MULLER V. NORTON.
and another v.
(Oircuit Oourt, N. D. Texaa.
1. AGSIGNMENT TO CREDITOns.
An assignment for the benefit of creditors, under the laws of Texas, wherein the assignor has expressly reserved an interest to himself, to the exclusion of his creditors, is null, void, and of no effect. Laurrence v.Borton, 15 FED. REI'. 853, followed.
Such an assigriment is a contract bE-tween the assignor and assignee, which, while it may be aided by the law, must be taken and construed by the terms and provisions expressly stipulated therein j and any stipulation therein which is intended to hinder or delay non-consenting creditors must find warrant therefor in the law, or the assignment to such creditor is null and void. Donoho v. Fii"" 58 Tex. 167, and KeefJil v. J)onald80n, 20 Kan. 168, followed.
On Demurrer. Wright tt Wright, for plaintiffs. Crawford tt Crawford, for defendants. PARDEE, C. J .. It was held by this court, in Lawrence v. Norton, that an assignment for the benefit of creditors, under the laws of Texas, wherein the assignor has expressly reserved an interest to himself, to the exclusion of hiacreditors, is on its face null, void,and, of no effect, (see 15· FED. REP. 853;) and in that case we also held, considering the act of 1879 in relation to assignments, that, under the third section of that act, assignments· for the benefit of preferred itors, who are preferred on their Own election, under stress of a pen· alty forfeiting their whole claim, are not in terms aided by the law, and are not favored by the courts.. We still adhere to the correct, ness of our conclusions in that and now, as then, we see .no an· tagonism between them and the decisions of the supreme court of th-e state of Texas in relation to the same law. In the case now under consideration,. it seems to us, the foHowing propositions are equally well taken, and can be equally suppQrtefilon principle and authority. The assignmeni in favor of creditors, llnder the act of 1879, is a contract between the assignor and assignee, which, while it may be aided by the law, must be taken and construed by the terms and provisions expressly stipulated therein. Vonoho Y. Fish, 58 Tex. 167; Keevil v. Donaldson, 20 Kan.168. That an assignment is made, under the third section of the act-of 1879, any stipilla#,ontherein which is intended to hinder and delay non· consenting creditors must find warrant therefor in the law, or the signment as to such creditors is riulland void. Keevil v. Donaldson. 8upra; Lawrence v. Norton, supra;: Bryan v. Sundberg, is See, also,' JajJray v. McGehee, 101 U. S. 361:;8. C. 28up. Ct., Rep. 367.
Reported by Joseph P. Hornor, Esq., of the New Orleans bar.
The assignment in this case, which is under the third section, pro7ides: "And for said purpose the said Fred. Muller and A. Jacobs are hereby authorized and directed to take possession at once of the property above conveyed and convert the same into cash as soon and upon the best terms possible for the best of our creditors." This provision authorizes the assignees, in their discretion, to dispose of the assigned property on credit. See Moir v. Brown, 14 Barb. 39; Schufelt v. Abernethy, 2 Duer, 533; Rapalce v. Stewart, 27 N. Y. 311; Hutchinson v. Lord, 1 Wis. 286; Keep v. Sanderson, 2 Wis. 31. For other authorities see Burrill, Assign. § 222. It is a badge of fraud·. Carlton v. Baldwin, 22 Tex. 731; and see Burrill, Assign. § 221. Such provision is not authorized by law, the said act of 1879 being silent as to the method of disposing of assigned property. The non-consenting creditors being compelled, under the law, to submit to a forced stay of execution until the consenting creditors are paid in full, itfollows that a sale on credit, the same not being authorized by law, hinders .and delays such non-consenting creditors beyond the sanction of the 10, w, and conseguently defrauds them. It is urged that the assignee need not sell on credit, and, unless he does, the creditors are not hurt. This may be true, but the creditors are not obliged to await the event. The assignment placed it in the power and discretion of the assignee to prolong the execution and closing of the trust for an indefinite period. This was not only unauthorized by law, but was against the policy of the law, for it cannot be denied that the policy of the law is to seCUre a speedy settlement of the trust and distribution of the assigned property. An assignment in favor of creditors which in effect authorizes the assignee to sell the property conveyed in a method not permitted by the statute, must be void; for contracts and conveyances in contravention of the terms or policy pf statute will not be sanctioned. See Jaffray v. McGehee, supra. It is further claimed in argument that to give effect to the objections urged against the assignment, and to hold the same invalid for fraud apparent on its face, is to sanction and permit the very evil which is the subject of complaint-that is, to give the attaching creditors a preference, and a preference, too, over creditors who have been snared and entrapped by the law. To this it is sufficient to auswer that the court is compelled to decide between two sets of preferred creditors-the oonsenting creditors and the attaching creditors. The one may be as meritorious as the other; but while the former may be open to the charge of collusion, and the latter to the charge of rapacity, the law favors the diligent and vigilant. The trouble arises with the debtor who wants to go further than the law of 1879 warrants, in driving creditors to abandon their just claims and demands. The demurrer should be sustained; and it is so ordered.
:McCOm.UOK, J., concurs.
MALVIN V. WERT.
and others v.
(Czrcuit Oourt, S. D. TezaB. February, 1884.)
An assignment which authorizes the assignee to sell the assigned goods on credit, which undertakes to distribute the remnant after paying consenling creditors, in opposition to the terms and provisions of the law, and by which the assignees, by such distribution, exclude from the benefits of the assignment their individual creditors, and reserve an interest for themselves, is unauthorized by law. Lawrencev. .J.V01'ton,15 FED. REP. 853; and Mutter v. Norton, ante, 719, followed.
On Demurrer to Answer of Garnishee. Crawford ct Crawford, .for plaintiffs. Wright ct Wright and J. A. CarroU,for garnishee. . PARDEE, J. The assignment in this case, which is under.section 3 of the act of 1879, is attacked for fraud apparent on its face, towit: (1) It prefers creq.itors for rent, taxes, and assessments. (2) It authorizes the assignee to sell the asaigneq. goodson credit. (3)It undertakes to distribute the remnant after paying consenting creditors, in opposition to the terms and provisions of the law. (4) The assignors, by such distribution, exclude from. the benefits of the assignan interest for. themment their individual creditors, and selves. The case of Lawrenc.e v. Norton, 15 FED. REP. 853, and Muller v. Norton, ante, 719, gives sufficient reasons for sustaining the second, third, and fourth grounds. On the first ground it is not neoessary to pass. The demurrer is sustained.
(Clircuit Court, N. D. Tea;a8. February, 1884. .
ASSIGNMENT TO CREDITORS.
An assignment for the benefit of all the creditors, without proof or euggcs tion of insolvency, where there is no attempt to prefer any creditor, but & de· cided attempt to hinder and delay them all, is unauthorized by law.
On Demurrer to Answer. Ray it Stanley and L. T. Smith, for plaintiffs. Wright it Wright, for defendant.
by Joseph P. Hornor, Esq., of the New Orleans bar.