2 Mich. 445 | Mich. | 1852
The assignment of Smith, under which the plaintiffs below claimed the goods in controversy, is fraudulent and void on its face, and must be so adjudged. It is not an unconditional assignment by the assignor, for the benefit of all his creditors; and it is therefore fraudulent and void in law, as against creditors for whom he made no provision. Great and well founded doubts have always been entertained by Courts generally, in this country, in relation to sustaining voluntary assignments by insolvent debtors at all, which give a preference to the claim of one creditor over that of another; and such transfers of property, by debtors in failing circumstances, have only been sanctioned by Courts in most of the States, where the surrender and transfer is, in fact, entirely unconditional. In Maine, New Hampshire, Connecticut, Georgia, and New Jersey, preferences in voluntary assignments by insolvent debtors, are inhibited by statute.- In Ohio and Pennsylvania,' such preferences are entirely disregarded, and the property assigned, inures by statute to the benefit of all the creditors of the assignor, in proportion to their respective debts. There is certainly great reason in this rule of law; and it is difficult to perceive how any other rule on the subject, could, in justice and equity, be adopted by statute; as any other, must necessarily, often lead to fraud and gross injustice to honest individual creditors. Yet, in those States, where no such prohibitory statutes have been enacted, insolvent debtors have been tolerated by judicial decisions, both at law and in equity, in mating unconditional asssignments of all their property, with classifications, and preferences. (5 Cow. R., 580; 11 Wend. R., 187; 3 Devereux R., 126, 134; 4 B. Monroe R., 296, ’7; 7 Peters R., 609, 614; 2 Barb. S. C. R., 9; 2 Binney R., 174, 186; 11 Alabama R., 689; 2 Comstock R., 365; 7 Paige R., 568; 5 John. R., 335; 2 Conn. R., 633; 17 Verm. R., 311; 8 Leigh R., 416; 10 Paige R., 223; 4 Barb. S. C. R., 546; 6 Hill R., 365; 10 Watts. R., 223, 244; 2 John. Ch. R., 565, 576; 8 Paige R., 417; 1 Sandford R., 251.) But in the case under consideration, the assignor has not made an unconditional assignment and transfer of his property, for the benefit of those creditors whom he did prefer; but expressly provided by a clause contained in the assignment, that the real estate conveyed under it, should not be sold by the trustees, until after ail the
That the assignment, by reason of this special reservation, is conditional, is certain, and cannot admit of a doubt; and that Earl, the plaintiff in the attachment is a creditor of the assignor, unprovided for, conclusively appears by the case. The instrument is therefore fraudulent and void, as against him, or -any other creditor of the assignor, not preferred. (Grover vs. Wakeman, 11 Wend. R., 187; Mackie vs. Cairns, 5 Cow. R., 580; Seaving vs. Brinkerhoof) 5 John. Ch. R., 329; Austin vs. Bell, 20 John. R., 442; Goodrich vs. Downs, 6 Hill R., 438; Barney vs. Griffin, 2 Comstock R., 365; Gazzam vs. Poynts, 4 Alabama R., 374; Wiswall vs. Ticknor et al., 6 Ib., 179.) Other authorities might be cited in support of this position, but it must be unnecessary. It is a well settled general principle of kw, that the assignment in this class of cases, shall definitely fix the rights of the parties beneficially interested, and that nothing shall be left subject to the discretion or future control of the assignor.
But there is another legal fatality to this assignment, appearing on its ” face. The assignor transfers all his property, including his real estate, his entire stock of goods,* notes, accounts, judgments, and other evidences of debt, not for the benefit of all of his creditors, but ostensibly for the benefit of three mercantile houses in the city of New York, maldng the firm of one of these preferred houses, his assignees. And yet, the assignment contains no provision whatever, for the appro
The provisions of our statute for the prevention of frauds, are taken from the New York statute, and are divided into three chapters, viz: 80, 81, and 82. Chapter 80 is entitled “ Of fraudulent conveyances and contracts relative to land.” This chapter in the first place and especially, provides for the protection of prior and subsequent purchaser's for a valuable consideration, and then makes other provisions touching the revocation of conveyances, and also provision in relation to contracts, leases, &c. Chapter 81 is entitled “Of fraudulent conveyances and contracts relative to goods, chattels, and things in action;” and contains the general provisions in relation to sales, and conveyances of personal property, the filing of chattel mortgages, &c. Chapter 82 is entitled “ General provisions relating to fraudulent conveyances and contracts.” Section 1 of this chapter, provides that “every conveyance or assignment in writing, or otherwise, &c., made with intent to hinder, delay, or defraud creditors, or other persons, of their lawful suits, &c., as against the persons so hindered, delayed, or defrauded, shall be void.”
