Sandwich Manf. Co. v. Max
| Decision Date | 03 March 1894 |
| Citation | 58 N.W. 14,5 S.D. 125 |
| Court | South Dakota Supreme Court |
| Parties | SANDWICH MANUFACTURING CO. et al., Plaintiff and appellant, v. MAX et al, dba Max & Baisch, a partnership, Defendants and respondents. |
Appeal from Circuit Court, Bon Homme County, S.D.
Affirmed
J. D. Elliott, D. C. Shull and F. D. Wicks
Attorneys for appellants.
French & Orvis, Yankton, S.D.
Attorneys for respondents.
Opinion filed March 3, 1894
We think the following statement at the head of appellants’ brief is a fair presentation of the facts in this case, and we adopt it as the basis of this opinion:
The plaintiffs appealed.
From this statement we draw the following facts: Max & Baisch were justly indebted to the Wenzlaffs in the sum of $7,000. In payment of such indebtedness they conveyed to them property whose cash value was $7,000 to 8,000. The property so conveyed constituted substantially their entire means, and resulted, as they knew it wouid, in the dissolution and discontinuance of their business. The Wenzlaffs knew that such conveyance and payment to them took and absorbed substantially all the property of Max & Baisch, and that it would necessitate the abandonment of their business. Max & Baisch were at the time largely indebted to other creditors, including the plaintiffs in this action, who were left, by such conveyance and payment to the Wenzlaffs, entirely unprovided for. The question to be determined is directly this: Is it the legal effect of these facts to make such conveyance to the Wenzlaffs an assignment by Max & Baisch for the benefit of their creditors? At common law, a debtor in failing circumstances may use any or all of his property to pay one or more creditors in preference to others. 2 Kent, Comm. 532; Burrill, Assignm., § 160. In this state this right of the debtor is expressly declared by statute.
“A debtor may pay one creditor in preference to another, or may give one creditor security for the payment of his demand in preference to another.”
Comp. Laws, § 4654. This provision simply codifies the common law, and, unless qualified by other statutory provisions, the right of a debtor to select and prefer one creditor to another remains as at common law. And it is very clear that Max & Baisch, in making such payment to the Wenzlaffs, were exercising a right recognized and assured to them both by the common and statutory laws, unless such right has been limited or restrained by other provisions of the statute; and this is what is claimed by appellants is done by the statute regulating assignments in trust by insolvent debtors for the benefit of their creditors. Section 4660, Comp. Laws, is as follows:
“An insolvent debtor may, in good faith, execute an assignment of property to one or more assignees, in trust towards the satisfaction of his creditors, in conformity to the provisions of this title; subject, however to the provisions of this code relative to trusts and to fraudulent transfers, and the restrictions imposed by law upon an assignment by special partnerships, by corporations or by other specified classes of persons; provided, moreover, that such assignment shall not be valid if it be upon, or contain any trust or condition by which any creditor is to receive a preference or priority over any other creditor; but in such case the property of the insolvent shall become a trust fund to be administered in equity, in the district court, and shall inure to the benefit of all the creditors in proportion to their respective claims or demands.”
and uninfluenced by several judicial decisions, some of which it will be necessary to notice hereafter, I think I should understand these provisions,—the one declaring the right of a debtor to prefer particular creditors, and the other regulating the making and declaring the effect of a general assignment in trust for the benefit of all creditors—to be distinct and independent provisions, either of which was available to a debtor. That two different courses were open to every debtor, he might, as provided in said Section 4654, use any or all his property to pay or secure any creditor in preference to others, or he might, as provided in said Section 4660, turn over all his property to a trustee for the benefit of all his creditors ratably. If he chooses to adopt the former course of paying or securing a preferred creditor, he must keep himself and the transaction within the rules of honesty and good faith as defined by the law. If he adopts the latter course of making a general assignment, he must follow the requirements of the statute authorizing and regulating such assignment; and, if in or by such assignment he undertakes to prefer one creditor to another, the consequence prescribed by such statute will follow. That the question is not one of morals, to be measured by the conscience of the court, but of law, to be tested by the enactments of the legislature.
These views, thus generally expressed, are plainly opposed by the opinion of the territorial supreme court in Straw v. Jenks, 6 Dak. 414, 43 N.W. 941. It is quite probable that the opinion of the learned judge, which was elaborate and instructive, laid down some propositions not necessary to a decision of that case upon the facts presented, and that the law which might perhaps have properly decided that case does not necessarily decide this. In that case the mortgagors made several chattel mortgages, at practically the same time, to as many different creditors. They were all immediately placed in the hands of an agent or trustee for enforcement. These acts were all so nearly simultaneous, and so closely related to each other as to suggest the deliberate intention of the mortgagor to thus create a trust in such agent or trustee for the benefit of such preferred creditors. In the case before us there can be no such element of trust, unless the law itself directly creates it, and that, too, against the express intention of the parties. But the opinion without doubt plainly teaches the doctrine upon which the appellants base their present contention in this case. It is thus stated in the opinion:
“Under this statute [4660] whenever an insolvent debtor makes a general disposition of all his property and effects, whether to all or only a part of his creditors, thereby abandoning his business, or putting himself in such situation that it is impossible for him to continue in it, he has made a voluntary assignment.”
And again:
“So long as the instrument employed by the debtor, whatever it may be called, works an absolute transfer of substantially all the property and effects of the insolvent from him to another or others, with a design on his part that it shall do so, and that his connection with the business shall cease, it is a voluntary assignment on his part under the statute in question.”
It is reasonably plain that if these propositions are adopted and followed as the law by this court, the decision of the circuit court must be reversed; for all the conditions exist which, ruled by such law, would make this conveyance an assignment with preferences. The opinion finds the efficient factor, which turns what would be otherwise a simple transfer of property to one creditor in payment of his debt into an assignment for the benefit of all credrtors, in the circumstance that such transfer embraces substantially all the debtor’s property—that is, that a debtor may convey nearly all his property to pay his debt to one of his creditors; and it is a proper exercise of his right to prefer such creditor. But if he convey a little more, so as to make substantially all his property,...
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