Towar v. Barrington

The opinion óf the court was delivered by Bell, J. — I am unable to recognise any ground, presented by the pleadings and proofs, upon which the assignment made by Barrington & Haswell to Bell, can be successfully impeached. True, objections have been presented, but in my apprehension, none of them are sustainable. The first is, that it is void under the statute of Elizabeth, as operating to hinder and delay the creditors of the assignors. Regarded generally, it operates no further to delay creditors than all similar assignments made by persons in insolvent circumstances. And yet these have never been esteemed as falling within the purview of the statute making fraudulent conveyances void. On the contrary, they are viewed as a means of effecting a distribution of the debtor’s property among his creditors, in satisfaction of their several claims, and this in furtherance of a duty incumbent upon him. Where even a preference -was given, by these instruments, to one creditor or class <?f creditors, before another, it was held not to be fraudulent, either at common law, or under the statute, and it required the intervention of the legislature to make it so. But it is said the assignment before us stands upon ground peculiar to itself: that it must be considered in connexion with the judgment confessed to Mrs. Haswell, in trust for all the creditors of the assignors except the complainant* and so considered it exhibits a clear intention by — 260 — them to delay him, in favour of all others. This position is deduced from the assumption that the assignment, notwithstanding the comprehensiveness of its terms, was intended to cover only the surplus remaining after payment of the Haswell judgment. I find no warrant for this assumption, either in the language of the instrument itself, in the circumstances attending the transaction, or in the answers of the defendants, which, as the case stands, must be accepted as true. The assignment purports to convey all the estate and effects of the grantors, for the benefit of all the creditors, equally, and the mere fact of the prior confession of judgment could not interfere with its legal operation, inasmuch as that judgment conveyed no interest in the property of the defendants, nor constituted a lien upon it. There is, therefore, nothing in this fact, standing alone, showing an intent by the assignors to postpone the complainant; and they swear they entertained no such intent. Besides to avoid a deed, under the statute of Elizabeth, it must be shown that both parties to it intended the forbidden fraud. This is clear from the cases of Magniac v. Thompson, 7 Peters’ R. 361, and Mackie v. Cairns, 1 Hopk. Ch. 373. Now, it is evident, the confession of the judgment and the execution of the assignment were distinct and independent transactions. Mr. Bell says, he had no knowledge whatever of the judgment until after the assignment was made, and Mrs. Haswell avers, she knew of no intention to make an assignment, when the bond and warrant to confess judgment was executed to her. If, then, such a fraudulent intent as is now imputed to the assignors had existence, it is clear neither the judgment creditor nor assignee participated in it. There is, consequently, nothing in this feature of the case, to withdraw it from the general principles applicable to such assignments. It is, secondly, urged that, as against the complainant, the assignment is void by force of the assignors’ agreements that “Haswell, Barrington & Haswell’ would not give — 261 — any judgment or other lien on their joint property or stock in trade, that would be prior or detrimental to the claim of the said Alexander Towar,” or “that the said obligors would not assign, or in any way dispose of their stock or effects to any person or creditor in prejudice of said Towar, and that every such assignment or transfer should be void as to him.” These agreements were carried in Mr. Towar’s pockets for several years, in purposed secrecy, while the debtors were permitted to trade with the world as if they had been free men, unencumbered. During this interval the very debts which the assignment is intended to cover, were created, bona fide, in the usual course of business, with the ostensible owners of the stock and effects, now claimed to be exclusively applicable to the payment of Towar’s debt. Surely, under these circumstances, such secret agreements ought not to be permitted to work an effect so unjust as that now claimed for them. Without precedent authority, I should be prepared to say, that setting them up after the lapse of years, in bar of innocent creditors, who acted in entire ignorance of them, more especially where it appears the secrecy was of set purpose to give the debtors a false credit, involves something so like fraud that no judge could give his sanction to it. But I am relieved from simple dependence on my own impressions by the principle, authoritatively settled, that a chancellor will never exercise his discretion in giving effect to executory agreements, in detriment of the rights of innocent third persons, without notice; a principle which is illustrated by Orby v. Trigg, 9 Mod. 2, 3, where a covenant to let a mortgagee have the estate in case it was to be sold, was not allowed to affect an intervening purchaser, without notice. I refer to this case, because it is cited, with approbation, by the present chief justice, in an able opinion delivered by him in The Insurance Company of North America v. The Union Canal Company, 2 Penn. L. J. 65, (ante, 53) where, also, the principle I have noted was acted on. Though — 262 — an assignor is a volunteer, and not a purchaser for value, yet he is, as was ruled in Seal v. Duffy, 4 Barr 274, a trustee for the creditors, and I see not why they may not enforce their rights, if they choose to do so, through him. It is, however, further contended, that by the confession of judgment, and execution forthwith issued, the property had passed out of the debtors, and they had either, first, nothing to assign, the goods belonging to the sheriff by virtue of his levy; or, secondly, only the surplus, after