Wilson v. Berg

Mr. Justice Mercur delivered the opinion of the court, January 6th 1879. This was an issue to try the validity of an assignment made by David Kelly to the plaintiff in error. The defendant alleged it was made fraudulently, with intent to hinder, delay and defraud the creditors of the assignor. The assignment was general and for the benefit of all his creditors. It was regularly executed and acknowledged, and duly recorded on the same day. The entire good faith of the assignee is conceded. The effect is to impeach it by evidence of the acts and declarations of the assignor. Ilis acts and declarations are, undoubtedly, evidence in so far as they prove he has unduly controlled or changed the legal effect of the assignment. Beyond that they are not evidence. The statutory intent, given to the assignment, is to pass to the assignee, all the property of every kind, which the assignor owned at the time of the assignment. A preference, on the face of the assignment, of any creditor, other than those preferred by Acts of Assembly, would be void. An agreement with the assignee, at the time of its execution, that any of the property, which, legally or equitably, ought to pass by the assignment, should bo excluded from the inventory, and be left for the benefit of the assignor, would be fraudulent. This because the assignment itself would be contrary to the statute. If, prior to the assignment, the assignor had fraudulently conveyed or concealed any of his property, such acts would not impair the validity of a general assignment subsequently made. If the conveyed or concealed property can be recovered by the assignee, it should be for the benefit of creditors. If ho cannot recover it, then any creditor may pursue it in like manner as if the general assignment had not been made. The subsequent assignment does not condone any previous misconduct of the assignor. The Act of 1836 permitted preferences in assignments. The Act of 1843 declared preferences void, except as to claims of laborers. ' It has, however, been held that the confession of a judgment to one creditor, just before making a general assignment, and with a view of preferring such creditor, did not defeat the prior lien which he thereby acquired to the prejudice of other creditors: Blakesley’s Appeal, 7 Barr 449; [172] Worman v. Wolfersberger’s Executors, 7 Harris 59. Hence, although the intention of the debtor was to remove from the operation of the subsequent assignment, a portion of his estate and his conduct produced that result, yet the validity of the assignment is not thereby impaired. The preference was not in and by the instrument, through and by means of which the debtor surrendered to his creditors all dominion over his property: Id. No law compels a debtor to make an assignment for the benefit of his creditors. It permits him so to do, and directs as to its effect when done. Prior to such action, except as against a bankrupt law, he has an undoubted right to prefer any of his creditors, by a conveyance or transfer of property or by a confession of judgment, although he may thereby hinder or for ever prevent his other creditors from collecting their just demands. In case of a general assignment,- the law contemplates that the assignor shall pass over all his estate of every kind which he then owns. When that is done the assignment is in accordance with law, and the effect given to it by law, cannot be in fraud of any of his creditors. ' Although the claims of some of his creditors may be ripe for execution, and the debtor have property out of which they might be collected; yet an assignment by which they will receive only a pro rata share with other claims, not even due, works no legal fraud. The fraud that is forbidden arises from acts done contrary to law or equity. It may result from a disregard of proper forms, or, if they be .observed,'from doing the acts with the intention of reaching a result not sanctioned by the authorities. As the law implies no fraud in a debtor transferring property to one creditor,, to the exclusion of his other creditors, before an assignment, and with a view of making it, so no inference of fraud, in the assignment, can arise from a transfer at any time, of all the property he then has, for the benefit of all his creditors. The policy of the law regulating assignments is that the property of an insolvent debtor shall be divided among all his creditors, rather than pay some in full, and others nothing. So effectual is an assignment for the benefit of creditors that if it be placed by the assignor or any one interested, in the office of the recorder of deeds of the proper county, within the prescribed time, it takes full effect, although the assignee is ignorant of it or refuses to accept the trust: Marks’s Appeal, 4 Norris 231. If an -assignment be made in the form and manner provided by law, and duly recorded, so as to pass all the property of the assignor, we cannot see how the motive existing in his mind can affect its validity. If in morals the motive be a bad one, yet in law, it produces no forbidden result. In so far as it hinders or delays creditors, it is a lawful hindrance- and delay, and cannot be held fraudulent. The commission of a lawful act is not made unlawful by the ■fact that it proceeded from a malicious motive: Jenkins v. Fowler, 12 Harris 308; s. c. 4 Casey 176 ; Glendon Iron Co. v. Uhler, 25 P. F. Smith 467 ; Smith v. Johnson, 26 Id. 191. [173] Tlie conduct of the assignor which the learned judge appeal's to have thought the strongest evidence of fraud was a separate and distinct transaction occurring one week before the assignment was executed. It was the sale of a valuable tract of land to persons to whom he was indebted in a sum much less than he received for the land. There was also some evidence tending to prove his fraudulent concealment of the residue of the purchase-money. We think, however, that an assignment for the benefit of creditors can be impeached only for fraud in the assignment, or at the time of making it, so as to have attached to the instrument or affected its operation. An erroneous view of the bearing of this transaction on the validity of the assignment pervades the whole charge and controlled all the rulings of the court. As an assignment may be fraudulent, although all the forms of law are complied with, the first, sixth and ninth assignments are not sustained. Nor do we discover any error in the recital of the evidence covered by the fourteenth assignment. The general rule is that when part of a record is given in evidence, the whole shall be received, yet the rule is not so inflexible as to apply in all cases. It was stated by the judge, and not contradicted by the evidence, that the declaration of trust by Mitchell, although on the docket, was executed long after the assignment of the judgment to him. As he is not shown to have been present when that assignment was executed, and the declaration of trust is without date, and is not shown to have been executed in pursuance of a previous agreement, we cannot say there was error in its rejection. It appears that all other parts of the record were afterwards given in evidence. The twentieth assignment is not sustained. All the remaining assignments partake of one common error, and in so far as the alleged errors are in conflict with this opinion the assignments are sustained. Judgment reversed, and a venire facias de novo awarded. Chief Justice Agnew dissented.