Otis v. Maguire

SOMKRVILLE, J. — The question presented in this case is, whether an absolute and unconditional sale of a debtor’s property to his creditors, for a valuable consideration, can be declared an assignment, within the meaning of section 2126 of the Code. This section, as amended by an act approved February 23, 1883, provides, that “ every general assignment made by a debtor, by which a preference or priority of payment is given to one or more creditors over the remaining creditors of the grantor, shall be and enure to the benefit of all the creditors of the grantor equally; but this section shall not apply to, or embrace mortgages, given to secure a debt contracted contemporaneously with the execution of the mortgage, and for the [298] security of which the mortgage was given.” — Acts 1882-83, p. 1*9. ' The case of Danner Co. v. Brewer (& Co., 69 Ala. 191, is an authority directly in point upon the question before us. It was there decided that an absolute sale, unconditional and free from all reservation, which is executed in payment or satisfaction of antecedent’ debts, is not an assignment, and does not come within the statute. The species of transaction, against which the statute is levelled, is distinguishable from a mere sale. It involves the transfer by a debtor of property by mortgage, deed of trust, or other conveyance intended as a seev/rity for, and not in payment or satisfaction of a debt due his creditor. It therefore implies the idea of a trust, under the operation of which there is the possibility of a reversion to the debtor of some interest in the proceeds of sale of the property assigned. When the debts intended to be secured are paid, the surplus, after deducting lawful expenses, goes back to the debtor. Such an assignment does not, ipso facto, like a sale, satisfy the claims of the creditors to any extent, but only “ provides a method for raising the means with which to pay them.” — Burrill on Assign. (4th Ed.) § 4 ; Bebb v. Preston, 1 Iowa, 460 ; Blank v. German, 5 Watts & Serg. 36; Danner v. Brewer, supra; Shirley v. Teal, 67 Ala. 449 ; Com. Bank v. Brewer, 71 Ala. 574; Bump on Fraud. Conv. (3d Ed.) 329-30. The decree of the chancellor, sustaining the demurrer to the bill, is free from error, and must be affirmed.