testimony, given as it was in open court, I do not feel like disturbing the conclusion reached by the circuit court.
Campbell, C. J.
When these complainants applied, under the statute, to set aside defendant’s attachment, we held they had no such statutory right. Rowe v. Kellogg, 54 Mich. 206. We also intimated that, as the record there appeared, we thought the facts found by Judge Mills would have supported a dissolution, and that it might be that complainants had some other possible remedy, which, of course, could not then be decided.
They now have filed a bill in chancery to set aside this ■attachment, and the court below gave them relief. I do not think the decree can be sustained on any known principle of ■equity.
The statute which allows a motion for dissolution has been uniformly construed as authorizing it without reference to the good faith or well-founded belief of plaintiff in the grounds of suing out the writ. The issue on that motion is whether the fraud or other wrong actually existed, and not whether plaintiff had reason to believe its existence.’ If not so existing, no amount of good faith would save the writ. Folsom v. Teichner, 27 Mich. 107; Blanchard v. Brown, 42 Id. 46.
If the present equitable suit will lie, it can only be on some principle which would have justified it had no statutory remedy existed for dissolution; and it. can only lie if it could have been brought when the jurisdiction of law and equity was in separate tribunals. A suit in equity to interfere with proceedings at law is a distinct proceeding, and hostile to the suit on the law side of the court. The cases in which -equity can restrain legal proceedings are very few, and still *534fewer where it can interfere with part of the proceedings resting on mesne process, without reaching the merits of the controversy.
The general rule, and so far as I know the universal rule, is that no court can interfere directly to set aside the service-of mesne process in another court where it is on its face regular and sufficient. So far as such power is vested anywhere, it is the function of every court to rectify abuses of its own process. If it has no such power in a given case, then the power does not usually exist, if it exists at all. A court of equity has no right, on account of some imagined danger, to enlarge its recognized jurisdiction in any direction, still less by way of interference with other jurisdictions. The fact-that the same judge acts in the matter can make no difference. A court of law cannot, by any construction, be put under new subjection to a court of equity until the Legislature so ordain.
But granting that there may be — although I think there are not — exceptions which will allow such interference, there is none that I am aware of which will allow a court of equity to extend a statutory jurisdiction to cases where the statute itself denies it.
The right to sue out an attachment is made by law to depend on the belief of the plaintiff in the truth of jurisdictional facts. The statutory remedy provides for considering the facts themselves. . But except by statute such inquiry cannot be made. Probable cause is not required to be shown by specific facts in the affidavit, but only by the plaintiff’s assertion of belief founded on reasons not detailed. And it. may exist where all parties are innocent in fact.
The only possible ground for equitable relief, if it exists at, all, must be fraud. And this fraud can only exist in using the remedy without any honest belief in the facts sworn to. Such is the rule in regard to suits for’malicious prosecution,, which cannot be sustained without proof of both malice and *535lack of probable cause. It would be remarkable if the property of a debtor should be held more sacred than his person.
This record does not, I think, show that the assignors who assigned to complainants had any conscious fraudulent purpose. But I think it appears very clearly that defendant had reason to believe they meant to do what they had no legal right to do. There was evidence, which I believe is true, that one of the Kelloggs gave Mr. Bowe to believe that the assignment would not be followed by an immediate winding up of the business. The case shows beyond contradiction that when the testimony was taken, long after the assignment, no steps had been taken to do so. In Wilhelm v. Byles, 60 Mich. 561, we recently held that the action of the assignees, however well intentioned, was a legal fraud against creditors, and that, if the assignors had made the assignment on any such conditions, it would have been a fraudulent assignment. I have no doubt from this record that this continuation of business was contemplated and intended, and that Mrs. Bowe had reason to believe it. Its actual effect was to hinder and delay creditors wrongfully, and thereby defraud them.
While I do not believe any of these parties were guilty of moral turpitude or had any dishonest or consciously illegal and wrong design, or thought any wrong was done, there can be no doubt of the legal fraud actually done under the assignment. I think the facts warranted Mrs. Bowe in her affidavit that she had reason to believe it was to be done, and that it was not wanton or malicious, or made with any unlawful purpose. I think the bill should be dismissed.
Morse, J.
I am not satisfied that the decree below is right upon the merits, and therefore shall reserve my opinion as to the jurisdiction of equity in this case.
The decree, as a basis for the relief granted complainants, finds that the defendant, Florence Y. Bowe, had no sufficient *536reason in fact or in law to believe that Kellogg, Sawyer & Co., the defendants in the attachment suit, were about to dispose of their property with intent to defraud their creditors, as stated in her affidavit, and that in fact they were not about to do so. It further finds her levy of attachment and execution upon the premises in controversy to be without authority of law, and without right in said Florence Y. Rowe to proceed in such action, and the levy of said attachment and execution fraudulent against the rights of the assignors, and fraudulent as against the complainants as trustees of the •creditors they represent.
There is no law as yet in this State preventing one creditor from obtaining a first lien upon the property of his debtor, and thereby a preference over other creditors, if such lien is obtained by due process of law and without fraud.
In this case there is no pretense but Florence V. Rowe had a valid indebtedness against the firm of Kellogg, Sawyer & Co. On the first day of February, 1883, she loaned them, through her husband, who acted as her agent, $1,700 in cash, and received their note as security for the payment of the same. This note bore interest at 8 per cent, per annum, and was due and payable 30 days from its date. At the time of the giving of this note, Joseph E. Kellogg, one of said firm, was ostensibly the owner of a fine house and lots, his residence, in Kalamazoo, valued at from seven to ten thousand dollars. On the thirteenth of the same month and year he quitclaimed this house and lots to his wife, the deed not being recorded until April 20, 1883.
