Bell v. Goetter, Weil & Co. , 106 Ala. 462 ( 1894 )

BB.ICKELL, C. J.

— The principal question of the case, to state it most favorably to the appellees, is, whether a judgment confessed by a debtor in failing circumstances, which, when recorded in the office of the judge of probate, becomes alien on all the property, real and personal, of the debtor within the county subject to execution, and which has been recorded in the several counties in which the property of the debtor is situate, is to be taken and deemed a general assignment inuring to the equal benefit of all the creditors of the debtor.

The statute as it now exists, and within the operation of which it is insisted the judgment must be drawn, reads: “Every general assignment made by a debtor, or a conveyance by a debtor of substantially all of his property in payment of a prior debt, by which a preference or priority of payment is given to one or more creditors over the remaining creditors of the grant- or, shall be and inure to the benefit of all the creditors of the grantor equally; but this section shall not apply to or embrace mortgages given to socure a debt contracted contemporaneously with the execution of the mortgage, and for the security of which the mortgage was given.” — Pamph. Acts, 1892-93, p. 1046. By its own terms the statute is limited to conveyances, to transfers, by which the debtor divests himself of title, passes it to a trustee for the benefit of one or more creditors, to the exclusion of all others, or directly to one or more creditors in exclusion of all others. First, it' is a general assignment creating preferences which it is declared shall inure to the equal benefit of ail creditors. A general assignment, within the meaning and operation of the statute, in view of the repeated decisions in construction of it, since its original introduction into our legislation by the Code of 1852, (Code of 1852, § 1556), is capable of a clear and precise definition. It is a voluntary transfer by a debtor of all, or substantially all, of his property subject to the payment of debts, for the security of one or more creditors in preference to others. The expression voluntary transfer, is not of course employed in the sense in which it is frequently used, that of not being supported by a valuable consideration, but as expressive of the true character of the transfer, that it is the act and proceeds from the volition of the debtor. It is a transfer of substantially all of the property of the debtor subject to the payment of debts; for if it be not, it would be a partial, and not a general assignment, and not within the operation of the statute. Referring to the original statute, and in this respect it is unchanged, it was said in Holt v. Bancroft, 30 Ala. 193, the first case in which there was a construction of it: “The object of the statute was to prohibit all discriminations bjr a debtor, making a general assignment, in favor of any of his creditors. It does not aim to deny, and does not deny to a debtor the power of securing a creditor’s debt by a conveyance of a part of his property. The right of preferring creditors by partial assignments is untouched by the section of the Code quoted. It is not the preference of itself, but the preference as a feature of a general assignment, which the statute condemns. This construction of the statute is the only one which can be adopted, without extending its meaning beyond the natural import of the language.” In that case, a trust deed for the security of a particular creditor, conveying a part of the debtor’s property, was deemed a part of a subsequent general assignment. But the court said, if the trust deed had not been a component part of the general assignment, it would not have been affected by the statute. And upon this theory and construction of the statute all our decisions proceed — that it is directed only to preferences as a feature of a general assignment. If there is not a general assignment, until the clause was introduced as to conveyances in payment of prior debts, it has never been supposed there was any occasion or room for the operating of the statute. In the last case in construction of the statute, prior to its amendment, it is said: “Thelaw of this State permits an insolvent debtor to make preferences among his creditors in the payment of his debts, by an absolute sale or transfer of his property in discharge of such debts. ***** The statutory prohibition against preferences in general assignments does not operate upon an absolute and unconditional sale of a debtor’s property toliis creditors In payment of debts due to them. * * * * * Such a sale is not within the purview of the statute, and if a preference is thereby effected, it is not such.a preference as the statute prohibits.” — Ellison v. Moses, 95 Ala. 221. The office, scope and effect of the subsequent amendment of the-statute, is to draw such sales or conveyances in payment of pre-existing debts within its operation, converting them like general assignments into a common security for the benefit of all creditors. Beyond this, the statute does not operate, and cannot operate without an expansion of its terms, which, in view of its history, would savor of judicial legislation. Assignments for the security of debts, or sales or conveyances in payment of debts, are contractual purely and simply ; their essential element is the mutual agreement of the parties. The lien which the law attaches to a judgment without regard to the manner in which it may be obtained, has in it no element of contract, and confers no right of property ; it creates no jus in re. — 2 Freeman on Judgments, § 333. In Conrad v. Atlantis Ins. Co., 1 Peters, 443, it was said by Judge Story: c ‘Now, it is not understood that a general lien by judgment on land constitutes, per se, a right in the land itself. It only confers a right to levy on the same, to the exclusion of other adverse interests, subsequent to the judgment; and when the levy is actually made on the same, the title of the creditor for this purpose relates back to the time of his judgment, so as to cut out intermediate incumbrances. But subject to this, the debtor has full power to sell, or otherwise dispose of the land. His title to it is not divested or transferred to the judgment creditor. It may be levied upon by any other creditor, who is entitled to hold it against every other person except such judgment creditor ; and even against him, unless lie consummates his title by a levy on the land, under his judgment. In that event, the prior levy is, as to him, void, and the creditor loses all right under it. The case stands, in this respect, precisely upon the same ground as any other defective levy or sale. The title to the land does not pass under it. In Short, a judgment creditor has no jus in re, but a mere power to make his general lien effectual, by following up the steps of the law, and consummating his judgment by an execution and levy on the land. * * * * The only remedy of the judgment creditor is against the thing itself, by making that a specific title which was before a general lien.” We are induced to this extended quotation, because therein is embodied so clear and precise a definition of the lien of a judgment, and of its nature, operation and •extent. It is apparent that the lien bears not the least resemblance to either a general assignment for the security of debts, or a sale or conveyance in the payment of debts, which alone fall within the operation of the statute.

