WAPLES-PLATTER CO. tI. LOW.
and was thereby damaged. This is the statement of a good caue of action, and the demulTer should have been overruled. The answer filed to the original complaint is not before this court, and the suggestions made by counsel for defendant in elTOr, based upon it, cannot be considered. The amended complaint, subsequently flled, to which no answer has been interposed, and the demurrer to frame the only issue that can be considered on this writ of error. The demurrer is upon the sole ground that the complaint does not state facts sufficient to constitute a cause of action. This general demurrer does not raise the question of the effect of the statute of limitations upon this action under the Code and practice in Colorado, and that Question has not been considered. Rev. St. U. S. § 914; Hexter v. Clifford, 5 Colo. 168, 172; Chivington v. Springs Co., 9 Colo. 597, 603, 14 Pac. Rep. 212; Hunt v. Hayt, 10 Colo. 278, 281, 15 Pac. Rep. 410 ; Jenning's v. Rickard, 10 Colo. 395, 401, 15 Pac. Rep. 677; Cross v. Moffat, 11 Colo 210, 212, 17 Pac. Rep. 771. The judgment below is reversed, with costs, and with directions to allow the defendant to answer.
WAJ;>I$8-PLATTER CO. v. LOW, (HA.NOOCK, Intervener.) (CI.rcu1t Court of Appeals, Eighth Ciroult. January 27, 1893.)
No. 139. 1.
FOB :BENEFIT OF ,CREDITORS-FBAUD ATTACHMENT·
RIGHTS OF CBEDlTOBS-
.PWntii! sued a merchant in the Indian Territory for a debt, (in which suit he; IJIibsequently had judgment,) and on the same day sued out an order of 'attachment, and placed it in the hands of the deputy marshal. Whereby" under of Arkansas in force in the Indian Territory, (Mansf. Dig. § 325,) it became a lien on all defendant's property which had not then been assigned. On the same day the defendant made a gener8l assig'nmen1l, preferring certain creditors, and joined Issue with the plaintltt on the allegations of the affidavit for attachment,-a mode of procedure allowed by the statutes of Arkansas. The assignee filed an interpleader, claiming the property under the assignment, and the two Issues were tried together before a single jury. Held, that proof that defendant at the commencement of the action was about to sell or dispose of the property with the fraudulent intent to cheat, hinder, or delay his creditors wassufficlent to justify a verdict against him. But to justify a verdict against the assignee plaintur must also prove either that the order of was delivered to the deputy marshal before the delivery and acceptance of the assignment, or that the assignee had knowledge of and took part in. the defendant's fraud.
In wch a ease the better practice Is to ftrst and separately try tothecourt the Issue between plaintur and the assignor, arising under the attachment afiidavit, and thereafter try the issue between plaintiff and the assignee. Sanger v. Flow, 48 Fed. Rep. 152, 1 C. C. A. 56, followed.
An instruction that the jury, before rendering a verdict for plaintiff, mMt find that the assignee was aware of or participated in defendant'.
fraud, was erroneous, in that such proof was not necessary to a verdict for plalntitt against the assignor only, nor even against the assignee, if the order of attachment was delivered to the marshal before the delivery and acceptance' of the assignment; fQr in that event ttle assignee took the property subject to the lien of the attachment.
PJIlDERAL REPORTER, vol. 54.
SAME-EvIDENCE OF FRAUD.
subsequently "tbe' iippllClation't1t lire SurpluS '$l,OQO to the, paylilentof , 'xatrotherdebt,tibll'(preferredol8 .CoDo'lullh'e evldencei the 8S!l1gnor tbejassign,ment. FarweU·v.. Maxwell, 34: , Go S,.A"II'r.t\SI¥GN¥Jl:N,T,AND . was on to delivery and accep'tlUice of 'the' -assignment befOre the order of attacht'nent came to the hands of the marshal; and, it a.ppearIng that the assignment was not :ll¢kMlVIlK1ged·oritUed until atter that time; that.the.ass1gQee was not in . the 1;()WU where it WlUld,rawn anlJ,,:E\igned on the dayol,its and Qnly (which seems tp have been befQl'e 1J1e assignment was'lldkn0wledged, and before the'order of was delivered) wa$ tn 'lIi1ltttomey:at law, whose power to bind the aSSfgnee 1?y bis receipt rm!l of it lsnot established,-such evldence' is not SIloh conclusive prQo!, fJt ot the assignment as to render 'lIhEi erroneous instruotions,tmmawr!al' . '" . , .
