Case ID: sc-eq_17/html/0545-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Curia, per Johnson, Ch.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Central Rail Road and Banking Company of Georgia et al. vs. Claghorn, Wood, et al. Stephen S. Bush, and others, vs. Central Rail Road and Banking Company of Georgia et al.
    
    1. The Savannah and Augusta Steam Boat Company, a Georgia corporation, being indebted to the Central Rail Road and Banking Company, and other corporations of said State, by notes, which were indorsed, on the 8th of April, 1840, renewed them, the renewals being indorsed, and con-formably to a promise which had been given to their indorsers, to indemnify them, then executed to each creditor a mortgage on their Steam Boats, with the appurtenances thereof, and on some articles of counting-house furniture. On the 12th of June following, one of the mortgaged boats being in the waters of Barnwell district, of this State, the sheriff of that district levied on her twenty-six foreign attachments, sued out by as many creditors of the company. An order was made by the Court of Common Pleas, for the sale of tlie boat, under the attachments* but befdre the sale, the mortgfig'e creditors filed a bill for an injunction, praying that the property might be sold by an order of this Court, on terms-, to prevent a sacrifice, which order was made, and the property sold by the Commissioner in Equity for Sam1 well district, the proceeds of the sale being the Subject of adjudication be1 tween the mortgagees and the attachirlg creditors-.
    2. By an Act of the State of Georgia, (Prince’s Digest, p. 164,) it is enacted, “That atty person* unable to pay his debts, who shall, at any timé hereafter* make any assignment or transfer of real or personal property* stock in trade, debts, dues or demands, in trust, to any person* in satisfaction or payment of any debt of demand, or in part thereof, for the use and bene1 fit of his creditor or creditors, or for the úse and benefit of any other per1 Son, by which any Creditor of said debtor shall or may be excluded from an 'equal share or portion of the estate so assigned or transferred, such assign1 toent, transfer* deed or conveyance, shall be null and void, and considered in law and "equity as fraudulent against creditor's. Provided, nevertheless* that nothing 'contained in this Act shall prevent any person in debt frorn bona fidé and absolutely selling and disposing of any part or the whole* of his estate* so the same be done free from any triist for the benefit of the seller, or any person appointed by him.” Held, that under the words “any Assignment or transfer*” found in this statute, an ordinary mortgage is em1 braced; but on the question whether the company was or was not able to pay their debts at the date of the mortgages, within the meaning of the Geor1 gia statute, that being a doubtful 'question of fact, the judgment of the Chan1 '¿ellor who tried the cause* that the conveyances at that date were not con1 trary to the Act, held decisive of it, unless there had been a decided pre1 ponderance of evidence opposed to thitt opinion. ’ *
    3. Held that 'the mortgage creditors could not- be compelled to resort to and exhaust their refnedy against the indorsers, before touching the fund in court. The indorsers having had the promise of a mortgage, being also indorsers upon accommodation paper* and standing as mere sureties to the company* had as strong an equity to be protected, as that of the defendants.
    4. The well established doctrine of this court is, that the surety is enti1 'tied to the benefit of all the securities which the creditor obtains from the debtor for the payment of the debt, and that the creditor must exhaust these before he can Call on the surety for payment-.
    •5. But as there Was other mortgaged property to which complainants Could resort, it was held that they must shew What had become of it, and what portion of it had been lost to them, before they could take hold of the fund in 'court-.
    6. The lien created by the act of the debtor did not stand upon the footing of an assignment* by operation of law* under a commission of bankruptcy in P foreign State, which operates merely as a power to receive, and vests no legal interest.
    
      7. Although the indorsers of the several notes may have been the dirept= ors of the Steam Boat Company, yet this would not he sufficient to infer that it was a fraudulent device, on their part, tP gain a precedence over other creditors, as there is nothing, either in law o.r equity, which forbids a member, or even a director, of a corporation, from contracting with it. He piay prescribe his own terms, which the corporation can accept or reject, and when the contract is concluded, he stands in the same relation as any other individual would, under the same circpmstances.
    8. Held unnecessary that the ipdorsers shoqld have been made parties.
    9. The debts, to secure which the mortgages were given, being contracted at a date anterior to the execution of the mortgages, and there being an agreement then on the part of the Steam Boat Company to secure their im dorsers by mortgage, amounted to an equitable lien, apd the fact of the ina-: bijity of the company to pay their debts ought tobe referred to that time. Per Jojsnson, Ch-
    