In Mobile Savings Bank v. Burke, 94 Ala. 130, it is said : “The lien of a judgment is not the subject of, and has none of the properties of a contract. It is the creature of legislation, and may be taken away without impairing the obligation of contracts — a statutory lien.” This is but a reaffirmation of a principle which has been of frequent assertion and application in this court — that the lien of a'judgment, or execution, is derived from statute, and a repeal of the statute creating it destroys it, in the absence of an exception or clause preserving it. The exercise of the repealing power by the legislature is not an invasion of any constitutional prohibition or guaranty, State or Federal. — 1 Brick. Dig., 900, § 144. ,A general assignment, or a sale or conveyance in payment of debts, is, each, a contract, within the prohibition and protection of the constitution, State and Federal. No subsequent legislation can destroy or impair the rights and interests they may create. The legislature pending this suit may take away the lien of the judgment, which is the feature supposed to convert it into a general assignment inuring to the'common security of all creditors— then the judgment would cease to be a general assignment not by the act or by the assent of the parties, but by the declaration of the legislative will.

The statutes secure to the judgment debtor, the right to redeem lands which may be sold under execution issuing on the judgment; and a like right is secured to judgment creditors. These are rights which are not to be taken away or impaired by judicial construction. Now suppose, by construction the judgment is converted into a general assignment, can these rights survive? A general assignment passes to the assignee an indefeasible title; tliere remains in the assignor no right, or equity of redemption ; there is no more remaining than the possibility of a reversion of so much of. the property as may not be necessary for the payment of the preferred debts, or of any surplus of the proceeds of sales which may remain after satisfying the debts. — Ellison v. Moses, supra. The purchasers from the assignee take an indefeasible title to the lands ; the title which resided in the assignee, without the incumbrance of the statutory right of redemption, whether it be the right of the assignor, or of his judgment creditor. — Comer v. Constantine, 86 Ala. 492. We know not any process of reasoning by which it is possible to convert the judgment from its real nature, character and operation, into a general assignment within the meaning of the statute. The two have no common elements or characteristics — they bear to each other no legal relation. The conversion would compel the divestiture of well defined legal rights ; and the compulsory formation by the parties of legal relations, into which they have not entered, and did not contemplate entering.

