Richardson v. Stapleton

| Miss. | Oct 15, 1882

Cooper, J.,

delivered the opinion of the court. •

The appellants, on the second day of February, 1882, sued out an attachment against the estate of the defendants, who were partners and merchants in the city of Jackson.

The grounds for attachment; as stated in the affidavit of the plaintiffs, were: —

1. That the defendants had property, or rights in action, which they concealed, and unjustly refused to apply to the payment of their debts.

2. That they had assigned, or disposed of, or were about to assign or dispose of, their property, or rights in action, or some part thereof, with the intent to defraud their creditors.

3. That they had converted, or were about to convert, their property into money, or evidences of debt, with intent to place it beyond the reach of their creditors.

4. That they fraudulently contracted the debt, or incurred the obligation for which suit was about to be brought.

The attachment was levied upon the stock of goods which had been in the possession of the defendants, and composed their stock in trade previous to the assignment thereof hereinafter mentioned.

The defendants, by proper plea, traversed the causes assigned for suing out the attachment.

On these issues a trial was had, resulting in a verdict and judgment for the defendants, from which judgment this appeal is prosecuted. The case is presented here on six special bills of exceptions taken to the action of th.e court on the trial of the cause ; we have found it necessary only to pass upon the first, which was taken upon the refusal of the court to instruct the jury, that a deed of assignment executed- by the defendants on the day on which the attachment was sued out, and a few hours before its issuance, was void on its face. This deed recited that Stapleton & Brother were at that time indebted to divers persons in divers sums, which they were then unable to pay, but were desirous of providing for their payment by a conveyance of all their estate not exempt by law. It then conveyed to Wm. M. Watson, as trustee, “all the stock of goods, wares and merchandize now in store, accounts, promissory notes, debts, deeds of trust, choses in action, property and effects of every description belonging to said parties of the first part, or either of them, or in which they have any right or interest, now due or payable, or to become due or payable, except what are exempt to them by the laws of the State of Mississippi.” A schedule marked “A,” and referred to in the deed, was as follows : —

“ Schedule A to accompany and form a part of assignment made by Stapleton & Bro., February 2, 1882 : —

Assets.

Stock of goods, wares, and merchandize, store fixtures, etc., about.$9,000 00

Notes, open accounts, deeds of trust, etc., about . . 7,000 00

1 horse and buggy. 350 00

Cash on hand . 24 25 ”

After providing in the usual terms for the sale of the goods and the collection of the choses in action and declaring certain preferences, the following provision was made: “If at the end of nine months, there shall remain any of said goods, wares, and merchandize, or other property of said parties remaining in his hands unsold, and there be debts still unpaid and due by said parties of the first part, said party of the second part shall proceed .to sell said remaining property and evidences of debt to the highest bidder, for cash, after giving ten clays’ notice of such sale by posting in three or more public places in the city of Jackson.” It is this clause, and especially that portion of it which requires the sale of the evidences of debt to which objection is made.

It is said that deeds of assignment for the benefit of creditors aré almost peculiar to America, and that when first introduced their validity was questioned under all circumstances because, they withdrew the property of the debtor from subjection to the claims of creditors by ordinary legal process, and thus delayed them during the time in which the deed was operative; but as the delay was but a necessary incident to the exercise of a legal right by the debtor, the right of appropriating his property to the payment of his debts, their validity, when, unquestioned for other causes, soon became conceded.

The objection thus originally interposed to these instruments, and the reply which was made to it, furnish the legal test for the solution of all questions touching their validity.

The debtor, as owner of his property, retains, though debtor, the power of its disposition. But it is a power restricted by his relation as debtor, and exercisable only for the purpose of devoting the property or its proceeds to the payment of his debts. A valid assignment for the benefit of creditors is a devotion of it to this purpose. If it is more or less than this, it is not an assignment valid because of the rightful exercise of the assignor’s power as owner, but valid only by and because of the assent of his creditors to it.

Successful attacks upon these instruments are based either upon the fact that they are made with a fraudulent, or con-vinous, intent on the part of the assignor, or that their tendency and effect is violative of the rights of creditors. Those of the first class are said to be fraudulent in fact — those of the other fraudulent in law. In truth, they are both fraudulent in fact, but in one class the fact is to be found by the jury upon consideration of all the circumstances tending to prove the intent of the assignor ; in the other, it is found by the court by a construction of the instrument alone.

