Henderson v. Bliss

Perkins, J. Suit, commenced by attachment by Bliss et al. against Porter, at the October term, 1854, of the Marion, Circuit Court, on partnership debts of Porter and Lawrence. At the April term, 1855, other creditors filed claims, and Bliss et al. obtained judgment against Porter on theirs. At this same term, Henderson, who had been summoned as a garnishee, answered; his answer was demurred to, and the cause was continued to a special term appointed to be held on the 4th Monday in August following. At that term the cause was tried against Henderson, the garnishee; and it was found that he had in his hands between 4,000 and 5,000 dollars belonging to the defendant. At the same term, the other creditors who had filed claims under the attachment, offered to make the necessary proofs, and asked, upon doing so, for'judgments on their claims, and for a pro rata distribution of the funds in the hands of the garnishee among the judgments; but the counsel for Bliss et al. objected because the claims of said creditors had not been formally entered as continued to the special term. The Court, however, overruled the objection, permitted the proof to be made, and ordered the distribution as asked. Exception was taken; and the first point to be considered is presented. Did the continuance of the principal suit carry with it the claims filed under it; and if not, can the party [102] now complaining take advantage of it? Our statute upon attachment suits provides, (2 R. S. s. 186, p. 70,) that “any creditor, &c., upon filing, &c., at any time before the final adjustment of the suit, may become a party to the action,” and may, &c., “in like manner as the creditor who is plaintiff.” And section 192, p. 71, enacts that, “ The money realized from the attachment and the garnishees shall, under the direction of the court, after paying all costs and expenses, be paid to the several .creditors, in proportion to the amount of their several claims as adjusted, &c.” The original attachment suit, with the claims subsequently filed under it, constitute, for some purposes, but one suit. Olney v. Shepherd, 8 Blackf. 146. And see Elderkin v. Fitch, 2 Ind. R. 90. For some purposes they constitute separate suits. 1 Ind. R. 296. But, however regarded as to this point, it is clear, by the statute above quoted, that, 1. Every creditor of the attachment-defendant has a right to file his claim, under the original attachment, at any time while the same is pending, and have the claim adjusted by the court; 2. That such creditors have a right to share, pro rata, upon their claims in distribution; and, 3. That the distribution must, of necessity, be postponed till all the claims are adjusted. It follows that, in this case, the Court was bound to adjust the claims filed at the term they were adjusted, or to postpone the distribution asked upon the original claim till a subsequent term, when such claims might be adjusted. The error in the case, then, so far as the party complaining on this point is concerned, if error there be, is a distribution earlier than should have been. But the complaining party asked for that distribution: he would not assign it for error, in point of time, if he could, and could not if he would. The judgments upon the claims are not nullities — cannot be impeached collaterally. [103] But the main question in the cause relates to the validity of an assignment for the benefit of creditors. Henderson, the garnishee above mentioned, in his answer admitted that he had in his hands the sum heretofore mentioned, but averred that he held it as a trustee for the benefit of the creditors of Porter and Lawrence, by virtue of an assignment made by the latter, Containing, among others, the following clause: “ But it is hereby expressly provided, that all such of our creditors as do not, within a reasonable time here-from, acquiesce and come in under this assignment, or as. shall refuse to release to us whatever residue of their debts, respectively, remains unpaid, on receiving the share and dividend falling to them under this arrangement, .shall take no benefit from the provisions of this assignment, &c., till those releasing are paid, and also the claim of one Amos Lawrence, for a fraction less than 800 dollars, whether he releases or not.” It appears that Porter and Lawrence are insolvent— the property assigned not exceeding in value one-third of the debts and costs. It is contended that the assignment is void in law, upon its face, on account of its requiring a release, and, also, in failing to fix a time for the acceptance of the terms of the assignment. The Court below so decided. We have looked into the authorities upon these questions. We are not going to review them. Upon the right of a debtor to require a release of further, liability as a condition to a participation in the benefit of an assignment for the benefit of creditors, the courts of different states have come to different conclusions— some holding such a condition fraudulent, per se, — others the dontrary. The question is, here, which line of decision shall we follow? We incline to hold such an assignment fraudulent in law. It not merely delays the creditors, — it does more. It absolutely annihilates a part of their claims. It creates, if held valid, a bankrupt law. And yet it is the doctrine of this Court that, as between individuals, the payment of part of a debt [104] is no consideration for a release of the whole. How, then, can it be under an assignment? Fitzgerald, v. Smith, 1 Ind. R. 314. However, waiving this point, there is another which seems to be conclusive. Those authorities which sustain the right of a debtor to require a release, hold that the assignment must fix the time within which it must be executed, and that that time must be a reasonable one, or the assignment will be regarded fraudulent. 2 Kent, 553. They also hold that the assignment must embrace all of the debtor’s property; and, if by partners, that it must embrace the separate property of each, as well as the joint property of all the partners. Thomas v. Jenks, 5 Rawle, 221. The assignment in this case does not come within these principles (1). IT. C. Newcomb and J. S. Harvey, for the appellant. J. L. Ketcham, for the appellee. Eor a general summary of the law upon voluntary assignments, see 1 Am. Lead. Cases, 86; Burrill on Assignments, passim. Per Curiam. The judgment is afiirmed with costs. Footnotes [(1)] But if the assignment had been held valid, the assignee could not have been garnished. Oliver v. Smith, 5 Mass. 183. — Farmers' Bank v. Beaston, 7 Grill and Johns. 421.— Colby v. Coates, 6 Cush. (Mass.) 558. In the last mentioned case Jones v. Gorham, 2 Mass. 375, and Decoster v. Livermore, 4 id. 101, were overruled.