Thaddeus H. Rowe, the husband of the defendant, testifies that, before and after the making of said loan, said Kellogg represented said residence to be his, and requested Rowe, who was dealing in real estate, to sell it for him, setting his price at $10,000. In the summer and fall of 1883, Rowe, in behalf of his wife, endeavored to obtain payment upon this note. On the sixth of November, 1883, he saw Frank I. *537Kellogg, one of the firm, who said that the firm had suspended payment, and could do nothing towards paying the note. He stated, so Bowe swears, that they were going to make an assignment, and had picked out one man for assignee, the complainant Byles, but that the assignment would not stop their business; they were going right along with the business the same as before. After this talk, Bowe examined the record, and found this quitclaim deed from Joseph E. Kellogg to his wife. Bowe then went home and informed his wife, the defendant, of his conversation with Frank Kellogg, and the discovery of the record of this deed.
The defendant then made the affidavit, and sued out her writ of attachment.
If the testimony of Bowe is true, he had ample reason to believe that the assignment about to be made was to be a disposition of property in fraud of his wife and other creditors.
She corroborates her husband as to the information he swears he imparted to her; and, if her testimony is true, she was justified in making the affidavit she did. And I am inclined to believe the statements of the Bowes. Kellogg denies the truth of the testimony of Bowe that he told him they were going to run the business right along as usual, but the subsequent action of the firm of Kellogg, Sawyer & Co., and their assignees, tends strongly to substantiate the statement of Bowe.
In fact, as appears from the testimony of all the parties, the business was run after the assignment just the same as before, except that the assignors were paid good salaries by the assignees for performing precisely the same duties in which they were each respectively engaged before the assignment.
At the time the testimony was taken in this suit, the opinion of this Court in Wilhelm v. Byles, 60 Mich. 561, had not been filed.
The assignment was executed November 9, 1883. The *538Kelloggs and Sawyer testified that after such assignment, and up to 1885, they had all been engaged in “aiding our assignees in conducting our business.” Mr. Sawyer was up in the woods, taking charge of the business at the mill, and doing the same kind of business he was before the assignment. Mr. Byles, one of the assignees, it is claimed, had a general oversight of the business. As Frank Kellogg testifies :
“ He goes up to the mill once or twice a month, and he comes down here occasionally, and he looks the thing over,. and gives general directions. We try to carry them out.”
It is perfectly plain from the whole record that there was-but little, if any, difference in the conducting of the business before and after assignment. And if the business had not been stopped by the decree of this Court, on the application of the creditors, whom the assignees claim to represent in this suit, there is good reason to believe it would have been running yet, without the payment of any dividends to the creditors.
Such being the action of the assignors, and the assignees-of their own choosing, after assignment, in perfect accord with their expressed intention by Frank Kellogg to Rowe,, as he claims, it strikes me as more than likely that Frank Kellogg stated to Rowe, in effect, that the proposed assignment would make no difference in their business, except as it operated as a forced (as far as the creditors were concerned), suspension of payment of their just debts. It appears that the assignment was used as a means of gaining time to carry on their business, and to stave off the creditors until such time as they were able to pay. And, such being the use the assignment was put to, the intention of such use, at the time of the assignment, may easily be inferred, if it is not, indeed, a logical conclusion.
In Wilhelm v. Byles the majority of this Court held that the arrangement shown in the present case, by which the *539assignees carried on the business of Kellogg, Sawyer & Go. substantially as it was before the assignment, was fraudulent as to the creditors of said firm; that the assignees could not hinder and delay creditors while they carried on the business of the assignors, and speculated upon the chances of making or losing in the conduct of the business in which the assignors had failed.
Any transaction by a debtor in failing circumstances, by which he endeavors and intends to hinder and delay his creditors, is fraudulent, even if it be a general assignment purporting to be for the benefit of all his creditors. Pierson v. Manning, 2 Mich. 445; Hollister v. Loud, Id. 309; Flanigan v. Lampman, 12 Id. 58; Angell v. Rosenbury, Id. 241; Allen v. Kinyon, 41 Id. 281; Buck v. Sherman, 2 Doug. (Mich.) 176. And in a case like the one at bar, where the affidavit charges an intent to dispose of property in the future to defraud creditors, any action of the defendant, after the making of such affidavit, and before hearing upon proceedings taken to dissolve the attachment, so disposing of his property as to hinder and delay, and thus defraud, creditors, is admissible in evidence upon such hearing; and, if it be established that such action was taken with intent to hinder and delay creditors, the attachment will not be dissolved.
This, in my opinion, is the status of this case: Frank I. Kellogg, one of the firm, stated to Eowe, who communicated such statement to the defendant before the making of the affidavit for attachment, that the firm intended, to make an assignment by which they would be enabled to carry on their business as before. Three days after such statement the assignment was made, and the business of Kellogg, Sawyer & Co. was conducted, after such assignment, substantially as before, from November 9, 1883, until the decree of this Court, April 15, 1886, put a stop to further proceeding in that direction. The creditors were delayed and hindered in the collection of their debts by this action for nearly three-*540years; and such creditors were compelled to appeal to this Court to get even a dividend out of the estate of the assignors.
What Mrs. Rowe feared would be done, what Kellogg threatened to do, was done; and we have once declared it a fraud upon the creditors. This being so, in my opinion, the decree of the court below is wrong, and ought to be reversed, and the bill of complaint in this cause dismissed.