Wliere; Under Dig. 1809, W1l1ch 'provldes tlJ,at a plalnWf may haveiili attachment when the defendant has sold, coilv'Elyed, dr otherwise ,qt biB property with the fraudulent intent'to cheat, binder, or delay biB creditors, or is about to sell, convey, or"otherw1se dispose of it with such intent, the plaintitr alleges only that the defendant is about to sell or convey bis property with such intent, an instruction that the plainti,t't that the had, at t¥date pfissulng the attachment, ·sbld or disposed ot h'1S propert.v with S'ilCh fraudulent intent is err:oneoUSi tor· proof that he was· about to dolO with suoo intent is su1Ilc1ent.
In Error to the United States COurt in the Indian" Territory· .ActioD by the.Waples-PlatterGompany against Charles fl.. Low to a sum of money. The action was by an attachment, and one J. S. Hancock intervened, claiming the property asaEisignee of Low for the benefit of creditorl9.· J$$lie was joined of the validity of the attachment, and its priority to .thea,ssignment, and the verdict and, judgment were agamst the plaintiff and in favor of both the defendant and the assignee. Plaintiff brings error. Reversed. Statement by SANBORN, Circuit Judge.
This'is awrtt of error to reverse a judgment aga1n8t theplaintitr in error in favor of thedetendant, Low, upon the issue tendered' by an afildavltfor attaclunent made by the pIalntitr, and in favor of the interpleader, Hancock, upon the issue tendered by his interplea in the attachment BUit. The defendant, Low, was a merchant in the Indian Territory, and the plalnti1'f was his creditor. On January 12, 1891, the plaintltr brought suitto recover his claim, and subsequently had judgment against the defendant for.rits· amount. On the same day that he brought this sult he sued out an order of attachment, and placed it in the hands of the deputy: marshal at 12:20 P.' M.; so that it then became a lien for the amount of plaintiff's claim on all the property of the defendant, Low, here in question .that had not at that time been assigned to the lntervener. Manst. Dig. 1 825; 26 St. at Large, p. 96. ,Oil the same day the defendant, Low, made a general assignment to the interpleader, wbich prefl;!rred certain ·()f his-credltors, Whether theassigmnent was delivered to and a.ooepted .by the interpleaderbeiore or after the order of attachment was del1:vered to· the marshal was one :of the disputed questions submitted to the jury. The. in force in the Indian Territory, perroit the defendant to contest the rightfulness of the attachment by controvertIng. lMIon oath the aJlegations of the aiIldavlt therefor, and' allow' any third
WAPLES-PLATTER CO. II. LOW.
pel'l!lOll clalm1ng the property nttached to file an interplea in the attachment proceeding Betting torth his clahn to the property, and to bave it there deter..ll1ned. The defendant a.ccordingly joined issue with the plaJntift on the 81· ot the a1l1da,vlt tor attoohtnent, and the interpleader, Hancock, filed his interplea., claiming the property under the asslgpment, and the two lssu.eB thus tonned were triOO, together before a single jury, who returned a verdict against the plaintitr on 'both. The elTors assigned relate c1lielly to the charge of the court to the jury, and are stated and considered in the opinion.
I'EDERAL' REPORTER \
.'" . ,
9f the .as follows!
the jury, and
11 the jury believe tromthe :evidence that the plaintifl!'sattachment waaileJried.npon the property assigned before the execution anddel1nry of th:e:deed ofasslgnment to either the assignee or his agent, and before the aceeptance'<thereof by theasslgnee or his agent, and if you shall alSO believe from the evidence that the defendant, Low, had at the date of the issuing of such attachment sold, conveyed, or otherwise disposed of his property, or was about to sell, convey. or otherwise .Qj.spose of. his property, with the intent to cheat, hinder, and delay his credltors,then you wlll find for the plaintiff." . "Fifth. The court tnstruc1B the jury that before you can the issues for the pla.iD:tiff as to the property· attached; which is claimed by the interpleader, Hancock, the plaintiff must have established by the greater weight of the testimony not only that the defendant, O. H. I,ow, made the deed of assign· illellt \Vith the fraudulent intent to c1;J.eat, hinder, and delay his creditors, but that the assignee; J. S. Hancock, knew of said fraud, or that he participated therein"; "Sixtb;. The court lnstruc1B the jury that, although they may believe from the evideJlce that O. H. Low was indebted to Colbert La Flore in the sum of ftvehll.D:dred dollars only, and that he intentionally preferrlm. said Colbert La Flore tor the sum of one thousand dollal'S in excess thereof, with the fraudu. lent intent to appropriate the same to bis own use, yet, unless the jury shall alsobellevefrom the evidence that the assignee or the preferred creditors knew of Low's fraudulent intention, or participated therein, then you should find for the interpleader, Hancock."