We may concede, as is argued by counsel, that the purpose of the confession of the judgment was-the preference of the judgment creditor to the exclusion of all other creditors ; and that thereby the result is produced which the statute interdicts from being produced by a general assignment. This furnishes no reason for an expansion of the statute by the courts to cases to which the legislature has not extended it. The debtor by the common law has the right to prefer creditors ; a right circumscribed only by the statutes and the principles of courts of equity directed against frauds’upon creditors. When a statute does not abrogate, but simply limits or qualifies the right, it would be an infringement of the well settled principle of statutory construction, that statutes are not to be regarded as derogating from the principles of the common law, save so far as may be expressed or fairly implied, if the courts were to take up the limitation or qualification where the legislature leaves it, and widen it to meet those cases to which it may be supposed it ought to have been extended. Prior to the amendment of the statute, drawing conveyances or sales in payment of pre-existing debts within its operation, the like argument was frequently pressed upon the courts. The invariable answer was, that such sales or conveyances were not within the legislative contemplation and intent — that they were not in any proper sense a security for debts, but a payment of debts ; though thereby the debtor preferred creditors, the statute was in prohibition of preferences only when made by a general assignment. — Ellison v. Moses, supra; 3 Brick. Dig., 50, § 29.

The statute has received a liberal construction — a construction intended to suppress the mischief against which it is directed, and to promote equality among creditors which it manifestly favors. Prior to the adoption of the statute, general assignments were recognized as a distinctive security for the payment of debts. They passed to the assignee the entire estate, or title, or interest of the assignor, leaving in him only a possibility of reversion. And in this respect they differed from other forms and kinds of security, such as mortgages or deeds of trust, by which the debtor did not part with his estate, or right, or title absolutely, but only conditionally, and to which an equity of redemption inhered. As the policy of the statute was the withdrawal from the debtor of the power to prefer creditors, and the promotion of equality among them, the construction it received from an early day after it became of force, and which has been continuous, is, that the form or character of the instrument creating the preference or priority of payment, is not controlling. Whatever may be the form of the instrument, if it is a transfer of substantially all of the property of the debtor, subject to the payment of the debts— if by its terms the property is redeemable on the payment of the debts — or, if by express terms, or by implication of law, a trust results to the debtor of any surplus remaining after satisfying the debts, it falls within the statute, and is a common security for all creditors.— Danner v. Brewer, 69 Ala. 191. But it must be observed that this construction reaches only instruments of transfer or conveyance for the security of debts, proceeding from the act and will of the debtor, and, as was said in Iiolt v. Bancroft, supra, it is only preferences as a feature of such instruments the statute condemns.

The power of the debtor to prefer creditors is limited, not abrogated. He may now convert his property into money, and pay the money to one or more creditors, leaving all other creditors unpaid. The statute is incapable of extension to such a transaction, which is unassailable if there be no secret trust or reservation of benefit to the debtor. So there are other inodes by which preferences may be acquired, without an infringement of the letter or spirit of the statute. We repeat, that by no satisfactory process of reasoning does it seem to us possible to convert this judgment into a general assignment. With these views the case of Rochester v. Armour, 92 Ala. 482, is not necessarily in conflict. There, the confessed judgments were deemed component parts of the general assignment which was in contemplation, and was executed in point of time near to the confession of the judgments. Here the judgment stands alone, not connected with any assignment or transfer whatever, and there does not appear that any was ever executed.

The result is, the chancellor erred in overruling the motion to dismiss the bill for want of equity, and in the appointment of a receiver, and the decree must be reversed, and the appointment vacated. The decree was rendered in vacation, and of consequence the cause will be remanded.

Reversed and remanded.