Iosco County Savings Bank v. Barnes

58 N.W. 606, 100 Mich. 1, 1894 Mich. LEXIS 751

• Court: Michigan Supreme Court
• Decided: April 10, 1894
• Status: Published

Opinion

Long, j.

Plaintiff commenced suit in the Ingham circuit court against the defendant by attachment on September 6, 1893. The affidavit upon which the writ issued averred that the defendant had assigned and disposed of his property with intent to defraud his creditors, and also that he was about to assign and dispose of his property with intent to defraud his creditors. A levy was made under the writ upon a large number of parcels of real estate in Ingham county, and the writ was personally served upon the defendant. September 23, 1893, the defendant presented a petition to the circuit judge of that county for a dissolution of the writ, and upon the hearing the writ was dissolved. The case comes to this Court by certiorari.

On the hearing before the circuit judge it appears that the plaintiff moved to quash the proceedings for the dissolution so far as related to certain lots in the city of Lansing, because it was shown by the petition for the dissolution that the defendant had no interest in those lots as owner, except a claimed homestead right.

The errors assigned in the affidavit for the writ of certiorari are that the circuit judge erred—

1. In denying the motion to quash the proceedings so far as related to such lots.

2. In sustaining the objection of counsel for defendant-to the question, “ I ask you where it is,” when petitioner's-counsel was asking as to the whereabouts of the remainder of certain money owned by the defendant, and about which he was testifying.

3. In excluding the question, “I ask for an answer,” and in instructing the witness, “ You need not answer it just at present.” This inquiry related to the whereabouts of $6,000 owned and. controlled by the defendant.

4. In concluding that the defendant had not assigned and disposed of his property with intent to defraud his creditors.

The return of the circuit judge to the writ of certiorari shows that the claim made on the first point was that the homestead could consist of no more than a single lot in the city, and that, the defendant did not specify which of the lots, being five in number, constituted the homestead; and that he overruled this objection. The return further shows that on the hearing for the dissolution of the writ of attachment before the circuit judge the plaintiff called Mr. Barnes as a witness, and that he testified, in substance, that he had made an arrangement to borrow oí Jeptha H. Wade, oí New York, the sum of $100,000, for use in the adjustment of certain debts upon which the witness was liable, as indorser or otherwise, for the Lansing Iron & Engine Works-and others; that for the purpose of securing the payment of this $100,000 in five years from the date of making the loan he had executed a mortgage to Wade for that amount June 30, 1893, covering a large portion of his real estate. The witness further testified that he had not received all of the money secured by this mortgage, but had received $50,000 of it, and that of that amount he had paid out $43,000 or $44,000 to creditors, and had $6,000 or $7,000 of it left. He was then asked by plain tiffs counsel:

“What have you done with the remainder of the money?

“A. I do not cafe to state where it is, unless that is important.

“Q. I ask you where it is.

“Defendant’s Counsel: I object to it.

“A. The money is in my control, that remains.

“Q. Will you pay our debt with it?

“A. I am ready to pay it out on the debts whenever the proposition is accepted.

“ Q. What proposition? -

“A, I obtained this money to fulfill my engagement with these creditors if they accepted that 20 per cent.

“ Q. Have they accepted it?

“A. A part of them have, and have been adjusted with the' rest of the debts.

“ Q. Then you are willing to pay us if we will take 20 per cent. ?

“A. I am willing you should be paid fully, but the proposition was that I would pay out of my own means 20 per cent, if they would take the principal debtors’ property for the other 80.

“ Q- Then you will not pay us unless we will take 20 per cent.?

“A. I cannot say that. I would pay, sir, all of these debts, if I had the money to pay it. I made the best proposition that I was able to do that time. * * *

“ Q. Will you pay the Iosco County Savings Bank this debt of $5,000 or more that you owe them?

“A. Weil, if you speak of my disposition to do so, I will say that if it was right for me to do it I would; but I do not think I should pay, to be frank, that Iosco County Savings Bank, and let everybody else lose. I would be glad to divide every dollar I had among these creditors, and have them satisfied.”

The witness further testified that he was an indorser for upwards of $315,000 for the Lansing Iron & Engine Works, $300,000 for the Lansing Lumber Company, and that he had become an indorser for O. E. Barnes, upon which there still remained unpaid upwards of $140,000, for which he was liable; that, if' he paid all the O. F. Barnes debts in full, and paid 20 per cent, upon the other indebtedness, it would exhaust every dollar of his property. He was then asked:

“How much are you offering the creditors of O. E. Barnes?

“A. I have not made any offer to them. I have been to tRose having the largest obligations, and offered them' all the security I could. I have not been able to pay them any money.

“ Q. You have offered them some security?

“A. Such as I had.

“ Q. At what rate?

“A. At full. If I do not pay those debts in full, I shall not realize my desire in coming in and making myself liable. I have not asked anybody to discount a debt a dollar. I have asked them to take full pay.

“ Q. In what way?

“A. The iron works, as I said to you; take the iron works property for whát it is worth, and let me pay the balance; and then I believe I can, if all the creditors will have patience with me, pay off the O. F. Barnes debt.”

The witness was later, on asked:

“1 think you said this $6,000 was under your control?

“A. Yes, sir.

“ Q. It is not where the creditors can reach it?

