Powers v. Hill

• Citation: 27 Mo.App. 190
• Parties: DEBORAH POWERS ET AL., Plaintiffs in Error, v. P. S. HILL, Assignee, Defendant in Error.
• Decision Date: 07 June 1887
• Court: Missouri Court of Appeals

27 Mo.App. 190

DEBORAH POWERS ET AL., Plaintiffs in Error, v. P. S. HILL, Assignee, Defendant in Error.

Court of Appeals of Missouri, St. Louis.

June 7, 1887

ERROR to the St. Louis Circuit Court, DANIEL DILLON, Judge.

Reversed and remanded with directions.

MILLS & FLITCRAFT, and ENOCH JOHNSON, for the plaintiffs in error: The intention of the framers should be considered in the interpretation, and when such intention is ascertained it will govern the application of the statute, even though such application be contrary to the strict letter of the law. Riddick v. Governor, 1 Mo. 147; The State v. Emerson, 39 Mo. 80; The People v. Insurance Co., 15 Johns. 380; Whitney v Whitney, 14 Mass. 92. This intention is to be gathered from the occasion and necessity for the passage of any particular act, and is not to be deduced wholly from the literal import of the words used in framing any particular section of the act. The People v. Insurance Co., 15 Johns. 380; Marshall, C. J., 9 Wheaton 189; Schultz v. Railroad, 36 Mo. 13. This statute has been construed in the following cases: Sprague Co. v Furnishing Co., 26 F. 572; Williams v. Jones, 23 Mo.App. 132.

SILAS B. JONES, for the defendant in error.

OPINION

THOMPSON J.

This is a friendly suit, brought against the assignee of an insolvent corporation for the purpose of procuring from the court a direction to the assignee, whether he shall pay, upon the plaintiffs' demand, a dividend paid by him on the demands of other creditors prior to the time when the plaintiffs' demands were presented and allowed. The question arises upon a demurrer to the petition. The substantial facts stated in the petition were that, in October, 1886, the Beck & Marshall Carpet Company, a corporation, made an assignment, under the statute, to the defendant, as assignee, for the benefit of its creditors. The plaintiffs, in their own right, and as assignees of other creditors, hold claims against the assigned estate, amounting to $1,968.91. The circuit court sustained a demurrer to the petition, and the plaintiff prosecutes a writ of error in this court.

The assignee gave notice, in due form of law, that he would, on the twenty-second, twenty-third, and twenty-fourth days of November, 1886, proceed, publicly, to adjust and allow demands against the estate and effects of the assignor. The plaintiffs' demands were not presented for allowance on either of the three days appointed. On December 15, 1886, the assignee declared and paid a dividend of fifty-five per cent. on the demands which had been duly presented and allowed. Afterwards, the plaintiffs, being non-residents of the state, made a satisfactory showing, under the statute, for their failure to lay their claims before the assignee at the time appointed, and demanded that the claims be allowed and made to participate in the dividend previously declared. The assignee allowed the demands, but refused to let them share in the dividend of December 15. The propriety of this refusal is the only matter of inquiry brought to our attention.

Section 373, of the Revised Statutes, provides that " all creditors who, after being notified as aforesaid, shall not attend at the place designated during the said term, and lay before the assignee the nature and amount of their demands, shall be precluded from any benefit of said estate; * * * provided, that any creditor, who shall fail to lay his claim before said assignee, during said term, on account of sickness, absence from the state, or any other good cause, may, at any time before the declaration of the final dividend, file and prove up his claim, and the same may be allowed, and the remaining dividends paid thereon, as in the case of other allowed claims."