Section 1 of chapter 80 provides that “ every conveyance of any estate, made with intent to defraud prior or subsequent purchasers,” &e., “shall be void.” Section 2 of the same chapter is a qualification of section 1, and expressly protects subsequent purchasers for a valuable consideration, without notice. But not so in chapter 82, there is no such protection provided for assignees in section 1, or in any of the succeeding sections, nor'are assignees or trustees named in the chapter. The language of section 1 is too clear and explicit to be misunderstood: ‘‘Every assignment,” &c., “made with intent to hinder, delay, or defraud,” &c., “shall be void.” Who is it that makes the assignment? It is the assignor, and not the trustee, who makes it. It is the assignor) and not the trustee, who is the debtor, and whose creditors are to he" affected by it. It is often the case that the trustee resides at a distance from the assignor, and knows nothing of the transaction until after the execution of the assignment. If not residing at a distance, being usually a friend of the assignor, the trust is accepted without much, if any thing, being said to him on the subject. And if the provision of the statute contained in sections 1 and 2 of chapter 80 is to be, by vague
That a transfer of property under a voluntary assignment, although fraudulent in law or in fact, is valid as between the parties when the creditors of the assignor submit, and do not take the necessai-y steps provided by law to set it aside or otherwise avoid it, is not controverted. The statute settles this question, and no judicial decision is necessary to give it a construction. It is the creditors of the assignor whom the
If an assignment by a debtor in failing circumstances, is drawn in such a manner as that it must necessarily, in its execution, tend to hinder or delay creditors unprovided for in the collection of their debts, then the legal presumption arising upon the face of the instrument, is, that it was so framed with that intent. Ho other presumption could legally arise upon it. “The law presumes every man to intend the legal consequences which must naturally flow from his own voluntary acts,” and every man is held responsible accordingly.
Why did the assignor, in the case under consideration, make a conditional transfer of his real estate ? The legal presumption is, that he, at the time, supposed his personal property, including his entire stock of goods, notes, accounts, judgments, and other evidences of debts outstanding, would be sufficient to pay the creditors preferred; and that the real estate, being in this manner placed beyond the immediate reach of other creditors, would ultimately revert. And why did he not, in assigning all his property, real and personal, for the benefit of a part of his creditors only, make provision for the payment of Earl out of any surplus property or funds remaining in the hands of his trustees, after satisfaction of the debts specified? The legal presumption is, that
It has been repeatedly decided by Courts of the highest character and standing in this country, that an assignment by a debtor in failing circumstances, for the benefit of a part of his creditors only, containing a resulting trust, is absolutely void in law, as against creditors unprovided for, whether there shall be in the end any surplus in fact, or not. And it can make no difference either at law or in equity, whether the instrument contains such a resulting trust, in terms, or by implication of law; the effect to those creditors to be affected by it would be the same. These decisions ate numerous, and have been made upon principle, which has become established, as a rule at law and in equity; the reason or justice of which cannot be controverted or successfully assailed.
