State ex rel. Fourth National Bank v. Johnson

83 N.W. 320, 105 Wis. 164, 1899 Wisc. LEXIS 360

• Court: Wisconsin Supreme Court
• Decided: December 18, 1899
• Status: Published

Opinion

The following opinion was filed June 21, 1900, and contains tbe points as announced in tbe memorandum decision filed December 18, 1899:

Marshall, J.

Tbe issues, raised as above indicated, present for consideration several important primary questions and it bas been deemed best to preserve of record tbe grounds for tbe conclusion reached as to each of them. We will accomplish that object by stating here each of such conclusions and briefly tbe supporting reasons. No question of judicial power to deal with the subject of this case is open for consideration. Everything pertaining to the case in that regard was fully considered in State ex rel. Fourth Nat. Bank v. Johnson, 103 Wis. 591. The conclusions there reached are controlling. It is a matter of some regret that the constitutional power of this court, by the exercise of its original jurisdiction to superintend and control inferior courts, has been necessarily invoked a second time in this matter, to vindicate the rights of creditors to an efficient use of the means wisely designed for the protection of their interests, to the end that an assignment for the benefit of creditors may be in fact what it is in name and theory. If anything were wanting to demonstrate the wisdom of the framers of our state constitution in intrusting to this court the ancient sovereign power to safeguard the personal and property rights of citizens by acting directly upon those courts upon which devolve the duty to treat such matters primarily, where otherwise such rights would be denied by a refusal of such courts to exercise, or keep within, or act judicially within, their jurisdictions,— situations like the one we have now to deal with amply furnish it. The judicial history of the state shows that there have been very few occasions for the exercise of the extraordinary power here invoked, and that suggests that it has always been understood to be what it is in fact, a powefc to be used only when there is no other remedy under our judicial system that will meet the situation and prevent irreparable mischief, and when that mischief springs from something other than mere error of judgment. It is not probable that the court in the future, any more than in the past, will be often called upon to exercise such power. Knowledge that it exists will promote such care in judicial administration as to give little cause for calling it into activity. The necessity for the exercise of the superintending power of the court in this instance was the same as in the case of State ex rel. Fourth Nat. Bank v. Johnson, supra. The decision of the court there, by subsequent administration of the assignment in the court below, was rendered so ineffectual to start and keep such administration in the line contemplated by the statutes and such decision, that it seems clear this second proceeding was necessary. We will now proceed in detail to carry out the plan above indicated for this opinion, of stating the points decided and the supporting reasons and authorities.

1. The acceptance of the resignation of "William Plankin-ton as assignee of the Plankinton Bank, while a petition for his removal as such assignee, purporting to have been signed by a” majority of the creditors of the assignor, representing a majority in value of the debts against the assigned estate, was before the court for consideration, was, in effect, a removal of such assignee because of his declination to further execute the trust, and was proper.

The significance of that conclusion grows out of a suggestion upon the one hand that if creditors have in any ■event the absolute right to dictate who shall be the assignee, it is only upon a vacancy in the position of assignee being created by a removal under the mandatory clause of sec. 1702, Stats. 1898, to the effect that upon a request being made for •such removal by a majority of the creditors, representing a majority in value of the debts against the estate, such request shall be granted, and thereupon the person named by ;such creditors, or some suitable person, shall be appointed as bis successor; while it is suggested ou the other band that the petition for the removal of "William Plankinton was in fact sufficient and so treated by the trial court, and that the acceptance of his resignation was without authority, there being no power conferred by statute in that regard.

Sec. 1698, Stat. 1898, confers generally upon circuit courts, and upon judges thereof, authority to supervise voluntary assignments for the benefit of creditors and to make all necessary orders for the execution thereof. It was plainly the intent of the legislature, by that provision, that the general jurisdiction of courts of equity in the administration of trusts, including the power to supply a trustee when necessary, and to permit one, after acceptance of the trust, to-resign under such circumstances as shall fully protect the persons interested, and to remove an assignee for cause, should apply to the administration of voluntary assignments, for the benefit of creditors. Perry, Trusts, § 280; secs. 2095, 2096, Stats. 1898. Sec. 1702, except in so far as it requires a change of assignees in certain cases on a petition of creditors, was not intended to confer any new power upon the court, but to regulate the procedure in the execution of a power conferred by the general language of ^ec. 1693, placing assignees under the supervision of courts of equity. Sec. 1702 says the circuit judge may, upon notice and after hearing, remove an assignee shown to be incompetent or to have been disqualified, or to have wasted or misapplied any of the trust estate. It will be recognized at once that any one of the grounds mentioned in the statute for removing an assignee would amply justify a removal if there were no statute. Perry, Trusts, § 280.