      Before Jqiwsoií, Chancellor, who made the following decree;
    Johnson, Ch. On the 8th of April, 184Q, the Savan^ jxah and Augusta Steam Boat Company — a Georgia corporation — being indebted, in various sums, to the five following corporations of the same State, to wit, the Central Rail R'oad and Banking Company of Georgia; the Insurance Ba$k of Columbus; the Savannah Insurance and. Trust tiompany; the Planters’ Bank of the State of Georgia ; the Marine and Fire Insurance Bank of the State of Georgia; and to one William A. Kain, (all of whom are plaintiffs in the bill,) renewed the notes which the said creditors severally held against them, the said Steam Boat company, which renewals were suitably indorsed ; and for the belter securing the said renewals, gaye to eac)i creditor a mortgage upon the following property of the said Steam Boat company, viz: three steam boats, called the Ham-burgh, the Oglethorpe, and the Elbert, with the machinery, tackle, boilers, engines, and other appurtenances, together with ten tow boats or flats, three hand engines, and gome articles of counting house furniture.
    The debts covered by the said mortgages, which were executed in Savannah, wej*e as follows:
    
      Central R. R. and Banking Co. of Georgia, $2,900 00
    Insurance Bank of Columbus, 1,800 00
    Savannah Insu. and Trust Company, 8,700 00
    Planters’ Bank of the State of Georgia, 5,000 00
    Mar. & Fire Ins. Bank of State of Georgia, 3,150 00 Wm. A. Kain, 2,868 54
    Making in all $24,418 54
    On the 12th of June following, the Hamburgh, one of said mortgaged steam boats, being in the waters of Barn • well district, in this State, the sheriff of that district levied upon her twenty-six writs of foreign attachment, which had been sued out against the said Steam Boat company, by as many creditors of said company, all of whom are defendants to the bill.
    On the levy of the attachments, an order was made by Mr. Justice Butler, upon application of the attaching creditors, for the sale of the Hamburgh, for cash ; under which order the said sale was advertised; but before the expiration of the term limited by the statute for such notices had expired, to wit: on the 9th July, 1840, the mortgage creditors filed their bill for an injunction, and praying that the Hamburgh might be sold by an order of this court, upon terms, to prevent a sacrifice of the property ; and tjjatf.the proceeds of sale might be applied to the payment of such of their demands as were then due, and the resicfhetfetain-ed, and applied, from time to time, as the remainder of said demands should come to maturity ; and for general relief.
    Upon this bill Chancellor Dunkin, by an order of the 9th of July, (the day of its filing,) restrained the sale under the attachments; and on the 15th of the same month passed a further order in the cause, directing a sale by the commissioner ; and on the 3d Monday in August of the same year the commissioner made the sale at the sum of $10,700.
    The proceeds of that sale are now the subject of adjudication.
    The case has been heard upon the pleadings in the cause and cross' cause, and upon evidence taken, mostly in writing, and to which I must refer for a more full statement, and upon the testimony of a few witnesses produced and. examined before me at the hearing, to whose evidence, contained in my notes taken at the time, and accompanying this decree, I must also refer.
    The principal question arises under an Act of the State of Georgia, (Prince’s Dig. 164,) approved the 19th of December, 1818.
    It is entitled “an Act to prevent assignments or transfers of property to a portion of creditors, to the exclusion and injury of the other creditors, of persons who fail in trade, or who are indebted at the time of such assignment or transfer,” and is as follows:
    “Whereas, a practice of selecting particular creditors, by assignments and transfers of property, made by persons indebted, and thereby excluding or defrauding other bona fide creditors of their just claims on the estates of insolvent debtors, is contrary to the first principles of equity and justice; to prevent the mischief thereof,
    
