Austin v. Bell, 20 Johns. 442

Austin v. Bell

20 Johns. 442 | N.Y. Sup. Ct. | 1823

Spencer, Ch. J.

delivered the opinion of the Court. The question here is, whether the assignment by E. Secor Co. is fraudulent, as regards Lambert and the other creditors *447who did not become parties to the assignment, by subscvibing the same, and who must, therefore, be regarded as disagreeing to it. The grounds on which the assignment is supposed to be legally fraudulent are, that it contains stipulations, reserving such sums as may be necessary to defray the expenses of defending suits at law or equity, against the assignors, in relation to the trust created j and for services in obtaining, or endeavouring to obtain, the discharge of the assignors from all their debts 5 and also such sums of money as the trustees may be obliged to pay to E. Secor, for the support of himself and family, until the first of May, 1820, not exceeding the rate of 2000 dollars per annum ; and, also, because, with respect to such creditors as should not assent to the assignment, by becoming parties thereto, and executing the same, by the first day of November, 1819, that the trustees should pay to the assignors, the proportion of such creditors as should neglect or refuse .to execute the deed.

The case of Murray v. Riggs and others, decided in the Court of Errors, (15 Johns. Rep. 571.) bears upon some of the objections made to this assignment. It appears that a majority of the Court concurred in the opinion délivered by Chief Justice Thompson ; and that the decree of the Court of Chancery was reversed, on the ground that the assignment of the 31st of May, 1800, was legal and valid. We are bound by that decision, whatever our private opinions may he, as to its accuracy or solidity. In that case, one of the appointments and reservations in the trust deed of the 31st of May, 1800, was, that the trustees should pay out of the proceeds of the property assigned, towards the support of the grantors, from the 28ih of March, 1798, until they should be respectively discharged from their debts, or until one year after they should be discharged by law, a sum not exceeding 2000 dollars a year, for each of the grantors. As to this reservation, the Chancellor was of opinion, on the authority of Estwick v. Caillaud, (5 Term Rep. 420.) that it did not destroy the provision in respect to the residue; and he intimates an opinion, that if the part not reserved was deficient, the creditors might apply to a Court of equity for the residue. (2 Johns. Ch. Rep. 580.) In this part of the Chancellor’s opinion, Chief Justice Thompson concurred. This, *448then, puts an end to the objection made to this assignment, as to a reservation out of the trust property, of a support, for a limited time, for one of the assignors; and it is equally decisive of the other objections, as to the provision for defraying the expenses of suits against the assignors in relation to the trust, and for expenses in endeavouring to obtain their discharge; for they fall within the same reason. I will merely remark, that the case of Estwick v. Caillaud, was decided on the ground, that although Lord Abingdon had not assigned all his property, it appeared that he reserved enough to satisfy the particular creditor, who sought to set aside the assignment, and that the other creditors had, for many years, acquiesced in it.

