WlllIL" ·· POLA.C1t.

81S

WEILand others

'1.

POLACK and others.

(Oi'I'ouit Court, E. D. Mis8ouri, E. D. May 5,1887.)

1.

ASSIGNMENT FOR BENEFIT OF CREDITORS-PREFERENCES BY CONFESSION OF JUDGMENT.

Undel' Rev. St. Mo. 1879, !9 3696, authorizing a judgment by confession, a confession by an insolvent debtor of judgments to the amount of 50 per cent. of hlll indebtedness, not fO,llowed by a voluntary assignment, nor made in contEimplation of one, is valid although it operates as a preference, and all the debtor's available property is seized to satisfy the judgments. l

2.

COUllTB.....JURISDIOTION-.TUDGMENTS OF STATE COURT-INJUNOTION.

.

Where an insolvent debtor confessed eight judgments in favor of certa.in of his creditors in a state court, and all his property was levied upon to satisfy such j'udgments, and a bill was filed in the federal courts on behalf of his other creditors, asking that !luch confessions of judgment be declared a gen· eral within the meaning of Rev. St. Mo. 1879, 304, for benefit of all the debtor's creditors, and that the sheriff who haa possession of the property under executions from the state court should be decreed to be 8. general s,ssignee or trustee,a!I1-enable to the orders of the court, held,)hljotthe .r,elief Il:sked could not be granted, and that the bill Dlust be dismisseu.

In Equity. On demurrer to bill. . . The R:evised Statutes of Missouri of 1879 provide (section 3M) "Every voluntary assignmel1t of, lands, tenements. goods" chattels, effects, person in trust for his, creditors, shall be and credits, made by a debtor to for the benefit of all the creditors of the assignor, in proportion to tbeir respective claims, and every such assignment shall be proved or ack110wledged and certified and. recorded ill the same manner as is prescribed by law' in cases wherein real estate is conveyed." The principal provision as. to confessions of referred to in the opinion of the court, is as follows: "Sec. 3696. A judgment by confession may be entered without action, either for money due or to become due, or to secure any person against contingent liability on behalf of the defendant, or both, in the manner herein . prescribed. ..

1. Binswanger and Thomas O. Reynolda, for complltinants. Krum &; Jonas, for defendants.
   'fHAYER, J. From the avennents of this bill, which are admitted by the demurrer, it appears that the defendant Joseph M. Polack, being indebted to a large amount and insolvent, on January 17, 1881, executed eight confessions of judgment in favor of his co-defendants, the CommercialBank of St. Louis, the Merchants' National Bank of Omaha, Moses Fraley, PhiIipGoodhart, P. J. Goodhart & Co., Alexander Polack, George Seeman, and J. H. Goodhart, with a view of giving them a preference over his other creditors. That executions were immediately issuea upon said confessed judgments, which the entire stock in trade, fixtures,
   

Rublxor Co. v. FaHey, ante,

1 Itesllecting'

preferences in assignments fortbe benefit of creditors, see Wocl.socket
80&.

B14
'l.nd choses in action of said Polack, and also a leasehold interest in the premises occupied by said Polack, were levied upon by the defendant Henry F. Harrington, he being sheriff of the city of St. Louis. The plaintiffs herein' (suing in behalf of themselves and all other credl,tors of said Polack) file this bill, wherein they pray said confessions of judgment be decreed to be for the benefit of all the creditors of said Polackinpr<>portion to their respective claimsj that the defendant HarTington: may: be decreedt9 be the custodian for all said, creditors of the funds rea)iz,ed pythe sale under the. e:lC'ecutions aforesaidjand'that he be radjudged to hold the same for the benefit of all the creditors of the <1efendant Polack. The judgments' confessed as aforesaid amount to t48,083.' The other debts of said Polack a.ggregate$50,OOO, according to the averments of the bill. It does not appear that the defendant Polack executed a general assignmentnnder the laws of the state of Mis- . the confessions of judgment above recited are construe.d as souri, . being in effect a general assignment. From the foregoing'statement,.it will appear that the plaintiffs in this case invoke an application of the doctrine announced in a series of cases that have been decided by the United,States circuit court for the districts ()f Missouri, beginning with the case of Martin v. Hausrnim,14 Fed. Rep. 160, and ending with the case of Elgin Nat. Watch 00. v. Meyer, ante, 659, decided by Judge BREWER at the Marehterm, 1887, of th'e United States cIrcuit court for the Eastern district of Missouri. With respec(tothe line of decisions above referred to, it may he remarked that the case of Martin v. gU'l.t8rt/,(J,n involved the single question whether a certain instrument was a chattel mortgage or in effect a deed of assignment, within the fair intent of the Missouri statute concerning assignments. By the instrument in question in that case, the debtor disposed of all of his property; it passed at once and irrevocably into the custody of a trustee, to be forthwith sold, and the proceeds applied to the liquidation of the claims of two creditors. For that reason the court very pl'operlyheld that the instrument was not ,merely a security for a debtj that. it did more than to create a lien in favor of the creditor, with a right of redemption in thedebtor; that, in point of fact, it was an absolute appropriation of all the debtor's property 'for the benefit of two creditors; and that, being an instrument of such 'llharacter, it was clearly distinguishable from a mortgage, and should be classed as an asThat. decision, ex press language recognized the ;right of a debtor in Missouri, 'though insolvent, to prefer a creditor. The only limitation imposed upon, exercise the right was that he wuld not give a preference "byan mstrument conveying the whole of his property to pay one or <;>f ,his creditors," tdth'e exclusion of ",'.' others. ' :>, The next caslilofimportance Clapp v. lJUtman, 21 Fed Rep. debtor, wheninsolvent, by a sin15, 737, in whipliit appeared tpat conveyance had made anabs'oIllte appropdatlonof all of his propof a single creditor. The case was clearly within erty to the the principle of Martin v. Hausman; as the court found that the jnstru-

