Rochester v. Sullivan

• Decision Date: 30 May 1886
• Docket Number: Civil 162
• Parties: E. ROCHESTER, Plaintiff and Appellant, v. M. J. SULLIVAN et al., Defendants and Respondents
• Court: Arizona Supreme Court

11 P. 58

2 Ariz. 75

E. ROCHESTER, Plaintiff and Appellant, v. M. J. SULLIVAN et al., Defendants and Respondents

Civil No. 162

Supreme Court of Arizona

May 30, 1886

APPEAL from a judgment of the County Court of Pima County.

Affirmed.

Hereford & Lovell, for Appellant. Haynes & Stiles, of Counsel.

The conveyance shows upon its face that it was made to hinder delay and defraud creditors, and falls fully within the prohibitions contained in sections 20, chapter 36 of the Compiled Laws, concerning fraudulent conveyances. The intention of the assignors to be gathered from the instrument. Wait on Fraudulent Conveyances, paragraphs 9-10.

Words hinder, delay or defraud not synonymous. A conveyance made either to hinder, delay or defraud is void. Wait, par. 11; Crow v. Beardsley, 68 Mo. 439; Burgert v. Borchert 59 Mo. 83.

A fraud upon creditors is any act which by intention withdraws the property of the debtor from their reach. McKibbin v Martin, 64 Pa. St. 352, 3 Am. Rep. 588.

Purpose to hinder and delay clear upon face of instrument because it expressly delays for six months. Bump on Fraudulent Conveyances, page 412.

See Pomeroy's Equity, paragraph 994, and note I; Bump on Fraudulent Conveyances, page 368; Grover v. Wakeman, II Wend. 187, 25 Am. Dec. 624; Legal right in Bump on fraudulent conveyances, pages 370, 371, 411; Van Nest v. Voe, I. Sanford Chancery, page 4; Planck v. Schermerhorn, 3 Barb. Ch. 644; London v. Parsley, 52 N.C. 313; Burt v. McKenstry, 4 Minn. 204, 77 Am. Dec. 507; Lehmer v. Herr, 62 Ky. (I. Duvall) 360; Holmberg v. Dean, 21 Kan. 73; Gardner v. Commercial Bank, 95 Ill. 298, 10 Reporter, page 300; German Ins. Bank v. Nunes, 14 Reporter, 206.

Where it appears from the face of the assignment that it was made to prevent a sacrifice of the property in the interest of the assignor and not the creditors, such deed is fraudulent and void as to creditors. Wait on Fraudulent Conveyances, sec. 325, and note containing citations. Dunham v. Wattermon, 17 N.Y. 9, 72 Am. Dec. 406; Burrill on Assignments, 3d Edition, page 471, 460 and notes 3 and 4.

Anderson & Anderson, for Respondents.

The general rules of construction of assignments for benefit of creditors are the same as those applicable to other instruments. Wait on Fraudulent Conveyances, sec. 343. Bump on Fraudulent Conveyances, 367; Burrill on Assignments, pp. 456-7

In Arizona there is no special legislation on this subject. Such instruments are regulated by the Territorial Statutes on fraudulent conveyancing which are substantially the same as 13 Eliz. C. 5, the statutes of conveyancing in general, and the common law. Burrill on Assignments, Chap. II.

The "Insolvent Act," passed at the last session of the Arizona Legislature, does not take away the right to make general assignment for the benefit of creditors. That right exists independently of statute, and is based upon the common law. Burrill on Assignments, sec. 47; Cook v. Rogers, 31 Mich. 396; Mayer v. Hellman, 13 N. B. R. 440; Burrill on Assmts. page 68, note I.

Condition that no sale shall be made does not make the instrument void. Burrill on Assignments, sec. 298; Bump on Fraud. Con. p. 411; Burrill, sec. 206.

A reasonable time to execute the trust is allowed by the law, and in this connection has regard to the character of the property and the condition of the markets. Bump Fraud. Con. p. 411; Burrill on Assmts. sec. 214.

For what constitutes reasonable time, see Hafner v. Irwin, 23 N.C. 490; Carnon v. Peebles, 27 N.C. 449; Gilmer v. Earnhardt, 46 N.C. 559; Young v. Bool, 33 N.C. 347; McCoy v. Hugus, 6 Watts, 345; Graham v. Lockhart, 8 Ala. 9; Farquharson v. McDonald, 2 Heisk. 404; Coleman v. Raynor, 3 Cold. 28; Bump Fraud. Con. p. 412, note; Dana v. Bank of United States, 5 W. & S. 223; Burrill on Assignments, sec. 214; Dance v. Seaman, 11 Gratt. 778; Cochran v. Paris, 11 Gratt. 348; Gilmer v. Earnhardt, 46 N.C. 559; Farmers' Bk. of Va. v. Douglas, 11 S. & M. 469; Bennett v. Union Bk. of Tenn., 5 Humph. 612.