It was also in argument contended, that by section 4 of chapter 82, the question of fraud is made a question of fact, and that without proof of the fact, the assignment cannot be adjudged fraudulent. This, by a species of illegitimate construction, is carrying that provision of the statute entirely beyond what the Legislature ever intended, or it will legally bear. It is not to be presumed that the Legislature intended, by this simple provision, to make such a radical reform as to turn principles of law into questions of fact, nor does it in fact or inferentially do so. In that class of cases where the assignment is unconditional, and in other respects legally unexceptionable on its face, it would, of course, become necessary for the party alleging it to be fraudulent, and seeking to avoid it on that ground, to resort to extrinsic facts and proof aliunde the assignment, in support of the allegations. Such extrinsic proof, however, is not necessary, nor is it required by the statute or any known rule of law, where the evidence of the fraud, or of the fraudulent intent of the assignor clearly and fully appears on the face of the instrument. In the case now before the Court, it does appear on the face of the instrument, that the assignment was not absolute and uncon
But it is said that the assignment; although on its face obnoxious to law, constitutes only prima facie evidence of fraud, and may be rebutted by extrinsic proof. How rebutted by extrinsic proof ? By what kind of extrinsic facts could an assignment void on its face, by reason of the illegal provisions contained in it, be rebutted, either by the assignor or the assignee ? They are both parties to the instrument, and are legally estopped from denying any of the express stipulations it contains. But, suppose that as in the case under consideration, no proof of any kind is offered on the trial, to rebut the legal presumption ari
Section 4 of chapter 82, is a literal copy of a section contained in the revised statutes of the State of New York, under which repeated decisions have-been made by the Courts in that State, and in which, voluntary assignments have been adjudged fraudulent and void in law, upon their face.
In Grover et al., vs. Wakeman, (11 Wend., 187,) the bill was filed to set aside an assignment, on the ground of fraud. The assignment was„voluntary, with classifications and preferences, and provided for the payment of creditors designated in the second class, upon condition that they would receive, in full satisfaction and discharge of their respective debts, such proportion as could be paid by the assignees of the property, after payment of the creditors' in the first -class. The assignors and trustees answered the bill, denying that the assignment was fraudulent, or made with a fraudulent intent. No proofs were taken, and the case went to hearing on bill and answer; and the Chancellor decreed that the assignment was, upon its face, fraudulent and void. On an appeal to the Court of Errors, the decree of the Chancellor was affirmed, 15 to 5, on the ground of the condition, in relation to the creditors named in the second class. In Webb vs. Daggett (2 Barb. S. C. R., 9,) which was also a case in which a bill was filed to set aside a voluntary assignment, on the ground of fraud, in which the assignor had preferred the payment of a fictitious debt, Justice Harris, in delivering the opinion of the £ourt, says: “ The Court is bound to consider that the assignment was executed with a fraudulent intent, and to declare it illegal and void, as against such creditors £¿3 seek to avoid it.” In Berry vs. Riley, (2 Barb, S. C. R., 307,) which was a case of voluntary assignment,
These decisions under the New York statute, were made upon principle, and are founded in reason and common sense — the only basis of correct legal rules or sound common law. That there are some few decisions to be found conflicting with them, is not disputed. But the-question is, are they sound law ? If they are not, then they ought .not to be adopted or recognized as such. The single decision of any Court, ought not to be deemed conclusive, as a precedent established forever; although final upon the parties, it should not and does not conclude other parties having rights involving the same question. It is an eler mentary principle in jurisprudence, well understood, that erroneous decisions are not to be regarded as law. The decisions in several of the States have been made under statutes differing, in many respects materially from our own, and are not therefore, any guide on the subject. In view of the recent decisions in the State of New York, it is unnecessary to review the former conflicting decisions, involving frandulent assignments by the old Court of Errors in that State. There are many decisions by Courts of common law jurisdiction, that never were sound law; decisions, the origin of which may be traced to some dictum merely, which has been inadvertently or improperly thrown by some Judge,, into the decision of a cause; or which may be traced to some antiquated adjudication, founded in error or prejudice, and which, by the light and reason of the present day, would appear absolutely absurd; or which maybe traced to some case, where the Court, instead of boldly meeting the question involved, and deciding it upon principle, assumes to bo governed by some analogous case, which, as found on examination,.
Where an assignment is fraudulent, as to any of its provisions, it is void in toto as against creditors who are entitled by law to take advantage of the fraud. This principle is universally adopted, and is too well established to need any reference to authorities, in support of it.
