Mahorner v. M. Forcheimer & Co.

Woods, J., delivered the opinion of the court. It appears quite satisfactorily that Pruitt, the assignor, retained in his hands, and did not turn over to his assignee, the cash proceeds of sales from his stock of goods made on the day of the assignment and the day immediately preceding. These sales amounted, after deducting cash paid out by the store on those days, to about three hundred dollars. It is contended by counsel for the assignee, however, that, as the assignor expressly reserved his exempt property by the terms of the assignment itself, the deed of assignment is not rendered void by this retention of the cash proceeds of those two sales, because, as counsel argue, it does not clearly appear that the total amount of money so retained actually exceeded two hundred and fifty dollars, and because the assignor was entitled to withhold money, if he so chose, to an amount not exceeding two hundred and fifty dollars. There are two obvious answers to this contention: (1) No one can read this voluminous record and fail of reasonable conviction that more than two hundred and fifty dollars was retained by the assignor. (2) Admitting that the amount was two hundred and fifty dollars, or less, still the assignor wrongfully withheld the same from his assignee, and this on two grounds: First, the sworn answer of the assignor to the cross petitions of the creditors assailing the assignment as fraudulent, by reason, in part, of the retention of money derived from sales of goods from the store, expressly states ‘£ that all the money collected by him — 308 — from the sales of goods and otherwise was applied by him to the payment of his debts. He denies that he kept the same in his pessession, and he denies that he still has the same, or any part thereof, in his possession.” Here is a distinct averment that he kept no money derived from sales of goods, but that he applied the same to the payment of his debts. But we have seen that he did retain about three hundred dollars, and there is an absence of all evidence showing the payment of any debt with the money thus withheld from the assignee. But, secondly, there is no hint anywhere in the transcript before us that the assignor ever selected and retained this money as exempt, and selection was necessary to retention. On this point, counsel for appellant cites the opinion of this court in Bernheim v. Andrews, 65 Miss., 28, as holding that, in a suit to which a debtor is not a party, one of his creditors, in a controversy with another creditor, may raise the point that property seized was the exempt property of the common debtor. Because of an insufficient statement of the facts contained in the report of that case, the counsel have been misled in their construction of the language employed in that opinion. Besides the very brief and imperfect statement of facts contained in the reported case, the original record therein shows perfectly that an elaborate motion for a continuance was made in the circuit court by counsel for Bernheim, which showed, among other things, that Bernheim could not safely go to trial because of the unexpected absence of Howell, the common debtor, by whom it was expected to prove that the barrel of whisky seized “was and is Howell’s exempt property, and that the debt for which it was condemned is the purchase money debt therefor.” That Bernheim was the seller of the whisky to Howell, and had a right to resort to the property sold for payment of the purchase price, even though claimed and held as exempt property, so long as it remained in the hands of the buyer, was the contention of Bernheim’s counsel, and this he professed to be able to support by the evidence of Howell himself, if a continuance were — 309 — granted. The circuit court overruled the application for the continuance “upon the ground alone that the evidence . would be inadmissible in this case if the witnesses were here to testify. ’ ’ On Bernheim’s appeal, this court reversed the action of the circuit court. In view of these added facts, the language of the court is conclusive against the contention that anyone other than the exemptionist may make selection of exempt property, for says that opinion: “It is for the exemptionist to select for himself, according to his judgment, taste or fancy.” In the case at bar there is no evidence showing, or tending to show, that Pruitt, the assignor, selected for himself the money retained as exempt property. The successful assault of the attacking creditors at this point renders void the deed of assignment, and entitles these creditors to the priorities recognized by the decree of the court below. To this extent, we altogether concur in finding of fact and conclusions of law reached on hearing below, but we cannot concur in the court’s action in dividing the creditors into three classes — (1) those who attacked the assignment as fraudulent and void; (2) those who did not assail the assignment as fraudulent and void, but sought only to set aside the preferences therein; and (3) those creditors whose debts were preferred — and then in decreeing priority and distribution in that order. Chapter 8, code 1892, provides a scheme in itself for the equitable administration of estates assigned generally for the benefit of creditors. By § 117 of that chapter, provision is made for this administration in one proceeding, to which the assignee, the assignor and all the creditors are to be made parties. By § 121 we find that “any creditor may file in said cause a cross petition against the receiver, and he may make the assignor or other persons, whether