Notwithstanding a circuit court may permit an assignee-to resign, it does not follow that the power can be exercised without any grounds therefor. There must necessarily be some presentation of facts to the court justifying judicial action, favorably to the resignation. Nothing of that kind appears here. In the face of a petition for the removal of the assignee, stating reasons that ■would not only justify but would require it, he filed his resignation without stating any reason whatever for such action. That was not a resignation calling for judicial action as such, but a refusal to further discharge the duties of the trust, which unquestionably warranted an order removing him, and an acceptance of such resignation under the circumstances was really an order of removal. Keating v. Vaughn, 61 Tex. 518.

It would be a very unjudicial proceeding to permit an as-signee to resign without any reason therefor whatever, in the face of such a petition as was filed in this case, unless the action of the court were considered as intended to be a removal of the assignee; not necessarily a removal within either the letter or the spirit of sec. 1102, but rather within the general power of the court to remove an assignee where the interests of all. concerned in the assigned estate plainly require that course to be pursued. But whether the vacancy was created by the removal of Plankinton or his being permitted to surrender his trust, the necessity for the appointment of a successor, and the interest of the creditors therein, were the same, and Plankinton’s status regarding that question likewise the same.

2. After the removal of the assignee he was not, as such assignee, entitled to be heard in opposition to the petition of the creditors for the appointment of his successor, or in any other way, as such assignee, to contest respecting such appointment. • o

That proposition, it would seem, may be taken without discussion, as self evident. Why the deposed assignee was permitted, as an interested party, to file an answer to the creditors’ petition, and to be heard in opposition thereto on the' subject of his successor, is a question that no one has ventured to answer. The respondent says that the creditors demanded an adjudication of the sufficiency of the petition to satisfy the calls of sec. 1702, Stats. 1898, and that in order to meet their views he compelled them to submit to a contest with Plankinton after his removal. Put why any such proceeding was necessary or proper to such an adjudication is not suggested. Plankinton being out, the sufficiency of the petition for his removal became immaterial. Being out, the question of who should be his successor was a matter in which he had no interest whatever. The question of his removal was the only one, in any event, that Plankinton had any interest in. Upon his removal from the position, .there was nothing left of the creditors’ petition in which he was sufficiently concerned to entitle him to appeal from what the court might conclude to do at the request of creditors as to filling the vacancy. It would have been just as legitimate, under the circumstances, for the court to have designated any other stranger than Plankinton to the proceedings to assume an adversary attitude to the petitioning creditors and to antagonize their efforts to have a person satisfactory to them appointed to administer the trust. The whole proceeding of compelling the creditors. to contest with Plankinton as to who should be his successor, appears to have been extrajudicial. If the court had entered an order on the creditors’ petition, appointing the man of their choice as assignee immediately after Piankinton’s removal, and he had appealed from such action, the appeal would necessarily have been dismissed, if for no other cause, for want of interest of the appellant in the subject.

3. The true intent and meaning of sec. 1702, Stats. 1898, is that, in case of a vacancy in the office of assignee in any assignment for the benefit of creditors, the court shall appoint to the vacancy the person nominated by a majority in number of the creditors of the assignor, representing a majority in value of the debts against the assigned estate, if such a nomination be made, unless it appears that the nominee is not a suitable person for the trust.

