Huey v. Prince

Opinion by Mr. Justice Dean, On December 20, 1895, L. H. Taylor & Company, brokers, by writing under seal, assigned to Arthur B. Huey certain book balances and equitable demands payable to the partnership, in trust, to divide the amount pro rata among certain specified creditors, whose names appeared on a list attached to the assignment. This assignment was not recorded. The next day, the same partnership made a general assignment for the benefit of its creditors, to George G. Pierie and Harrison C. Seeler, which assignment was duly recorded the day following. The assignee under the unrecorded assignment collected a sum exceeding $30,000, which was claimed by the assignees for the general creditors. Of this amount $9,442.21 was asserted to belong to Prince, one of the assignees under the unrecorded assignment, individually, not only by virtue of the assignment, but because he had obtained a judgment for that amount against L. H. Taylor & Company, more than a year after the assignment, on which judgment an attachment was issued and levied on the funds collected under the unrecorded assignment. The balance of the $30,000 was held for the other creditors named in the list appended to the writing, which was also attached by Harry E. Keller, trustee, under a judgment confessed to him as trustee, for them more than a year after both assignments. This .bill was filed for the purpose of determining the right of the assignees for general creditors to the fund. There was no dispute as to the facts, and the cause was argued in the court below on bill and answer. The fund was awarded, first, to the judgment of Abraham C. Prince, and the balance to the judgment of Harry E. Keller, trustee. From that decree the assignees for the general creditors bring this appeal, assigning for error the decree. The question is, what is the legal result of the failure to record the first assignment of a particular part of the estate for the benefit of particular creditors ? The learned judge of the court below, following Seal v. Duffy, 4 Pa. 274, and Weber v. Samuel, 7 Pa. 499, held, that the fund passing by the unrecorded assignment was subject to levy on attachments issued on judgments obtained after the recorded general assignment. The decision is clearly right, if those cases ought to rule the question. There has been no decision by this Court since they — 156 — were announced which expressly overrules them. But the court below, in the case before us, and this Court, in decisions following them, have had some difficulty in reconciling those cases with the express declaration of the statute. The 5th section of the act of March 24, 1818, 7 Smith’s L. 132, provides: “All assignments so as aforesaid to be made and executed, which shall not be recorded in the office for recording of deeds in the county in which such assignor resides, within thirty days after the execution thereof, shall be considered null and void as against any of the creditors of said assignor.” The statute is explicit, the assignment is “ null and void as against any of the creditors of said assignor.” Whether, for any purpose, it is good as between assignor and assignee it is not important to inquire, for that is not our case. The first case between contending creditors which called for a constructioü of the statute, was Seal v. Duffy, supra. It is badly reported, the facts not being fully or clearly stated. It would seem, however, that Duffy, on a judgment against Taylor & Company, issued an execution and levied on the property of defendants. On the same day that the execution was issued, June 18, Taylor & Co. made a general assignment in trust for creditors generally, which was not recorded; two days after, on June 20, they assigned all their property to Seal for the benefit •of all releasing creditors. Other creditors, with notice of the assignment to Seal, then issued executions and levied on the property seized on Duffy’s execution, subject to his levy. The ■sheriff sold the property and paid the money into court; feigned issues were awarded to determine the rights of the claimants. Duffy’s judgment was found by the jury to be fraudulent, which •eliminated him from the contention; it was further found as a fact that Taylor, the assignee under the first deed, although he had not recorded it, had accepted the trust. The court decided that the neglect to record the deed could only be taken advantage of by the execution creditors who levied on the property subject to Duffy’s execution; that Seal, the second assignee, could not, as against them, take the fund. Seal appealed to this Court, and it was decided that the legal effect of the unrecorded assignment to Taylor was to vest in him, the moment the deed was delivered, title in all the property intended to be conveyed, and thereby created him a trustee for the credit — 157 — ors; that equity would not suffer the trust to fail by reason of bis neglect to record the deed and, without a reconveyance, there was no estate in the assignor which passed to Seal by the second assignment, although it was upon the same trusts. In considering the express terms of the act of assembly, the Court says: “The language is, ‘as against any of the creditors,’ by which is to be understood, as against any one who may elect to make the objection in the only effectual mode in which it can be made, namely, by judgment and execution levied. . . . This restrained construction satisfies the terms of the statute, while it still leaves the deed operative so long as anything remained upon which it can operate, and is so far consonant with the equitable rule which forbids the destruction of a trust without the consent of all interested in it. The opposite construction asked for by tlie plaintiff