Abraham Clark Freeman.

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bonus, for he had the benefit of it in defraying the expenses of
conducting his own business. Our conclusion is that the findings
are not supported by the evidence.

Order reversed.

THE CASE of Horkann v. Nesbitt, 58 Minn. 487, is similar in its
facta to those in the principal case, and waa decided on the authority
of the principal case, and Keromitt v. Adam son, 44 Minn. 121. The
court said: **Loaning money through agents who charge asurious and
illegal interest under the guise of pretended services rendered the bor-
rower constitutes a void transaction."

USURY— LOAN BY AGENT.— A loan negotiated by an agent for
both ).>artie8, and bearing legal interest on its face, is not rendered
usurious by the act of the agent in taking a commission note for hia
services, payable to the lender, thus raising the total interest above the
legal rate, provided the lender neither authorizes nor ratifies the act
of the agent: Richards v. Purdy, 90 Iowa, 502; 48 Am. St. Rep. 468.
Thiasubject is thoroaghly discussed in the extended notes to Bank v.
CkK>k, 46 Am. St. Rep. 196, and Davis v. Qarr, 55 Am. Dee. 895.



Ibwin v. MoKechnib.

[68 MmviaOTA, 146.]

RBGBIVBRS— GARNISHMENT.— A debt due from receivers of
a railway company appointed by a federal court may be gamlslied
in a state court, but no executory process can issue on the Judgment
rendered In the state court; that Judgment can be satisfied only by
an application to the court appointing the receivers for an order di-
recting its payment in the due order of the settlement of the affaln
of the railway company.

Action on a note and garnishment against the appellants as
receivers of a railway company. They moved to be discharged
from the garnishment on the ground that the state court had no
jurisdiction over them or of the money in their hands. Theix
motion was denied and they appealed.

J. H. Mitchell, Jr., and T. B. Selraes, for the appellanta.

A. Tighe, for the respondt^nta.



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496 Ibwui v. McEschnik. [Hun.

^^ MITCHELL, J. The garnishees were appomted» hj fhi
TTnited States circuit court for this district, reoeiTa of thi
Northern Pacific Bailway Company, and while opeiatuig iti
road under the authority of that court became indebted to Um
defendant for labor and services. The plaintiff, having a ctnae
of action against the defendant for money due on contnet,
brought an action for its recoveryy and sought therein to
garnishee, in the hands of the receivers^ the money due from
them to the defendant Ko question is made, nor could well
be, but that, under the '^removal act" of March 3, 1887, the r^
ceiven are subject to suit in respect to any transaction of theia
in operating the road; the only point made being that the monej
sought to be reached was in custodia legu^ and hence not subject
to garnishment.

No one will question the correctness of the proposition that
property in the hands of receivers appointed by the court is in
custodia legis, and not subject to levy or gamiahmoit This doe-
trine receives additional force in this case from the rule of judi-
cial comity ^^ between state and federal courts, by which each
will refuse to interfere with property in the custody of the other
— a rule which we are always solicitous to observe. But in this
case it will be noticed that what is sought to be reached by gam-
ishment is the property, not of the railway oempany, but of the
defendant, viz., a debt due him from the receivers.

Moreover, while garnishment of a debt is often called a mode
of attachment, yet it does not effect a specific lien on any property
of the garnishee, such as is acquired by the actual seizure of
property. The effect of the judgment is merely to detennine
the existence and amount of the debt, and to substitute the plain-
tiff for the defendant as the person to whom it is payable. The
judgment against the receivers would not be against them pe^
sonally, but against them officially. No executory process could
be issued on it, for that would interfere with the control of the
property in the custody of the federal court. The manner in
which the judgment so rendered shall be paid must be under the
exclusive control of that court. It can only be satisfied ss other
demands may be satisfied, viz., by an application to the court
in which the receivership proceedings are pending for an order
directing its payment in the due order of the settiement of the
affairs of the insolvent company by that court.