payment of the amount of the judgment. The latter portion of this proposition has been already answered, at least in part, and this conveys, also, a partial answer to the first branch of the proposition. The bond and warrant to Mrs. Haswell, and the entry of judgment thereon, as already intimated, transferred no property in the debtors’ goods and effects, subsequently assigned. The execution afterwards issued was the work of the creditor, not of the debtors. It is true, it operated to vest an interest in the sheriff, sufficient to enable him to pursue the goods levied, in the hands of a trespasser. But, until sold, the property of the judgment debtors was not wholly divested. It remained in them subject to the levy, and was at their disposal, burdened with the encumbrance. Upon payment of the execution or the withdrawal of the levy, the alienee holds the goods altogether free of the lien, and has a plenary property in them, by virtue of the transfer, without more. In fact, what is usually called property in the sheriff is a qualified interest, depending on the levy. That being gone, all semblance of property is gone with it. It results, then, in this; if the judgment and levy be good, the execution creditor has a claim upon the proceeds of the goods levied, superior to either the assignee or the plaintiff in the present proceeding. If the levy be withdrawn, or for any cause, be found insufficient, the property assigned passes to the assignee, free of encumbrance. Now the complainant avers the illegality of the levy, and if upon any ground advanced — 263 — by him, which does not impute fraud to the assignee, it be set aside, it is difficult to perceive how the complainant can be permitted to set it up as sufficient to intercept the transfer of the property to the assignee, even if such were otherwise its legal effect. But, as already said, it works no such consequence. An execution and levy is entirely compatible with a continued property in the debtor, sufficient, at least, for every purpose of sale and transfer. There is nothing in Seal v. Duffy impeaching this view. That was the case of a fair assignment, good against the assignor and acquiescing creditors, to pass the property of the things assigned. It is upon this distinct ground that decision proceeds. The difference is, that here the levy does not pass the property. From what has been said, it will be perceived I am of opinion the assignment to Bell is operative to vest the property assigned in the assignee, for the equal benefit of all the creditors. He will, consequently, so take unless the pi'ior levy and a sale under it should be found sufficient to prevent this. It would seem, therefore, to be the business of the assignee, as the representative of all the creditors, to contest that levy, and he has, in fact, offered .to do so, provided the now plaintiff, recognising the assignment as valid, desires it. The plaintiff declines the condition, under the idea that both the execution and assignment are void as to him. We have seen that, with regard to the assignment, this is an error. Yet I do not perceive why he may not be permitted to contest the first levy, as one having an interest under the assignment. But in doing so he must be regarded as standing upon the assignment, and claiming the benefit of its legal operation. He attacks the judgment and execution on three distinct grounds. 1. As fraudulent in fact. 2. As fraudulent in law, under the statute of Elizabeth. 3. As being so under our several acts of assembly regulating this subject. 1. By the bill, it is averred the judgment was collusively — 264 — entered, and with a view to defeat creditors, no debt being, in fact, due to Mrs. Haswell. The answers and exhibits, however, fully disprove this allegation, and it is now abandoned. The averment of actual fraud is, therefore, left to rest solely on the fact that among the debts proposed to be secured by this judgment, there are two represented by the defendants themselves; one of these being due to George D. Haswell, as executor of the estate of John J. Haswell, deceased, and the other to Edmond Barrington, as administrator of the estate of Michael Connor. Now it is undoubtedly true that an attempt by a failing debtor to reserve an interest to himself, under colour of a transaction purporting to be for the benefit of his creditors, or any of them, avoids the whole transaction, whether this be by way of assignment or confession of judgment. This is the doctrine of Irwin v. Keen, 3 Wh. 247, and Hart v. M'Farland, 1 Harris 182. And it is based on the evidence afforded of an intention to commit an actual fraud. But there is no such feature, in the case before me. It is in uncontradicted evidence that the several sums for which the judgment is a security to Has-well & Barrington, were received by them in their respective characters of executor and administrator, and by them invested in the business of the firm of which they were members, the firm having full knowledge of that fact. Under such circumstances, I think, equity would follow the fund in the hands of the debtors, and if so, there is no rule which would prevent the debtor from securing it himself. But on another ground, this part of the transaction is sustainable. “ It is a maxim, that where two rights meet in the same person, they are viewed as if they existed in different persons.” Allison v. Wilson, 13 S. & R. 333; Petrie v. Clark, 11 S. & R. 377; Depau v. Waddington, 6 Wh. 220. The law treats them as distinct individuals. Now here were debts due from Barrington & Haswell, as traders, to Barrington & Haswell, respectively, in their — 265 — distinctive characters of executor and administrator. In the latter capacity, they are to be regarded just as though they were other natural persons, and, fraud being out of the way, are entitled to stand as distinct creditors of failing debtors. There is nothing in the doctrine that a personal representative is vested with the personal chattels and dioses in action of a decedent which militates against this. His representative character may always be averred, where justice and propriety