Court Opinion

ID: 6999912
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:40:13.449261+00
Date Added: 2024-06-11T16:09:53.657853
License: Public Domain

Mr. Justice Higbee delivered the opinion of the court. The question presented by this record is, did "the action of the appellant George G. Mowry, in conveying his property to the George G. Mowry Implement Company, constitute fraud, either in fact or constructively ? The decree of the court below found in effect that the sale and delivery of the property in question was constructively fraudulent. Appellant assigns the entering of this decree as error, while appellee assigns as a cross-error the fact that the court did not hold that the facts stated in the answer constituted a fraud in fact. If there was actual fraud in the sale and transfer of the property to the implement company the same should be wholly set aside. Even though a grantee or assignee pays valuable, adequate and full consideration, yet, if the grantor or assignor sells for the purpose of defeating the claims of his creditors, and such grantee or assignee knowingly assists in effectuating such fraudulent intent, or even has notice thereof, he will be regarded as a participator in the fraud. “A deed fraudulent in fact is absolutely void as against creditors and is not permitted to stand for any purpose of reimbursement or indemnity.” Beidler v. Crane, 135 Ill. 92. If it appeared from the facts in this case that the appellant George G. Mowry organized said implement company and conveyed his property thereto for the purpose of defeating the claims of his creditors—that in pursuance of the same design the stockholders of said implement company assigned the same to said appellant Ainsworth, and that said Ainsworth assisted said appellant Mowry in such transactions, knowing that the object of said Mowry was, and the effect would be, to defeat the claims of his creditors—then, and in that case, the whole transaction would be fraudulent in fact, and neither said Mowry nor said Ainsworth would be permitted to profit thereby. The facts in this case, however, do not show such condition of affairs. On the contrary, it appears that the appellant George G. Mowry, being in failing circumstances, called his creditors together and proposed to turn all his property over to them. The creditors agreed that the property would not bring more than thirty-five cents upon the dollar of his indebtedness, and thereupon the appellant Ainsworth undertook to indorse Mowry’s notes to that extent and the offer was accepted by those present so far as they had the authority to do so. The representatives of appellee who were present considered it the best thing to be done for all parties concerned, and recommended its acceptance by appellee. We think that under the circumstances, as shown by the answer, appellant Mowry did all that any honest man could do to protect his-creditors. The question then arose as to how appellant Ainsworth could be reimbursed for the money advanced by him to pay the creditors. It was agreed that the best plan was to form the corporation for the purpose of continuing the business and assign the stock to Ainsworth as security. There is no doubt but that Mowry could have either mortgaged or actually sold the property to secure the funds necessary to pay his indebtedness at thirty-five cents on the dollar. There was no concealment as to the purpose of the parties in forming the corporation, and there is no evidence of actual fraud in the conveyance of the property to the implement company or the assignment of stock in the same to Ainsworth. ¡Nor do we think there was any constructive fraud shown by the answer. Appellee cites us to the case of Bennett v. Minott, 28 Ore. 339, as being in point and decisive of this case. In that case a hardware merchant in failing circumstances, and being pressed by his creditors, caused the formation of a corporation, subscribing for most of the stock himself, his wife, his attorney, and a friend taking the rest. He thereupon assigned his stock of hardware to the corporation, of which he was president, general manager and treasurer, and soon afterward transferred all his shares of stock except a very few, to his wife, in payment of a debt he claimed to owe her. A creditor’s bill having been filed, the conveyance was set aside. It was held that, under the circumstances, it was not important whether the creditor was or was not indebted to his wife in good faith at the time he transferred the stock in the hardware company to her, because the court regarded the transaction by which the hardware company claimed to become the owner of the stock of merchandise as having been consummated for the purpose of hindering, delaying and defrauding creditors in the collection of their claims, and that therefore the conveyance must be declared void as to them. As the statement of facts contained in the answer in this case shows no such condition of affairs, but on the contrary' shows an honest endeavor on the part of Mowry to assist his creditors in the collection of their indebtedness, and to devote his property to that purpose, the case above referred to does not apply. We are of opionion that the facts stated do not constitute fraud, either actual or constructive, and the decree of the court below will therefore be reversed.