The third instruction ·we will not stop to criticise, but the fifth and sixth cleaJ'ly contradict it, and are obviously erroneous. They are too'broad. It is true that, if the jury found that the order of attachment was not delivered to the marshal until after the assigmnent was delivered to and accepted by the interpleader, they must, in that event, have found that the interpleader knew of or participated in the defendant's fraudulent scheme before they could find for the plaintiff upon the issue between him and the interpleader. Emerson v. Senter, 118 U. S. 3, 6 Sup. Ct. Rep. 981; Baer v:'Rooks, 50 Fed. Rep. 898. But no such finding was required to warrautthem inreturning a verdict for the plaintiff against the defendant. The only issue there was whether or not the defend· ant was at the commencement of the aetion about to sell, convey, or otherwise dispose of his property with the fraudulent intent to cheat,hinder, or delay his creditors. The fact that the defendant in his assignment preferred Colbert La Flore for $1,500. when he knew he owed· him but $500, with the intent to subsequently direct the application of the surplus $1,000 to the paJmlent of another debt, not preferred by the aSSignment, was conclusive evidence against Low of the fraudulent character of this assignment. It may be admitted that, where an assignor by mistake or through ignorance or uncertainty as to his liability erroneously but in good faith stats the amount of his liability to some creditor too high., the assignment may yet be sustained, (Farwell v. Maxwell, 34 Fed. Rep. 727 j)though it will be noticed that the aeisignment in the ease just cited was not one giving preferences, and stands upon very different ground froID. a preferential assignment like that in the case at bar, where the assignee is required by statute to give a bond c.onditioned that he will "sell the property to the best ad·
vantage, and pay the proceeds thereof to the creditors mentioned in said assignment according to the terms thereof." Mansf. Dig. § 305; v. Frayser, 24 Fed. Rep. 460, 464. In this case, however, the defendant admitted on the trial that he knew he owed Colbert La Flore but $500 when he preferred him in his assignment for $1,500, and his only excuse was that he secretly intended thereby to secure the payment not only of the $500 he owed C<llbert La Flore, but also of $1,000 that he owed to one William La Flore, who was in no way connected in business with Colbert. If upon such a state of facts such a preference is a lawful exercise of the power of the assignor, no reason is perceived why a preferential assignment securing a single creditor to whom the defendant owes but a dollar for an amount equal to the entire value of his assets might not be sustained upon the testimony of the assignor, subsequently given, declaring to what creditors, and to what amounts, he intended to apply the proceeds of his property. The effect of this state' of facts upon the assignee will not now be considered, because this case must be retried, and a different state of facts may then be presented. It is sufficient to say that the &l5Signment is not void on its face, since its vice does not there 84ppear, and hence the assignee may have received and accepted it in good faith without notice of the intended fraud of the assignor; the assignor is concerned, when he knowingly prefers but, so far a creditor in his assignment for an amount far in excess of the debt he actually owes him, for the express purpose of creating a secret trust in the surplus above his debt, to the end that he may subsequently dispose of it according to his own secret intention, which he may change at any moment, he thereby presents conclusive evidence of his fraudulent intent in making the assignment upon every principle applicable to such instruments. Nothing is better settled than that the assignment in this class of cases, where preferences are permitted, as at common law and by the statutes of Arkansas, must definitely fix the rights of the parties beneficially interested, and that nothing be left to the discretion or further control of the assignor. Thus in Haydock v. Coope, 53 N. Y. 68, where a debtor made a preferential assignment, and his son at the same time borrowed of a class of the preferred creditors a large portion of the amount secured to them on a credit of five years, the court treated the son's control of the proceeds of the property as that of the father, and held the assignment void, because it practically left so large a portion of the proceeds under the debtor's control, and declared that.
his creditors so as to secure to h1Imleif the future control of the property as-
"To hold that a debtor may exercise his right of giving preferences among
signed, or its proceeds, would give facilities for the grossest frauds, and. utterly defeat the ends for which assignments have been sustained, which are the application of the property to the payment of their debts."