in error would be a statutory cancellation of a deed of trust. . . . This would be contrary to the rudimental law of property, and there being nothing in tbe statute which compels us to this extreme we cannot agree to give it our sanction.” This case was heard before four of tbe five justices then constituting tbe court, Gibson, C. J., Rogers, Coulter and Bell; Burnside was absent. Tn less tlian two years thereafter the ease of Weber v. Samuel, 7 Pa. 499, came up for trial before Rogers, J., at nisi prius, one of tbe justices who sat in Seal v. Duffy. The main contention was as to tbe effect of an unrecorded assignment as to general creditors, and this was his instruction to the jury: “Was, then, the deed (the unrecorded one) of March 22, 1837, void? This is a question of law, and I instruct you that it is void, because it was not recorded in pursuance of tbe act of March 24, 1818. . . . That tliis case falls within tbe letter of tbe act cannot be doubted, for it applies to voluntary assignments such as this, and makes it tbe duty of tbe assignee to have it recorded in the county where tbe assignor resides.” On appeal, tbe majority of tlie Court reversed tins ruling, mainly on the authority of Seal v. Duffy, supra; Gibson and Rogers dissenting, and concurring with tbe construction of the act in Justice Rogers’s charge. While they do not expressly so state, the only inference is, that in less than two years after Seal v. Duffy was decided, two of the four justices who concurred in the decision bad changed tlieir minds. — 158 — We do not notice this for the purpose of negativing the binding force of the decision, but to call attention to the absence of an unwavering conviction in the judicial mind, at that time, as to the soundness of the construction put upon the statute in Seal v. Duffy. In Kern v. Powell, 98 Pa. 253, Kern on March 28, 1877, assigned certain property to his son in trust for assignor’s wife; the deed was not recorded; a few days afterwards he mad§ a general assignment to Powell for benefit of general creditors, which was duly recorded. The first assignee consented that the second should sell all the property and account for the proceeds of that conveyed to him by the unrecorded assignment. After sale the second assignee declined to pay, and the first brought suit. This Court held that noncompliance with the act of 1818 made the first assignment void as to all the creditors represented by the second assignee, and that all the propertjr passed to him, because he had recorded his deed in compliance with the act. In Dickson & Co.’s Estate, 166 Pa. 134, the same question on the same facts was ruled on the authority of Kern v. Powell. We concede that Seal v. Duffy has been many times cited by counsel and sometimes by this Court as authority since its announcement. Sometimes, too, without mentioning it by name, the decisions, as in the last two cases, have been in direct conflict with it. The argument of appellee’s counsel, that these two, apparently, conflicting decisions are distinguishable from Seal v. Duffy on their facts is to some extent correct, but the main fact is, that they could not have been decided as they were without giving an opposite interpretation to the statute from that announced in Seal v. Duffy. It appears to us that the decision was not free from doubt in the minds of all the eminent justices who pronounced it. Even where ádhered to since, its soundness has been most ably questioned by the ’ profession, and more than one judicial decision was in the teeth of it, although not expressly overruling it. There is no reason why we should give a strained construction to the act of 1818 in favor of execution creditors. The assignors, here, first sought to prefer certain creditors by the assignment ; this, doubtless, they discovered would, under the act of 1843, inure to the benefit of all the. creditors; then, impliedly treating the assignment, themselves, as void, long after it was made, after the general assignees had filed their first account — 159 — and an auditor had been appointed, the assignors confess judgments to the preferred creditors, the attachments are issued and the fund levied upon. The injustice this would work to the whole body of creditors, by thus withdrawing over $30,000 from them and giving that large sum to a special few, is palpable. We think the act of 1818 should be construed according to the intent so plainly manifested by its words. The first deed not being recorded within thirty days from its execution must “ be considered null and void as against any of the creditors of the assignor,” whether execution creditors or not. This, of course, overrules Seal v. Duffy, supra, and the case of Weber v. Samuel, supra, which immediately follows and rests upon it, in the construction of the act of 1818. In following Seal v. Duffy, the learned judge of the court below erred because this Court erred in its first interpretation of that act. We deem it proper to settle once for all the conflict between Seal v. Duffy and many of the eases following it, and perhaps others which may be decided in the future, by formally overruling it and its companion, Weber v. Samuel. But, aside from this, we think the decree of the court below ought not to stand. On the subject of assignments by insolvent debtors, dating from the decision in Seal v. Duffy, the judicial and legislative mind seems to have been somewhat antagonistic. The resolution of January 21, 1843, the acts of April 17, of same year, of April 16, 1849, of April 22, 1854, and of February 17, 1876, all seem to have been intended to overrule or modify judicial decisions. But the act of 1843 is the one which touches directly the case before us. It declares that: “ All assignments of property