The views and suggestions of the late Justice Sutherland, on the subject of voluntary assignments by insolvent debtors, are worthy of all commendation. He says, “it is time that some plain, simple, but comprehensive principle should be adopted and settled upon this subject. In the absence of a bankrupt law, the right of giving preferences must probably be sustained. Let the embarrassed debtor, therefore, assign his property for the benefit of whom he pleases; but let the assignment be absolute and unconditional — let it contain no reservations or conditions — let it not extort from the fears and apprehensions of the creditors or any one of them, an absolute discharge of their debts, as the consideration of a partial dividend — let it not convert the debtor into a • dispenser of alms to his own creditor — and above all, let it not put up his favor and bounty at auction, under the cover of a trust, to be bestowed upon the highest bidder. After the maturest reflection upon 'this subject, I have come to the conclusion that the interest both of the debtor and creditor, as well as the general purpose of justice, would be promoted by confining these assignments to the simple and direct appropriation of the property of the debtor, to the payment of his debts. The remnants of many of these insolvent estates are now wasted in litigation, growing out of the complex or suspicious character of the provisions contained in these assignments. One device after another to cover up the property for the benefit of the assignor, or to secure to him, either directly or indirectly, some unconscientious advantage, has from time to time, received condemnation. But new shifts and
These sound views of Justice Sutherland, have since been adopted by the Courts of the State of New York, and of several other States. They should be adopted and acted upon by Courts every where, unless inhibited by statute. No views ever expressed upon the-subject, are more clear, just, or appropriate. They are evidence of that high regard for honesty, and fair dealing, which ever marked the career of that able and distinguished jurist. The Courts of this State are not inhibited from adopting them by any provision of the statute. On the contrary, they are clearly in accordance with both the letter and spirit of our statute, which must be sustained by Courts, or a direct and open encouragement given to chicanery and fraud in the business transactions of the country. ,
There is one other question presented by the case, equally fatal to the assignees, so far, at least, as the interest of Earl, the attaching creditor, is concerned. There was no acceptance of the trust by the assignees in fact, until after the. goods had been seized under the attachment.
The assignees reside in the city of New York, and were not present at the time of the execution of the assignment. It was executed by Smith, and delivered to the attorney of the assignees in Branch County, on the 26th day of March, 1849. On the 6th day of April, thereafter, the goods were attached. On the trial of the cause the assignees introduced and read in evidence their own letter to their said attorney, dated on the 16th day of April, and in which they say; “we wrote to you under date of the 6th of April, instant, since which time we have twice telegraphed you, the last time accepting the assignment, and desiring you to write us fully upon the matter, and we would then give you instructions how to act in future. We could not tell from your letter to us how we were preferred, but, it is explained in a letter to Bostwick & Masterton from Mr, Smith, in which Mr. Smith states that
This letter of the assignees is explicit; and furnishes conclusive evidence that they did not in fact accept the trust until after the goods were seized under the attachment of Earl. A further implication arising from the language of this letter, is, that on the first information received from their attorney on the subject, they were dissatisfied with ■the terms of the assignment, and refused to become trustees under it, ■and that they did not in any manner signify their acceptance until after ■the 6th of April. The goods, therefore, according to their own written statement, introduced in evidence by their attorney, were legally'in the custody of the sheriff under the attachment, before their acceptance of the trust; hence the assignment is inoperative as against Earl, the attaching creditor, he having acquired a prior valid lien upon them.
That there must be an acceptance of the trust by the trustees before the assignment can take effect, is unquestionable. It is true that in some cases it has been held that where the trustees were not present, their assent for the purpose of giving effect to the transfer of the property might be presumed; this presumption, however, is not conclusive, but may be rebutted, and in the case under consideration, is rebutted by the letter of the assignees. In Lawrence et al., vs. Davis et al., (3 McLean, R., 178,) the Court held, “that in making a voluntary assignment of property, the assent of two parties was necessary to its validity as in every other case of contract, and that a debtor could not ohange his relation to his creditors by merely making an assignment of his property to them.” In Crosby vs. Hillyer, (24 Wend., 280;) the assignment was executed and delivered to the trustee, who hesitated and delayed to accept the trust; during the time of his hesitation and delay an execution was levied on the property. The Court held that the execution attached before the assignment took effect; that the trustee merely taking the assignment into his hands and retaining it, amounted to nothing; that there must be an acceptance, and that a delivery without an acceptance was nugatory. These cases are applicable, and decisive of the question.
Let it he certified to the Circuit Court for the County of Branch, as the opinion of this Court, that the assignment is void, and that the judgment of the Branch County Court should be reversed.