Smith v. Baker
| Decision Date | 12 February 1897 |
| Citation | 49 P. 61,5 Okla. 326,1897 OK 37 |
| Parties | SMITH et al. v. BAKER et al. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
1. The right of an insolvent debtor to pay one or more creditors in preference to others, and the right to make a general assignment for the benefit of all his creditors ratably, are distinct and independent rights.
2. Where an insolvent debtor makes conveyance of the whole of his property, by bill of sale or chattel mortgage, to one or more of his creditors, in good faith, and in absolute executed payment of a bona fide debt, or for the security of a bona fide indebtedness, although in exclusion of other creditors, the transaction lacks the essential elements of a trust, and cannot be brought within the range of the statute relating to voluntary assignments. The statute regulating and permitting voluntary assignments by insolvent debtors for the benefit of creditors was not intended to, and does not affect or qualify the right of such debtors to make preferences among their creditors under section 4 of chapter 27 of the Statutes of 1893.
3. Under the laws of this territory, in 1893, an insolvent debtor had two ways in which he might dispose of his estate First, under section 4, c. 27, St. 1893, by using the same to pay or secure his debt to one or any number of his creditors second, if he desired to distribute his estate equally to all his creditors, he might do so under the assignment law. If he elected to distribute his estate under the assignment law, such distribution was required to be for the benefit of all creditors equally, and the assignment could not create preferences in favor of any.
4. Where the legislature of one state or jurisdiction adopts a statute in force in another jurisdiction, which has already received a construction in its courts, it is presumed to adopt the construction thus given: but, to sustain the presumption, such construction must have been placed thereon by the highest judicial tribunal authorized to pass upon the question, and such construction must have been so long established as to have been known, or so long that it reasonably might have been known, to the legislature adopting it.
Error from district court, Canadian county.
Action by J. H. Baker and others against Rebecca A. Smith and others. From a judgment for plaintiffs, defendants bring error. Reversed.
The judgment of the court below, from which this appeal is prosecuted, was upon a motion for judgment upon the petition and answer in the cause, and adjudging certain conveyances to be an assignment for the benefit of creditors, appointing a receiver to take charge of the property and effects conveyed, and for a sale thereof, and decreeing that the funds arising from such sale should be held by such receiver in trust to be applied in payment of the costs and expenses of the suit, and of the indebtedness due the creditors of the persons making such conveyances. The facts averred or admitted in said petition and answer may be fairly stated thus: On April 28, 1893, the plaintiffs in error Kate Smith and Florence Smith formed a general partnership for the purpose of carrying on the business of general merchants at El Reno, in said county, under the firm name and style of Smith & Smith. On May 1, 1893, Rebecca A. Smith, also a plaintiff in error, and the mother-in-law of said Kate Smith and Florence Smith, loaned to said firm $3,120, and took their notes for said amount. She afterwards loaned to said firm various sums, amounting to $1,853, and on October 11, 1893, took their notes therefor. That all of the money for which said several notes were given was used by said firm of Smith & Smith in their business. That said firm had two store rooms, in one of which they carried on the business of druggists, and carried a stock of drugs, etc.; in the other, a general stock of dry goods, groceries, boots, shoes, etc. The firm of Smith & Smith became, in the regular course of business, indebted to the defendants in error and on November 23, 1893, numerous action had been commenced against them in the courts of said county by divers creditors, other than the defendants in error, and judgments were about to be taken in said action. That said firm was then insolvent, and unable to meet their obligations as such obligations became due. That said Rebecca A. Smith was on said 23d day of November, 1893, aware of the financial condition of the firm of Smith & Smith, and knew that said firm was insolvent. That on said day she purchased of Smith & Smith their entire stock of drugs, which was valued and invoiced at $1,870, and took a bill of sale therefor. That she took immediate, actual possession of said drug store, and thereafter carried on the business in her own name. The consideration for the sale of said drug store was the cancellation of the said notes dated October 11, 1893. That said bill of