      “Be it enacted, That any person, unable to pay his debts, who shall, at any time hereafter, make any assignment or transfer of real or personal property, stock in trade, debts, dues or demands, in trust, to any person, in satisfaction or payment of any debt or demand, or in part thereof, for the use and benefit of his creditor or creditors, or for the use and benefit of any other person, by which any creditor of said debtor shall or may be excluded from an equal share or portion of the estate so assigned or transferred, such assignment, transfer, deed or conveyance, shall be null and void, and considered in law and equity as fraudulent against creditors. Provided, nevertheless, that nothing contained in this Act shall prevent any person in debt from bona fide and absolutely selling and disposing of any part or the whole of his estate, so the same be done free from any trust for the benefit of the seller, or any person appointed by him.”
    The questions have been raised, whether an ordinary mortgage falls within the instruments contemplated by this statute; and if so, wdiether the debtor who executed the moi'tgages here was, at the time of their execution, in the condition intended by the Legislature, to incapacitate him from making the conveyances.
    The evidence discloses that the Steam Boat company had promised an indemnity to the endorsers of their notes, of which renewals were made on the 8th April, 1840, and upon which the mortgages were engrafted ; that the company required the renewals to enable them to go on ; that when the renewals were effected, the security of a mortgage was required at the instance of the endorsers; and that the object of the company in procuring the renewals, was to assist them to put their affairs in such a train as to enable them to make an advantageous sale of their charter and property. As well with a view to show the creditors, from whom they were asking an extension of credit, that their property intended to be mortgaged to them, was a sufficient security, as with a view to a future sale, they caused estimates to be made by competent and skilful persons, of the value of their property; who valued it at $53,000.
    There is the testimony of several witnesses in the cause, who valued the property of the company, including their chartered privileges, at from 50 to 78 thousand dollars; most of them, and especially those who had opportunities, estimating the boats and tangible property above 50 thousand. The direction given to the appraisers by the company, was to put the lowest fair valuation upon the property; and the general opinion of the witnesses is, that the value was low. The clerk of the company says, that the debts were about nine thousand dollars below the value assigned to the property by the appraisers.
    On the other hand, we have strong circumstantial evidence, that they were much embarrassed at the time. On the 11th of April, three days after the date of the mortgages, Mr. Duncan, the president of the company, then at Savannah, in a letter to the agent at Augusta, says, “We had very nearly come to a halt in the affairs of our company, from the banks’ refusing to renew, without additional security.” “We gave it,” he proceeds, “by a mortgage on our property; and at the same time, secured Mr. Thomas, for his implication, by indorsement of your draft; although we suppose you can manage to get freight enough from him to protect that, or, at all events, will collect your rail road freight bills, so as to pay that. You have now got nearly all the iron; and there can be no objection to their paying the bill then.” “Can you not collect and send us down $2000 ; so as to pay off pressing demands, and keep off judgments 'l Do make an effort.”
    The company proceeded, after their accommodation by the banks, in the usual course of their business, and in the month of May even reduced their debts, but to what extent we are not informed.
    On the 7th of May, they passed a resolution to sell out, and authorized an offer of sale to be made to two other companies, at $50,000; and if this should fail, then that the offer should be made to other persons. One of the companies declined, without assigning any reason ; the other assigned as a reason for declining the offer, that it was not in a condition, or disposed at that time, to purchase any more steam boats than it already had. The offer was then made to Mr. Fawnes, who, thinking it a good bargain, accepted it, upon condition that he could get friends in Augusta to join him. He visited that town to consult them; but the negotiation was broken oft by the levy of the attachments.
    At that time the Elbert lay sunk in the river; the Oglethorpe was undergoing repairs; and the Hamburg had broken down, (Which was the occasion of her being in the waters of Barnwell when levied on.) The affairs of the company came to a crisis. President Duncan sent down a boat from Augusta, took off the tow boats, and discharged the hands.
    Henry and William Harper say the company was, in their opinion, unable to pay its debts at the time the mortgages were given. And the plaintiffs, in their bill, make it a ground of jurisdiction, (and so state the fact,) that by the sacrifice of the Hamburg, they have reason to apprehend that the residue of the mortgaged property will not be sufficient to pay even the $24,000 due them, and for which they held a lien, exclusive of all other creditors. We have the testimony of several witnesses, declaring parties lar instances of their not being able to get money out of the company, some of them about the time the mortgages were given. But in opposition to all this, as I have said, we have the testimony of others, who best knew the indebtedness of the company, on the one hand, and that of those most capable of judging the value of their property, on the other; and by comparing the one with the other, it would appear that their property, at a fair value, as it stood at the execution of the liens, and independently of the casualties that afterwards occurred, was worth more than their debts. If all their debts had been due, and they had been pressed for prompt payment, they could have paid them, if they could have sold their property for cash at a fair price; otherwise they could not. Some of those that pressed, they did not pay, although they were able to prosecute the business until the Hamburg broke down.
    Now, were they, at the date of the mortgages, able or unable to pay their debts, within the meaning of the Georgia statute 'l
    