require it, in a case situate like the present. Secondly, the position that the judgment is fraudulent in law, under the statute of Elizabeth, is equally untenable. Neither at common law, nor under the statute, was there any principle which prohibited an insolvent man from preferring one creditor before another, by a confession of judgment, with a view to immediate execution. This was so held in Blakey's Appeal, 7 Barr 449, even .after our act of 1843, forbidding preferences in assignments. But, thirdly, the act of 16th April, 1849, contains a proviso, which, though most awkwardly constructed, admits of no other interpretation than the manifestation of an intent to prohibit even bona fide judgments and liens being acquired against the property of an insolvent debtor, with intent to give a preference over other creditors. This construction, it is true, is by implication, but it is a necessary one, and, therefore, as strong as though the language were direct. Now, in the instance before me, though the defendants, Haswell & Barrington, deny by their answer, an intent- to prefer the creditors named in the declaration of trust, signed by Mrs. Haswell, and aver that their object was, simply, to place those creditors on an equal footing with Towar; and the defendant, Mrs. Haswell, denies all knowledge of the debt due to Towar, when the bond was executed to her j I cannot shut my eyes upon the fact that when that bond was made, an immediate execution of the judgment to be entered upon it was in the contemplation — 266 — of all the parties to the transaction. True, this design may not have been imparted to the debtors in terms, but it is impossible to believe they did not expect it. In giving the judgment they may have been chiefly actuated by a desire to put their remaining creditors in a position as favourable as that occupied by Towar, holding warrants of attorney to confess judgments. They may not have intended to violate the provisions of the acts of 1843 and 1849, of which they had no knowledge.” But they must have known that a first levy would give an advantage, and when they confessed a judgment, without stay of execution, omitting to give notice thereof to Towar, in violation of their written stipulation, it is incredible that they did not anticipate an execution, and the legal consequences which flow from a levy. Indeed, there is no attempt at a denial of this. The defendants merely say, that of their own motion, by the confession of the judgment, they did not place the general creditors in a better situation than that enjoyed by Towar; and that they had no intention to violate the acts, because they knew not of them. But if they contemplated putting it in the power of Mrs. Haswell, as the general representative of the other creditors, to steal a march upon Towar, or any other creditor, it is enough, though they never heard of the acts prohibiting it. It is so even on the concession that Mrs. Haswell knew nothing of Towar’s debt, for under our acts an intent to prefer entertained by the debtor is enough. Without entering upon detail, it may be sufficient to say that looking to the whole transaction, and the circumstances that surround it, I have no doubt that the probability, nay, almost certainty, of an immediate execution was in the minds of the parties, and the effect of it well understood. That execution, as being the instrument of preference, is, therefore, within the purview of the act of 1849. To give due effect to that act, the writ must be restrained. Yet as this conclusion is only in favour of all — 267 — the creditors represented by the assignee, the judgment representing at the same time all the creditors but Towar, the injunction against the execution will only be granted on condition that Towar also relinquish his execution and levy, and agree to come in under the assignment. This is the necessary result of the recognition of the assignment and of Towar’s position in court, as one protected by it. As all the parties are before me, presenting their conflicting rights, I am in possession of the whole subject, and may make such a decree as will quiet the controversy altogether. This can only be done by compelling all the creditors to come in under the assignment. An analogous case» is where there has been a decree for the distribution of assets, in the hands of a trustee. There, a court of chancery will restrain a creditor, even though he be not a party to the suit, from proceeding at law for his own individual debt. This it does, because having taken the fund into its own hands, it will administer it equitably, and not permit the trustee to be pursued at law; and an injunction may be granted on the application of an executor, heir, legatee or creditor. This it does because it considers the decree in the nature of a judgment for all the creditors. Martin v. Martin, 1 Ves. 211; Morrice v. Bank of England, Cas. Temp. Talb. 217; 2 Bro. P. C. 465; Dyer v. Kearsley, 2 Mer. 482, n; Brooks v. Reynolds, 1 Bro. Ch. 183; 2 Swanst. 545; 3 Daniel’s Ch. Pr. 298. Here, we have the assignment, in lieu of a decree, and equally efficacious; and the creditors to be restrained are parties before the court. It will be decreed accordingly. And now, to wit, March 15th, 1851, the complainant, Alexander Towar, having filed a paper,' agreeing that the writs of execution issued by him against the defendants, Barrington & Haswell, be set aside, and that the complaint against Thomas Bell be dismissed, and the assignment to said Bell, by the said Edmond Barrington and George D. Haswell be maintained and established; it is ordered and — 268 — decreed, that the bill be dismissed, so far as regards the defendants, Edmond Barrington, George D. Haswell, and Thomas Bell, and that Mary Ann Haswell be enjoined and restrained from setting up or proceeding with the execution now outstanding upon her judgment against said Barrington & Haswell; and that the costs be paid by Thomas Bell out of the assigned estate. The rule to set aside the execution was made absolute, üpon the same terms as are contained in the foregoing decree. — 269 — CAS S IN THE SUPREME COURT OF PENNSYLVANIA.