Howell v. Wm. T. Dixon & Bro.

The Chief Justice

delivered the opinion of the court:

The appellees, as plaintiffs in the court below, sued out an attachment against John W. Howell, which was levied on certain goods in the possession of the appellant, who, as assignee of Howell, claimed the goods and commenced proceedings to try the right of property in the goods under sec. 22, p. 524, McClellan’s Digest. On the trial that ensued in the Circuit Court the presiding Judge charged the jury that the deed of assignment from Howell to Greeley was void.

The appellant assigns here as errors :

1st. The court erred in giving its charge to the jury, construing the assignment from Howell to Greeley and declaring it void.

2d. That there was error in submitting the cause to a jury and entering a verdict and judgment thereon, when there was no issue joined or traverse of claimants’ said affidavit upon which to base a verdict and judgment, because from the case in the record it appears that the jury was sworn to try an issue joined.

3d. The court erred in entering up the judgment that it did enter, as appears of record, same being for sale of property.

4th. There was error in the verdict and judgment finding the property subject to appellees’ attachment.

It is claimed by counsel for the appellees in this court that said deed of assignment is void as to creditors upon two grounds:

1. Because the assignment, after preferring certain creditors, stipulates for a release from the creditors who are to be paid pro rata out of the proceeds of the property assigned after the payment of the preferred creditors.

‘The language of the assignment on that point is as follows : “ To distribute and pay the remainder of said proceeds ratably and in equal proportion to my other creditors in satisfaction and release of all my debts by me owing.”

2. That said deed reserves to the assignor any surplus of said proceeds. The language is as follows: “To repay me, my executors and administrators and assigns, the residue of said proceeds, if any there be.”

As to the first ground urged the authorities are numerous and conflicting, and counsel have, with commendable industry, brought to our attention a large number of cases bearing on the subject.

The question in this State is an open one.

In "Walters and Walker vs. Whitlock, 9 Ela., 87, an assignment was involved which contained a clause of the same legal import as the first above quoted, as to release by creditors of the assignor, but in that case the point was conceded by counsel and the Court said: “ Here we will remark that it has not been contended by counsel for the appellee that the assignment is not valid,” and this question was not passed on by the court.

In England the doctrine that a failing debtor can by deed of assignment of his whole property stipulate therein for a release from his creditors has been uniformly maintained; such stipulations have been held valid even against a claim of the crown. King vs. Watson, 8 Exch., 6 ; 5 Eng. L. & E., 431.

The Supreme Court of Rhode Island also sustains. these stipulations. See Nightingale vs. Harris & Lippitt, 3 Ames, (6 R. I,) 321, and the courts of the following States: Pennsylvania, Mechanics’ Bank vs. Gorman, 8 Watts & Sergeant, 304; Maryland, McCall et al. vs. Hinckley & Woodward, 4 Gill, 128; Kittewell vs. Stewart, 8 Gill, 472. In both these cases, however, there was a divided court. Alabama, Rankin, Duryea & Co., vs. Lodor, 21 Ala., 380; Maine, Fox vs. Adams, 5 Maine, 245; Arkansas, Clayton vs. Johnston, 36 Ark., 406. See also Brashear vs. West, 7 Peters, 615, and Habrey vs. Whiting, 4 Mason, 206.

The leading case declaring the contrary doctrine is Grover vs. Wakeman. 11 Wendell, 189. The court in that case says: “ An assignment containing a provision makiug a preference to certain creditors in the distribution of the assigned property to depend upon the execution by them of a release to the debtor of all claims against him is void, and being void in part as to creditors is void in toto.”

