Ward v. Tingley — 4 Sarat. Ch. Sent. 476

Majority

p. 476

Ward & Heath v. Tingley and Robinson.

Headnote

In determining whether an assignment is, or is not, fraudulent against creditors ; the question is not whether fraud may be committed by the assignee, but whether the provisions of the instrument are such, that when carried out according to their apparent and reasonable intent, they will be fraudulent in their operation.

An assignment giving preferences to a first and second class of creditors, who were designated, provided that the assignee, as Soon as conveniently might be, should advertise in such newspaper or papers as he might deem best calculated to give information to the creditors, requesting them to render their claims to him at a reasonable time and place ; and the debts of the assignor which should come to the assignee’s knowledge by the expiration of such time, (not in the two first classes,) should constitute the third class of creditors, and be paid rateably; and

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that all other debts should be paid after those ; is not fraudulent against creditors.

Nov. 24, 1846 ;

January 9, 1847.

This was a suit by creditors, to set aside an assignment as fraudulent. It came before the court on an order to show cause why a temporary injunction granted against the assignee, should not be continued.

The assignment was executed by George H. Tingley to Ebenezer P. Robinson, and transferred all his property, for the payment of his debts in the order specified. The first and second classes of creditors were particularly described, and were preferred over all the other classes.

The third class was marked out by a provision, making it the duty of the assignee, “ As soon as conveniently may be, shall cause a notice to be published in such newspaper or papers as he may deem best calculated to give information to the creditors of the said Tingley, requesting such creditors to tender their claims against the said Tingley to him at a reasonable time and place. And the debts owing by the said George H. Tingley, which shall come to the knowledge of said Ebenezer P. Robinson, on or before the day mentioned in the said notice,” other than those constituting the first and second classes, were designated as the third class, and were to be next paid by the assignee. All other debts of the assignor, were made the fourth class, and were not to be paid till the third class was paid in full.

D. Shepherd and C. Ellis, for the complainants.

I. In the payment of the debts of an insolvent, the rule in chancery is, that equality among the creditors is equity; and the court leans against preferences. (Chancellor’s Opinion, in Boardman v. Halladay, 10 Paige, 229, &c.)

II. An assignment for the benefit of creditors giving preferences, should be absolute and unconditional; should fix the preferences, either directly, or by reference to ascertainable facts at the time ; and should leave nothing to the action or discretion of the assignee. (Grover v. Wakeman, 11 Wend. 203 ; also, Barnum v, Hempstead, 7 Paige, 568, and 10 Paige, 223.)

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III. The debtor has no right to postpone the time when the limits of any preference are to be determined. (See Grover v. Wakeman, Opinion of Justice Sutherland ; also, in 4 Paige, 41.)

IV. He has no right to leave the fixing of the limits of such preference, after the assignment, to himself, to the assignee, or to a third person ; and much less to chance, i. e., to the accident of debts coming to the trustee’s knowledge within a specified time.

V. This assignment hinders and delays creditors, because the assignee cannot pay the third and fourth class at all, until the time to be fixed upon by himself shall expire ; as the rights of such creditors will not be determined until then. Whereas, the debtor and his trustee are bound to pay, as soon as they are able.

VI. It is not a question whether fraud will be, but whether it may be committed, by an abuse of the powers conferred by an assignment. (See opinions in the cases above cited.)

VII. The debtor is presumed to know the names of his creditors, and the amounts of their debts, and should have furnished a list, and should not leave the assignee to hunt it up or guess at it, and leave the preference to depend upon his success.

VIII. The debtor has no right to attempt to compel the creditors to do any thing which they are not bound by law to do; e. g., to compel them, under a penalty of non-payment, to present their claims at a particular time and place.

W. J Hoppin and A. P. Man, for the defendant, Robinson.

The form of this assignment was taken from 2 Humphrey’s Precedents, 1245. The assignee is rather restricted, than otherwise, in his discretion. It provides only what prudent assignees always practice. The assignee is bound to advertise immediately. No unnecessary or unreasonable delay is directed • there can be no delay other than is absolutely necessary. There is no reservation in favor of the debtor, either of property or control. The third class is in fact, the residuary class; the fourth was put in for more abundant caution.

Upon consideration, I do not think

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the provision which is complained of, is evidence of fraud in the assignment. If there were no directions as to the mode of ascertaining the outstanding demands against the assignor, the assignee would become informed, first, by the application of the respective creditors, and if that were not likely to inform him fully, by an advertisement in the newspapers. The latter would be discretionary ; and if he should omit it, and after a reasonable time, should proceed to divide the assets in his hands among such creditors as had come to his knowledge, his duty would be discharged, and the only relief remaining for a creditor, who had been overlooked, would be to receive his demand out of any future assets that might be received by the assignee.

Any fraudulent concealment of the existence of an assignment from the creditor, or any other violation of trust in the matter, would of course entitle him to a more efficient remedy.

Now in this case, I do not perceive that any thing is provided in the assignment which ought not to be done by the assignee or which would not be proper in itself, had no such direction been given. He is to advertise for creditors in one or more papers, as soon as conveniently may be, and he is to select for the purpose such papers as he may deem best calculated to give information to the creditors.

The time is unexceptionable. If it be not done speedily, it will be a breach of trust. As to the newspapers, he may err in judgment, but that can scarcely be to an extent productive of injury in such a city as this. It is true, he may also err wilfully in this respect, but that will not be the fault of the assignment, and it will be remediable in the same manner as any other violations of duty by a trustee.

Then the debts of the assignor, which come to his knowledge within the time specified in the notice, (the first and second classes excepted,) are to constitute the third class.

This leaves open to creditors the ordinary and usual mode, of presenting their claims to an assignee, without waiting for a notice in the newspapers'or otherwise ; and it makes it the duty of the assignee to take more than the usual pains to give extended notice of the necessity of so doing to all concerned.

There is no condition imposed, other than that which the

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nature of the case inevitably imposes upon creditors; the notifying of their demands to the assignee. Nor is there any power in the assignee to declare or fix future preferences.

The probable delay furnishes no objection. The advertisement in the ordinary course of events, will elapse long before the assignee will be in a condition to pay any dividend on the third class of debts.

Fraud may be committed under an assignment made in the most direct and simple form. The question is, not whether fraud may be committed, but whether the provisions of the instrument are such, that when carried out according to their apparent and reasonable intent, they will be fraudulent in their operation.

I am unable to perceive any such provision in this assignment, and as the argument turned upon the instrument alone, I must deny the motion for an injunction against the assignee.

Order to show cause discharged, without costs, and temporary injunction against the assignee dissolved.