M'Allister v. Marshall

Tilghman C. J. after particularly stating the case, delivered his opinion. When the cause was argued, I strongly inclined to the opinion that the trust might be supported, because the creditors by whom it was created, had debts fairly due from Charles Marshall and Son, to a much greater amount than the value of their whole property; so that the relinquishment of part in favour of the family, seemed no more than giving up what was their own: and although this view of the case is just, so far as concerns the debtor and those Creditors who wished to provide for his family, yet on full consideration of the bearing of this transaction on other creditors, I have been induced to alter my opinion. We have no bankrupt law. In considering therefore what an insolvent debtorunay do, and what he may not do, as to the disposal of his estate, we must have recourse to the common law, and the provisions of the statute, 13 Eliz> c. 5. The debtor may prefer one creditor to another, and for this pur — 345 — pose he may make a conveyance of any part of his property at its fair value. But he cannot under a pretence of preferring one creditor, make a conveyance for the purpose of hindering others from coming at his property, nor above all can he by any mode of contrivance or secret trust, cover any part of his effects from the legal/process of any of his creditors. If Charles Marshall had proposed to part of his creditors to accept a conveyance of his whole estate, for the purpose of excluding all others, who would not consent that a portion of it should be secured for his wife and children, it cannot be doubted but the proposal would have been fraudulent, and its acceptance by the creditors could not have Washed away the stain. I do not believe that Mr. Marshall intended in fact to defraud, and I am very sure, from personal knowledge of many of the creditors, that they were actuated solely by motives of benevolence. But we must discard all private knowledge or conjecture, and consider the case as it is presented on the written evidence. Now when I look at the assignment, and the reconveyance of'part of the assigned property in trust for the family of the assignor, they appear to be one transaction, as much as if the whole had been contained in the same deed. I must take it, that part of the consideration of the assignment was, that there should be a reconveyance; in other words the assignment was executed, with an understanding that the family should be provided for by a gift of the house and lot. The condition imposed on all the creditors who had not executed the power of attorney, was unreasonable; not only were they to release all demands, but also to leave it to the discretion of persons whom they had not chosen, to relinquish at their pleasure any portion of the property received from their ■ debtors. This is going further than is warranted by the decisions of this or any other court. In Lippincott v. Barker, it was held, that an assignment of all the debtor’s property, to ■ be equally divided among all the creditors who should sign a releash within a given time, was valid. The opinion of the Court was restricted to the particular circumstances of that ■case, in which creditors, to a greater amount than the whole estate, as soon as they were informed of the assignment, agreed to accept it, and executed releases. If the Marshalls had made an absolute conveyance of their whole — 346 — estate to any number of creditors whose debts were fairly e(lU£d to the estate, it would have been good, and those crediturs might afterwards have done what they pleased with J}ut that is not the case. Who can say that the assignment would have been executed, without the agreement to reconvey a part? Very important consequences are involved in the decision of this cause. If the trust deed be supported, it will be an inducement for every insolvent debtor, to insist on a provision for his family. And he will accomplish his object, if he can but prevail on a number of creditors, who have debts equal to his whole estate, to accept his offer. There will not be wanting powerful motives to join in this scheme. Each creditor will reflect, that if he refuse he may lose every thing. What the law authorizes, he has no reason to think unjust or immoral, and then even honest men may fall into a practice, which, without any ill intention on their part, will be ratifying under the sanction of this Court a system of fraudulent bankruptcy. It is no satisfaction to the excluded creditors to tell them, that they have their remedy by actions against the defendant. Their actions are fruitless, because by the laws of Pennsylvania, every defendant who surrenders his property for the use of his creditors, is discharged from imprisonment. But his wife and children are not obliged to sui*render their property. If then we decide that the property is legally vested in the wife and children, it will remain to them, and the head of the family will nevertheless be entitled to his discharge. These are the considerations which have induced me to be of opinion, that the assignment was void, so far as concerns those creditors who refused to accept it. Consequently the property in question, having never passed from Charles Marshall, was subject to the execution of the plaintiff, who is entitled to judgment in this ejectment.- Ye ates J. A legal objection has been raised to the plaintiff’s recovery in this case, founded on his subscription in the sheriff’s docket. He has paid only 140 dollars 69 cents, the amount of the costs of his action against Charles Marshall and Son, and retained in his own hands the amount of the purchase money. Suppose the amount of his debt and interest at the time of the execution of the deed to be 2962 — 347 — dollars 93 cents, this sum added to the costs paid, there would remain 1896 dollars 38 cents to be paid by him out of the consideration money of 5000 dollars. I see no force in this objection. The sheriff 'has signed a receipt for the purchase money, and has acknowledged the deed. He is therefore liable for the balance of 1896 dollars 38 cents, to the party who may lawfully demand it. Should the plaintiff succeed in the present instance, he would become responsible to the sheriff under his written engagement. But should he fail therein, there could be no reason whatever to charge him with the balance. It cannot