Pollock & Bernheimer v. Sykes

• Decision Date: 22 March 1897
• Citation: 74 Miss. 700,21 So. 780
• Parties: POLLOCK & BERNHEIMER ET AL. v. C. R. SYKES, RECEIVER, ET AL
• Court: Mississippi Supreme Court

21 So. 780

74 Miss. 700

POLLOCK & BERNHEIMER ET AL. v. C. R. SYKES, RECEIVER, ET AL

Supreme Court of Mississippi

March 22, 1897

March 1897

FROM the chancery court of Monroe county HON. BAXTER MCFARLAND Chancellor.

E Lancitot, an insolvent merchant, conveyed all of his property on the same day by two instruments, the one first actually executed being a deed of trust to secure certain creditors and the second a general assignment, executed about twenty minutes afterwards, and the general assignment covered the equity of redemption to the property in the deed of trust. The assignee in the assignment filed his petition and bond in the chancery court under code 1892, ch. 8, and a number of creditors filed cross petitions attacking the validity of both conveyances, claiming that they should be construed as evidencing a common purpose and should be treated as if the two were one instrument, and that they were violative of the statute, code 1892, ch. 8, regulating general assignments, and, further, that the debts secured by the deed of trust were usurious. Hurst & Co., creditors, sought by their cross petition to recover, specifically, the goods sold by them to Lancitot.

In the course of the administration by the assignee and receiver he filed a petition asking the court, the trustee and beneficiaries in the deed of trust uniting with him, to extend the receivership over the property conveyed by the deed of trust, but subject to it, in order that the interest of all parties might be promoted by administering the two trusts in one suit, but also asking that in all things he keep separate accounts, etc. No objection to this petition was made by the attaching creditors, and the court granted the prayer of the petition.

Decree affirmed.

Gilleylen & Leftwich, Houston & Reynolds, and Houston & Barron, for appellants.

The record presents this question squarely to this court, whether chapter 8 of the code of 1892 can be furtively evaded by a debtor, powerless in the hands of a bank and its officers which has been furnishing him money at a usurious rate of interest, so as to get the benefits of the statute and escape its burdens.

Lancitot, confessedly insolvent (and the answers admit C. R. Sykes and the beneficiaries in the deed of trust knew it), voluntarily offers the First National Bank to secure its indebtedness. He goes to the attorneys of the bank and discusses the preparation of a deed of trust. Before the deed of trust is begun to be prepared, he is blandly told that giving the deed of trust will stop his business. The preparation of the general assignment, by these same attorneys and another, then begins, and it and the deed of trust go hand in hand, pari passu, until they culminate in the execution of both at one sitting of the officer who takes the acknowledgments. Both instruments are carried to the chancery clerk's office and filed within a few minutes of each other. We assert, with some confidence, two propositions as touching the validity of the deed of assignment which the learned chancellor sustained: (1) It is void on its face, in that the deed of assignment is a mere auxiliary of the deed of trust and contemporaneously executed; (2) evidence aliunde shows that the deed of trust and the assignment together were a preferential disposition of the entire estate of the debtor in the interest of the debts secured by the deed of trust, and that the whole is a palpable evasion of the assignment chapter of the code of 1892; so much so that the courts will not execute it; in other words, the whole constitutes together an attempted assignment which is invalid.

The first proposition is best proven by a confession placed of record by the assignee and trustee, in the deed of trust, themselves. The deed of trust is purely voluntary. There is no extension of the law day for the payment of the notes accrued. There is no consideration. These excellent lawyers, while avoiding Scylla wanted to escape Charybdis. James A Roy, a solvent indorser, had placed his name on the back of these notes secured in the deed of trust, and an extension would release him. That city of refuge was not given up, so that the deed of trust is but voluntary. Dunlap v. Burnett, 5 Smed. & M., 702; Perkins v. Swank, 43 Miss. 349; Pope v. Pope, 40 Miss. 516; Schumpert v. Dillard, 55 Miss. 348; 15 Am. & Eng. Enc. L., 757.

The assignment is fraudulent on its face, in so far as it requires the assignee to preserve and hold the goods for fifteen days, until the law day of the deed of trust arrives. The deed itself thus palpably hinders and delays creditors in the collection of their debts. The assignee stands over the goods, keeping the general creditors off, until the time when the trustee can come in and take possession. He is a lion in the path of creditors. They cannot attach, they cannot replevy, they cannot levy an execution during that time. But the appellee responds to this attack: "Fifteen days is a very short time, and does no harm to creditors." It does not lie in his mouth to say this. It is the principle of the thing that confronts the court.

