Silver & Goldstein v. Chapman
| Decision Date | 14 January 1927 |
| Docket Number | 5444. |
| Citation | 136 S.E. 914,163 Ga. 604 |
| Parties | SILVER & GOLDSTEIN et al. v. CHAPMAN et al. |
| Court | Georgia Supreme Court |
Judgment Adhered to March 3, 1927.
Syllabus by the Court.
When this case was formerly before this court it was held that "the question as to whether or not the sale and assignment of the exemptions claimed was bona fide or fraudulent was for the jury under the facts of the case"; and the jury on the second trial, under substantially the same evidence, having found the sale valid we cannot say that their verdict is contrary either to the law or the evidence.
The assignments of error contained in the first, second, and third grounds of the amendment to the motion for new trial are without merit.
An insolvent debtor may prefer one creditor to another, and to this end he may transfer choses in action as collateral security for a pre-existing debt, the surplus in such case not being reserved for his own benefit. A voluntary bankrupt has an assignable interest in the property claimed by him in his petition as exempt, under the Constitution and homestead laws of this state; and he can transfer this interest in good faith to his creditor either in extinguishment of, or to secure, a pre-existing debt, before the property is set aside by the trustee in bankruptcy, and before the same is confirmed by the bankrupt court.
Insolvent debtors can transfer choses in action to one or more creditors to secure pre-existing debts, to the exclusion of other creditors. Where a bankrupt transfers and assigns in good faith to a creditor his homestead exemption, for which he has applied to be set aside in money, to secure a debt to such creditor, with the understanding that the creditor, for the bankrupt, is to turn over to another creditor whom the bankrupt wishes to prefer the surplus of such funds left after paying the debt of the transferee, such transaction does not amount to an assignment and is not void because it fails to comply with the requirements of the law touching the execution of assignments for the benefit of creditors.
Error from Superior Court, Jackson County; W. W. Stark, Judge.
Action by Silver & Goldstein against W. H. Chapman and another doing business as Chapman Bros., in which the Ridley-Yates Company intervened. Judgment for defendants, and plaintiffs bring error. Affirmed.
Transfer by bankrupt of homestead exemption to creditor, surplus to be turned over to another preferred creditor, was not an assignment for benefit of creditors (Civ.Code, 1910, §§ 3230, 3232 et seq.).
Chapman Bros., a firm composed of W. H. and Oscar Chapman, were adjudicated bankrupts. Each of them applied to have set aside a cash exemption of $1,600 out of their stock of merchandise and other property. Silver & Goldstein held the notes of the bankrupts, containing waivers of homestead and exemption. These creditors filed their petition against the bankrupts alleging the above facts, and praying for an injunction restraining the bankrupts from transferring or attempting to transfer the property claimed by each of them as a homestead or exemption, and for the appointment of a receiver to take charge of said exemptions when set aside, for the purpose of applying the proceeds to the claims of petitioners and other creditors similarly situated. Ridley-Yates Company intervened, alleging that on May 18, 1922, and prior to the filing of the petition in this case, each of the bankrupts in consideration of the sum of $5 cash in hand paid and other valuable considerations, transferred, sold, and assigned to intervener all right, title, and interest which he might have to any property or funds claimed by him as a homestead exemption in the bankruptcy proceeding. Each assignment was in writing and made directly to the intervener. It prayed that the title to the funds set apart as homestead exemptions to the bankrupts be decreed to be in it; that, if the homestead exemptions set apart to the bankrupts had been paid over to the receiver, he be ordered to pay the same to intervener; and that, if the homestead exemptions had not been turned over to the receiver, he be directed to dismiss his intervention in the bankrupt court in which he claimed the same. By amendment Silver & Goldstein alleged that said assignments were fraudulent and void because made to hinder, delay, and defraud creditors of the bankrupts. The plaintiffs by another amendment alleged that said assignments were not made in good faith, but that the debtors made them with the reservation of an interest in said property. By another amendment plaintiffs allege that said assignments were for the benefit of the creditors of said assignors, made when they were insolvent, and were invalid because the assignors did not comply with the laws of Georgia relating to assignments for the benefit of creditors, in that each of said assignments was not executed, filed, and recorded as a deed, and contained no inventory of property or list of creditors and no affidavit that said assignment was of all property, and that the same was not made to hinder, delay, or defraud creditors. They further alleged that, while each of said assignments on its face purported to sell said property only to Ridley-Yates Company, the two assignments transferred property of the value of $3,200, with the secret agreement between the assignors and assignee that the surplus should be paid by the assignee to Dougherty-Little-Redwine Company, another creditor of assignors, holding a note against the bankrupts for about $910.
On the trial P. D. Yates, the president of Ridley-Yates Company, testified as follows: The bankrupts came to his office and disclosed to him the purpose of their visit. W. H. Chapman told him they were in financial trouble, and were looking for advice. They had a list of liabilities, amounting to $74,428, and assets amounting to $27,235. After looking into their affairs, he told them that they were hopelessly insolvent, but that he was not experienced in giving advice; that the Retail Merchants Credit Association would give advice as to what to do. They went over there. Chapman Bros. had been a good customer of theirs for a number of years, and they were friends. His company had sold them goods since they had been in business and had confidence in them, and they had confidence in his company. Chapman said they would like to protect Ridley-Yates Company if he could, and witness said that if Chapman would do anything for his company he would appreciate it. Chapman then said he would like to make the homestead exemptions to Ridley-Yates Company and Dougherty-Little-Redwine Company. Each of the bankrupts made a transfer of the same kind. Each transfer is to Ridley-Yates Company. The two exemptions were for $3,200, and the claim of Ridley-Yates Company was for $2,400. Its claim and that of Dougherty-Little-Redwine Company were more than the exemptions. The party who wrote the assignments left out Dougherty-Little-Redwine Company. He told Chapman, if his stock was sold in the bankrupt court at a reasonable price, he would buy it in, take their notes and chattel mortgages on the stock of goods, and sell it back to them. If it sold for more than it was worth, he would sell him new stock and take his note for it. The stock of merchandise was sold by the bankrupt court and bought by Ridley-Yates Company and Dougherty-Little-Redwine Company for $7,550, and the purchasers sold it to Chapman Bros. at the price they paid for it. Ridley-Yates Company paid 77 per cent. of the purchase price, and Dougherty-Little-Redwine Company paid 23 per cent., these payments being proportionate to their claims. The exemption fund, after the notes of Ridley-Yates Company were paid, was to be applied on Dougherty-Little-Redwine Company's notes. The Chapmans were not to get any of the fund. Ridley-Yates Company and Dougherty-Little-Redwine Company performed their duty in buying the stock of goods. The Chapmans had no interest in the exemption funds after the assignments. They had no agreement to give them anything out of it.
"The only thing we were to do was to put them back in business by getting them these goods or purchasing new goods for them."
Ridley-Yates Company proved its claim in bankruptcy, and got a 5 per cent. dividend, amounting to $126.
Oscar Chapman testified:
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