The intent of the statute to permit the creditors to select an assignee to fill a vacancy in the position, subject to their naming a suitable person for the trust, is sufficiently indicated by the fact that the circuit court is required, by mandatory language, to remove an assignee when requested so to do by a specified proportion of the creditors, representing a specified proportion of the indebtedness of the assignor, and to substitute the nominee of such creditors regardless of any reason for the change except the mere wish of such creditors. That is consistent only with the idea that the creditors of an assigned estate are to be considered the real owners thereof in the proceedings to administer it, and that their wishes, so far as consistent with the due execution of the trust, in the handling of that which is equitably their own property, must be recognized and given effect by the court. While the assignee, in the first instance, must, from the necessities of the case, be appointed by the assignor, as soon as the equitable title to his property has passed to his creditors, they are entitled, by statute, to control it for the purpose of the trust, through such agent as they may • select, subject only to their being able to agree upon a suitable person, and subject to such supervision by the court as may be necessary to secure an honest administration of the trust and the closing up thereof as the law provides.

The words of the statute “ or some suitable person,” following words requiring the court to appoint the nominee of the creditors as assignee in case of a change, obviously mean that if the nominee of the creditors is unsuitable the court may appoint a person who is suitable. The idea that the legislative intent was to permit the court to appoint a suitable person as assignee regardless of the wishes of the creditors in regard to some other suitable person, seems contrary to the reason and spirit, if not the very letter, of tbe statute. It will be noted that the necessity for creditors, representing a certain proportion of the indebtedness of the assignor, to join in a petition in order to satisfy the calls of sec. 1702 has regard only to the absolute right of creditors to have an objectionable assignor discharged or removed. The removal having taken place and a vacancy in the position created, the statute says, in effect, that'the court shall appoint the person designated by the creditors if he be a suitable person for the trust. The legislative idea plainly was that, a vacancy being created in the office of assignee, regardless of the occasion of it, the wishes of the creditors are to be regarded in filling the place, upon the theory that they are really the only persons concerned in the matter.

4. The right of creditors to control the appointment of the assignee in the circumstances mentioned is statutory, and a refusal of it by the presiding judge, unlawful.

Nothing need be said in regard to that proposition in addition to what was said to proposition 3.

5. The mere fact that a person nominated for assignee by creditors is himself interested in the estate as a creditor, or the trial judge has some undisclosed motive for not appointing him, or deems some other person better suited for the trust, does not justify refusing to appoint such nominee.

The right of the creditors to name the assignee, subject to their presenting a suitable person for the trust, carries with it, necessarily, the right to know why their nominee is deemed unsuitable, and the right to ample opportunity to present another name or names, and precludes their right of selection being properly treated as lost till they shall have failed to agree upon a suitable person after all reasonable efforts to that end have been exercised. A suitable person, within the meaning of the statute, obviously does not mean the most suitable. The court has no authority to reject the nominee of creditors merely because a better per■son, in the judgment of the presiding judge, can be obtained.

The only ground of unsuitableness of the nominee of the creditors here suggested by the return of the respondent is that he was a creditor of the estate. We have no statute prohibiting a creditor of an insolvent person from being his assignee, while the policy of the law plainly prefers creditors as trustees of property where it is to be administered in whole or in part for their benefit.- Such is true in the administration of estates. Courts elsewhere have treated such legislative policy as clearly indicating that the circumstance of a person being the creditor of an insolvent is to be regarded rather as entitling him to a preference as assignee than as a disqualification. Frink v. Buss, 45 N. H. 325. In no instance that we can find was the mere circumstance that a person was a creditor, in the absence of some statutory regulation on the,subject, regarded as affecting unfavorably his qualification for .the position of assignee of his debtor for the benefit of the latter’s creditors, while the contrary has been many times held. Burrill, Assignment, § 57, and cases cited.

So it follows that no justification appears for ignoring the wishes of the creditors, as was done by the court in this case. Ho suggestion was made, when the creditors’ nominee was rejected, that he was unsuitable for the trust, and no suggestion in that regard, within the meaning of the statute, is made in the return of the respondent. The word “ unsuitable ” as used in sec. 1702 plainly has regard to interest and business qualifications for the office of trustee, and such relations to the estate and its creditors as will be consistent with the proper and safe administration of the trust. Those requisites being reasonably satisfied, there is no room, under the statute, for the court to act other than one way, and that to sanction the wish of the creditors. Any other course is a mere arbitrary, unjudicial act, in direct violation of statutory rights.

