Wolf v. Gray

• Decision Date: 22 March 1890
• Parties: WOLF v. GRAY
• Court: Arkansas Supreme Court

13 S.W. 512

53 Ark. 75

WOLF v. GRAY

Supreme Court of Arkansas

March 22, 1890

APPEAL from Little River Circuit Court, R. D. HEARN, Judge.

Gray & Clem, merchants, made a general assignment of all their property for the benefit of their creditors. The deed of assignment preferred Hill, Fontaine & Co. in the sum of $ 3,300.00, and provided for payment to all other creditors who should, within 120 days after the execution of a bond by the assignee, as required by section 305 of Mansfield's Digest, execute and deliver to the assignee a release of the residue of their several debts after payment of their distributive shares of the proceeds of the assignment. The residue of the property assigned was to be paid to all the other creditors. There was no provision in the deed requiring that the assignee should notify the creditors of the condition upon which they would be preferred.

Wolf & Bro. sued Gray & Clem for $ 1,591.62 and caused an attachment to be levied upon their property, alleging a fraudulent disposition thereof. The attachment was discharged and plaintiffs appealed.

Affirmed.

Cohn & Cohn for appellants.

1. The assignment was clearly made to hinder, delay and defraud creditors, and was intended to ignore their rights and interests. It aimed to confiscate a solvent estate at the expense of creditors. 8 S.W. 861, 862; 80 Ky. 334. The intent of the assignor, by statute, alone controls. 51 Ark. 60. See also 15 Tex. 507.

2. An assignment which has been made with a view to coerce creditors into accepting a compromise, or which was used for this purpose, is fraudulent as to creditors. 23 Minn. 242 250; 4 Paige, 24; 1 Am. Lead. Cases (5th ed.), 78; 84 N.Y 531; 11 Wend. 203.

3. Releases were exacted; no provision being made for notifying creditors. It does not appear that any creditors assented to the assignment, and accepted it, and gave releases within the time prescribed. And no presumption exists that they intended to or that they would do so. 5 Mo. 241; 6 Mo. 317; 18 Ark 131; Burrill, Assignments (3d ed.), secs. 284, 285.

Though assignments exacting releases were held to be good in Clayton v. Johnson, 36 Ark. 406, yet their effect is coercive; they are usually resorted to by persons who wish to accomplish fraud of some sort. Releases have been condemned by able courts, and have been overthrown by courts in the largest commercial communities. 7 Pet., 615; Burrill, Assignments (3d ed.), secs. 192-3-4; 47 Ark. 370.

Clayton v. Johnson is a mistake, and has been overruled in 47 Ark. 367, 369. It is at war with other decisions of this court. 37 Ark. 64; 39 Ark. 68. See 24 F. 460; 24 F. 465. A debtor should have no right to exact releases, either as a condition of preference or otherwise. Burrill, Assignments, secs. 192, 194. The failure to provide for notice comes within the objection of delay of creditors, which ought to vitiate an assignment, as held in Collier v. Davis, 47 Ark. 367. See Burrill, Assignments (3d ed.), sec. 293.

4. The assignment purports to convey all the property of the assignors, yet the evidence shows they withheld a large amount of their assets -- cotton in the hands of Hill, Fontaine & Co. This was a fraud. 46 Ark. 405.

U. M. & G. B. Rose for appellees.

1. There is no evidence whatever that the assignment was made to coerce a compromise. As to the intent of the assignor determining whether an assignment is fraudulent, that is settled by statute.

2. Clayton v. Johnson has constituted a rule of property in this State for ten years, and it has never been overruled, and is abundantly sustained by authority. No authority is cited to sustain the position that the assignment is void because it does not direct the assignee to notify the creditors.

3. Appellees were indebted to Hill, Fontaine & Co. in a sum much in excess of the value of the cotton. They were factors, and had a right to sell it to pay their advances. Mechem on Agency, sec. 1032; Edwards on Factors, sec. 34; Edwards on Bailments, sec. 290.

Scott & Jones also for appellees.

The assignment in this case is not open to the objections in Clayton v. Johnson, 36 Ark. 406, or Collier v. Davis, 47 Ark. 367. An assignor may stipulate for release, if he dedicates all his property to the payment of all his creditors. 47 Ark. 347. The right to prefer is conceded. 2 T. R., 24; 2 H. Black., 371.

OPINION

COCKRILL, C. J.

In Clayton v. Johnson, 36 Ark. 406, an assignment for the benefit of creditors was upheld, which stipulated for a release of indebtedness from assenting creditors as a condition to their participation in the assets. There was no express reservation to the debtor in that case of the assets remaining after the assenting creditors were paid. In the subsequent case of McReynolds v. Dedman, 47 Ark 347, 1 S.W. 552, an assignment similar to that in Clayton v. Johnson, except that it contained an express reservation of the residue of the estate to the assignor, was adjudged fraudulent upon the ground that it was in effect an attempt on the part of the insolvent debtor to prefer himself to non-assenting creditors -- that is, to those who refused to execute releases. Quickly following this decision came the case of Collier v. Davis, 47 Ark. 367, 1 S.W. 684, in which it was ruled that in every assignment, such as that passed upon in Clayton v. Johnson, there is an implied reservation of the surplus to the use of the assignor; that, as the effect of an implied reservation is like that of an express reservation of the same benefit, there could be no distinction in principle between them, and that one could not be sustained while the other was condemned. The case of Clayton v. Johnson was, therefore, overruled upon that point. It was not the stipulation for a release -- the validity of which, upon the principles of justice and humanity, Chief Justice English so earnestly and ably maintained in the latter case -- that was condemned in Collier v. Davis, but only the reservation of the surplus by the debtor to himself before satisfying his creditors. An insolvent debtor who executes an assignment for the benefit of his creditors, Judge Smith who pronounced the judgments in both the latter cases maintained, "may stipulate for a release, but he must dedicate all his property, not...