Richardson v. Thurber — 6 N.Y. St. Rep. 489

Majority

p. 489

George H. Richardson, App’lt, v. Horace E. Thurber, Resp’t.^[1]

(Court of Appeals,

Filed March 1, 1887.)

Headnote

1. Assignment fob the benefit of creditors—Preferences—Wages— Laws 1884, chap. 328.

The omission to prefer the wages or salaries owing to employees, etc., in an assignment for the benefit of creditors, does not render it void under Laws 1884, chapter 328.

2. Same—Meaning of word “assignment” in Laws 1884, chap. 328, and Laws 1877, chap. 466.

The word “ assignment ” as used in Laws 1877, chapter 466, and the amendment thereof, Laws 1884, chapter 328, sometimes has reference to the written instrument of transfer, and sometimes to the transfer and trust, which the written instrument makes effectual.

3. Same—Power of legislature.

The legislature has power to regulate and control general assignments for the benefit of creditors, may permit them only upon express conditions, and when it does so he who makes an assignment, by the act accepts and consents to the conditions.

p. 490

Appeal from a judgment of the supreme court, general term, first department, affirming a judgment of the New York county special term, sustaining a demurrer to a complaint in an action to set aside an assignment for the benefit of creditors.

James L. Bishop, for app’lt; E. More, for resp’t.

The question involved in this controversy is in some respects so close and evenly balanced as to have produced conflicting opinions in the supreme court and drifted very able judges into disagreement. Either view of the problem seems open to some just criticism on the part of its adversaries, and the principal merit of our judgment upon the question will be that it is final and settles the rule to be observed.

In 1884, the general statute regulating assignments by insolvent debtors was amended so as to provide that “in all assignments made in pursuance of this act the wages or salaries actually owing to the employees of the assignor or assignors at the time of the execution of the assignment shall be preferred before any other debt, and should the assets of the assignor or assignors not be sufficient to pay in full all the claims preferred pursuant to this section they shall be applied to the payment of the same pro rata to the amount of each such claim.” Subsequent to that amendment a firm of insolvent debtors made and executed a voluntary assignment to the defendant, regular and in accordance with the general statute in all respects except that it contained no preference for wages owing to employees. The plaintiffs recovered judgment against the assignors, issued execution thereon to the sheriff, and then commenced the present action in equity to set aside the transfer as fraudulent and void, and an illegal obstruction to the collection of their debt, founding their sole objection upon the omission in the instrument itself to provide a preference for wages. Passing by the obvious incongruity acted upon by the special term, of a creditor appealing to a court of equity for its aid against a fraud, which is only such because it benefits the creditor to the harm of others not before the court, we come at once to the real question of the true construction and meaning of the statute.

Briefly stated the conflicting views revolve about the inquiry whether the enactment was intended to force into every assignment as the contract and mandate of the assignor a clause giving the desired preference, or to effect the result by its own statutory force operating in every case as a condition added by the law, and effective even if unexpressed in the instrument. The argument of the

p. 491

appellant stands most strongly upon what is claimed to be the literal language of the statute, and insists that the legislature has spoken in plain and unambiguous language, and the courts must obey. We are not convinced that the language employed is free from ambiguity. The word “assignment” may sometimes have reference to the instrument which effects the transfer, and sometimes to the transfer itself, considered as a legal effect or result. A grant of land may sometimes refer to the deed or conveyance, and sometimes to the passage of the title and its vesting in the grantee. In such cases the context or the apparent meaning determine the sense in which the word is used. It is said of the statute before us that the word assignment is invariably used as referring to the instrument of transfer. To some extent, that is true, but true because the manner of its use or the context discloses that intended meaning. When it is said in the act of 1811, that the assignment shall be acknowledged and recorded, there is no difficulty in understanding the necessary reference to the instrument. But, when it is said that very assignment shall be in writing, it is equally plain that the assignment means the legal transfer to be effected only by an instrument in writing. And when, again, it is said that on an accounting the county judge shall have power to examine the parties and witnesses on oath “in relation to the assignment,” we know from the character of the provision, and what follows, that the word “assignment” does not mean the mere written instrument, but is used in the broader sense of the transfer and trust which the written instrument makes effectual. So, in the section under consideration, we are to ascertain in which sense the word was used. The language is “in all assignments made in pursuance of this act.” That may mean in all written instruments of assignment, or in all cases of a general assignment. This section adds that the wages “shallbe preferred,” without saying by the assignor or assignors, and declares that, when the assets shall be insufficient to pay in full “all the claims preferred pursuant to this section,” a pro rata payment shall be made. Here it is not directed that the assignor shall so provide, but that the assets shall be applied to such payment. It seems to dictate, not what the assignor shall require, but what the assignee shall do, and speaks of the claims preferred pursuant to this section, instead of the claims for wages preferred by the instrument of assignment. These considerations incline our opinion towards the construction of the respondent, and -they are strengthened by,,reflection upon the purpose of the provision, and the consequences of a different view. The object was the protection of employees. That purpose, in

p. 492

the present case, may be defeated if we are simply to declare the assignment void. Suppose, too, as the general term suggest, that an assignment is made without any preferences, but gives up the whole estate to creditors equally. “ Equality is equity; ” but does it become fraudulent because a preference is not given, or rather, is not the statutory preference impressed upon the trust fund in the hands of the trustee ?

We are warned, however, that this construction may lead to unconstitutional results. It is argued that an assignment is a private contract creating a private trust fund, and the assignee derives all his powers from the instrument; that where the assignor does not prefer employees, if the statute does it, and compels the assignee to pay, the legislature stands in the attitude of appropriating the assignor’s property against his will and in violation of his expressed intentions. But the difficulty is imaginary. No one doubts the power of the legislature to regulate and control general assignments for the benefit of creditors. It may permit them to be made, as it has already done, only upon expressed conditions; and, when it does so, he who makes an assignment by the act accepts and consents to the conditions. Availing himself of the permission, he cannot be supposed also to repudiate its terms. That answer frees the federal law from the accusation of confiscating the property of a debtor against his will. That law gives to the United States priority of payment, even in case of a voluntary assignment; and it seems to be conceded that such priority is wholly irrespective of the terms of the assignment. The learned counsel for the appellant points out distinctions peculiar to the federal law and to governmental functions. There is great force in his suggestions, and yet the illustration shows that a statutory preference superimposed upon a voluntary assignment is not a novelty, or incapable of enforcement, or necessarily inconsistent with the rights of the citizen.

If we read this assignment in connection with the statute, and as if that formed part of it, we reach the one result which the statute sought to accomplish, and with much less of interference with the purpose and intent of the assignor than would follow from the utter destruction of his assignment.

Without pursuing the subject further, we conclude, though not without some hesitation, that the construction of the general term in this case is correct.

The judgment should be affirmed, with costs.

All concur.