    I understand there is a diversity of opinion among the profession in that State, upon the construction of the Act; and that it has received different interpretations by the bench, on the different circuits there; and I have seen evidence of this in several brief opinions with which I was favored at the hearing.
    When an enlightened profession and eminent Judges differ upon a law familiar to themselves, I can entertain no great confidence in my own humble judgment upon the point. It must be doubtful.
    It would have been a relief to me, if I could have learned from the bench of Georgia, what this law of Georgia is ; but the peculiarity of her judicial institutions is, that they contain no means for authoritatively declaring it. I must, therefore, grope in the dark as well as I can, in deciding upon a statute of her own, in a controversy deeply affecting the interests of her own citizens, and without the aid of her own judicial opinion upon it.
    From the whole enactment, taken together, I learn that the debtor described is one who is about to wind up his affairs. He has the choice before him of paying his creditors equally, or of preferring some of them ; or he may act dishonestly towards them all, and under some deceitful device, endeavor to secure an interest in his property to himself or his family, while it is withdrawn from all responsibility for his just debts. The different members of the enacting clause seem to be directed to this state of things, and to admonish him what conduct is pointed out by honesty and justice. The Act says, he may pursue the first course; but forbids him to adopt either of the latter methods. He shall not directly assign or transfer his whole property to one or more creditors, in satisfaction or payment of their demands, excluding other creditors; nor shall he do the same thing indirectly by an assignment or transfer to other persons, in trust for making such a preference by paying particular creditors, or holding the property so that they shall receive the use and benefit of it; nor again, shall he defeat the whole of his creditors by making an assignment or transfer to third persons, in trust for the use and benefit of any other person ; a provision which cuts him and his family off' from the enjoyment of that property, which, in substantial justice, does not belong to them, but to his creditors. It appears to me, this interpretation satisfies every phrase employed by the Legislature ; and if so, the persons said in the Act to be unable to pay their debts, are those whose affairs have come to a stand, and who occupy the position of actual insolvents. The words and spirit of the Act will embrace not only those whose insolvency is known and declared to the world, but those who under a secret knowledge of their ruined condition, are taking steps to close their business. In doing this, they shall do equal justice to all the creditors. If the tendency of their acts is not perceived by others, as may be the case when they intend to defraud all the creditors, and prefer themselves or their children; it makes no difference what the form of the proceeding may be, as soon as it is ascertained w'hat their design was in adopting it, the whole will be set aside as an offence against the Act. And so, again, if under failing circumstances, and with a design to fail, and failing, prefer a particular creditor, the transfer is either effected, or a train laid for effecting it, by concert with him, it matters not, in my opinion, what the form of the transfer is, or by what apparatus the fraud is perpetrated; the act will condemn it.
    
