Macdonald v. Wallstein

The complaint in this action sets forth that the plaintiffs are creditors of the defendants, Wallstein & Heinemann, and that such defendants were co-partners in business, and being in failing circumstances, and intending to give up their business, on the 21st day of May, 1889, confessed various judgments to parties named in the complaint, and conspired with other defendants to evade the statute regulating general assignments and restricting preferences in such assignments to one-third of the assets of the assignors; and that with such intent they transferred all their outstanding accounts to one of the defendants, and that the persons who received the confessions of judgments and transfers of property knew that the debtors were insolvent, and also knew that the debtors intended, by means of such transfers, to evade the provisions of the general assignment act, and that the judgments and transfers were made and given in order to devote-

The only ground upon which the action is based, therefore, is an attempted evasion of the provisions of the general assignment act, as that act now reads. There can be no claim that the complaint may be regarded as an ordinary creditor’s bill, as the plaintiffs, not being judgment creditors with executions returned unsatisfied, are not in the position to file such a bill.

No authority is shown to support this action, unless those cases in which it has been held by this court, at special tern, and by the supreme court of the United States in the case of White v. Cotzhausen, 129 U. S., 329 , that voluntary transfers of property made contemporaneously with the general assignment, may, according to the circumstances of the case, be regarded as part of the act of assignment, so that an assignee, or in case he declines, a creditor at large may bring an action in a;d of the assignment to have the property thus voluntarily transferred brought under the operation of the assignment, and to set aside such transfers, may be considered as affecting this case. But there is nothing in any of the cases referred to which gives support to such an action as this. There was no intention whatever, so far as this complaint discloses, on the part of the debtor firm to make an assignment for the benefit of creditors. On the contrary, it appears that they did not intend to take advantage of the general assignment act; and there is nothing in that act which compels debtors in failing circumstances to resort to its provisions, and to put their property in the hands of a trustee for creditors.

The provisions of that act only apply to cases in which an assignment is made, and the interdiction upon preferences relates only to preferences made in the instruments authorized by that act. There is nothing in it which changes the general rule of law existing in this state that a debtor may prefer a creditor by confession of judgment or by the absolute transfer of property. There can,' therefore, be no such thing as evading a statute by which the party performing the act complained of is not bound, and is not required by law to follow. That these confessions of judgment and transfers may be fraudulent and may be set aside by a plaintiff properly in court is not the question here. The sole question is whether or not a general creditor may maintain an action to set aside such judgments and transfers as being in violation of the terms and provisions of the assignment act. I think there can be no doubt that the general assignment act does not apply at all, and, therefore, the demurrer must be sustained, and judgment thereupon ordered in favor of the defendant demurring, with costs.