Under the "removal act/* the defendant himself could ban
sued the receivers and recovered judgment, and we are unable
to see why the plaintiff may not, through garnishee proceedings^



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July, 1894.] In bb St. Paul Gbbmak Insubancb Ca 497

recover judgment against them for the same daim^ or why t
judgment in his favor interferes with property in the custody o£
the federal court, any more than would a judgment in favor of
the defendant for the same claim. We understand that the order
of the court appointing these receivers is even broader than the
statute, and authorizes suit to be brought in any court of com-
petent jurisdiction on claims against the company which accrued
before the receivership, as well as those subsequently incurred
by the receivers. We only refer to this as showing that the fed-
eral court does not consider such suits as at all interfering with
its jurisdiction over the receivership or with the property in itf
custody. In view of the fact that the receivers of railway com-
panies, as ancillary to winding up the insolvent estate for the
benefit of creditors, are authorized to operate the ^^ road in lieu
of the directors — sometimes for years — ^any other rule would work
great injury, and would often leave the creditors of the employees
of the receivers remediless. There is nothing in the point that
the indebtedness of the receivers is only contingent. The indebt-
edness is absolute; the only contingency is as to their ability to

pay.

Order afiSrmed.

Buck, J., absent, sick, took no part

REOEIVERS— ATTACHMENT.— A fund in the hands of a receiver
IB not attacboble, being subject to the order of the court and in the cun-
tody of the law: Adams v. Haskell, 6 Cal. 113; 65 Am. Dec. 491, and
note. The garnishment of a receiver or other officer of a court is effec-
tive when the moneys in his hands have been distributed bjjr the court
and directed to b« paid in specified sums to the several parties entitled
thereto, and the garnishment is of the interest of one of the parties:
Dantmoor ▼• Furatenfeldt, 88 Oah 622; 22 Am. St. Bep. 331, and note.



In bb St. Paul Gbbman Insubanob Company-

[66 HimoaoTA, 168.]

INSUBANC&-LIMITATION OP ACTION FOB LOS&— A con-
dition in a fire Insurance policy requiring the bringing of an action
for a loss within one year after such loss occurs. Is waived if the in-
surer makes an assignment for the benefit of creditors within such
j^ear, and the claim is not barred as to the fund in court, although
not filed with the assignee until more than a year after the loss.

LIMITATIONS OF ACTIONS— ASSIGNMENTS FOB THE BEN-
EFIT OF CREDITORS are for the benefit of all creditors whose
claims nre not barred by limitation at the date of the assignment, and.
If not then barred, are not afterward barred as to the fand in eoori
during the pendency of the insolvency proceedings,

▲k. St. Rkp.. Vol. XLIX.~J2



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498 In re St. Paul Gebmam Insurance Co. [Minn.

A. Tighe, for the appellant.

C. D. & T. D. O^Brien, for the respondent.

*«* CANTY, J. The St Paul German Insurance Company
issued a policy of insurance to appellant, insuring his property
against loss by fire for one year from September 22, 1891.
Thereafter, on November 17, 1891, a loss occurred. There-
after, on April 14, 1892, the *^^ company, being insol-
yent, made an assignment, under the insolvency law of this state,
for the benefit of its creditors, to J. F. Franzen.

The policy of insurance contained a provision requiring the
insured to commence any suit or proceeding to enforce any claim
for loss within one year from the time of the loss. The appel-
lant did not file its claim for such loss with such assignee within
one year from the time of the loss, or until November 28, 1892.
For this reason the court below held that the claim was barred
by the limitation provided in the contract, and that appellant
could not recover, and he appeals to this court.

It is urged by respondent that because the statute of limita-
tions continued to run against this claim as a personal liability
of the insolvent, and, as against it, was barred before this claim
was filed with the assignee, it ceased to be a claim against his
assigned estate.

We do not agree with respondent. We are of the opinion
that the conditions requiring the bringing of an action on this
claim within the year were waived by the insurer by providing a
fund for the payment of the claim, to the extent of that fund.
We cannot see why such conditions in an insurance policy can-
not be waived by the insurer as well as other conditions in it.
This provision is intended for the protection of the insurer when
he disputes the claim, and can hardly apply when he has pro-
vided a fund for its payment, at least to the extent of that fund.
If A is indebted to B, and, a short time before the statute of
limitations runs on the debt, A transfers property to C, to be by
him disposed of, and the proceeds applied on the debt, will this
not interrupt the running of the statute, at least as to this fund?
On well-settled principles, it will, and B can charge C as trustee
after the time the statute would have run were it not for the
creation of the trust. Payment of money into court in a suit on
a debt takes the debt out of the statute of limitations as to the
money so paid into court: Long v. Greenville, 3 Bam. & C. 10.
Such an assignment for the benefit of creditors is for the bene-
fit of all creditors whose claims are not barred by the statute of