sale was duly recorded on the 23d day of November, 1893. That the firm of Smith & Smith was then and remained indebted to the said Rebecca A. Smith to the full amount of the notes given by them on the 1st day of May, 1893; and on demand of said Rebecca A. Smith for security on said notes the firm of Smith & Smith, on said 23d day of November, 1893, executed and delivered to her a chattel mortgage on the stock of dry goods and groceries in their other store, which mortgage was duly recorded on said date. At the time of making said bill of sale and the said chattel mortgage, the firm of Smith & Smith had no real estate, and the said bill of sale and chattel mortgage covered and conveyed all the personal property which said firm owned or possessed, except that which might have been exempt by law from seizure and sale under attachment or execution. The indebtedness for which said bill of sale and chattel mortgage were given was a bona fide, subsisting indebtedness. When they made said bill of sale and chattel mortgage, the firm knew that they could not continue their business longer, and must abandon the same, and said Rebecca A. Smith then knew that said firm, by reason of their inability to meet their debts and liabilities, could not longer continue their said business. That it was stipulated in the said chattel mortgage that the mortgagors might retain possession of the goods mortgaged, and sell the same in the usual course of trade, as the agent of the said Rebecca A. Smith; accounting to her for the proceeds of such sales, less certain expenses in selling the same. That, immediately on the delivery of said bill of sale and chattel mortgage, Rebecca A. Smith took possession of all of said property so conveyed, and continued to operate the two said stores and run the same until November 25, 1893, when, under the order of the court in this cause, a receiver was appointed and took possession thereof. That Fremont Smith and William C. Smith are the husbands, respectively, of said Kate Smith and Florence Smith, and were made parties defendant in said petition. That on the 1st day of December, 1893, plaintiffs in error filed in said cause a motion to set aside the order appointing said receiver, on the grounds--First, that said action was not pending at the time said receiver was appointed; and, second, that neither of the defendants had any notice or knowledge that any application had been or would be made for the appointment of a receiver in said cause, prior to the appointment of said receiver. That said motion was by the court overruled, and by plaintiffs in error exception was taken. The plaintiffs in error filed a demurrer to the petition in said cause, which demurrer was by the court overruled, and exception was duly saved. From the final judgment and decree in said cause, plaintiffs in error have appealed, and the cause is brought to this court for review.
C. H. Carswell and Dille & Schmook, for plaintiffs in error.
W. H. Criley, Forest & Gunn, Blake & Blake, and Keaton & Cotteral, for defendants in error.
TARSNEY, J. (after stating the facts).
The question in this case is directly this: Is the legal effect of the above-stated facts to make the bill of sale and chattel morgage a general assignment by Smith & Smith for the benefit of their creditors. At common law, a debtor in failing circumstances may use any and all of his property to pay one or more of his creditors in preference to others. There was no principle or rule of the common law which limited or controlled the right of an insolvent debtor in the distribution of his assets, provided they were applied in discharge of his bona fide debts. At the common law, an insolvent debtor might make preferences among his creditors and use the whole or any portion of his property in the payment of one or any number of his creditors, or give the whole or any part of his property, as security for the payment of debts, to one or any number of his creditors. The statute of this territory recognizes and affirms the right of a debtor to prefer one creditor to another. "A debtor may pay one creditor in preference to another, or may give to one creditor security for the payment of his demands in preference to another." Section 4, c. 27, St. 1893. This provision simply codifies the common law, and, unless qualified by other statutory provisions, the right of the debtor to select and prefer one creditor to another, and to transfer his property in payment, or to convey it as a security to one or more of his creditors, remains as at common law; and it follows that Smith & Smith, in making payment of a part of their debts to Rebecca A. Smith by their bill of sale, and in securing the remainder of said debt by their chattel mortgage, were exercising a right recognized and assured to them both by the common and statutory laws, unless such right has been limited or taken...
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