In Averill v. Loucks, 6 Barb. 470, where a. preferential assignment provided that the debts should be paid in the order provided in schedules to be filed within 60 days after i1$ date, Judge Paige declared it void, because it did not fix definitely the rights of the v.54F.no.1-7
ties, but, reserved'ito, the'Mldgrior the control over the proceeds of his property, To ilie ,same, effect 'are, Pierson v,, Manning, 2 Mich. 450; Grover v. Wakeman, U Aird, 6 WalL 78: :Ma.cld,e, v. Cairns, 500",. 54:7, 580:' hoff, 5 JQlu18.!'Oh. 329, 333; Barney v. Griffin, 2 N. Y. 365, 371; G8$zam v. Pdyntz, 4 Ala. 374, 380; Wiswall v. Ticlq),or, 6 Ala. 179, 18ft To give "jUdicial ,,sanctio,:n· 'to an 'assignment ,making such' 8. in question 'wo'o1d enable' assignors to force com· proinlses with their unpreferred cfeditors by presentin.g exaggerated statements of' their preferred liabilities, would pernnt the creation and execution. of secret trust$, 'and would enable the assignors to will the proceeds ofthetr JYi'bi>erty after assignments had been made: and these,are the · i'ery vices in' assignments agaiIiSt whieh:eourts haveeonstantlygu!U:'ded,and must continue to guard, the public. It is plain" therefore, that, so far as the, issue between plaintift" and defendant' was conool'l1ed, there was error' in the fifth ins1;rl:1c:tion, which charged the· jrtry that, before t4ey could render a the plaintiff, they find that the interpleader was aware of or participated in the defendant's fraud. No such finding was required to warrant a verdict upon that issue. , Not only this, but UQ suchftilding was requisite to warrant a verdict even against the interpleader in the event that the jury found that the order of attachment was delivered to the marshal before the assignment was delivered and accepted, and that question WM submitted to them, to determine. In that event the attachment became a 1lrst' lien upon the property, and any assignee taking the ,property of the debtol," under a subsequent assignment took notnore than the debtor had; and that was the property subject to this lien. The assignee's guilt or innocence, knowledge or ignorance of the debtor's fraudulent acts or purposes could not give him more. Bergman v. Sells, 39 Ark. 100. These views of the issues trioo were fairly presented by the evidence, and were vital to the Sllpport of the plaintiff's contention. He was entitled to have the law applicable to tllem fairly presented to the jury, while by these instructions it WM entirely withdrawn from·them. It is insisted by counsel for defendants in error that the evidence was conclusive that the assignment WM delivered' and accepted before the:o:rder of attachment was placed in the hands of the marshal; and henee that these instructions worked no prejudice to the plaintiff and constitute no reversible eITor. The burden of proof was on the interpleader to establish the delivery arid acceptance of the assignment before the order of attachment came to the hands of the marshaL", The evidence found in the bill of exceptions is far from furnishin,g conclusive proof of this fact. ludeed, it appears from it that the assignment was not acknowledged or :filed until after that time: that the assignee WM not in the town ,where it was drawn and signe4 on the day of its execution; that the only delivery (which appears to havebeeri before the assignment was acknowledged, and before the order of attachment was delivered) was to an attorney at ,law, whose power' to bind the assignee by his receipt and aecevtance of it is established by no proof.' 'These circumstances
c(lrtainly competent, ,a)ld SOmelYihat;perj;uas!ve" that there llq<¥lptance of, the assignment until after the attachment was in, the qfthe marshal. The giving of the, following instruction t,o.:,tb.e, jury is another error afjSigned:
"Second. The court instJ.llcts the jury that the bul'den of proof In this case Is on the plaintiff, and, in order that he recover, he must have established by the greater weight of the testimony that the defendant, O. H. Low, had. at the date of the issuing of the plalntifr's attachment herein, sold, conveyed, or othel'Wtse disposed of his property with the fraudulent intent to cheat, hinder, and delay his creditors."
Section 309 of Mansfield's Digest, under which the order of at· tachment was issued, provides that the plaintUf may have an attachment inltn action for the recovery of money in certain cases,-two of which are where the defendant"(7) Has sold, conveyed, or otherwisEl disposed of his property, or sufrerecl or permitted it be sold, with the fraudulent intent to cheat, hinder, or delay his' creditors; or (8) is about to sell, convey, or otherwise dispose of his property with such Intent."
The affidavit for attachment alleged that"Said defendant, Oharles H. Low, Is about to sell, convey, or otherwisEl diepose of his property, or suffer or permit It,tobe sold, with the fraudulent Into cheat, hinder, or delay bls credltoJ;B."