    I cannot say, in this case, that the company was actually insolvent when they gave their mortgages, or that they gave them as a means of winding up, and in so doing, giving a preference to the mortgagees; or that they were so understood by the banks, or that the latter had any reason to suspect that the transaction was any thing else than one in the ordinary progress of the company’s business; and, therefore, I cannot conclude the conveyances were contrary to the Act; although my impression would be that the mere form of a mortgage would not save the transaction, if evidently adopted as a means of getting round the statute.
    J see nothing to convince me, that the Steam Boat company intended to stop, when they gave the mortgages, or that they were so understood by those with whom they Were dealing. On the contrary, the evidence impresses me with the belief, that their intention was to go on and do a successful business, until they could sell out upon good terms ; and that the deeds were not executed or accepted as a payment and satisfaction, but only as a security for the debts; and, therefore, I cannot pronounce them void, under the Act of Georgia..
    The deeds operated, under the laws of Georgia, to vest the title in the mortgagees-, subject to a right to redeem, in the same manner as mortgages of personalty operate in this State. And, (if the plaintiffs really need the remedy,) the mortgages must be allowed to prevail over the attachments here, and to give a preference, in the .distribution of the fund in court, which arose from the sale of the mortgaged property. This is a lien created by the act of the debtor, and must be noticed in the distribution of the proceeds of the property bound by it; and does not stand upon the footing of an assignment by operation of law, Under a commission of bankruptcy, in a foreign State, which operates merely as a power to receive, and vests no legal interest.
    But do the plaintiffs in the bill need the remedy] They have found the property, of which they allowed the custody to the debtor, in the hands of the law. They come to disturb this possession upon equitable grounds, and they show a case in which they have another security, to which they may resort. The defendants insist that they must exhaust this remedy against the indorsers. The ground taken by the defendants is, that the fund in court is a security common to both parties, and that, upon a principle familiar to this court, the plaintiffs must resort to their exclusive remedy against the indorsers, leaving the common fund to the defendants. There is no doubt of the soundness of the principle alluded to, but is it applicable to this case? The indorsers had the promise of a mortgage. This is one equitable consideration. Again — they were indorsers upon accommodation paper, and stand as mere sureties to the Steam Boat company. Their right to be protected, presents an equity as strong as that of the defendants; and the court cannot, for the benefit of the latter, turn the plaintiffs round to a remedy which must have the effect to sacrifice them.
    The case, however, discloses the fact that there is other mortgaged property to which the plaintiffs may resort. Until this is exhausted, they will not be allowed to disappoint the defendants, who have no security but the fund in court. They must show what has become of the other mortgaged property, and what portion of it has been lost to them, before they can take hold of this fund.
    I shall retain the bill, and direct an inquiry into the value and amount of the other mortgaged property, allowing the plaintiffs, of course, a deduction for any portion of it that they can show to have been lost to them, without fault on their part. It is also referred to the commissioner, to take an account of all the debts which have been, or may be proved before him, by a day to be fixed by him, by advertisement for all the creditors of the Steam Boat company to come in and establish their demands ; that he report the nature, extent, and priority of the different claims ; and that he take an account of all matters of account, necessary for a final distribution of the fund in court, and report a scheme for the distribution thereof. A final order of distribution will be made on the coming in of the report. The costs of these suits, and of the attachments, to be paid out of the fund.
    From the foregoing decree the defendants (the attaching creditors,) appealed, and now moved to reform the same, on the following grounds :
    1. Because, under the provisions of the Act of the Legislature of Georgia, mentioned in the decree, the mortgages in question are null and void as to the attaching creditors.
    2. Because the question, viz : whether the Savannah and Augusta Steam Boat company was or was not able to pay its debts at the time the mortgages mentioned in the decree were executed, is a question of fact depending on the weight of the evidence, and ought to he submitted to a jury.
    3. Because the mortgage creditors, under the peculiar circumstances of this case, ought to be required to exhaust their other securities, to wit, their remedy against the in-dorsers, before they are allowed to have recourse to the fund in dispute.
    Patterson, for the motion.
    According to the English Bankrupt laws, a mortgage of all the debtor’s property, is an act of bankruptcy.
    The indorsers are the President and Directors of the company, and they agree amongst themsellves, that they will mortgage to themselves, to secure them as indorsers.
    The whole machinery shows that the mortgagees intended to secure themselves at the expense of the other creditors.
    Mr. Patterson cited 2 Story’s Equity, 498^9 ; Angel and Ames, on Corporations, 200 ; 15 Johnson’s Rep. 358; 2 Cowen, 666^-78 ; 3 Id. 662 j 7 Wend. 31.
    Cohen, contra.
    As to collateral securities, cited 1 Johnson Ch. Rep. 119 j 14 Peters, 19 ; 7 Cranch, 69.
    As to-a preference claimed for the captain of the boat, 11 Peters, 175.
    As to the question of fact, whether such a case of insolvency was made out as to bring the mortgages within the Georgia statute, cited 2 McCord Ch. 15 ; 2 Id. 59, 71, 73, et seq.
    