WElL 'Ii. POLACK.

815

ment waS not intended as a security for a debt, and the conveyance was accordingly decreed to be an assignment. FolloWing that case came the case of Olapp v. Nordmeyer, 25 Fed. Rep. 71, which case;it must be conceded; enlarged the doctrine of the vious cases. In the Nordmeyer Case there was It confession of judgment in favor of one creditor, followed on the same day (after an execution had been levied on the bulk of the debtor's property) by a general assignment executed subject to the lien of the corlfessed judgment. The court reached the conclusion that the confession of judgment and the assignmentweremerely successive steps in the same transaction,an<l that both steps were taken to accomplish but one purpose; that is to say, an assignment of all the debtor's property, with a preference in favor of one .creditor. The idea which.underlies this decision is that the debtot knowinglysougbt to evade one of the provisions of the voluntary assignment act,'while making use of the act to distribute his property among creditQrs. It was acCordingly held' that all of the debtor's property must be rllotablydistributed among' his creditors, disregarding the lien of the confessed ,iudgniebt. , . .. ' . Several other cases. were cited on the argument, notably KeUog v. Richardaon;19 Fed. Rep. 70; Preund v. Yaegerman, 26 Fed. Rep. 812", andStatev.Mdfse, 27 Fed. Rep. 262. Partieularstress was laid on80me language used by the coui-tin those cases. .An examination ofthem, howe,ver, .satisfies me that there was no intent on the part of the court to ex''tend tlie doctrine now invoked beyond the limit reached in Martin v. .andparticulatly in Olapp v. Nordrneyer. . In none of the caSe!:! heretoforerefei-red to has the right to prefer creditors been denied to ,a :Missouri (lebtor, whether he be at the time solvent or insolvent. .In.c:leed, it Would he impossible to deny such right in'this state without ignoring a multitude of decisions upholding the privilege. The most that {lan be said is that the decisions in question establish the rule in the federaIcourts that if a debtor, on the eve of a business collapse, makes .a conveyance of the whole or of the bulk of his property for the benefit 'of one or more creditors, to the exclusion of others, such instrument will beheld to' an assignment, no matter what the debtor or his creditor may see fit to call it. There is much less reason for denying that anlosolvent debtor has the right to confess judgment, even though it may 'Operate as a preference. That right in this state rests upon an express .statute, and has the same legislative sanction as the prohibition against preferences in a voluntary assignment. Vide Rev. St. Mo. 1879, §§ 36962698. And inasmuch as men rarely confess judgments, unless they are in"Solvent in the sense of not being able to pay debts as they mature, it may well be assumed that the legislature had in contemplation the use that would be made by insolvent debtors of the statute concerning confessions 'Of judgment when that act was passed. In construing the two statutes, that is to say, the one relating to judgments by confession, and the one relating to voluntary assignments, it is the plain duty of the court to so -construe them that both may stand and be operat!ve, as both are of equal

