Ingraham v. Wheeler , 6 Conn. 277 ( 1826 )

Brainard, J.

That a man has a right, for honest purposes, to dispose of his own as he may please, is a principle of natural justice; and generally, a man cannot dispose of his property for better or more honest purposes; than the payment of his just debts. So long as a man has a sufficiency to discharge his just debts, and makes an honest disposition of it, for that purpose; or, if he discovers a reluctance on his part to make this disposition among his creditors, so long as they can find, and, by the agency of the law, apply enough to satisfy their demands ; all is well. Here there is no difficulty in law or in equity. But the difficulty arises, when there is a deficiency of assets, and perhaps the want of honesty.

What then is to be done, is the question. It should seem, that the abstract principles of natural justice would dictate, that the moment a man became insolvent, unable to pay his just debts, the same natural justice would seize the property of the insolvent, and hold it responsible for the equal benefit of all his creditors. But this, however pleasant and plausible in theory, has been found, without the aid of some artificial system, incapable of practice. It has been found, that where there is no system of bankrupt law, the maxim vigilantibus non dormientibus, must apply; hence it is, that when a debtor is insolvent, or in failing circumstances, a creditor, who can, according to law and the forms of legal process, secure a sufficiency of property not under paramount claims, shall he satisfied in whole.

On the same principle it is, that the insolvent has a right to dispose of his property for the payment of his just debts; and to do this with a preference of creditors. The father has a right to prefer the son; the son, the father; the friend, the friend; so long as the debts are just, and the property honestly and fairly applied.

These are principles I early learnt, and have always recogni-sed. To admit that an insolvent has a right to prefer his favour-ite creditor, his friendly indorser, who assisted to support his buoyancy, perhaps to the deception of the ignorant and incautious, and who had received assurances that in no event he should suffer, to the claims of his butcher and his baker, I thought was going far enough.

But to the case under consideration. Andrew Hutchinson, of North-Providence, in the state of Rhode-Island, on the 1st day of May, 1824, executed a deed of assignment to Jabel In-graham and Barney Merry, of the same place, the present plaintiffs, of all his property, in possession and in action, and in whosesoever hands the same might be, in trust for the use and benefit especially of certain creditors therein named, with directions to those assignees and trustees, to pay out of the proceed the debts and claims of those creditors so named, in full; then to apply the residue, should any there be, to the payment of such other creditors not named, as should, within six months thereafter, execute discharges in full of their respective demands. The clause is this: "all the rest and residue of said proceeds, if any there shall be, after the payments aforesaid, shall be applied, by said assignees, to the payment, in whole or in part, of the claims and demands of all other of the creditors of the said Andrew, who shall, within the term of six months from the date of these presents, discharge the said Andrew from their said claims and demands ; the payments to be made in proportion to the several claims so discharged. And it is hereby expressly understood, that no creditor shall be entitled to receive a dividend of the proceeds aforesaid, until he shall have signed such discharge."

The first question is, as to the validity of this deed of assignment. Although there may be some apparent inconsistency and contradiction in some of the authorities on this point, 1 think the case of Hyslop v. Clarke, 14 Johns Rep. 458. decisive of it. The assignment, in that case, was of a similar character and in similar terms to the present; and the court decided it void under the statute of frauds. I think the principles in that case sound, and applicable to the present, as they respect this point.

No insolvent debtor has a right to prescribe terms to his creditors; to say to these, "take up with the crumbs, on my own terms, or have nothing." Besides, if those creditors do not see fit to comply with such terms, where is this residue? The answer must be, in the hands of the trustees, of the bankrupt's own creation, and for his own use and benefit; a trust necessarily resulting. I therefore lay this instrument totally out of the question, as being void; and that upon the face of it.

At this time, the property in question was in the hands of Wheeler, the defendant; and had nothing else happened, his subsequent attachment must have held it.

But it appears farther from the motion, that Wheeler, the defendant, while in the possession of the property, and before notice of the second assignment, viz on the 6th day of May, 1824, attached it for a debt of about 600 dollars, a debt admitted to be justly due; and the great and decisive question in the case, is, which of the two has the preference, the attaching creditor without notice of the transfer, or the assignees, as bona fide purchasers, on good consideration. This must depend on the circumstances of the case. A purchaser is bound, in every instance, where it is practicable, to take immediate possession of the property; and when he does not, there is a badge of fraud, open however to explanation. Where it is not practicable to take immediate possession, he is bound to do it, or that which is equivalent, in a reasonable time; he is bound to use due diligence. After the execution of the said deed of assignment, the plaintiffs were entitled to a reasonable time, either to give notice of the fact to the bailiff or to take possession of the pra- perty. And whether they did use this diligence; or whether they were so remiss that fraud ought to be inferred; were questions of fact very properly left by the judge to the jury,

But it appears from the motion, thaton the 5th of May, 1824, at twenty minutes past four P.M., Hutchinson executed another deed of assignment of the same property, to the same assignees, constituting them trustees for the same general pnrpos-es, with the exclusion of the obnoxious conditions imposed on certain creditors in the former. And the first question here is, as to the validity of this assignment.

It is said, that this second assignment was only an attempt to resuscitate the first, a mere dead letter. I think not; it refers to the first, for certain purposes, necessary for explication. But, in my view, it is a new and independent instrument; an assignment, which, according to the principles already established, and to which I have alluded, was valid, and did transfer all the property of the bankrupt, including that in question, to the assignees, unless some other person had a paramount claim or right to it.

The case of Wain's assignment in Lanfear v. Sumner, 17 Mass. Rep. 110. seems opposed to these principles. That was a case of the assignment of property then at sea; and it was holden, that an attaching creditor should hold, in preference to the assignee, although no negligence was imputed to him in taking possession of it, after its arrival in port. But in this state, I believe, that doctrine, to that extent, has never obtained.

To cases of this class we have applied the well known principles applicable to ships at sea, and other property afloat. An indorsement and delivery of the bill of sale, and other documents evidential of right and ownership, in the one case, and of the bill of lading, in the other, has been deemed sufficient, provided the purchaser or assignee takes possession of the property within a reasonable time after its arrival, or as soon as reasonably practicable.

The assignees in this case, as bona fide purchasers, were entitled to a reasonable time to take possession.

I would not advise a new trial.

Hosmer, Ch. J. and Lanman and Daggett, Js. were of the same opinion.. PETERS, J. was not present when the case was argued, and therefore gave no opinion.

New trial not to be granted.