be pretended, that while the wife and daughters of Chazles Marshall hold and enjoy the premises in question, the purchaser at the sheriff’s sale should, after losing his debt and costs, pay him the surplus of the purchase money. More serious difficulties, arising from the peculiar circumstances of this case, occur to our consideration. [His honour here particularly stated the facts.] The doctrine of assignments executed in favour of creditors by an insolvent debtor, has been much agitated, and has undergone the full consideration of this Court in the late cases of Wilt v. Franklin, 1 Binney 502, and of Lippincot v. Barker, 2 Binney 174, In the last case it was held by a majority of the Court, that an assignment by a debtor of all his property to trustees, for the benefit of such creditors as should within four months execute a release of all demands, was good, provided certain creditors agreéd to accept it on that condition. I see no cause to recede from my opinion delivered in that case. I freely admit, that independently of the bankrupt laws, a debtor may prefer one set of creditors to another, and that such a measure would neither be illegal nor immoral. The present case goes much farther. From the internal evidence, which the two powers of attorney, the deed of assignment of the 14th February, and the release to the trustees of the next day, carry with them, independently of the circumstance of the two last deeds being attested by the same witnesses, I am constrained to conclude, that the assignment was made in full and perfect confidence, that Mrs. Marshall and her daughters should receive the provision contained in the release, and that this was the great leading motive to make the assignment, The — 348 — «•editors at their first meeting directed the assignees whom they had chosen, to report the measures best for themselves and also for Charles Marshall and Son. The powers of attorney contemplate a compromise of mutual interest, and the proviso in the conclusion of the conveyance to the trustees, shews manifestly the sense of the parties on the whole transaction. I» therefore consider the assignment and release, though purporting on the face of them to be made with an intervening day, as cotemporaneous acts depending on each other, and in fact as one instrument. Of course the question in my view of it is reduced to a single point, whether the assignment and release under these circumstances can legally bar such creditors as refuse to accede to those measures. It has been urged, that one or more creditors may legally accept of an assignment of the whole or' any part of the estate of their debtor in payment of their demands, provided it does not exceed in value the amount of his or their debts; and that being so entitled, they may convey it to whom they think proper. This is not that case. The terms held out to the creditors are unreasonably hard and severe. Unless théy would surrender up their undoubted individual right of judgment, and subscribe the letter of attorney, giving a carte blanche, to the assignees, ratifying the trust for the wife and children of Charles Marshall, they are excluded from any participation of the dividends. This appears to me a species of compulsion. I have no doubt that the most humane feelings for an unfortunate family, induced this arrangement, but my moral sense imperiously dictates to me, that until the debts of the head of the' family are paid, his relatives cannot justly entitle themselves to any portion of his property. The trust created by the assignees is certainly valid against the subscribing creditors, who by their subscription have assented to their acts. With their own property they might do as they pleased, and were under no control. But a composition made in order to exempt any part of the property from creditors, who might refuse their assent to the .proffered terms, seems to me unavailing as to the dissenting creditors, and taints the whole transaction. Lippincot v. Barker was professedly decided by the majority of the Court under, the peculiar circumstances of that case. From — 349 — the facts here shewn, I am fully satisfied that a trust for the family of Charles Marshall was originally intended by many of the creditors, which I cannot conceive binding on those creditors who have been unwilling to authorize that measure. I am not pi-epÉ?ed to say, nor is it necessary that I should express an opinion, whether the humane views of the creditor might not have been effectuated in some other mode, or whether it could be done legally. The object of the assignment has ceased; the debts of the subscribing creditors have been fully released by'their attornies in fact, constituted for that purpose with full and ample powers. Consequently the premises in question revested in the former owner as to non-subscribing creditors, and were liable to their execution. I am therefore of opinion that judgment be entered for the plaintiff, to be defeasanced by the payment of principal interest and costs of the two judgments entered for the plaintiff and John Erskine against the defendant, in conformity to the terms proffered by his counsel in the course of -the argument. Br.ackenr.idge J. The following discourse which I have found amongst my papers, would seem to have some bearing-on the case before us. it is part of a sermon from the 16th chapter of St. Luke’s Gospel, beginning with the first verse. “ There was a certain rich man, which had a steward, aiid “ the same was accused unto him that he had wasted his “goods. And he called him and said unto him, how is it “ that I hear this of thee? Give an account of thy stewardship, for thou mayest be no longer steward. Then the “ steward said within himself, what shall I do? For my lord “ taketh away from me the stewardship. I cannot dig, to beg ‘C,I am ashamed. I am resolved what to do, that when I am ■ “ put out of the stewardship, they may receive me into their “ houses. So he called every one of his lord’s debtors unto “ him and said unto the first, how much owest thou unto “ our lord, and he said an hundred measures of oil. And he “ said take thy bill, and sit down quickly, and write fifty. “ Then said he to another, and how much owest thou? And he said an hundred measures of wheat. And he said unto him, Sake thy bill and write foicr score. And the lord commend350 “ ed tbe unjust steward, because he had done