“A. I don’t say that. I have not taken any pains to place it where they would reach it. I am not keeping it from creditors; I am keeping it for creditors.

“ Q. Keeping it for those that accept the 20 per cent, offer?

“A. Well, I want to pay the interest. I have said that I would pay the interest on the debts there up to the time when this bargain was made, — when this mortgage was made, — that is, on some interest on their papers. I expected to have paid that in money, and have said I would pay it in money, and am endeavoring to keep a reserve to meet that payment,

“ Q. Where is this $6,000?

“A. I have said I preferred not to answer it unless it is material.

“ Q. I ask for an answer.

“ The Court: You need not answer it just at present.”

The return further shows that, after hearing all the testimony and the arguments of counsel, the circuit judge determined that the defendant had not assigned and disposed of his property with intent to defraud his creditors, and therefore dissolved the writ.

We have not set out here the testimony in reference to the homestead property, but it appears that this real estate was deeded to the defendant’s wife some two years prior to the time when these proceedings were had; that the deed was made under an arrangement by which the defendant took from his wife certain other real estate, and also at a time when the defendant was not indebted to any considerable extent, as compared with the amount of property held and owned by him, which was upwards of $500,-000. We think the circuit judge was right in holding that*in this transaction there was no evidence of an intent to defraud any one. A consideration was paid for the homestead by the wife; and whether it was entirely adequate or not can have but little weight, under the testimony in the case. At. least, the circuit judge had the right to determine the question of fact, and there was testimony warranting the conclusion which he reached that no fraud was shown in this transfer. The burden of proof was upon the plaintiff in that proceeding to show affirmatively that, whatever disposition was made of his property by "the defendant, it was with intent to defraud creditors; and we cannot say, as matter of law, that the circuit judge was in error in his finding. State Bank v. Whittle, 41 Mich. 365; Schall v. Bly, 43 Id. 401; Genesee County Sav. Bank v. Barge Co., 52 Id. 164.

We think the circuit judge was correct, not only in the finding made in the matter of the homestead interest, but also in finding upon the main question that there was no evidence showing or tending to show that the defendant had disposed of his property with intent to defraud his creditors. The testimony not only fails to show any such intent, but does show the utmost good faith upon the part of Mr. Barnes to pay his creditors. He was an indorser to a large amount upon the paper of the Lansing Iron & Engine Works, the Lansing Lumber Company, and of O. F. Barnes. He attempted to aid all these parties in the payment of their debts. His proposition was that the creditors of the Iron & Engine Works should receive from him 20 per cent, of that indebtedness if they would look to the principal debtor for the other-80 per cent. This was attempted, and to meet the 20 per cent, these mortgages were made. He had, in the mean time, paid up over $300,000 of the O. F. Barnes paper. There is no proof of any concealment of property, no artifice or bad faith. The disposition which he sought to' make of his property was to pay as fast and as far as lie could. If the arrangement could be carried out to pay 80 per cent, from the property of the Iron & Engine Works, he believed he could pay the debts of his son, O. F. Barnes, in full. This was the inducement which led him to make the attempt, and the record is clear that he has disposed of none of his property except in payment of the debts of these concerns. The 16,000 or $7,000 which had been received from the mortgage was kept for the purpose of carrying out tha,t arrangement. He had made no disposition of it. He kept it, and had it under his control, to meet the interest in that matter. This is conclusively shown by his testimony.

It is said, however, that the arrangement made with the creditors of the Iron & Engine Works was fraudulent, in that it was a proposition to them to take 20 per cent, and release him, or he would not pay anything. This is not the testimony of Mr. Barnes, and the circuit judge held that it did not bear that construction; and in that the circuit judge was correct. The whole situation must be looked at and the arrangement viewed in the light of the surrounding circumstances. It appears to us that the circuit judge was right in saying that the testimony' warranted the construction that it was an honest effort to pay all he could out of his property, and not an effort to defraud anybody.

It is claimed, however, that the giving of the mortgage for $100,000, and receiving only $50,000 thereon, is an evidence of fraud. We do not think so. The money received on the mortgage, or the most of it, was at once turned over to creditors; and the reason of giving it for $100,000 is fully explained.

It is said, also, that the refusal to disclose where the $6,000 was deposited or kept was evidence of fraud. When it is remembered for what purpose it was kept on hand, there can be no question that such safe-keeping was in the interest of creditors, and not against their rights. It was to aid in carrying out the arrangement made, and to pay the interest on the amount necessary to do so. The keeping it away from one set of creditors to the advantage •of another would be no evidence of fraud. He had the right to prefer one creditor over another, and to pay off •one class first in preference to another. If the circuit judge had permitted the answer to the question, and the defendant had answered that he had the securities for this $6,000 concealed at his house, or the amount in cash in his pocket, it would not warrant any inference of fraud, under the circumstances here stated. Gore v. Ray, 73 Mich. 385.

No witness was called by the plaintiff except the defendant. It is upon his testimony alone that plaintiff relies to sustain its suit; and, as we have already said, there is not a particle of evidence showing or tending to show any fraud or concealment. All his actions have been in the interest of creditors, or some of them. We have no power to reverse the findings of the circuit judge upon the questions of fact if there is evidence to sustain them. We think they are sustained by the evidence, and that the circuit .judge was not in error in ruling out the question as to where the $6,000 was kept by defendant.

Judgment affirmed.

The other Justices concurred.