Wood v. Adler-Goldman Commission Co.

Riddick, J. The questions to be determined in this case arose in an action of replevin brought by the appellee, the Adler-Goldman Commission Company, a corporation organized under the laws of Missouri, against O. C. Wood, the sheriff of Bogan county, to recover a stock of merchandise, store fixtures, etc., which said sheriff had seized as the property of Oppenheimer & Co., under writs of attachment against them. The appellee claimed to have purchased said property and certain lands from Oppenheimer & Co. for the consideration of eight thous- and and five hundred dollars, which sum it placed as a credit on the indebtedness of Oppenheimer & Co to them. Oppenheimer & Co. were insolvent, and, before said credit was entered, were indebted to appellee in a sum amounting to over fifty thousand dollars, in addition to indebtedness to other parties. On the same day that the bill of sale for the property in controversy was executed, Oppenheimer & Co. executed another instrument in which, after reciting that they were indebted to appellee in a large amount, they say : “And also for the further consideration that the said Adler-Goldman Commission Company agree to pay the following named parties, to whom we are justly indebted as per amount set opposite their names: (Here follows a list of certain creditors and amounts due them). Now, therefore, for the purpose of securing the same, we hereby transfer to the said Adler-Goldman Commission Company, by way of pledge, the choses in action described in the schedule hereto annexed ; also twelve hundred and sixty-one bales of cotton now in their hands and in transit, consigned to them, said cotton to be sold by them in the usual way within thirty days from this date, and the net amount, after deducting usual expenses, to be credited to above indebtedness. If, after thirty days from this date, any of said choses in action should remain uncollected, and any of our debts unpaid, we hereby authorize the said Adler-Goldman Commission Company to sell said choses in action at public sale for cash at the front door of our store house in the town of Paris, Arkansas, after giving ten days notice of the time, place and terms of sale, by advertisement in some newspaper published in the county of Logan, Arkansas, or by written or printed notices posted in at least ten conspicuous places in said county, and out of the proceeds of said sale the said Adler-Goldman Commission Company shall pay our debts due them as above, so far as said proceeds will extend, rendering the overplus to us. Witness our hands this 11th day of January, 1892. (Signed) Ike Oppenheimer, S. Stern-berg, of the firm of Oppenheimer & Co.” Appellant contends that these two instruments—the bill of sale of the property in controversy and the transfer of the cotton and choses in action—having been executed on the same day, and for the purpose of carrying out a preconceived intention, must be construed together, and that they amount in law to an assignment for the benefit of creditors, and are void because not made in conformity to the statute. Conceding that -these instruments must be construed together, as part of the same transaction, the question for this court to determine is whether, when thus construed, they constitute an assignment for the benefit of creditors. By the term “voluntary assignment” is meant a conveyance of some or all of a debtor’s property in trust for the purpose of being disposed of by the trustee to raise a fund to pay debts, as distinguished from a sale to a creditor in payment of his claim, and from a pledge ■or hypothecation as a security, in the nature of a mortgag-e. Anderson’s Dictionary of Law, 83; Dias v. Bouchaud, 10 Paige, Ch. 461. “To constitute an assignment, the property must be conveyed absolutely to raise a fund to pay debts.” Richmond v. Mississippi Mills, 52 Ark. 30. One of the conveyances mentioned above purported to be a bill of sale of the stock of merchandise and chattels in controversy, in part payment of the debt due from Oppenheimer & Company to appellee. The other purported to be a pledge of certain choses in action and bales of cotton to secure the remainder of the debt due appellee, and also for an additional sum which, in consideration of the making of such pledge, appellee agreed to pay to certain creditors of Oppenheimer & Company. Oppenheimer & Co. had refused to make these transfers until appellee expressly agreed to pay these sums for them to the creditors designated. Having agreed to pay these sums as an inducement and a consideration for these conveyances, after they were executed, appellee was in the same position as if Oppenheimer ■& Co. had paid it so much money for the use and benefit of the creditors. The statute regulating assignments for the benefit of creditors was not intended to prevent embarrassed creditors from selling property to pay debts, nor from mortgaging or pledging it for that purpose. A debtor, when he has pledged, mortgaged, or sold his property to obtain money to pay debts, may, if he chooses, allow the lender of the money to distribute the fund among the creditors, provided the transaction is free from any dishonest intent. Although, in such a case,r,|the lender would hold the fund in trust for the creditors, and could be compelled to perform the trust, the statute regulating assignments for the benefit of creditors would not apply, for the reason that, in such a transaction, there would be no conveyance of property in trust for the purpose of being disposed of by the trustee to raise a fund to pay debts, and, without such a conveyance of property in trust for the purpose of being disposed of by the trustee, there is no assignment. It is only where property is conveyed to another in trust to be disposed of by him for the purpose of raising a fund to pay debts that the statute applies and undertakes “to regulate, direct and secure a performance of the trust.” Burrill on Assignments, (6 ed.) 24. In the case at bar, the property