    The fact that the testimony is involved in doubt, furnishes no ground to reverse the Chancellor’s decree; cited 1 Bailey’s Eq. 510.
    As to the term insolvency, 3 Cranch, 73 — 91 j 1 Peters, 386— 439.
    On the question whether mortgages were embraced within the statute in question, Mr. C. contended that to maintain the position that they were, it was necessary to prove that a mortgage was a deed, or assignment in trust; and further, that it is the 'payment of á debt. On this point, cited 1 Jac. and Walk. 177.
    The assignment or transfer contemplated by the statute, he contended, was the ordinary assignment by which an insolvent debtor transfers his property to assignees, in trust, for the benefit of his creditors, who are to receive the same in payment or satisfaction of their debts. Cited 6 Greenleaf, 388.
    Can these mortgages be sustained under the proviso of the statute! Cited 1 McCord Ch. 486; 1 Tread. Con. Rep. 151.
    As to the distribution of the fund in court, cited 5 Cranch, 289 — 298,
    The indorsers were promised mortgages when these debts were created, to protect them from loss; and will not equity consider that as done, which should have been done 1 Cited 1 Bailey’s Eq. 223.
    On the question whether an issue should be ordered, to try the fact of insolvency by a jury, cited 1 Hill Ch. 442 ; 2 Id. 515 — 525.
    Bailey, same side,
    cited 1 Story’s Eq, 595, 589-92.
    Bauskett, in reply,
    cited 4 Paige Ch, Rep. 23 ; 5 Cowen, 547.
    
      
      
         The following extract is from, the opinion of the late Judge Nott, in the case qf the Bank of Georgia, vs. Henry Schultz, touching the construction of the Georgia statute, on this point:
      “The 1st ground which X shall notice, as relied on by the appellants for the reyersal of the decree, is, th^t the mortgage under which the complaint fonts claim is void by an Act of Georgia, passed the 15th day of December, 1818. The title of the Act is, «An Act to prevent assignments or transfers of property to a particular portion of creditors, to the exclusion and injury of other creditors, of persons who fail in trade, or who are indebted at the time of such assignment or transfer.” The preamble of the Act is, «Whereas, a practice of selecting particular creditors, by assignments and transfers of property, made by persons indebted, and thereby excluding Or defrauding other bona fide creditors of their just claims on the estate of insolvent debtors, is contrary to the first principles of equity and justice,” &c. 1 The enacting clause provides that any person or persons unable to, pay his, her or their debts, who shall at any time hereafter make any as-> signment or transfer qf real or personal property, stock in trade, debts, dues, or demands, in trust to uny person or persons, in satisfaction or payment of any debt or demand, or in part thereof, for the use or benefit of his, her, or their creditor or creditors, or for {he use or benefit of any other person or persons, by which any creditor of such debtor shall or may he excluded from an equal share or portion, of the estate so assigned or transferred, such assignment or transfer, deed, or conveyance, shall be null and void, and considered, in law and equity, as fraudulent against creditors: Provided, that nothing contained in this Act shall prevent any person or persons in debt, from bona fide and absolutely selling and disposing of any part or the whole of his, her, or their estate, so the same be free from any trust for the benefit of the seller, or any person or persons appointed by him, her, or them.”
      “Two questions now arise under the Construction of this Act. 1st. Whether it embraces such transfers as that now under consideration? 2d. Whether McKinny, at the time of making the mortgage, came within the description of persons contemplated by the Act ? In order to determine the first question, we must resort to the rule laid down for the construction of all statutes; to look to the old law, to ascertain the mischief complained of, and the remedy intended to be provided. Of these matters we can know nothing, except what appears upon the face of the Act itself ThosO who are acquainted with the recent history of Georgia may, perhaps, derive instruction from particular circumstances existing at the time. But this court cannot look beyond the provisions of the Act for its construction. Neither does it appear to me necessary or proper that we should. The mischief is distinctly set out in the preamble of the Act, and the remedy is as distinctly declared in its enacting clause. The manifest object of the Act throughout. is to prevent a debtor “who is unable to pay his debts,” from making any transfer of his property to one or more of his creditors in exclusion of the rest; and to effect an equal distribution among all the creditors. Now there can be no doubt that the McKinneys were indebted to the Bank of Georgia, the sum of $40,000, at the time this mortgage was made. There is as little doubt that it was made to secure to the bank that sum, to the exclusion of the other creditors, if it should turn out that the rest must necessarily be excluded by a failure of funds to pay all their creditors. The Act does not speak of any particular kind of assignment or transfer, but extends to all, of whatsoever description they may be, the tendency, or rather, the effect of which, shall be, to prevent an equal distribution of all the effects among the creditors. I think, therefore, that the terms of the Act are broad enough to embrace the transfer now under consideration ; and I am also of opinion, that the spirit of it requires that it should receive that construction. Indeed, it appears to me,- that by a contrary construction, the object of the Act would be entirely defeated. If the Act can he evaded by apportioning out the property among a few favorite creditors, by way of mortgage, to the exclusion of the rest, then, I think, the State of Georgia has legislated in vain on the subject. I do not put it on the ground of fraud, but upon the positive provisions of the Act, the policy of which is too plain to be mistaken. I am of opinion, therefore, that the mortgage, so far as it relates to the debt of $40,000, must be considered as void.”
    