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July, 189i.] McEiBBiN v« Elunqboh. 499

Umitations at fhe date of the aadgmnent, and, if not then harred,
aie not barred afterwaida during the pendency of the proceed-
ings: In re Leiman, 82 Md. 225; 8 Am. Bep. 182. See, also,
i«T Mijiot y. Thacher, 7 Met 348; 41 Am. Dec 444; 2 Wood's
Limitations of Actions, 2d ed., sec 202. This rule has also been
applied by the federal conrts in bankruptcy proceedings, under
the United States statutes: Bump on Bankruptcy, 10th ed., 581.
The order appealed from should be reversed. So ordered.

Mitchell and Buck, JJ., took no part

ASSIGNMENT FOB THE BENEFIT OF GBEDITORS' CLAIMS—
LIMITATIONS OF AOTIONS.— The statute of limitations does not
continue to run a^inst the claims of creditors of an insolvent debtor
after his application for the benefit of the insolvent laws, and before
an audit ana order of the court distributing the insolvent's estate :
Matter of Insolvent Estate of Leiman, 32 Md. 825; S Am. Bep. 182.



McKiBBiN V. Ellingson.

[58 MINNESOTA, 205.]

assignment FOR BENEFIT OF CRBDITORS-OONFLIOT
OF LAWS.~The validity of an assignment for the benefit of cred-
itors, made, so far as signing and delivery is concerned, in one state
to a resident thereof by a nonresident debtor, of property whoUy
within the state of his residence, and finally executed by being
recorded in that state, is to be determined by the law of that state.

ASSIGNMENT FOR BENEFIT OF CREDITORS-VALIDITY
—CONFLICT OF LAWS.— If the validity of an assignment for
the benefit of creditors appointing a nonresident assignee is not de-
termined by the law of the state where it is executed, its validity
must be decided by the rules of common law, when questioned in
another state.

ASSIGNMENT FOR BENEFIT OF CRBDITORS-EVIDBNOB
OF FRAUD.— By the common law, the appointment of an unfit
assignee for the benefit of creditors, as distinguished from one in-
capacitated by law to take and execute the trust, is a badge of fraud,
but does not render the assignment void ipso facto.

FRAUD— PLEADING.— A statement of facts in a pleading tend-
ing to show a fraudulent intent is not equivalent to an allegation
of such intent.

ASSIGNMENT FOR BENEFIT OF CREDITORS— CONFLICT
OF LAWS.— An assignment for the benefit of creditors, valid by the
law where the debtor resides and where the property Is situated,
passes the title to the assij?nee, and the subsequent removal of the
property to another state does not displace such title as to creditor!
residing therein, and seeking to recover on their claims.

Keith, Evans, Thompson & Fairchild, for the appellanl

B. H. Schriber, for the* respondents.



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600 McEiBBiN V. Ellingson. [Minn.

•^ GILFILLAN, C. J. PlaintiffB brought an action on
promissory notes^ in Samsey county^ against Ellingson, and in
that suit brought garnishee proceedings against Turner. On
the disclosure, the latter claimed title to the money or property
sought to be reached. Thereupon the plaintiffs filed a supple-
mental complaint against the garnishee defendant, and he filed
his answer thereto. The plaintiffs demurred to the answer, and
from an order sustaining the demurrer the garnishee defendant
appeals.

Upon the allegations of the complaint admitted by the answer,
and those of the answer, these are the facts: Ellingson resided
and did business in, and all his property, consisting of real and
personal property, was in, the stat« of North Dakota; and, being
insolvent, on February 3, 1893, he, at Minneapolis, in this state,
executed and delivered to Turner, who resided in Minneapolis,
an assignment to him for the benefit of his (EUingson's) creditors.
The assignment was never filed in the office of the clerk of any
district court of this state, but, as required by the laws of North
Dakota, it was recorded in the office of the register of deeds of
the county in which Ellingson *^^ resided, and all the require-
ments of the law of North Dakota respecting such assignments
were complied with. The assignee took possession of the as-
signed property, and the money in his hands at Minneapolis,
where the garnishee summons was served, was proceeds of sale of
such property.

Of course, if the assignment -was valid and passed the title to
the property, that title would be respected everjrwhere and where-
ever the assignee might subsequently carry the property or its
proceeds.