It is claimed by the appellants that the court below should have declared the deed under consideration to be void upon its face. In all cases of assignments for the benefit of creditors, it is necessary that the property conveyed shall be converted into money for the payment of the debts due by the assignor, and within certain limits, not well defined, he has been permitted to direct the time and manner in which this shall be done. It is necessary, however, that in doing so he shall keep in view the intei'ests only of the creditors, not considering his own. He is not only prohibited from providing for a benefit to himself, but he may not impress his will upon the future management of the trust-estate to the injury of his creditors. Whatever provisions or limitations in a deed lead to the deprivation of their right to appropriate the property to their demands are unauthorized by law, and taint, with their illegality, the whole instrument of which they are a part.

It must be borne in mind that the trustee in a deed of assignment takes the assigned property impressed with all the limitations appearing on its face. It is the measure of his ■ right, his power, and his duties, and both he and the creditors who claim under it must abide by the terms it imposes. No court has the power to relieve him from compliance with it, nor to substitute its judgment for that of the assignor. To change its provisions is to create a new, not to execute the original, trust. Creditors must attack and overthrow it, or abide by it as written.

The assignor had the legal right to execute a deed devoting his property to the payment of his debts. It is the right to thus devote it that is the foundation of the right to convey. More correctly speaking, the law required this devotion, but permitted him to make it. On the other hand, his creditors were by law entitled to subject it to their demands by legal process, or to have it surrendered by the debtor without limitations or restrictions injurious to them. Was this done by the deed ?

It conveyed to the trustee a stock of goods of the estimated value of $9,000, and choses in action amounting to the sum of $7,000. In considering the validity of this deed, in determining whether its provisions ordinarily and naturally would subserve or subvert the right of creditors, we must consider the character of the property assigned, the habits of man in dealing with it, the manner in which it is ordinarily converted into money. Merchandize, we know, is the subject of purchase and sale throughout the commercial world. It has a known, though fluctuating value, and is universally converted into money by sale. Choses in action have no entity. They are not ordinarily converted into money by sale,, but by collection-. Their value is fixed by the right-to enforce their payment through the courts, and by the-habits, character, and solvency of the debtor. Men ordinarily put their goods into market, their choses in action in the courts. Sales of such property are unusual, resorted to-only under peculiar circumstances, and when resorted to ordi" narily, if not universally, resulting' in loss to the seller. For this reason, though they may by our statute be seized under execution, they are not vendible thereunder, as is other property, but the officer is required to summon the debtor to answer as garnishee. In Anderson v. Sachs, 59 Miss. Ill, we held that a deed was not avoided by a grant of power to the trustee to sell choses in action, but there the power conferred was to be exercised, or not, by the trustee at his discretion. If fairly and honestly exercised, it would not, and could not, result in injury to creditors, because the trustee might-, and it was his duty to, collect such of the choses in action as were collectible. It was his duty to acquaint himself with the circumstances of the debtors, and if upon offering the debts for sale- a sum approximating their value was not bid, it would have been his duty to decline the offer. To a suggestion that the power was a dangerous one and might be abused, we replied that the creditors had the same safeguards against the abuse of that power that they had against the abuse of other powers necessary to be conferred, i.e., to restrain the trustee through the Court of Chancery,' and to hold him personally liable for its unwarranted exercise.

The provision here is widely different. It is not a power to be exercised by-the trustee if deemed by him beneficial; but he is absolutely and unconditionally required, after the expiration of the time named, to sell. In'addition to this, the time in which collections might be made was limited to nine months, and this was insufficient to enable him to collect the dioses in action by legal proceedings. It is said that we cannot know that the claims were not all secured by mortgages or within the jurisdiction of justices of the peace, in which event, it is said, they might have been collected by suit, if ■collectible, within the time prescribed. But this is not shown ky the deed, nor does anything appear from which such facts might be fairly inferred. We are impressed with the force of the suggestion made by the counsel for appellants, that this provision in the deed naturally operates as an invitation and temptation to the debtors.of the assignor to defer the payment of their debts with the expectation of buying them at the forced sale at less than their amounts.

We are of opinion that this clause of the deed, operating before the lapse of time sufficient to enable the trustee to collect the dioses in action by suits at law would, in by far the greater number of cases, result in their sacrifice. That thereby, and to the extent of the loss so occurring, the property assigned would be withdrawn from the creditors of the assignors; that this is an unlawful infringement of their rights by the assignors and avoided the deed.

It follows that the court erred in refusing the instruction asked, for which reason the judgment is reversed and cause remanded.