Ellison v. Moses

• Decision Date: 17 May 1892
• Citation: 11 So. 347,95 Ala. 221
• Parties: ELLISON ET AL. v. MOSES ET AL. [1]
• Court: Alabama Supreme Court

11 So. 347

95 Ala. 221

ELLISON ET AL. v. MOSES ET AL. ^[1]

Supreme Court of Alabama

May 17, 1892

Appeal from chancery court, Montgomery county; JOHN A. FOSTER Chancellor.

Bill by Henry Ellison and others against Henry Moses and others. Decree for defendants, and complainants appeal. Reversed.

The object of the bill is to declare two deeds executed to M. P Le Grand, Sr., one executed to M. P. Le Grand, Jr., trustee a mortgage executed to H. C. Moses, receiver, a transfer of certain stocks and other personal property to M. P. Le Grand Jr., trustee, and the payment of certain money to Josiah Morris & Co., parts and parcels of the general assignment made by Moses Bros. for the benefit of their creditors on July 6, 1891. The chancellor sustained a demurrer to the said bill interposed by M. P. Le Grand, Sr., M. P. Le Grand, Jr., and Josiah Morris & Co., and held that the plea filed by Robert Goldthwaite, as receiver appointed to succeed H. C. Moses, was a sufficient answer to the said bill. The complainants assign as error the decree of the chancellor upon the demurrers, and his ruling upon the plea of the receiver.

Watts & Son, for appellants.

Sempel & Gunter and Tompkins & Troy, for appellees.

WALKER J.

On July 6, 1891, Moses Bros. made a general assignment of all their property for the benefit of their creditors. On the same day they conveyed to M. P. Le Grand certain property in payment of an antecedent debt due to him; to M. P. Le Grand, Jr., trustee, certain other property in payment of an antecedent debt due to him; and executed to Henry C. Moses, as receiver in a cause pending in the chancery court, a mortgage on certain other property, to secure a sum of money due to him as receiver. On the preceding 26th day of June they had conveyed certain other property to M. P. Le Grand in payment of another antecedent debt then due to him, and on the 4th day of July they had transferred and delivered certain other property to Josiah Morris & Co. in payment of an antecedent debt then due to them. It is charged that the several conveyances giving preferences in the payment of the debts respectively provided for were executed when Moses Bros. were utterly insolvent and in contemplation of the general assignment; and that, when the preferences were made, the several preferred creditors above mentioned well knew of the insolvency of Moses Bros., and of their intention to make an assignment. The purpose of the bill is to have all the conveyances and transfers above mentioned declared and treated as parts of one general assignment for the benefit of all the creditors of Moses Bros., and to avoid the preferences. The law 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. He may convey the whole or any part of his property in payment of an antecedent debt; and, if the price is reasonably fair, and there is no reservation of a benefit or trust in his favor, the sale is valid, and will be sustained, whatever may have been the debtor's intentions, and though the preferred creditor knew of such intentions, and that the sale would leave the debtor unable to pay his other debts. That such preferences are allowable is settled by numerous decisions of this court. Chipman v. Stern, 89 Ala. 207, 7 South. Rep. 409; Hodges v. Coleman, 76 Ala. 103; Crawford v. Kirksey, 55 Ala. 282; 3 Brick. Dig. p. 517. The statutory prohibition against preferences in general assignments (Code, § 1737) does not operate upon an absolute and unconditioned sale of a debtor's property to his creditors in payment of the debts due to them. This question also is well settled by the former decisions of this court. The general assignment, in which preferences or priorities of payment given to one or more creditors over the others are prohibited, implies the idea of a trust, under the operation of which there is the possibility of a reversion to the debtor of some interest in the proceeds of a sale of the property assigned. No such idea is involved in an unconditioned sale of property in absolute payment and discharge of a debt. Here the debt is extinguished, and the debtor is stripped of all interest in the property sold. 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. Otis v. Maguire, 76 Ala. 295; Danner v. Brewer, 69 Ala. 191; Comer v. Constantine, 86 Ala. 492, 5 South. Rep. 773. The result is that the law as it now stands permits an insolvent debtor to prefer one or more of his creditors over the others in the payment of debts by a sale of property in satisfaction thereof, and prohibits preferences or priorities of payment in a general assignment by the debtor for the benefit of his creditors. Only the legislature can make the prohibition against preferences equally operative in both classes of cases. The courts must recognize and enforce the law as it exists. They cannot ignore distinctions created by the lawmaking power. It is not shown by the bill that any of the conveyances and transfers made by Moses Bros. in payment and discharge of certain of their debts had the features or characteristics of an assignment for the benefit of creditors, as distinguished from an absolute sale. If all the property of the debtors had been exhausted in the payment of the preferred debts, the creditors who were left wholly unprovided for would not have been entitled to disturb the sales merely because the preferences were thereby made. The validity of the sales was not affected by the circumstance that some other property was left to the debtors which they conveyed by a general assignment for the benefit of their remaining creditors. The complainants were not entitled to have the absolute sales and conveyances treated as parts of the general assignment.

The decree of the chancery court to this effect was correct.

The conveyance to Henry C. Moses, the receiver appointed by the chancery court in the case of Paull v. Knox, does not purport to be in satisfaction and discharge of a debt due to him as receiver, nor does it purport to come within the exception to the statute in reference to "mortgages given to secure a debt contracted contemporaneously with the execution of the mortgage, and for the security of which the mortgage was given." Code, § 1737. It is a mortgage executed to secure the repayment of the amount of certain trust funds which had come to the hands of Henry C. Moses as receiver subject to the directions of the court to lend the same upon the security of real-estate mortgages. He allowed the firm of Moses Bros., of which he was a member, to use these funds, without furnishing the security upon which he was authorized to lend them. It does not appear how long they had had the use of these funds before the mortgage in question was executed. The plea on the subject does not allege that at the time the funds were appropriated and used by the firm there was any express agreement on their part to give the proper real-estate security for the repayment thereof. The averments of the plea show no more than that the receiver's permission of the use of the funds by his firm, and their acceptance of them with notice of the requirements of the court in reference thereto, raised an implied agreement on their part to give the proper real-estate security; and that the execution of the mortgage by Moses Bros. after they had received and used the funds was merely the performance of the duty imposed upon them in the premises. The mortgage in question, and the instrument which is a general assignment on its face, were executed on the same day, and the bill alleges that they were parts of one and the same transaction. The property conveyed by the mortgage is, by the terms thereof, redeemable on the payment of the debt thereby secured. By the express terms of the instrument a trust results to the debtors of any surplus which may remain after satisfying the debt. It was merely a provision for payment by the appropriation of certain property, or the proceeds of the sale thereof to that end, and not a payment itself. These are distinguishing characteristics of the transfer in which preferences are avoided...