Conkling v. Carson

Opinion by Treat, C. J.: The deed of assignment of the 22d of June, 1846, was illegal and fraudulent as against the existing creditors of Carson & Games, because of the provision requiring creditors, who should become parties to it, and entitled to share in the proceeds of the' property assigned, to receive their dividends in full satisfaction and discharge of their respective demands against the assignors,-’ The law does not allow a debtor to impose such harsh and onerous conditions upon his creditors. A debtor in failing circumstances has an undoubted right to prefer one creditor to another, and to provide for the preference, by assigning his effects ; but he is not permitted to say to any of his creditors that they shall not participate in his present estate, unless they will release all right to satisfy the residue of their debts out of his future acquisitions. It is unnecessary, however, to discuss the question, as the cases of Howell vs. Edgar, 3 Scammon, 447, and Ramsdell vs. Sigerson, 2 Gilman, 78, are directly in point, as to the invalidity of the original assignment. But that assignment was not absolutely void, and therefore incapable of confirmation. It was fraudulent, per se, as to the existing creditors of the assignors, and liable to be avoided by them, but by them only. As between the parties, it was valid and operative. The title to the property passed to the assignee, subject, indeed, to be defeated by creditors in a condition to reach the property by the process of the law. A sale by the assignee to a bona fide purchaser, before the creditors had pursued their legal remedies, would be valid and effectual. The deed, then, being Voidable only at the instance of a creditor having a judgment against the debtors, could be made good by matter ex post facto. It was in the power of the parties to purge it of all obnoxious provisions. The deed was capable of confirmation, before the rights of creditors intervened to prevent it. Murray vs. Riggs, 15 Johnson, 571; Sterry vs. Arden, 1 Johnson’s C. R., 261; Hone vs. Woolsey, 2 Edward’s C. R., 289. The complainants were not in a position to attack the assignment, until long after the execution of the agreements of the 16th and 28th of July, 1846. Those agreements were executed by the assignors and assignees, as well as by all of the creditors who had signified their assent to the original assignment; and they so modified and changed the terms of that assignment, as to divest it of the objectionable clause. The creditors were left free to become parties to the assignment, and participate in its benefits, without impairing their right to proceed against the assignors, for any balance that might remain due them after the execution of the trust. The assignment, thus purged of the exceptionable feature, must stand, and the rights of the creditors, in respect to the property assigned, must be governed by it, unless it contains some other provisions that may render it invalid. The only other objection taken to the assignment, is the clause providing for the payment to the assignors, of the surplus that may remain after the satisfaction of the debts of such creditors as shall become parties to it. This provision does not invalidate the assignment. The precise question arose in the case of Cross vs. Bryant, 2 Scammon, 36. In that case, the debtors made an assignment for the benefit of their creditors, which declared that the proceeds of the property remaining in the hands of the assignee, after the payment of such of the creditors as should, within sixty days, execute the deed of assignment, should be paid over to the assignors. It was contended that this provision vitiated the assignment, but the Court held otherwise. The Court said : “ The provision in the deed requiring the payment over of any surplus, should there be such, to the assignors, was not an improper condition. It was but the declaration of a resulting trust, which the law would raise, had it not been inserted.” We are disposed, without a reinvestigation of the question, to adhere to that decision. It was made many years since, and important rights may have been acquired on the faith of it, which would be seriously affected by a contrary determination. Nor do we perceive that any considerable injustice or inconvenience can result from sustaining such an assignment. The clause in question permits the creditors to come in under the assignment, within a reasonable time, and partake of its benefits, without discharging their debtor from the payment of any balance that may remain due them. If they decline to do so, they are at full liberty to pursue their remedies against the debtor. If there is any surplus, after the payment of the claims of the assenting creditors, it may be reached either in the hands of the trustee or the debtor. If there, was no such provision in the assignment, the trustee would be authorized, after a reasonable time had elapsed for creditors to come in and claim the benefit of the assignment, to restore the surplus to the debtor. Not one of the numerous cases referred to on the argument, as establishing a different doctrine, goes the length of holding an assignment fraudulent, per se, because of the insertion of a provision like the one in question, although the expressions used by judges in some of them, would seem to authorize such a conclusion. The strongest cases, and in fact the only cases in which the question can be said to have arisen, are Burd vs. Smith, 4 Dallas, 69; Mackie vs. Cairns, 5 Cowen, 547; and Austin vs. Bell, 20 Johnson, 440. In the first case, the assignment provided that the shares of such of the creditors as should not, within nine months, signify their acceptance of its provisions, should be paid to the assignor, “to the intent that he might therewith compound with and satisfy such creditors.” The Court—three judges against two—held the assignment fraudulent as to a creditor who had obtained a judgment against the debtor, before the deed was delivered to the assignees, and before any of the creditors had assented to the assignment. The decision was clearly right. The deed was not operative, at least against the creditor, until it was delivered to the assignees. In the second case, the Court held an assignment fraudulent and void as to creditors, which reserved to the debtor out of his estate an annual sum of $ 2,000, for the support of himself and family, for the period of four years, unless he should be sooner discharged from all his debts. This decision was unquestionably correct. The reservation was absolute, not depending, as in this case, on the voluntary acts of the creditors. In the last case, an assignment was held invalid, as it clearly should have been, which required the creditors to release the debtor from all their demands; and which reserved to him the shares of such, of the creditors as declined to become parties to the assignment, as well as the sum necessary for the support of himself and family. It will thus be seen, that in all of these cases the assignments might have been declared invalid, without impugning the principle which we are inclined to sustain. We do not therefore consider them as authorities in point on the question involved in the case before us. , The decree of the Court below is affirmed, with costs. Decree affirmed..