be

FEDERAL REPORTER

authority. . far this court has only gone to the extent of holding, with respect to judgments by cQnfession, that an insolvent debtor who himself of the statute concerning assignintends to and doef:! in fact ments for, the purpose of distributing his property among creditors, will not bevepnitted tQ evade its just provisions against preferences by a confession <;>fjudgment executed wactically at the ,same moment that an assignment is executed, and for no other purpose than to defeat the ,This.if:! the full scope of the decision in ,policy, of, tJ:1e assignment (Jla,pp aS,l It. , now,under consideration, the confessioPll ofjudgment ,.In'tAe, not an assignment, nor does it appear that the debtor conterp,plated. at the, time the judgments qonfessed. There no on the part of the debtor in, t4e at bar (as in th,e Case) to use the provisions of, one merely for the PllrP9se .of eyadingthEj provisions of statute, a.ri.d for that reason the ,not .The bill now before the, cOl;1t;tlnerelyshows thll:t an himself 9f the right to confessjudgmentwMch is conferred by the' statutes of this state. (leaving 'those j;udgments to be ,ElUforced Pl'escribe<i by; law,) and thlJ-t lIe exerCised such right cil1clun,&j:.apces that inust hav,e been any solid gronndupon ,which ,this cClJlrtcan; iqtervene to prevent judgments from, being, enforced in ,the usual Ip8,Ijlne,l', ,and ,a,s the state contemplate. , ' T,he prayerp[j;he anomalous, in that it asks certain judgments regularly obUi-ined in the stl;tte the, cQ:urt but instrllments of an entirely, <iifferent chal'llyter, und it asks this court tojnterfere with process emanating fJ.tQm the state court for the of such to declare that the she,riff,of city or St. ,Lo:uis, ",ho now holds fu:uds realized upon execution" un,dersaid judgments, is m.erely an assignee .or a trustee with respect,tol:\]lch.funds, and us auch is umenable to the orders of this court. sufficient to condemn it. PreThe prayer-of tqepill is, in vious decisions of the fede,ral. courtl;l in this. state furnish no warrant for :can grant'the relief tberein demanded. " I shall uccordthe, ingly ordert.Qllt the demurrer be sl;1stllined·

·1

'

LA.MONT '11. HOTEL MEN'S MDT. BEN. MS'N.

817

LA.MONT 'lI. HOTEL MEN'S MUT. BEN. AsS'N.

(Oircuit Oourt, N. D.lllinoia. May 16, 1887.)
liITE INSURANCE-AsSIGNMENT:'-"'INSUltABLE ETY. BENEI1'IT ·SOCI-

.Where, under the articles of association and py-Iaws of a mutual benefit so· ciety, the benefits are payable to the person designated by the member in his application for membership, or by his last will and testament, it is competent .' fOr such trl.ember by his own act, and with the cO:Qsent of the company, at any tLme,befo1,'e his death, without the formalities of a will, to make a transfer 0.£ the benefit from the origh:ial beneficiary named to any other person he may , select, whether the person so selected has or has not an insurllobleinterestin , .' !hdsllfe.1

,

In JJ)qlljty.,

w. a. A8Q.y and Ogden, for Lamont. John Raldwin and Bates, Broughman &: Tuttle, for Graft.

J. This is a suit in equity to recover the sum of. :$2,000 upon a benefit certificate issued" by the defendant to one JohnP. Hulett. The defendant company is a corporation organized and existing un·der an act of the state of Illinois entitled" An act concerning corporations," approved April 18, 1872, and by one of the articles of the association it is provided as follows: "Upon positive proof of tna death of any member, the board of directors shall order an appropriation equal to two dollars for each member then on the rolls of the association,. unles!l.the same shall exceed 1.000 members, in which case the amount appropriated shall be limited to the sum of $2,000, and shall pay the same to the person or persons previously designated by the deceased upon his application for· as shown by the books of the association,' or as ordered by his last ,will and testament." The proof shows that Hulett became a member of this association on February 3, 1883, and up to the time of his death, which occurred August 11, 1885, he remained a member in good standing. In his application for membership he designated his daughter, Mary A. Lamont, as his beneficiary. On the sixteenth day of August, 1884, he designated EmilYR. Graft as his be\lefl(liary in the place of Mary A. Lamont; and this change was accepted and approved by the board of directors of the association, a.nd from that, time forward the name of Emily R. Graft as the beneficiary ofth'is member was carried on the books of the association. The complainant insists that the change was void and inoperative; that she acquired a. vested right to the benefit by virtue of Hulett's origil1al1:?enefit certificate; and that the assignment and transfer of the benefit to Mrs. Graft was wholly inoperative and void. Without taking time to discuss the large number of cases cited by each party". in this case, it is sufficJent to say that there is probably, a. conflict
lAs to the rights of an assignee of an insurance policy, when the assignee has no insurable interest in the life ot the insured, see ltuth V. E:atterman, (Pa.) '3 At!. Rep. 835, and note.

v.30F.no.11-52