It is claimed that it was invalid: 1. Because, having been ex-
ecuted in this state, it was a Minnesota contract, and its validity
must be judged by the law of this state, and that, not having
been filed as required by our statute, it was void; 2. If, because
its subject matter was in North Dakota, and it was intended to
take effect and be operative and be carried out there, it was a
North Dakota contract, then it was void by the law of that state.

Though we were to deem it executed in this state, still it would
not come within our statute regulating assignments. That
statute does not assume to regulate assignments executed in this
state by nonresidents, who have no property and no place for
carrying on business in this state, and the trusts created by which
are to be carried out in another state. « That is evident from the



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July, 1894.] McKiBBii« v. Ellingboh. 601

lequirement (Gen. Stats. 1878^ c. 41, sec. 23) that the assign-
ment shall be filed in the oiKce of the clerk of the district court
in the county wherein the debtor resides, or wherein the business
in reference to which it is made has been principally carried on
— a requirement which a nonresident, having no property and no
business in the state, could not comply with. The statute does
not assume to regulate the business of nonresidents whose sole
property and business is out of the jurisdiction of this state; so
that if it is to be deemed a contract executed here, to be judged
by the law here, inasmuch as the statute does not apply to it, its
yalidity is to be determined by the rules of the common law.

But it is not to be deemed as fully executed in this state. The
parties were contracting with reference to the laws of North Da-
kota, creating a trust to be performed there, and which would be
yaiid there, and they intended to do what the law of that state
required to make the trust operative and effectual there; and
what they contemplated in the way of executing and making the
assignment ^^^ effectual was not completed until it was taken to,
and, as required by the law of that state, recorded in, the county
of the debtor's residence. As soon as it was fully executed, so*
as to take effect where it was intended to take effect, by doing:
what the law of that state requires, it became, to all intents and
purposes, a North Dakota contract, to be judged by the law of
that state. By the law of this state, an assignment for the benefit
of creditors is of no effect till it is filed, so as to become the basis
of a judicial proceeding. Till filed, the assignment is not com-
pleted. Suppose a debtor, resident in this state, having a busi-
ness and property only in this state, should, in some other state-
say, where such assignments are prohibited — sign, seal, and
deliver an assignment intended to be filed here, and to be
operative only here, and which should be brought here and filed.
Would we hesitate to say that the filing was the final act of exe-
cution, that the assignment was to be deemed as executed here,
and that it was a Minnesota contract, to be judged as to its valid-
ity by our law? We think not No matter where the partial
execution, the writing, signing, sealing, and delivering might
be done, it would be deemed executed in that state where the
final act to make it go into effect was intended to be and was
done. This assignment was finally, fully executed in North
Dakota.

This makes it unnecessary to go into the large field of inquiry,
when a contract is executed in one state, but intended to be peov



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502 McKiBBiN V. Ellinobon. [ICizm.

fonned in another, by the law of which state is its Talidity and
the sufficiency of its execution to be determined?

The objection to its validity as a North Dakota assignment ia
that it appoints as assignee a nonresident of that state. The
statute of that state on the subject of assignment for the benefit
of creditors is fully set out in the answer. We are not referred
to any decision of the court in that state; and we assume that,
except as otherwise provided by the statute, the validity of an
assignment is to be determined upon the principles of the common
law. We are referred to two provisions of the statute (see. 4663,
subds. 4, 5), but we do not see that they prescribe what effect the
appointment of a nonresident assignee shall have on the validity
of the assignment We take it that it is to be determined by the
common law. By the common law, the appointment of an unfit
assignee, as distinguished from one incapacitated by law to take
and execute the trust, was *^ a badge of fraud — ^was evidence
of a fraudulent intent on the part of the assignor to secure to him-
self some control over the disposition of the assigned assets.
Thus, the appointment of one incompetent from ignorance of
business, from blindness, from inability to read and write, from
residence at so great a distance from the place where the trust
must be executed as to suggest that he will not attend to it him*
eelf, is a badge of fraud. In the same category comes residence
of the assignee in another state. But none of these rendered an
assignment void ipso facto. It was only as they established a
fraudulent intent that avoided it. In the case most relied on to
avoid this assignment (Cram v. Mitchell, 1 Sand. Ch. 251), there
were three assignees — one blind, one unable to read and write,
and the other a nonresident of the state. The court, in its opin-
ion, discusses each and all of these as tending to show an intent
by the assignor to keep the control in his hands, and hinder and
delay creditors, and, as to the nonresidence of one of the as-
signees, said: "So, if a failing debtor, whose property was all sit-
uated in this city [New York], and whose principal creditors
resided here, should make an assignment to three merchants
residing in Boston, and who, although creditors of the assignor,
could not give their personal attention to the management of
the tnist, without some satisfactory explanation it would be ap-
parent tliat the assizor had created a necessity for a substitution
in the conduct of the estate which would be likely either to give
him control of the assets, or to afford him opportunities to retain
and appropriate them to his own use.'*