    
      
       Prince’s Digest, page 164,
    
   Curia, per Johnson, Ch.

I concur entirely in the decree of the circuit court, and but for some diversity of opinion amongst the members of this court, I should not have felt called on to say more.

The question whether an ordinary mortgage is embraced in the words, “any assignment or transfer,” found in the statute of Georgia, came directly before the Court of Appeals of this State, in the case of the Bank of Georgia against Henry Schultz, at January term, 1827, in which it was held that mortgages are embraced by them, and in the absence of any authoritative decision of the courts of Geoiv gia upon the subject, the defendants are entitled to the full benefit of that decision.

Without intending to enter into a minute analysis of this statute, it may be remarked that from what may be col= lected from its title, the preamble and the enactment, the Legislature intended to prohibit any one who was “unable to pay his debts,” from securing any portion of his effects to himself by “assignment or transfer,” and from giving to one creditor a preference over another, upon the principle that in justice all were equally entitled; and notwithstanding some grave objections opposed to it, I am disposed to concede that upon a strict construction of the statute, if at the time of the assignment or transfer the debtor was in truth unable to pay all his debts, the assignment or transfer would be void, although the fact was unknown both to the debtor and the assignee or transferee; but it is very clear that the fact of the inability of the debtor to pay his debts, must be referred to the time of the contract, and cannot be made to depend on subsequent casualties, to which the fortunes of all men are exposed. It is not so provided in the statute, and a different construction would render all securities by liens on property dependant on the ultimate solvency of the debtor. I take it, therefore, that it is incumbent on the party seeking to avoid the contract or assignment, to shew that at the time the debtor was unable to pay his debts.

The questions then arise, as to the time when the contract between the Savannah and Augusta Steam Boat company, and the Central Rail Road Banking company of Georgia, was entered into, and whether the former were or were not at the time unable to pay their debts.

I collect from the pleadings that the debt to secure which the mortgage was given, was contracted in 1838, and at that time there was an agreement on the part of the Steam Boat company to secure their indorsers by a mortgage of their effects; that, in itself, created an equitable lien, and the fact of the inability of the company to pay their debts, ought, I think, to be referred to that time, for the subsequent execution of the mortgage in 1840, was but a fulfilment of that agreement. The mortgage being in effect a security to the indorsers, and, moreover, avowedly intended for that purpose, and of the fact of insolvency at that time, there is no evidence at all. But if it be referred to the time of the mortgage, it was incumbent on the party affirming it, to prove the insolvency of the Steam Boat company; and to shew that such was not the fact, I need only refer to the evidence, and the conclusion deduced from it by the Chancellor who tried the cause, and that in all doubtful questions has always been regarded by this court as decisive of it. It is put on the footing of the verdict of a jury in a law court, with regard to which the rule is, that if there is evidence on both sides, the court will not weigh it in an appeal, unless there is a great preponderance on one side, but suffer the verdict to stand ; and it ought to be remembered, too, that if the claims of the attaching creditors are sustained, it works a forfeiture of the security which the indorsers and the Rail Road and Banking company have obtained by their vigilance, amounting in effect to a legal, if not an actual fraud, which never can be allowed but on clear and unequivocal proof. Here all the arguments on the part of the attaching creditors are based on the supposition that the evidence is equivocal.

