Wilcox v. Payne

The plaintiffs, with the judgment and execution issued and returned unsatisfied, bring suit to declare void defendants Payne and Steck’s general assignment to defendant Smith for the benefit of creditors, dated December twenty-eighth and accepted December 29, 1887. On December twenty-eighth, the defendants confessed judgment to various creditors, presumably for paying off debts, amounting to about $30,000, and levy was made without delay upon the personal property belonging to the firm, to a large amount, and precedent to the assignment. It appeared on the trial that within twelve days prior to December twenty-eighth, the defendant Payne appropriated from the firm’s cash assets about $40,000, totally unaccounted for, and presumably thereafter devoted to his oAvn use. This fact constitutes a fraudulent hinderance and delay to creditors, rendering the assignment void, and it must be so decreed.

I do not think the plaintiffs’ standing in court is prejudiced by the return of an execution upon other judgments. Under whatever name of prior nomenclature actions of this character may be classified, they are certainly not in aid of execution process, and, therefore, not amenable to the principle of equity regulating suits seeking that result, where an execution outstanding at least when the bill was filed, has been held invalid.

In Royer Wheel Co. v. Fielding (38 Sup. Ct. R., 274), such was the relief sought against the general assignment and fraudulent deeds of realty. The distinction between the two kinds of- equity suits is clearly stated by the court

The other class of cases referred to by the learned court are those where the aid of equity is invoked to remove some fraudulent or inequitable obstruction interposed by the defendant, to the collection of the judgment, independently of which, the remedy would have been ample at law. In such cases the return of the execution before suit was held fatal to relief. This action is more properly classified with the first mentioned, and return of •execution was proper under the statute. Supra and section 1871, Code of Civil Procedure.

The learned counsel for plaintiffs presents an ingenious •contention, founded upon the confessions of judgments, the general assignment and the statute restricting the total of preferences in those instruments to the amount of one-third in value of the assigned estate left after deducting wages, salaries, etc. Laws of 1887, chapter 503. It is urged that the judgments and assignments should be held as one transaction, and the latter void because a fraudulent evasion of the statute was intended and accomplished, the preferences given by the judgments largely exceeding the statutory limit. This could not logically result in condemning the assignment, because excessive preferences do not invalidate, but only bring proportionate rebate. It is •quite possible, treating the acts as one transaction, an action might be upheld to so decree, and hold the judgments liable to reduction as preferences; but, if so, the judgment •creditors would necessarily have to be brought into court, although the judgments may have been the means used to avoid the restriction and “ thwart the law.” I find' neither principle or authority to uphold doing more than bring them within the limit required by statute.

Circumvention in this wise, however, reprehensible, will not justify the conclusion of an intent to hinder, delay and defraud creditors, which is the ground for invalidating an insolvent assignment. No cited adjudication goes to such a length.

In Preston v. Spaulding (120 Illinois, 208), the virtual preferences made by confession of judgment were held part of the one transaction with the general assignment and void, the whole property to be distributed under the assignment. The Illinois statute made preferences invalid. Under a like law it was so held in Clapp v. Nordmeyer ( 25 Fed.Rep., 71 ; U. S. Circuit Court, E. D. Missouri); Berry v. Cutts (42 Maine R., 445); Holt v. Bancroft ( 30 Ala., 197 ).