What has been said we embody in propositions 6, Y, and 8, decided as follows:

6. The wishes of the creditors in the circumstances above meiitioned are controlling, in the absence of any showing that their nominee is unsuited for the place, and it is beyond the discretionary power of the court to do otherwise than to make the appointment accordingly.

Y. The appointment of Irving M. Bean as assignee, without investigating the sufficiency of the creditors’ petition for the appointment of Henry W. Herman, apd in the absence of any showing that the latter was unsuitable for the trust, was in excess of judicial power, and contrary to the plain policy of the statute.

8. Irrespective of whether the petition contained a clear majority in number of the creditors of the assignor, representing a majority in value of the debts against the assigned estate, since it was unquestionably largely representative of the wishes of creditors, and there was no opposition thereto by creditors, and no showing of unsuitableness of the petitioners’ nominee, there was no room, for a proper exercise of judicial discretion, in view of the legislative policy to allow creditors to control the selection of an assignee in case of a vacancy in the position, subject to the opinion of the trial judge as to the nominee being a suitable person for the trust.

It follows that the proceedings of the trial court were ruled by a misconception of the statutory rights of the petitioning creditors. The court assumed and exercised power that it did not possess, and refused to exercise power which it was clearly called upon to exercise by statute. . The result, was that the whole scheme of the statute, to allow creditors' of an insolvent, who has made a voluntary assignment for the benefit of creditors, to control the office of assignee, was-, nullified. That situation, manifestly, should be changed at the earliest practicable moment, in order that the wrong done to the creditors may be minimized so far as possible. It was. a wrong that cannot be redressed in any other way than in this summary method of appeal to the constitutional superintending power of this court.

The order appointing Bean need not necessarily be treated as a nullity. It should be formally vacated and the nominee of the creditors be immediately appointed in order that there may be no interval when there will not be a person to regularly represent the assigned estate. Without that course, it might be necessary to appoint a receiver pending the selection of an assignee.

The petition of the creditors for the appointment of Mr. Herman,prima,facie, represents a majority of all of the creditors, and of all of the indebtedness of the estate; but whether it is in fact so strongly representative of the wishes of creditors'as indicated upon its face or not, is not deemed inate-rial. There is no opposition by any creditor to Herman’s-appointment. Under such circumstances the court has no-right to refuse to appoint him and ignore the wishes of the creditors, merely because the petition is not sufficient strictly to require the creation of a vacancy if Plankinton had not resigned the trust. So large a representation of creditors as-the petition unquestionably contains, there being a vacancy to be filled, should have been considered, and should be now considered, as voicing the entire interest in the estate desiring to be heard on the selection of an assignee.

In view of whát has been said, it is held, as a final conclusion and last proposition decided:

9. The violation of the statutory right of creditors by the appointment of Irving M. Bean as assignee should be remedied by a speedy vacation of the order of appointment; and since it is for the best interests of the creditors that the office of assignee should not be vacant, and there is no express wish by creditors for the appointment of any person other tham Henry W. Herman to the trust, and no valid reason disclosed Avhy he is not suitable therefor or should not be appointed,, a wise judicial administration requires, not only that the appointment of an assignee should be made in place of Irving M. Bean at the time of the making of the order vacating the appointment of the latter, but that Henry ~W. Herman should be such appointee, and that the proceedings in that regard should be had speedily, and without delay, to determine whether the petition under investigation before the court commissioner contains a clear majority in number of the creditors of the assignor, representing a majority in value of the debts against the assigned estate. If the affirmative of the proposition were established, and no showing were made of unsuitableness of Herman, the right of the creditors to his .appointment would be beyond the discretion of the circuit judge to deny. If the negative were established, since the petitioners are largely representative of the creditors, it would be an abuse of discretion not to appoint Herman; he being suitable for the trust, and his appointment not being opposed by creditors.

The foregoing covers all that need be said in deciding this ease. A peremptory writ of mandamus should issue in accordance with the points decided in this opinion.

JBy the Court. — So ordered.