Fulton & Bro. v. Gibian & Co.

Lumpkin, Justice. The facts of this case appear in the reporter’s statement. 1. The execution and delivery by an insolvent partnership of several mortgages, all bearing the same date, does-not make an attempted assignment for the bénefit of creditors. Hollingsworth v. Johns & Co., 92 Ga. 428. Nor does the transaction, considered as a whole, take the character of such an assignment because, in addition to the mortgages, the partnership also executed and delivered to the mortgagees and other creditors an instrument transferring as collateral security for the claims of all these creditors the dioses in action belonging’ to the partnership, it not appearing that a trust in favor of the debtors or of any one else Avas thereby created. An insolvent debtor may assign to- a creditor, for that creditor’s exclusive benefit, dioses in aetion as collateral security for his debt. Boykin, Seddon & Co. v. Epstein et al., 94 Ga. 750. It being clearly the right of a debtor to secure his creditors in either of the above mentioned ways, we cannot see Iioav securing them simultaneously in both ways would render the transaction an assignment to which the assignment acts of 1881 and 1885 would be applicable. The decision of this court in Powell et al. v. Kelly Bros. et al., 82 Ga. 1, supports the ruling made in the present case. The case of Kiser & Co. v. Dannenberg Co., 88 Ga. 541, is altogether dissimilar; indeed, the dissimilarity is so-obvious, we need not undertake to specify the points of difference. In Johnson v. Adams, 92 Ga. 551, there was an element of trust. In the head-note of the decision therein,. [233] the distinction between that case and one like the present is clearly pointed ont. There are other somewhat similar cases in which a trust of the same character was created, which renders them inapplicable to the present discussion. 2. The instrument by which Gfibian & Company, the insolvent partnership, sought to effect a transfer of their choses in action to certain of their creditors was as follows: “For value received, we hereby transfer and assign, for collateral security, to the Exchange Bank of Macon [and other named creditors] the accounts, claims, choses in action and equities due and owing to us, a schedule of which is annexed to this transfer and made a part hereof. The said accounts to be collected or used and applied to the debts which the parties named hold against us, all accounts collected to be distributed pro rata upon the mortgages executed by us in favor of said parties on October 15th, 1891. Any overplus that may be collected over and above the claims aforesaid shall be paid upon the mortgages of Max Cohen [and two other named creditors], to whom such claims are also transferred and assigned. Such overplus to be distributed pro rata on the amounts due such parties, as shown upon certain mortgages which were also executed by us on October 15th, 1891, in their favor. We hereby waive all notice required by statute in case any of these claims should be made by the parties to whom they are hereby transferred. This October 16th, 1891.” It will be observed that the above instrument specifically stipulates that the transfer thereby made is to the second class, as well as to the first class, of the creditors therein named. Unquestionably, therefore, the legal title to* the property thus assigned was effectually transferred to both classes of creditors jointly, each class having an equal right with the other to immediate possession, and each taking a present interest therein. It is true that the instrument effecting this transfer plainly contemplates that, in order to secure the fruits thereof, the property must necessarily be converted into cash; but it does not undertake to impose any duty in this regard upon the one class rather than upon [234] tbe other. It simply vests in both classes jointly the legal title, leaving them free to adopt such means as they may command to effect a division of the property Clearly, the creditors of neither class are constituted trustees for the other, given any power to exercise independent and exclusive control over the property, or charged with any duty of converting the same into cash and accounting to the members of the other class for their respective interests. It would require a considerable strain to hold that any trust was created by this assignment. Surely, if none of the creditors made any attempt to collect the choses in action so assigned for the protection of all, and allowed the same to become utterly worthless in their hands, we would not feel authorized to hold that either class would thereby become liable for the loss thus occasioned to the members of the other class. The case of Boykin, Seddon & Co. v. Epstein, supra, distinctly settled the proposition that a debtor, in the exercise of his right to prefer creditors, could assign choses in action as collateral security, either to a single creditor, or to a number of creditors jointly, provided no trust was created by such transfer. Of course, it is not a necessary prerequisite that each and every assignee should be given an equal interest in the property assigned; that is to say, the debtor would be entirely at liberty to provide that the interest of one creditor should be, say one half, that of another one twelfth, and so on. In other words, it is not incumbent upon the debtor to himself divide the property up, giving to each creditor only so much thereof as it is desired shall constitute his part; but an assignment of the whole may by one instrument be made to all the creditors, the particular interest of each in the undivided whole being sufficiently specified to enable a subsequent division of the property to be made by the creditors among themselves. The real objection urged against the assignment made in the present case is, that Gibian & Co. had no power to [235] arbitrarily divide tbe assignees into two separate and distinct classes, giving to one a preference and priority of payment over the other. As no trust was imposed upon tbe first class by this arrangement, we fail to see how the assignment would be thereby invalidated. The sole purpose of this provision was to definitely fix the beneficial interest each class should receive under the joint assignment to both. Had property worth a definite amount been assigned, there surely could be no objection to the debtors providing that the interest of certain creditors should, in any event, be equal to the full amount of the claims held by each, respec-' tively; and after this interest was deducted and paid out of the property as a whole, the balance remaining should be divided pro rata, among other named creditors according to the amounts of their respective claims. What was done in the present instance, amounts practically and substantially to the same thing. The exact value of the choses in action assigned could not, because of the uncertainty as to their collection, be definitely ascertained. Therefore it was that Gibian & Co-., wishing to> save some of their creditors entirely from loss, provided that the interest of this class should equal the full amount of their claims, regardless of the, actual value of the property assigned; and to successfully carry this scheme into effect, further stipulated that sufficient of the proceeds realized from the property should be first set apart and paid over to this class, in order that the remaining interest conferred upon the creditors of the second class might be determined and divided ratably among the latter. Really, the important thing to be considered is whether or not the instrument by which the transfer was effected passed the title to the property actually assigned into both classes of creditors jointly, and not into one class alone for the benefit of both. We have no hesitation in saying both classes took under the assignment a joint, present and immediate interest in the property. This being so, it is of very [236] little practical importance to inquire as to the precise beneficial interest which, as between themselves, either class could assert against the other. Had the property been actually assigned and transferred to one only of these classes, giving that class exclusive possession of and control over the property in order that its claims should first be satisfied, and imposing upon it the duty of then administering the property for the benefit of the other class, an express trust would have been created, and the case would have worn an entirely different aspect. 3, 4. We do not think that Fulton & Bro., intervening creditors, established by a sufficiency of proof their contention that they were entitled to rescind-the sale of their goods to Gibian & Co., on the ground of fraud in the purchase. And on the whole, we find no error in the granting of a general nonsuit as to all the intervenors. Judgment affirmed.