In Ohio, Atkinson vs. Jordan, 5 Ohio, 178; North Carolina, Hafner vs. Irwin, 1 Iredell, 490 ; Mississippi, Robbins vs. Embry, 1 Smedes & Marshall, Ch., 208; Missouri, Drake, vs. Rogers, 6 Mo., 317 ; Georgia, Miller vs. Conklin, 17 Ga., 430 ; Texas, Carlton vs. Baldwin, 22 Texas, 724 ; Tennessee, Wilde vs. Raulings, 1 Head, Tenn., 34; and in Colorada, Duggan vs. Bliss, 4 Col., 223, the principle laid down in Grover vs. Wakeman, supra, is followed. We are inclined to adopt the conclusions and approve the reasoning of the courts which hold stipulations in a deed of assignment requiring a creditor to release his debtor as a condition to participating in the proceeds of his estate, to he void.

It is claimed by the counsel for the appellant that the language used in this assignment, “ in satisfaction and release of all my debts by me owing,” is not a condition addressed to creditors, but is an instruction to the assignee. Its effect is the same. In the one instance you say to the creditors, you cannot be paid unless you release your debtor; in the other you say to the assignee, do not pay the creditor unless he releases the debtor. In either the creditor is required to release all indebtedness, while only receiving a part of his debt. In the cases above quoted in 7 Peters, 615, and in 4 Mason, 206, Chief Justice Marshall,'in delivering the opinion of the court in the former case, said: “Yet we are far from being satisfied that, upon general principles, such a deed ought to be sustained,” and Mr. Justice Story, in the latter, said: “ While giving effect to the contrary principle from what he understood at that time to be the weight of authority, that if the question had been new and many estates had not been passed upon the faith of such assignments, the strong inclination of his own mind would have been against their validity.” It is said in Burrill on Assignments, p. 267 : “ The rule is clearly settled against the validity of the stipulations in question, and the decisions in Ohio, Missouri, Mississippi and Georgia, have thrown great weight. in the scale.” Eurther, pages 267 and 268 : “'It is true the Supreme Court of the United States sustained an assignment containing a stipulation for a release, but this was done with marked reluctance, and only because the court felt itself bound by the construction which had previously been given by the courts of Pennsylvania to the statute of that State.” Again, “ taking into consideration the opinion expressed by Chief Justice Marshall in Brashear vs. West, supra, it seems probable that should a case be brought before the Supreme Court of the United States which could be decided on geueral principles, and free from the controlling influence of State construction, the decision would be against the right to stipulate.”

Mr. Bump says “ the doctrine ” holding such stipulation void “is supported by the weight'of authority.” Bump on Fraudulent Conveyances, 427.

Counsel for appellees insist also that the clause reserving .the surplus to the assignor quoted above vitiates the assignment.

We think, notwithstanding there is some conflict, the-weight of authority is against such a reservation when the-assignment contemplates a pro rata payment to certain-creditors contingent upon their releasing him from all indebtedness. In case any of the creditors decline to accept the offer, the portion coming to them would be returned to-the assignor. This is a contingency upon the happening of which a part of his estate would be returned to him. while he had outstanding unsatisfied debts. Most of the courts that hold that an assignment which exacts a release-as a condition to participation in the assignor’s estate is. valid, hold also that such assignment must convey all the property of the debtor. See eases cited as to the validity of' stipulations for release, infra, and also Bump on Fraudulent Conveyances, 429, 430. There was no error in the-charge of the court.

Counsel for appellant insists that “if this assignment asatrust for creditors was not valid, we say, it appearing that Greeley, the assignee, was a large creditor of Howell, wmcan well regard it as a sale of goods to Greeley in payment of bis debts so far as it goes, and the assignment as an evidence of his debt to Greeley, and a conveyance of the-property which would save it from attachment by other creditors.” We are not authorized by this record to consider this proposition. The record does not show that such a charge was asked by the appellant in the court below, or that any charge touching the proposition was given by the court and excepted to. It cannot be raised for the-first timS here.

Appellant also assigns as error that the jury was sworn 'to try the “ issue joined ” when there was no issue.

As to this it is sufficient to say that no objection was made or exception taken in the court below as to the manner of swearing the jury. It cannot be raised for the first time in this court.

The order in the judgment directing a sale of the property attached while unnecessary was not error, as it only directed what was the legal consequence of a verdict and .judgment for the plaintiff in attachment.

The judgment is affirmed.