In the case of Murray v. Riggs and others, there was a provision in the assignment of the 31st of May, 1800, that the assignees should hold the balance of trust property subject to the further order of the assignors, and that the creditors who should not, in one year, accept of the conditions, or who should knowingly embarrass the objects of the assignment, should be for ever excluded from any share under the assignment. The only remaining question is, whether the stipulation reserving to the assignors the proportions of such of the creditors as neglected or refused to execute the assignment by the first day of November, 1819, renders it fraudulent and void. In this case, Lambert sued out his executions, and levied on the property assigned, a few days before the first day of November, 1819. The difference between the provision in the deed of the 31st of May, 1800, in the case of Murray v. Riggs, and the provisions of this deed, is this; in the former case, the creditors who refused, for one year, to accept of the conditions, or who should embarrass the objects of the assignment, were for ever excluded from any share, but it was not provided that the shares to which they would have been entitled, by accepting the conditions, should revert or result back to the assignors; but, in this case, instead of throwing the distributive shares of such as refused to execute the assignment, into the general mass, for the benefit of all the creditors, it is expressly reserved to the assignors themselves. In the case of Murray v. Riggs, Chief Justice Thompson, observed, “ for any thing *449that appears, all the creditors of Robert Murray & Co. (the grantors,) were satisfied with the assignment, and the provision there made for the payment of their debts,” He went on to say, “ this is an important feature, in which this case is distinguishable from that of Clark and Hyslop.” In the case of Hyslop v. Clark and others, (14 Johns. Rep. 458.) the assignment contained a provision, that if any of the creditors should refuse to give the assignors a discharge from their entire debts, then the trust, providing for the payment of the scheduled creditors rate ably, should cease and become void, and the trustees were directed not to execute it; and, in that event, the deed further provided, that the trustees should hold the property assigned in trust, in the first place, to pay the debt due to Robert Hyslop Sf Co. and then to pay the avails of the assigned property to such of the creditors as the assignors should appoint ; and upon the further trust, in any event, that the overplus should be paid to the assignors. The case of Hyslop v. Clark was decided in October term, 1817, and the case of Murray v. Riggs, in February, 1818.Chief Justice Thompson assented to the decision in Hyslop v. Clark, and it cannot be admitted, that he intended to overrule that case, by any thing he said in the case of Murray v. Riggs. The contrary, in truth, appears, from his distinguishing between the two cases, as has already been mentioned. Mr. Justice Van Ness, who delivered the opinion of the Court, in Hyslop v. Clark, considered that part of the deed which declared the trust void, on the refusal of the creditors to give releases, and which, in that event, directed the avails of the property to be paid to such of the creditors as the assignors should appoint, as an attempt on the part of the debtors to place their property out of the reach of their creditors, and to retain the power to give preference to creditors, at some future period. That it was, also, one object to coerce the creditors to acquiesce in the terms offered them, and that, therefore, that part of the assignment was void under the statute of frauds; and that being void in part, as against the provisions of a statute, it was void in toto ; and in this opinion the Court unanimously concurred. Now, I cannot perceive any material distinction between the case of Hyslop v. Clark, *450and the one before us, unless, indeed, it be that this is u. stronger case of legal fraud. In this case, on a refusal by any of the creditors to execute the assignment, their shares in the division of the property assigned were to revert to the assignors. In other words, it was to be at their absolute disposal, to apply to their own use, or to pay to their creditors, as they pleased. This is not only an attempt to coerce creditors, and to place the property beyond their reach on execution, btit it is the reservation of property which ought to have been devoted to the payment of their debts, to their own private benefit and use. Without, in the least, impugning the doctrine, that a man in debt has a right to give a preference to creditors, I am bound to say, that a deed which does not fairly devote the property of a person, overwhelmed with debt, to the payment of his creditors, but reserves a portion of it to himself, unless the creditors assent to such terms as he shall prescribe, is, in law, fraudulent and void, as against the statute of frauds, being made with intent to delay, hinder, or defraud creditors óf their just and legal actions. In Seaving v. Brinkerhoff, (5 Johns. Ch. Rep. 329. 332.) this principle is fully adopted and recognised. The case of Burd v. Smith, (4 Dallas’ Rep. 76.) is expressly in point. In that case, Glenachan, being overwhelmed with debt, but having a large property in possession, and many suits depending against him, made an assignment of Ms property to trustees. One of the trusts was to pay ratoably, to such of the creditors .as should, in writing, agree to accept the same, within nine months after the date of the assignment, and to pay to McGlenachan the proportion of all such creditors as should not signify their acceptance, within the specified time, to the intent, that he might therewith compound with and satisfy such creditors. On the ground, among others, that the deed contained a resulting trust to the grantor, thereby placing the dissenting creditors in his power, and that this was a badge of fraud, the majority of the Court pronounced the deed to be fraudulent and void.

The only remaining question is, whether, as the property assigned was levied on before the time limited for the creditors to signify their assent, by executing the deed, the deed was not operative and valid until after the first of November ; *451and if so, then, whether the levy and seizure can be justified ? In the case of Burd v. Smith, the assigned property was sold by a creditor within the nine months, allowed to the creditors to signify their acceptance. Though the objection was taken on the argument, that Clemchcm had nothing but a contingent interest in the property assigned, yet the Court held, that the title of the purchaser under the judgment was good. In the case of Hyslop v. Clark, no time was limited within which the creditors were to assent, and Clark had dissented. The attention of the Court was not, therefore, pointedly called to the consideration of the question now presented. Lambert, by suing E. Secor Co. and by issuing executions on his judgments, had definitively made his election, and taken his stand, not to come in under the assignment, nor to execute it; therefore, as regards him, he is in the situation of a creditor refusing to execute the assignment, and able to make the objection, as well before as after the first of November, 1819, that it is void. The case of Wilkes & Fontaine v. Ferris, (5 Johns. Rep. 344.) is referred to, as containing a doctrine that invalidates the lien in this case. The Court there say, that Cheriot might have a resulting trust, after the purposes for which the assignment was made were satisfied, and that such residuum of interest was not the subject of sale on a ft. fa.; but the Court had, in the same case, decided that the assignment was valid. Where the assignment itself is void, as against a statute, and where the creditor takes the property on execution, which that assignment intended to convey, he takes no residuum, nor equitable interest of the assignors, but he takes property belonging to his debtors, the title of which never passed from them to their assignees. The effect of our opinion will be to give to one of the creditors an entire satisfaction of his debt, while others, equally meritorious, may go, either wholly or partially, unpaid. But the law serves those who are vigilant; and the creditor who has first obtained judgment and execution, reaps the fruits of his vigilance. The preference which the plaintiffs have lost, and Lambert has acquired, may be attributed to the plaintiffs* indiscretion, in assenting to become trustees in a deed, which the policy of the law must condemn.

Judgment .for the defendant.