The second instruction was erroneous for two reasons: First. The plaintiff had not alleged, arid consequently was not required to prove, that the defendant had sold, conveyed, or otherwise disposed of his property with the fraudulent intent at the time of the commencement of the action. His ground of attachment was that he was then about to sell, convey, or otherwise dispose of it with such intent. Second. The fraudulent intent the statute requires the plaintiff to establish is to cheat, hinder, or delay his creditors, while the instruction imposed upon him the burden of proving an intent to cheat, hinder, and delay his creditors. There are other assignments of error, but it is unnecessary to notice them. The result is that, upon the trial of an issue between the plaintiff and defendant, raised by the denial by the latter of the plaintiff's allegation in his affidavit for attachment that the defendant was at the commencement of the action about to sell, condispose of his property with the fraudulent intent vey, or to cheat, hinder, or delay his creditors, the knowledge or participa.tion of an assignee of the defendant 'for the benefit of his creditors in his fraud is not material. An assignment whereby an insolvent assignor knowingly prefers a creditor for an amount in excess of his indebtedness to him with the secret intent to cause the surplus above his actual indebtedness to such creditor to be subsequently applied to the payment of a debt he owes to another creditor, who is not secured by the assignment, is conclusive evidence of the assignor's intent thereby to cheat, hinder, or delay his unsecured creditors; and where the lien of an attaching creditor becomes fixed upon the property of the debtor before the delivery and acceptance of an assignment preferring creditors, made by him with the fraudu-
lent intent to cheat, hinder, or delay bis creditors, in the trial of the assignee's'right to the property under the assignment as against the lien of the attaching creditor, it is not material whether the assignee was aware of or participated in the debtor's fraud. In the charge of the court these rules were disregarded, and the judgment below is reversed, with costs, and with instructions to grant a new trial.
NATIONAL BANK OF COMMERCE v. TOWN OF GRANADA. (Circuit Court of Appeals, Eighth Circuit. January 27, 1893.) No. 138. 1.
Under Mills' Ann. St. . Colo. § 4431, the proper method of procedure In the issuing of town bonds to fund a fioating debt, as provided for in section iBbY an ordinance of the board of trustees, ordering an election. Laws ()Qlq. 1887, p. 445, § 1, provides that all town ordinances shall be recorded In a book kept for that purpose, and authentiooted by the presiding officer of the board and the clerk, and all by-laws of a general or permanent nature shall be published in some newspaper, and such by-laWS and shall not take effect· until the expiration of five days after they are but tije ,bOQk' of .otdinances provided for In the act shall be' pl:'iD1atacie evidence of publica..Uon. Held, that an ordinance calling an election to authorize the funding of the fioating debt of a town, which was PlJ:$Sed, but not recorde«l or published, never went into e1fect, and that bonds authorized by SUch an election were'void. 48 Fed. Rep. 278, af· firmed. ,., :. .
&MJIl__PunLtCATION OF OBDnUNCE.
A recital in such bonds that they are issued under the ordinance does not estop tlle town from showing that ordinance was never published, and is th.erefore void,since neither the mayor nor clerk, who signed the bonds, have any duty in relation to publishing ordinances, or determining when they had been pUblished according to law. 48 Fed. Rep. 278, and 44 Fed. Rep. ll.fIirmed. Dixon Co. v. Field, 4 Sup. Ct. Rep. 315, 111 U. S.
In Error to the Circuit Court of the United States for the District of Colorado. Action by the National Bank of Commerce of Kansas City, Mo., against the town of Granada, state of Colorado, to recover on cere tain town bonds. The circuit court gave judgment for plaintiff. 41 Fed. Rep. 87. A new trial was thereafter granted, (44 Fed. Rep. 262,) and judgment thereon given for defendant, (48 Fed. Rep. 278.) Plaintiff brings error. Afflrmed. Statement by CALDWELL, Circuit Judge:
This action is founded on interest coupons cut from. bonds purporting, on their face, to have been issued by "the city of GTaIlada. in the county of Bent, state of Colorado." The following is a copy of one of the bonds: "f500. State of Colorado. Number "Number City Funding Bond 9 9 of the City of Granada. ''The city of Granada, In ijle. county of Bent, state of Colorado, acknowledged itself indebted to t:!le b'ee.rer in the of five hundred dollars, payable fttteen years after the first day of December, 1887, redeemable after five