It is very clear that this court has the power to direct an issue at law as well as the circuit court, of which we have numerous examples. The object is to inform the conscience of the court as to the truth of the facts involved in the issue. During the many years that I presided in the law court, the uniform course of the Constitutional Court, on appeals in cases involving doubtful questions of fact, was to refer it to the Judge who presided on the circuit, to say whether in his judgment the verdict was or was not opposed to the decided preponderance of evidence, and to grant or refuse a new trial accordingly; and I think the same rule ought to prevail in this court.

I know that the general usage has been in conformity with it. For the most part, the Chancellor, who has derived his information from original sources, is better able to judge of the truth of facts, than those who obtain the knowledge of them through a second hand. I do not intend to be understood as laying this down as an imperative rule, for that would cut off all consideration of matters of fact, nor was it so understood in the Law Court. All that I mean to say is, that it ought, like the verdict of a jury, to prevail, unless there is a decided preponderance of evidence opposed to the opinion of the Chancellor; and that I have already shewn is not the case here.

This brings me to the consideration of the last ground of this appeal, which, in effect, insists that under the peculiar circumstances of the case, the mortgage creditors ought to be compelled to resort to and exhaust their remedy against the indorsers, before they should touch the fund in court.

Judging from what appears on the face of the decree, this would seem to be rather a novel proposition. The well established doctrine of this court is, that the surety is entitled to the benefit of all the securities which the creditor obtains from the debtor for the payment of the debt, and that the creditor must exhaust these before he can call on the surety for payment; and this is in the teeth of the proposition stated in this ground of appeal. But under this covert, it was stated in the argument, and for any thing that appears the fact may be so, although it is not in proof, that the endorsers of the several notes were the directors of the Steam Boat company, and that it was they who contracted with themselves to be indemnified by a mortgage against their liabilities as indorsers; and hence it is attempted to be inferred that it was a fraudulent device on their part to gain a precedence over other creditors. There is, upon a superficial view, something very startling in this, if the facts be true, and they probably are as to some, perhaps all, of the indorsers; but the alarm will cease when we take into consideration the motives and influences which operate upon men to lend their credit to assist individuals or corporations to pursue their enterprises. The directors of a corporation ought to be, and generally are, better informed as to its liabilities and resources than any one else, and if they, having the means, refuse to aid them in their operations, by the loan of money or credit, no one else will be found to do it; and I need not add, what is known to all having any experience, that an overweening confidence in their capacity to manage the affairs of a corporation, and a mistaken view of the state of its finances, has often involved the stockholders, and especially the directors, in distress and ruin. No man likes to give up an enterprise in which he has embarked, until he is satisfied that it cannot succeed, and this feeling is strengthened by the numbers that are embarked in it. Few are willing to recede, whilst there are any to persevere. Now there is nothing, either in law or equity, which forbids a member, or even a director, of a corporation, from contracting with it, and like any other individual, he has a right to prescribe his own terms, which the corporation are at liberty to accept or reject, and when the contract is concluded, he stands in the same relation to the other creditors of the corporation, as any other individual would under the same circumstances. When the question of priority arises, it must depend on the bona Jides of the transaction, fraud or no fraud. If by greater diligence, and without fraud, he has fairly gained an advantage over the other creditors, he is entitled to retain it; and I cannot, from the evidence in this case, detect the slightest ground of suspicion that there was any fraud on the part of the indorsers, in obtaining the mortgage to secure the debt of the Steam Boat company.

It is objected on behalf of the attaching creditors that the indorsers ought to have been made parties, and certainly the general rule is, that all persons having an interest in the subject matter in controversy, which wdll be affected by the judgment of the court, ought to be made parties.

It would be a sufficient answer to this objection, that it was not raised by the pleadings, nor is it found in the grounds of appeal, and comeg from a party who might have made them parties, if they had thought proper. In addition to this, I cannot perceive how the attaching creditors are interested that the indorsers should be made parties. They are represented by the Rail Road and Banking company, and it is their interest that the company should exhaust their remedy against the principal debtor before they resort to them, (the indorsers) and the court would doubtless compel the company to do so, on the application of the indorsers ; but they have not sought to come in for that purpose, and for myself, I cannot see what benefit or advantage the attaching creditors would derive from it, or in what it would aid their defence.

I am, therefore, of opinion, that the decree of the circuit court ought to be affirmed and the appeal dismissed, and it is so ordered.

Johnston, Chancellor, concurred.