wisely; for “ tlle children of this world -are in'their generation wiser “ than the children of light. And I say unto you, make you « friends of the • mammon of unrighteousness, that when ye “fail, they may receive you intdffesverlasting habitations. “ He that is faithful in that which is least, is faithful also in “ much; and he that is unjust in the least, is also unjust in “ much. If therefore ye have not been faithful in the un- “ righteous mammon, who will commit to your trust the “ true riches? And if ye have not been faithful in that “ which is another morís, who shall give you that which is “ your ownP No servant can serve two masters; for either “ he will hate the one and love the other, or else he will “ hold to the one and despise the other. Te cannot serve God “ and mammon.” “ This steward was an insolvent man, who was unable “ to pay over to his lord the monies which he had re- “ ceived, and for which he had become his debtor. He “ cast himself therefore about to settle the account in collu- “ sion with the debtors of his lord. The lord commended “ the unjust steward, not it is to be presumed, because he “ was unjust, but because he was necessitous. Pie had done “ wisely” for that occasion, and not what the children of “ light would do, -but not more wisely for all times than the “ children of light would do, for I will venture to say, his “ lord would never trust him again. “ In our day and in this generation, the children of this “ world think themselves wise in defrauding their creditors, “ and doubtless they exhibit no small share of worldly wis- “ dom in the devices to which they resort in accomplishing “ that object. But my brethren, I take it there is but a shade “ of difference in law, and none at all in conscience, between “highway robbery and the compelling a creditor to take “ less than his due, at the same time that by any contri- “ vanee, or as the lawyers call it, shift, or chevisance, you “ save something for yourself” So far the divine. W ould not the moralist say the same thing? For what is ,religion but morality, with a sanction drawn from a future state of rewards and punishments? Would not .the jurist say the same? For what is law, but the enforcement of justice amongst men? The reddere suum cuicjne is the definition of justice. Would not the politician — 351 — say the same? For the happiness of the social state, is but the aggregate of individual happiness, and this depends upon the mqral rectitude of each one of the community. An honest man may not be able to pay his debts, owing to misfortune, or to disappointment in his calculations. But no honest man, or child of light as the divine would say, would withhold the rag upon his back, or upon that of his child, if the creditor who has a demand against him would insist upon pulling it off. He would not conceal a rag, or annex a condition to the surrender of it, that the creditor should release all further claims on the future rag which he might acquire by his labour and industry in life. But not so with insolvent debtors. They take the benefit of the act, and make a surrender of their effects ,upon oath; but there are few instances where there is not reason .to suspect, that there is .concealment in the surrender which they make, and this, from the evidence, that in most cases they are seen to emerge with sometimes not less and sometimes more ease of circumstances than before. As the heathen poet says to his mistress, it may be said to the insolvent when he has taken the oath, “ Simul obligasti “ Perfdum votis caput, enitescis “ Pidchrior multo,— He is like the chrysalis, that has cast its coat and taken wing; it shines away with a splendor which it had not before. In a proceeding towards creditors, independent of an insolvent act, I am unfavourable to the debtor making a bankrupt law for himself. An unconditional surrender of all his effects, until his debts are paid, if he surrenders at all, is the only principle that can receive my sanction in a court of justice. There are decisions to .the contrary in this Court; but it ■will require a series of decisions by men of different educations and habits of thinking, before I can yield to them. If these decisions are founded in nature and truth, they will prevail, if not, they will go by the board. Commenta hominum delet dies, judicia natura confirmat. At die same time that I thus withhold my assent to these decisions, I am far from inculcating ^unfeelingdisposition towards debtors. I say to the debtor, w do justice,” to the — 352 — creditor, “ love mercy,” and this is the language of the scrip» ture* ^ hold it the duty of the debtor to surrender himself to the humanity of the creditor, and not to attempt to take an undue advantage of his situation as a creditor, and to impose terms. And this will be found in the end to be the wisest course for the debtor himself, even with a view to his getting forward again in' the world, notwithstanding what is ironically said in the text of the sermon, from which I have given an extract. And that it was ironically said in the opinion of the divine whom I have quoted, will appear from’ the concluding sentence of his discourse. “ My breth- “ ren,” says he, “ to conclude, the children of light who are “ thought fools, are in reality wiser than these children of “ the world. An unfortunate and insolvent man, who acts “ fairly, will in ninety-nine instances out of an hundred, find “ a better account in the credit of integrity which he will “ establish, than in concealment, or a compulsory accept-a anee of a part for the -adióle on the part of the creditors. u For if there were not a generosity in man, there is a “ secret operation of Providence, which attends and blesses u the industry of the honest. It is the language of the scrip-u ture, ‘ I have been young and nozv am old, yet have I not u seen the righteous forsaken, nor his seed begging b readd ” In the case before us I am of opinion for the plaintiff, and upon this principle, were there nothing else in the case, that the term of a release was coupled with the surrender, and that time was given for creditors to come in, who might be willing to accept and give a release, which was to the delay of other creditors, who might choose to go on, and recover against the debtor. I consider it as a principle that ought not to be endured or made a part of the law. Judgment for plaintiff.