in trust, which shall hereafter be made by debtors, to trustees, on account of inability at the time of the assignment to pay their debts, shall be held and construed to inure to the benefit of all the creditors, in proportion to their respective demands.” This was followed by the decision in Blakey’s Appeal, 7 Pa. 449, that the act did not prevent the debtor preferring creditors by judgment before the assignment, and in Lea’s Appeal, 9 Pa. 504, that it did not prevent him from inserting a stipulation in the deed for a release from the creditors to be benefited. The latter case prompted the act of 1849, which declared, that such stipulation should be — 160 — held as a preference and inure to the benefit of all the creditors. This left untouched just one mode of preference, that by judgment before assignment, which has stood to this day. While the act of 1848 was in force when Seal v. Duffy and Weber v. Samuel were decided, it was not referred to by either court or counsel. In Weber v. Samuel the facts all arose before the passage of that act, in Seal v. Duffy, afterwards. Whether the assignment, which is not printed, by its terms, did not. bring it under the act of 1843, or whether its application was. not noticed, we cannot tell; we can say that it had no effect on the decisions. But assuming that the court correctly decided that, under the act of 1818 the first and unrecorded assignment, was voidable only at the suit of an execution creditor, how it would have decided had the act of 1843 been invoked by the assignee of the general creditors whose deed was recorded, is not decided. That is now the ease before us. The assignment to Huey is on its face a preference; it says: “ The intent and purpose being, that having respect to the superior claims of these depositors everything realized from the said accounts is to belong to and be divided among them.” This preference assignment, it will be noticed, is dated December 20, 1895 ; the general assignment is dated the day after; the attachments were not issued until sixteen months thereafter. In whom was the title to the property by the very fact of preference ? The act of 1843 says such preference shall, inure to the benefit of all the creditors. It seems to us, the moment the general assignee qualified he had the right to demand and receive this property assigned to promote a preference; no judgment long subsequent, nor any attachment upon it, could affect the right of the general creditors, for in the eye of the law it belonged as completely to. the general assignee as any other chose in action, for he was the. representative of all the creditors, and was bound to protect their rights: Irwin v Keen, 3 Wharton, 347. To hold otherwise the very object of the statute might be defeated. For illustration, a debtor discovers his inability to pay his debts; suppose, as argued by appellee, he can withdraw from his general creditors by a preference assignment, specific property for' the benefit of favored creditors, and although the assignment, is not recorded, it is only voidable on attack by an execution. — 161 — creditor; the debtor, then, at his leisure, may confess judgment to the favored creditor, and he only has the right to touch the property thus withdrawn. If this be correct, there is nothing to hinder the debtor from pursuing the same plan with all his property; that is, from assigning it in separate parcels to separ rate assignees, and thereafter confessing judgment that it may be seized and appropriated in the order and degree of his favor. Such a construction of the act of 1843 cannot be sustained. And so this Court, in substance, held, in National Bank’s Appeal, 57 Pa. 193. In that case, Miller, the assignor, conveyed a part only of his property to assignees in trust to sell the same and pay the proceeds to certain named creditors, among them National Bank, appellant, any surplus to be paid to the assignor. Creditors not preferred claimed to share pro rata in the fund. The court below held this to be an assignment because of inability to pay debts, and allowed the creditors not named in the preferred list to come in on the fund. The bank appealed to this Court, and the decree of the court below was affirmed, Agnbw, J., saying, the act was palpably intended to prevent the very preference made in the assignment, and thus placing the assignor’s property beyond the reach of all the creditors. The creditors in this case who asserted a right to share in the fund were not execution creditors, and had been impliedly excluded from the particular property, by not being in the preferred list. If they had a right in the assigned property, it accrued the moment the conveyance was made embodying a preference. Neither judgment nor execution would have strengthened this right. It arose immediately when the assignor, by reason of his inability to pay his debts, committed the act which the statute declared gave them the right. In our case the claim is made by the qualified representative of all the creditors, and he is the proper party to make it. It is clear to us that the preference set up cannot be successfully enforced in face of the act of 1843. The subsequent judgments and attachments of the preferred creditors in no way helped the situation as to them ; there was nothing remaining in the assignor; all his right, title and interest had passed to his assignees for creditors generally by the conveyance and the provisions of the act of 1843. Therefore, they are entitled to the money for distribution among all the creditors. — 162 — The decree is reversed, and it is ordered that the fund in dispute be awarded to George G. Pierie and Harrison C. Seeler, assignees for general creditors. Costs pf tbis appeal to be paid out of the fund.