The substantial facts proven on the trial of this case were, that on the 5th day of January, 1862, one of the.firm of Lee & Kinnard, who were bankers, went to Mr. Noble, as their attorney, and informed him that they were unable to continue business much longer unless something very favorable should occur within a very few days, '
'
On the 6th and 7th .days of January, the firm of Lee & Kinnard, in the absence of Mr. Noble, consulted his partner, Mr. Beckwith, who during those days made out-schedules of the property, preparatory to the making of an assignment. He also prepared a deed for certain real property, to be executed by Lee & Kinnard to Pearsall. On the evening of the 7th, Mr. Noble having returned, and the deed being signed, was delivered to him as agent or attorney for Pearsall, and the money due Benton was paid him. The cashier of the State Bank was called in and a settlement was had, showing a balance due the State Bank of about $8,000, some $2,000 of which had been borrowed that morning, for the day. This balance was paid by Lee & Kinnard to the State Bank at that time, in money and negotiable paper.' All this occurred between seven and twelve o’clock on Tuesday night, the 7th day of January.
Between twelve and two o’clock, on the morning of the 8th of January, all the necessary schedules having been theretofore prepared, the assignment was drawn, the assignee sent for to ascertain if he would accept the trust, and it was executed, delivered and accepted. There is some controversy as to the precise hours in which the various acts were done, but the above is the probable time, judging from all the evidence. ■ There is some positive or express testi-1
The correctness of this instruction, as well as the true rule of law applicable to the very gist of the controversy in this case, will best be ascertained by a brief examination of the law of assignments, aside from any statute, and then the extent of the change effected by the statute.
It is a well established and long settled rule in English and American law, that a debtor in failing circumstances may dispose of his property in trust for the benefit of his creditors, and may, by such conveyance or otherwise, give preference in payment to one creditor before another. 2 Kent’s Com., 532; Burrill on Assignments, 108; 1 Am.
And in Blakey's Appeal, 7 Barr, 449, Coulter; J. observes: “It is only when a man loses dominion over his property and transfers that dominion to another, that the right of creditors to a pro rata dividend attaches. Whilst a man retains dominion of his property, he may incumber and convey it as he pleases, if not directly forbidden by law, and prefer such creditors by payment or transfer as he chooses. And if it were not so, an individual could not get along in his business.” See also, Uhler v. Maulfair, 23 Penn., 481; Hopkins v. Beebe, 26 Id., 85. And in Wakeman v. Grover, 4 Paige, 23, Chancellor Walworth says: “It is settled that the insolvent has the right, while his property remains in his pwn hands, to
The right of the debtor to use, control and dispose of his property is absolute, and he is in no manner rightfully subject to the dictation of his creditors, for they have no legal right in his property by reason of being creditors. But when he transfers his property to another by assignment, without preference, the rights of his creditors attach, and then the rule that equality is equity, applies to it. Until he loses dominion over it, however, his jus disponendi continues, and is subject alone to his will.
It is also laid down as a general rule, that in the absence of any statutory prohibition, and of a bankrupt law, a debtor may, at any time before liens have attached upon his property, make a general or partial assignment to a trustee for the benefit of his creditors, with preferences; which assignments will be valid, as against the process of creditors, from the time of the execution of the deed. Burrill on Assignment, 117; 2 Kent’s Com., 532; 1 Am. Lead. Cases, supra.
It is very clear, from the foregoing principles, sustained and exemplified as they are by the authorities cited, and numerous others, that unless the right of the debtor to dispose of his property absolutely, or by assignment with preferences, has been limited or restrained by our statute, the theory of the instructions given is wholly without any legal basis.
Accordingly it was held by this court in Cowles & Co. v. Ricketts, 1 Iowa, 582, that an absolute sale by a debtor of substantially all his property, in payment of a single debt, he having other creditors, and they being known to the transferee, was not within the statute, and that the word “ assignment ” had a peculiar and appropriate or technical meaning in law, and was used in that meaning in the statute. And in Frommne v. Jones, 13 Iowa, 474, it was held,
assignment of what was left for the benefit of their creditors pro rata. The only legitimate ■ inquiry (aside from the question of actual fraud which is not alleged in this case) is, whether these debts were paid before the assignment was made, or, to use the language of the books', before they “had lost dominion over the property.’’ It cannot affect the legality of these payments that Lee & Kinnard were insolvent or' contemplated insolvency, or were about to make a general assignment, if, in fact, they did not make it till after the payments were made. Such distinct or special transfers have often been held not to be within the statute. Vide Meredith Manufacturing Co. v. Smith, 8 N. H., 348; Low v. Wyman, Id., 536; Barker v. Hall, 13 Id., 298; Brown v. Foster, 2 Metc., 152; Henshaw v. Sumner, 23 Pick., 446; Fairbanks v. Haynes, 23 Id., 323; Bates v. Coe, 10 Conn., 280; Wounan v. Wolfersberger’s Executors, 19 Penn., 59.
Again, in the latter part of the instruction, the jury are charged that if they believe the instruments “were to effectuate one object, namely, the distribution of the insolvent effects, &c.” Under the statute, it is very proper for an insolvent debtor to “ effectuate the distribution of his effects” among his creditors; but if he does it by a general assignment, he must make it pro rata, or it will be invalid.
This construction of our statute is in accordance with principle, and is sustained by abundant authority, and seems necessary to effectuate its purpose and guard against injustice. Our statute is grounded upon an entirely different base from the English and our national bankrupt laws. They are upon the theory of the right of creditors to force their debtors into an assignment in bankruptcy, and hence a long list of acts of bankruptcy are prescribed, upon the doing of any one of which, by the debtors, the creditors
For the error of the court in giving the instruction, as before shown, as well as for refusing to set aside the verdict and grant a new trial, the judgment of the District Court is
Reversed.