Upon the face of the deed there is nothing to indicate that the assignees were insolvent. "The burden of proving insolvency rests upon the creditor assailing the assignment." Bump's Fraud. Con. p. 374.

Definitions of insolvency contained in Wait on Fraud. Con., sec. 143; Burrill on Assmts., secs. 62 and 63.

Barnes, J. Porter, J., concurs.

OPINION

The facts are stated in the opinion.

BARNES, J.--

This was a suit to set aside a conveyance made by the appellees of the property described in the conveyance, on the ground that it was executed to hinder delay, and defraud creditors, in violation of section 20 of chapter 36 of the Compiled Laws of the territory of Arizona. The appellees, it appears, were indebted to L. Zeckendorf & Co. in the sum of about $ 1,500 and to the appellant in the sum of $ 960, and to two other creditors to the amount of about $ 800. The deed conveys to Albert Steinfield, of the firm of L. Zeckendorf & Co., in trust to secure the payment of the said indebtedness. It provides that six months from its date sufficient of the property is to be sold at public sale to pay one-half of the indebtedness, and, at the expiration of one year, the remainder is to be sold, and the proceeds to be paid on the remainder of the indebtedness. The grantors were to retain possession of the property until sales were made. The deed was executed on the first day of July, 1885, and on the seventh day of September, 1885, appellant obtained judgment against appellees for the amount of their debt. Execution was issued and retained nulla bona. Appellant then commenced this suit to set aside the deed of assignment, on the ground that it was made with the intent to hinder, delay and defraud creditors. No evidence was introduced outside of the deed, and it is not claimed that there was any fraud in fact in the execution of the deed; but it is insisted that the deed upon its face, as a matter of law, is fraudulent and void.

Section 20 of chapter 36 of the Compiled Laws of Arizona is similar to statutes which have been enacted in nearly all the states and is an enactment of the statute 13 Eliz. c. 5, commonly known as the "Statute of Elizabeth." Probably there is no legislation which has been engrafted onto the common law of England which has been more discussed by the bar, and considered by the courts, and written about by the commentators of the law. Prior to that statute the owner had absolute dominion over his own property, to do with it according to his own good will and pleasure; and, within the limits prescribed by law, might make any disposition of it. He might sell it or give it away; he might contract debts to be satisfied out of it; confess judgments and create liens upon it. Bump. Fraud. Conv. 13. This act of 13 Eliz. is a limitation upon that right, and the owner may not sell and convey his property if in so doing he have the express or implied intent to hinder, delay or defraud his creditors. Where it is charged that a conveyance is of this character, the onus is upon the creditor who assails the assignment to show that it is in plain violation of the law. Townsend v. Stearns, 32 N.Y. 209; Kruse v. Pringle, 8 Or. 158. The same fair and reasonable rules of construction must be applied to such conveyances as are adopted in ascertaining the meaning of other instruments. Whipple v. Pope, 33 Ill. 334; Bump. Fraud. Conv. 365. This statute was carefully construed in Meux v. Howell, 4 East, 1, 13. In the court of the king's bench Lord Ellenborough there held that "while every assignment of a man's property, however good and honest the consideration, must diminish the fund out of which satisfaction is to be made to his creditors, yet that assignment must be devised of malice, fraud or the like to bring it within the statute." In the case of Pickstock v. Lyster, 3 Maule & S. 371, it was held that "the actual intent to defeat the particular creditor of his execution was not considered of itself sufficient to defeat the statute, the assignment being for the benefit of all the creditors." The supreme court of the United States in Reed v. McIntyre, 98 U.S. 507, quotes this case with approbation, and lays down the doctrine that where the provisions of the assignment are consistent with an honest purpose to deal honestly and fairly with the creditors, the assignment reserving for the benefit of the debtor or his family no interest in the property, and imposing no improper restrictions upon its speedy sale and satisfaction of the debts, the consequent temporary delay in the prosecution by particular creditors of their claims by the ordinary legal remedies was regarded as a necessary and unavoidable incident of a discharge by a debtor of his duty to creditors. In Pickstock v. Lyster, 3 Maule & S 371. Lord Ellenborough held that the deed was not fraudulent, but was for the fair purpose of equal distribution, and Bagley, J., said: "It seems to me that this conveyance, so far from being fraudulent, was the most honest act the party could do." To the like effect are the authorities generally, as will be seen from an examination of the adjudicated cases cited in ...