parties to the suit before that time or not, defendants thereto, and show to the court that the assignment is fraudulent, or ought not, for any other reasons, to be enforced, and property other than that in the trustee’s or assignee’s hands may be shown to be liable for the — 310 — debts of the assignor. ’ ’ In this section we find, further, that “the creditor filing a cross petition, if he succeed in establishing that the assignment ought not to be enforced, shall have priority over all other creditors in the distribution of the proceeds of the property in the assignee’s hands, and a lien, from the filing of his cross petition, on other property he may seek to have subjected to his debt,” etc. By §122 provision is made for any creditor, by cross .petition, to demand a personal decree against the assignor for the amount of his debt, but declaring that the priority of such personal decrees shall not affect the distribution of the assigned effects, or proceeds thereof. By § 123 it is made “the duty of all creditors to establish their claims to the satisfaction of the court; and any creditor may oppose and controvert the demand or claim, in whole or in part, of any other person, and the court shall, on motion, cause all proper issues to be made up to test the validity of claims. ’ ’ We have thus a scheme complete within itself, by which, in one proceeding, assignee, assignor and all creditors are required to appear as parties, and present and make good their demands. Distinct provision is made for proceedings by creditors to annul the assignment for fraud, and declaring the result to the attacking creditors which must follow a successful attack, but no priorities are created for any creditors other than those by whose intervention the assignment has been decreed to be void. The deed of assignment shown to be fraudulent falls, its preferences fall, its provisions all fall; but the assigned estate itself remains in the hands of the court for distribution in accordance with the principles of equitable administration. The only priorities recognized are those of the successful creditors in the attack upon the fraudulent assignment. All other creditors, after the fall of the assignment, stand upon equal footing. The preferred creditors, in the general attack upon the fraudulent assignment, even though no specific attack has been made upon the preferences, are neither the better nor the worse off because of the total destruction of the deed of assignment. In — 311 — no event can we find any ground in this new scheme for classing them as other than creditors not entitled to priorities, and, to us, it seems equally clear that they are not to be postponed to other creditors who have not attacked the assignment itself. If the preferred creditors can be postponed to creditors who have not attacked the assignment itself, but only the preferences created by it, we should be bound to hold the converse of this proposition, and declare priorities to preferred creditors over those who had assailed preferences only, where this limited assault was unsuccessful, but the gross inequitableness of this latter proposition is perceptible on the slightest reflection. To illustrate: Suppose A makes a general assignment of an estate worth $10,000, with preference for B’s debt, which amounts to $10,000, while all his other debts unpreferred amount also to $10,000. C alone of all A’s creditors, having a debt of $500, files his cross petition assailing the assignment as fraudulent, and succeeds in having it declared void, whereby he secures his §500, and leaving $9,500 untouched in the hands of the court’s assignee-receiver. Could B be then heard to say that the assignment had not been completely set aside and annulled, but only vacated sub modo, and, no attack having been made specifically upon the preferences, the assignment must be upheld as to his debt, C having been paid off, and he permitted to walk out of court with the entire remaining $9,500, whilst all other creditors, with the debts amounting to $10,000, shall go out empty handed ? But our statute leaves no room for doubtful disputation. With the fall of the fraudulent assignment preferences fall, and the entire estate is to be equitably administered for the benefit of creditors, the only priority recognized being that awarded by the law to those by whose instrumentality the assignment was overthrown. We affirm the decree appealed from in so far as it declares the assignment void, and in so far as it maintains the priorities of the creditors of the assignor who attacked the conveyance as — 312 — fraudulent. We reverse in so far as the decree establishes any priorities between all other creditors, and in so far as it denied any relief to ti. W. Foote. So far as we can now see, there was no controversy over the note of November 20, 1893, for $375, which appears in the now vacated assignment as the first preferred debt. As to the other notes given Foote by the assignor, on November 29, 1893, and due respectively in thirty, sixty, ninety days and four months, given in extension of Pruitt’s note to Mrs. Hambrick, as the assignment describes them, there is obscurity. As to Foote’s claims generally, we content ourselves with saying that certainly something is due this creditor, and, on clearer proof in the court below, after our remanding the case, this creditor should be allowed to show exactly what is due him, and for the amount so found to be due, he is entitled to share with all others not entitled to priorities, equally in the distribution of the estate being administered. Affirmed in part and reversed in part.