Cowles & Co. v. Ricketts, 1 Iowa 582

Cowles & Co. v. Ricketts

1 Iowa 582 | Iowa | 1855

Isbell, J.

Several questions are raised by counsel for; _ appellants in this case, the primary of which is, was the transfer made by Bussell to the plaintiffs, constructively fraudulent? We say constructively, for if fraud in fact, or actual fraud, need be shown, it was clearly the duty of the court to let the cause go to the jury, that it might determine whether such fraud did or did not in fact exist. The determination of this question, involves a construction of section 977 of the Code, which provides that “ no general assignment of property by an insolvent, or in contemplation of insolvency, for the benefit of creditors of the assignor, shall be valid, unless it be made for the benefit of all of his creditors, in proportion to the amount of their respective claims.”

On the part of the defendant, it is insisted, that the word assignment in this statute, includes sale ; that the intent of the legislature was, that insolvent debtors' should distribute their effects with an even hand; and that if the statute is not so construed, the end of its enactment will be defeated,, *585by insolvents always selling, and never assigning. While it might be very desirable that the effects of an insolvent debtor should be divided among his creditors pro rata, without permitting any preference or advantage to any one above another, yet has the legislature attempted, by this statute, to provide a means of enforcing this ideal equity, to the extent claimed? We are clearly of the opinion, that it has not.

In .giving construction to the word assignment, as used in ' the statute, we must be governed by the ordinary rules of construction. The word assignment, is one which has acquired a peculiar and appropriate meaning in law ; it is a technical word; and must be construed according to that peculiar and appropriate meaning. Code, § 26. The common law definition of an assignment is, “the transferring and setting over to another, of some right, title or interest in things, in which a third person, not a party to the assignment, has a concern and interest.” 1 Bac. Abr. 329. But, again, it is a rule equally imperative, that this word must be construed inaccordance with the context. The language, no general assignment of property by an insolvent, or in contemplation of insolvency, for the benefit of creditors, to our minds clearly implies a trust, and contemplates the intervention of a trustee, which is incompatible with the idea of a sale absolute. Again: the general policy of the law, may have great weight in determining the true intent of the legislature in this enactment. The maxim of the common law has ever been as between creditors, in securing their dues, qui prior est tempore potior estfure.

But how stands our statute law, in relation to this subject? Chapter 76 of the Code, provides for the sale or mortgage of personal property, where the vendor or mortgagor retains possession; and by section 1195, it .is provided, that when “ the entry shall be made in the entry book of the recorder; the sale or mortgage shall be deemed complete as to third persons, and shall have the same effect, as though it had been accompanied by the actual delivery of the property so sold or mortgaged. No exception is here alluded to, in case *586tbe mortgagor is insolvent. And it bas been the constant every-day practice, to give validity to sncb transfers of property, unaccompanied with actual fraud, notwithstanding the insolvency of the vendor or mortgagor, which would clearly violate the principle contended for here, by defendant. It is, also, the every-day practice to give validity to the first attachment, and the first execution levied on goods; the lien, of the first judgment on real estate; and all of this, notwithstanding the known inability of the debtor to discharge all of his debts. Not only this, but by a recent enactment (Session Laws, 1853, 143), if a debtor has property exempt from execution, which he refuses to give either in security or payment of his debts, he is liable to the process of attachment. Now, it would seem, that this enactment contemplated a right in'a debtor to pay his debts in property, in good faith. Nothing is said as to the solvency of the debtor, and we should hesitate to say, that a debtor, if unable to pay all his debts, should be precluded from the benefit of this law, to avoid costs, and the injury to his credit by being attached; or, on'the other hand, that an attachment levied on such debtor’s property, in case of refusal to give it in payment or security, should not have a precedence of lien over other creditors, not so vigilant in making collection. But in case such attachment would be valid, and the debtor not have the right to voluntarily pay the debt with his property, it would involve the absurdity, that a debtor might be compelled by the law to pay a creditor, which he would not, by the law, b & permitted to pay voluntarily. We conclude that the construction contended for, is not warranted by the words, the context, or the general policy of the law.

At common law, a debtor may prefer any one of his creditors by payment of his debt, or by conveying, in trust, so much of his property as will be sufficient for that purpose. Widgrey v. Haskill, 5 Mass. 144; Hatch v. Smith, 5 Ib. 42; Stephen v. Bell, 6 Ib. 339; New England Insurance Company v. Chandler, 16 Ib. 275.

We hold that the former branch of this proposition, is not *587changed by the statute under consideration. The latter, is so far changed by the statute, that a general assignment of the property of an insolvent, or one which is made in contemplation of insolvency, is of no validity, unless made for the benefit of all the creditors of the insolvent, in proportion to the amount of their respective claims. Assuming that the evidence in this case, is true, was the transfer by Russell to plaintiff, a payment ? That it was substantially so, there can be but little doubt. The transfer was absolute- There is no attempt to- show that it was accompanied with any secret trust; No interest remained in Russell. Possession was given to plaintiffs. The consideration is not attempted to be shown as inadequate; and the clear inference from all the evidence is, that the goods went in discharge of the existing liability of Russell te plaintiffs, at their full value-But these, and the like considerations, were properly referable to the jury, to determine whether the transfer was fraudulent in fact.

"We have considered the case, with a view only to the question, whether a transfer by an insolvent of all his property, in actual payment or discharge of a. pre-existing debt, he having other creditors known to the transferee, is fraudulent, per se. "Whether fraud, in fact, existed, will still be a question, in case the cause is brought to a hearing. Holding, as we do, that such transfer, unaccompanied with actual fraud, is valid as against other creditors of the transferer, we conclude, that the- court erred in not allowing the case-to ^o to a jury, and that, therefore, the judgment must he revefsed, ■