was not conveyed or delivered to appellee to be disposed of for the purpose of raising a fund to pay creditors, nor to be held in trust for creditors. A portion of it was sold to appellee in part payment of its debt, and the remainder delivered as a pledge to secure the balance of the debt due appellee, including the sums it had assumed and agreed to pay other creditors. After appellee had received the property, under this agreement, the creditors whose debts he had assumed could have enforced the agreement by an action at law to compel it to pay the sums of money it had agreed to pay, which sums would be treated as a fund received by appellee for the use and benefit of these creditors. Keller v. Ashford, 133 U. S. 610; Mellen v. Whipple, 1 Gray, 322; Carnegie v. Morrison, 2 Met. 381; 1 Parsons on Contracts (8 ed.), 468, and authorities cited. The rig-ht of these creditors to recover was not limited to the property pledged or its proceeds; and that this was the understanding of the parties is shown by the action of appellee, for it paid the assumed debts at once, without waiting to dispose of the property. It is a general rule of law that no one can sue on a contract to which he is not a party, but there are exceptions to the rule. The cases from the Supreme Court of Pennsylvania, cited by counsel for appellant, only lay down the exception mentioned above—that when one receives money or property upon a promise to pay the debt of a third person, such person can maintain an action on such promise. “ These cases,” say the court in Delp v. Bartholomay Brewing Co. 15 Alantic Rep. 871, “are cases in which the third person, although nota party to the contract, may be fairly said to be a party to the consideration on which it rests.” In that case Delp received from Bingham & Spencer, proprietors of the Hotel Albemarle, its entire stock and assets, under an agreement that he would pay the debts of said Bingham & Spencer. One of the creditors brought an action on this promise, and it was sustained. The court, speaking of Delp, said “he assumed the payment of these debts, and the property was put into his hands for this express purpose. Whether thereby a technical trust was created is not material. It has always been held that the creditor in such a case has a right of action to compel payment in accordance with the agreement.” Although it may be true that cases can be found holding that, where property is conveyed to one under promise that he will pay the debt of another, he will be treated as a trustee until he performs his promise and pays the debt, yet such transfers do not come with the meaning of our statute of assignments, unless the conveyance is made to the grantee for the purpose of having him dispose of the property to raise a fund to pay debts. In the case of one who sells property to another upon the consideration that he will pay certain debts of the vendor, the transaction, if without fraud, is distinguished from an assignment by the fact that the title passes absolutely to the vendor, and, after he pays the debts, there is no resulting trust in favor of the vendor for the residue of the property, or its proceeds, as there always is in cases of assignment. When one pledges or mortgages property to another for the purpose of securing a debt, or to obtain money to pay a debt, it is distinguished from an assignment by the fact that a beneficial interest remains in the mortgagor or pledgor, and he has the right to redeem, and an assignor does not have. These distinctions are elementary, and may be found in Burrill on Assignments, or any other text book on the subject of assignments, with authorities collated. In the case of Goodbar v. Locke, 56 Ark. 315, a pledge of choses in action for the benefit of certain creditors was held not to be an assignment. Justice Hemingway, who delivered the opinion of the court, said : “As the debtors were not by the terms of the instrument divested of the beneficial ownership, it was not an assignment; and, although the debtors may have had no reasonable hope of paying the debts and retaking the collaterals, the property remained in them, and could be reached by unsecured creditors as other equitable assets may be.” In the case at bar the right to redeem within thirty days remained to Oppenheimer & Co. in che property pledged. Some of the cases from the supreme court of Ohio, cited by counsel for appellant, may seem to hold that such transfers as those umier consideration would, in that State, constitute an assignment for the benefit of creditors, but those cases are, to a certain extent, governed by a statute of that State which, in effect, provides that all conveyances by debtors to trustees in contemplation of insolvency, with the intention to prefer one or more creditors, shall be held to inure to the benefit of all the creditors in proportion to their respective demands. All conveyances coming within the meaning of this statute are held in Ohio to be assignments, and the property conveyed inures to the benefit of all the creditors. Bagaley v. Waters, 7 Ohio St. 359, where the statute is quoted. delivered July 14, 1894. After a due consideration of the matter and of the authorities cited by the learned counsel for appellant, we feel convinced that this pledge was made, not to secure the creditors named in the instrument, but to secure the debt due appellee, including the sums assumed by him; that a right of redemption remained in Oppenheimer & Co. after the execution, and that these instruments, whether construed separately or together, are not conveyances in trust for creditors, within the meaning of our statute regulating voluntary assignments. In the absence of any evidence tending to show a fraudulent intent, the determination of this question disposes of the case, and we deem it unnecessary to discuss the other point raised. The judgment of the circuit court was, in our opinion, right, and is therefore affirmed. Judges Battle and Hughes concur in the judgment, but not in the reasons given.