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July, 1894.] WooDWABD-HoLMEs Company v. Nudd. 608

In Gneiin ▼. Hunt, 6 Minn. 375, it was held that the selection
of an incompetent assignee (in that case one unable to read oi
write) from an improper motive will avoid an assignment, but, in
the absence of such motive, it will only furnish ground for
removing the assignee, and that such incompetency is a badge of
frsiud. That is in accordance with the tenor of all the dedsiona.

There is no allegation in either of the pleadings of any fraudu-
lent intent in making the assignment The statement of evi-
dence tending to prove that intent is not, in pleading, equivap
lent to an allegation of the intent

The question, when will a transfer, valid by the law of the
owner's domicile, but which would not have been valid if exe-
cuted here, be *^' held to pass the title to personal property
situated here, as to creditors of the owner resident here, and
seeking a remedy here against such property, is not in the case,
because, by the law of the state where the assignor resided, and
where the property was situated, the title passed, and the subse-
quent removal of the property to this state would not displace
such title.

Order reversed.

Buck, J., absent, sick, took no part

ASSIGNMENT FOB THB BENEFIT Of OBBDITOBS— OOIU

FLIOT OF LAWS.~A voluntary assignment in insolvenoy for the
benefit of creditors, if valid where made, is valid evervwhere, unless
repugnant to the law of the place where the property is situated and det-
rimental to the riffhts of domestic creditors in the latter Jurisdiction t
Hayden v. Yale, 46 La. Ann. 862; 40 Am. St. Bep. 282, and note.

PLEADINQ FBAUD.— When fraud is sought to be alleged the plead
ing is insufficient unless the facts constitutins the fraud are also averred-
Olougb V. Holden, 115 Mo. 886; 87 Am. St. Sep. 888, and note; Nichols
V. Stevens, 128 Mo. 96; 46 Am. St. Bep. 514.



WOODWABD-HOLMBS CoMPAKT V. NuDD.

[58 MiyNEflOTA, 236.]

PARTNERSHIP REAL ESTATE — DOWER IN.— Partnership
capital, invested in lands for the benefit of the partnership, Is to be
treated as personalty until it has performed all its functions to the
partnership, and thereby ceased to be partnership property, and until
then it is not subject to either dower or inheritance, but, after all of
the purposes of the partnership have been accomplished, whatever
of such land remains in specie is to be regarded as real estate, sub-
lect to dower or inheritance.

PARTNERSHIP REAL ESTATE— DOWER IN.— When a part-
nership is dissolved, and its aifain wound up and completely ended



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604 Woodward- Holmes Company v. Nudd. [Minn.

by judgment or agreement, and partnership land remains In specie
unconyerted, it is no longer a part of the partnership assets, and then,
and not until then, it is subject to the dower rights of the wives of
the partners.

PARTNERSHIP REAL ESTATE— DOWER IN.— If, in an ac-
tion to dissolve a partnership, and wind up its affairs, the partnership
land is sold' and converted into money, and such money is distrib-
uted among the firm creditors and partners according to law, such
land in the hands of tlie purchaser is not subject to any inchoate
dower interests of the wives of the partners, although it was not
necessary to sell all of the land to pay the firm debts, and its sale
brought a price in excess of the amount of such debts.

Hale, Morgan & Montgomery, for the appellant
Young, Fish & Dickinson, for the respondents.

889 MITCHELL, J. The effect of the findings of the trial
court is that the real estate which is the subject of this action
was formerly the property of a manufacturing copartnership
composed of defendant's husband and one Holmes, having been
purchased, paid for, and used by the firm as a site for its manu-



Online LibraryAbraham Clark FreemanThe American state reports: containing the cases of general value and ... → online text (page 58 of 121)