It is perceived that the ruling of the circuit court rests upon a literal reading of the statute. We are of the opinion, however, that the language of this section of the statute is to be construed in subordination to the general policy of the statute, as expressed in section 354, as amended by the act of March 7, 1885, which reads as follows: " Every voluntary assignment of lands, tenements, goods, chattels, effects, and credits, made by a debtor to any person in trust for his creditors, shall be for the benefit of all the creditors of the assignor in proportion to their respective claims; and every provision in any assignment providing for the payment of one debt or liability in preference to another, shall be void, and all debts and liabilities (including judgments entered by confession thirty days previous to such assignment) shall be paid pro rata from the assets thereof; and every such assignment shall be proved or acknowledged, and certified and recorded in the same manner as is prescribed by law in cases wherein real estate is conveyed." It is perceived that the primary object of the statute is to enable an insolvent debtor, by making an assignment thereunder, to place his property in the custody of a trustee, to be administered for the equal benefit of his creditors, and that the statute prohibits preferences in such deeds of assignment, and avoids confessions of judgment, which have been made within thirty days prior thereto. The policy thus expressed is founded in the most obvious justice. It has always been a favorite maxim of courts of equity that equality among creditors is equity. This principle has been regarded as peculiarly applicable to cases where the debtor is a corporation, and has been formulated by those courts in the familiar rule that the assets of an insolvent corporation are a trust fund for the benefit of its creditors, by which those courts are universally understood to mean for the equal benefit of its creditors. The meaning is, that creditors standing in equal right and in equal relations, must share equally. " An assignment for the benefit of creditors is a trust, and the assignee is to be regarded as a trustee." Shockley v. Fisher, 75 Mo. 502; Perry on Trusts, sect. 585. A superintendence over the administration of trusts is perhaps the largest head of equity jurisdiction. In general, trustees are subject to the control of courts of equity, and exercise their powers in conformity with the principles established by those courts. In this state, where legal and equitable remedies are blended, and are administered in the same tribunal, the rule prevails none the less, that trusts are administered in conformity with that mass of rules and principles which pass under the general designation of equity, except in cases where the trustee is subject to explicit statutory directions.

There is reason, no doubt, for the holding that an assignee for the benefit of creditors, in admitting creditors who have not proved up their claims at the proper time to a participation in the dividends, is subject to the explicit direction of the statute above quoted. Undoubtedly this is so in all cases where, to admit such creditors to dividends previously declared and paid, would have the effect of withdrawing any portion of such dividends from the creditors who have received them, or otherwise prejudicing the substantial rights of other creditors, or sensibly delaying or obstructing the winding up of the estate. But where, as in the present case, it does not appear that any such prejudice to any other creditors, or inconveniences to the administration, will be produced by admitting the tardy creditors to a full participation in the dividends, prior and subsequent to the proving of their claims, the policy of the statute must prevail. The language above quoted from the statute is directory; and, within the limits above stated, the assignee must exercise his powers as a trustee in conformity with the declared purpose of the statute, which is that of effecting a pro rata division of the assets of the insolvent debtor among his creditors. A strict adherence to the language of the statute, in a case like the present, would involve the inequitable result of subjecting a meritorious creditor to a forfeiture of more than half his demand, for no other reason than his delay of less than three months in proving up the same, which delay he has excused to the satisfaction of the assignee. To follow the letter of the statute, where it leads, in such circumstances, to such results, would afford a striking illustration of the maxim that " the letter killeth."

A somewhat analogous question, under the same section of the statute, was before this court in the case of the Fourth National Bank v. Scudder (15 Mo.App. 463.) In that case the assignee had refused to allow a tardy creditor to prove his demand, though it was admitted to be a just and incontestable claim. The circuit court, on an appeal from his ruling, required him to audit the demand, and this court affirmed the judgment of the circuit court. In the last paragraph of the opinion, it was said: " It can not escape the attention of any one, that the grounds on which we are asked to reverse this judgment proceed in entire disregard of the merits of the claim and of the plain justice of the case. No prejudice whatever appears from the allowance of this claim. It is not even suggested that, by its allowance, the assignee will suffer any substantial inconvenience in discharging his trust or in adjusting his accounts. In allowing the claim to be presented after the time fixed and advertised by the assignee, the circuit court has done no more than exercise a sound discretion, such as is exercised in setting aside judgments by default for the purpose of allowing causes to be heard upon their real merits. The exercise of such a discretion can not be made a ground of error. We are forbidden, by the legislature, to reverse the judgment of any court, unless we shall ‘ believe that error was committed by such court against ...