This transaction is not like the case of Sells v. Grocery Co., 72 Miss. 590-605, where the assignment was not at first contemplated. The evidence was uncontradicted in that case that, at the time of the execution of the bill of sale and the deed of trust, there was no contemplation of making an assignment. The assignment was first thought of on December 5, 1892, the day on which it was executed, the bill of sale and the deed of trust having been executed on November 30, 1892. Nor is this transaction like Mayer v. McRae, 16 S. Rep., p. 875, where the instrument was executed in payment, etc. In this case the deed of trust and the deed of assignment were complementary one of the other. Both were conceived before either was born. They were executed one in support and aid of the other. Both were discussed before either was begun.

The proper construction of code of 1892, ch. 8, we contend, is that a general assignment must be administered by the chancery court. The assignee cannot be made a stakeholder for the trustee for fifteen days, and do nothing in the meantime. When the assignor attempts this, as in this case, we think the instrument is invalid on its face. This feature of chapter eight can be no more evaded than the statutes against preferences can be avoided in those states where preferences are invalid. The reasoning of the courts on such statutes, we think, are potent in this case, mutatis mutandis. Burrill on Assignments, secs. 93 and 324 et seq.; Perry v. Holden, 22 Pick. (Mass.), 269 et seq.; Fairbanks v. Haynes, 23 Pick. (Mass.), 323 and 325; Perry v. Cutts, 42 Me., 453; Pope v. Pope, 40 Miss. 516; Dano v. Brewer, 69 Ala. 191; Krew v. Prindle, 8 Oreg., 158; French v. Towries, 10 Gratt. (Va.), 513; Meissey v. Mayer, 26 Va., 471; Van Patton v. Marks, 52 Iowa 518.

These various instruments are construed as parts of the common design of the debtor, who abandons his entire estate to pay debts, and attempts preferences by indirection. Here the evasion of the law is just as palpable, through the manifest purpose of the assigner to abandon his estate to his creditors through the medium of chapter 8, code 1892, and the chancery court; and at the same time he refuses to allow that court to fully administer the estate, and take entire dominion over it. We invite the court's attention, first, to that line of cases which construes several instruments together as constituting a general assignment, none of which are such standing alone. White v. Cotshausen, 129 U.S. 329; Winner v. Hoyt, 28 N.W. 380; Lorrabee v. Franklin Bank, 21 S.W. 747; 29 Cent. Law Jour., 243; Putney v. Freeselben, 11 S.E. 337; Burnham v. Hoskins, 44 N.W. 341; 2 Supreme Court Rep., 367,

These cases go further than is necessary in the case at bar. for here there is a general assignment. There is a second class of cases where there is an assignment without preferences on its face, in states where preferences are prohibited, and, contemporaneously with it, other conveyances making preferences, all of which are construed as one instrument. Preston v. Spalding, 10 N.E. 903; Farwell v. Nillson, 24 N.E. 74; Perry v. Cutts, 42 Me., 445; Hall v. Bancroft, 30 Ala. 193; Kellogg v. Root, 23 F. 525; Van Patton v. Burr, 3 N.W. 524; Field v. Geohegon, 16 N.E. 912; Burnham v. Haskins, 44 N.W. 341; 34 N. J. Eq., 478; 12 N.W. 550.

Clifton & Eckford, on same side.

Does the mortgage and assignment constitute one instrument? E. Lancitot was insolvent and was being pressed by his largest creditor, the bank. He decided to give the bank and a few other creditors a deed of trust on his stock of goods, which constituted almost his entire estate. When he notified his lawyers to prepare the mortgage, who were also the retained counsel of the bank, they told him it would force him out of business, and advised him to make, also, a general assignment. He then decided to make, also, a general assignment, and the two deeds were prepared at the same time by the lawyers, Sykes & Bristow, and both completed before either was executed. The mortgage was executed seven minutes before the assignment, and recorded twenty minutes before the assignment. No extension of time was given on the debts by the bank, but the mortgage matured fifteen days after date, and provided that E. Lancitot should retain possession until the law day, but could not sell any of the goods. The assignment gave C. R. Sykes, the assignee, immediate possession of the goods, referred to the mortgage as a superior lien, and directed that the assignee and receiver should turn over all these goods to the trustee in the mortgage, on the law day of the deed, to pay off the debts.

1. Where an insolvent debtor...