Penn Plate Glass Co. v. Jones

Opinion by Me. Justice Mitchell, This is a bill by an attaching creditor seeking to have a transfer of property from Jones, the principal debtor, to Mellon & Sons, the garnishees, declared void, first as in fraud of creditors, and secondly, as to part of it, as an assignment for the benefit of creditors, not recorded within thirty days. On the first point the referee found that Jones was indebted to the firm of Mellon & Sons, and was in failing circumstances, but “ was endeavoring to defer the inevitable result of his insolvency and liquidation, in the hope that, in some undefined way, he might be able to continue the business, but the bank (Mellon & Sons) recognized that it was not possible for Jones to continue his business, and was endeavoring to put itself in such condition as would best secure the payment of the indebtedness of Jones to it.” Mellon & Sons thereupon took an assignmentinwriting from Jones to themselves directly of certain stocks, etc., as collateral security for his existing and any future indebtedness to them, and on the same day an assignment, also in writing, to defendant W. S. Mitchell for the use of Mellon & Sons, of all the debts, dues and accounts owing to said Jones, trading as the Campbell-Jones Glass Co., as further collateral security for his indebtedness, existing and future. A few days later, by written bill of sale, Mellon & Sons bought of Jones [296] his entire stock of glass and other merchandise, fixtures, books, book accounts, debts, etc., and paid for them by a credit on his indebtedness duly entered in his account in their books and the surrender to him of certain notes and other evidence of debt. By these transfers the Mellons practically acquired possession of all the available assets of Jones, though the value did not equal the amount of his debt to them. The referee so found, but he also found that “as respects Mellon & Sons they did not enter into any arrangement with Jones or any one else to do this for the. purpose of hindering and delaying the creditors, but they procured a transfer of all this property made to themselves, either by way of collateral or by purchase, for the purpose of paying or securing to be paid the indebtedness of Jones to the bank. They knew that Jones was broken, and made haste to acquire all that could be had.” He therefore found that there was no fraudulent intent, and no fraud in fact. In this conclusion the court below concurred, and a review of the evidence shows us no ground to question the correctness of this result. What a creditor may do in a bona fide effort to secure payment of his claim, notwithstanding the delays or hindrances he may thereby impose upon other creditors, has been very fully considered in the recent case of Werner v. Zierfuss, 162 Pa. 360. The facts of the present case bring it clearly within the rules there settled, and the law was properly applied to them by the learned referee and the court below. On the second point, the referee found that the assignment by Jones of all the debts, dues and accounts owing to him to Mitchell for the use of Mellon & Sons was in effect an assignment for the benefit of creditors, and therefore void against plaintiffs for default of being recorded within thirty days. It appeared that Mitchell was a partner in the firm of Mellon & Sons, but the learned referee held that this did not alter the rule applicable to a case where property was transferred to a trustee to be administered for the benefit of creditors, either in general or by preference, which would be void under the act of 1843. The referee did not have the advantage of the citation of Vallance v. Ins. Co., 42 Pa. 441, and the court below on the authority of that case reversed his conclusion on the second point, and held the assignment good. We are now very earnestly pressed to decide that Vallance v. Ins. Co. is in [297] applicable to the present case, because it professes to rest on the act of 1818, which is different from the act of 1843, and because what was there said, which is apparently applicable here, was upon a question not raised by the facts, and is therefore obiter dictum. We are not able, however, to assent to either of these propositions. Yallance v. Ins. Co. arose long after the act- of 1843, and, although that act is not specifically referred to in the opinion, it was as applicable in that case as in this. But on the point here involved there is no difference in the statutes. The act of 1843 provides that all assignments by debtors to trustees to pay their debts, to prefer one or more creditors, etc., shall inure to the benefit of all creditors in proportion to their respective demands. This provision was a change of the law as to preferences, as it stood under the act of 1818, and, while sustaining the assignment, avoided its preferential features by giving all creditors an equal standing and proportionate interest under it. Had the assignment by Jones been to a third party for the use of Mellon & Sons, the argument of appellant would have been sound, for under the act of 1843 the preference would have been void but the assignment would have been good, and would have inured to the benefit of all creditors alike. But the point of the present case is that the assignment to Mitchell was not an assignment for the benefit of creditors at all, which is required to be recorded under either act. As to this our decisions are uniform and conclusive. In Chaffees v. Risk, 24 Pa. 432, it was held that an assignment directly to the creditor himself, either in satisfaction or as collateral security for his claim, is not an assignment for the benefit of creditors within the recording feature of the statute, and this decision has been uniformly followed: Henderson’s App., 31 Pa. 502; Claflin v. Maglaughlin, 65 Pa. 492; Handy’s Est., 167 Pa. 552, 562. When, therefore, the case of Vallance v. Miners’ Ins. Co., 42 Pa. 441, came before this Court, that point was already settled, and is so treated in the opinion, referring to Chaffees v. Risk, and the real question presented was whether an assignment to one partner in trust for the payment of the firm debt was an assignment to the creditor himself. It was so held, and it is noteworthy that such a case was one of the illustrations previously used in the opinion in Chaffees v. Bisk in answering [298] the same argument now presented by appellant, that in the present case Mitchell was a trustee for the other partners. “ It seems to be conceded,” says Chief Justice Lewis, “ that where the assignment is to one creditor only, for the security of his own debt alone, the act of 1818 does not apply. But it is thought that where there are several assignees they are trustees for each other. If this be so, they are certainly not the kind of trustees for the creditors of the assignor which fall within the true intent and meaning of the act. ... To adopt the construction contended for would invalidate all assignments to secure partnership debts, because it might be said with equal propriety that partners are trustees for each other.” The decision in Vallance v. Ins. Co. was the logical sequence of the same view. The reasoning of Strong-, J., in support of it is not only in the same line, but is in itself sound and convincing, and we should not hesitate to follow it, even if the case were not too long settled an authority to be now disturbed. The learned court below was right in applying the rule to the present case. Judgment affirmed.