Case Name: Gordon & als. v. Cannon & als.
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1868-04
Citations: 18 Gratt. 655
Docket Number: 
Parties: *Gordon & als. v. Cannon & als.
Judges: 
Reporter: Virginia Reports
Volume: 59
Pages: 655–669

Head Matter:
*Gordon & als. v. Cannon & als.
April Term, 1868,
Richmond,
i. Deeds of Assignment — To Secure Creditors — Preferences — Release Clause. — A debtor in failing circumstances may convey bis whole property for payment of his debts, giving preferences among his creditors, and requiring a release from such as accepted it.
3.Same — Same—Same—Whole Property Must Be Conveyed. — To render such a deed valid, the whole of the debtor’s property must be conveyed by it; but this need not appear on the face of the deed.
3. Same — Same—Partnership.—A partnership in failing circumstances has the same power; and if two of three partners convey all the effects of the firm and their individual property, and the third has none, they may require a release both of the firm and all the members, by the creditors who accept the deed.
4. Same — Same—Schedule of Goods to Be Annexed— Recordation without Schedule. — A deed conveys a stock of goods of the grantors, and refers to a schedule of the goods, which when made out is to be considered as annexed to the deed, and to be taken as a part of it. Though the schedule is not annexed before the recording of the deed, the deed is valid without it.
5. Same — Same-Authority to Appoint Agents — Liability of Trustee for Acts of Agents. — A deed of trust for payment of debts authorizes the trustee to appoint agents, and provides that he shall only be liable for the money that comes into his hands, and shall not he liable for the omissions or defaults of the agents. This does not discharge the trustee from the obligation to select fit agents, and to hold them to a strict and prompt responsibility for their acts. And this is the extent of his liability without such a provision in the deed.
6. Same — Trustee a Creditor — Effect.—The fact that in such a deed the trustee is a creditor secured in it, does notaffectthe validity of the deed, but only the power of the ^ trustee to act. If the debtor does not object to his acting, it is no reason why another creditor should object: if that is the only obj ection to him.
7. Same — Same—Release Required by Debtor — What Deed Should State. || — When the debtor in such a deed requires a release, the deed should give to the creditors all the information in the power of the debtor, as to the nature and value of the pr op-erty conveyed, and the amount of the debts intended to he provided for, and time to obtain information not given in the deed; and to determine whether they will accept or reject the offer made to them. In this case sixty days were allowed, and held sufficient.
8. Same — Same—Partnership—Case at Bar. —R A & Go. stopped business, and K & R, two of the members of that Arm, and P, formed the ürm of U R & Go. They failed, and conveyed all the assets of both Arms, and the individual property of R in trust to pay indiscriminately a debt of R and the debts of the two Arms; and they required a release. The deed is valid; but it will be re-formed, so as to apply the property of each to pay Arst the debts of that person or Arm from whom or which the property was derived.
By deed bearing’ date the 30th of November, 1866, William! H. Rogers, James I). Riddick and J. Pendleton Rogers, merchants and partners trading under the name and style of Rogers, Riddick & Co., in the city of Richmond, and Mary Jane Rogers, wife of William H. Rogers, conveyed to Edward T. Cannon two tracts of land in the State of Texas, containing four thousand two hundred and fourteen acres, the property of William H. Rogers, ail their stock of goods, “an inventory of which stock will, as soon as practicable, be taken and be annexed to this deed as a schedule, to be marked schedule A, and which schedule, when so annexed, is to be treated as a part of this deed; also all debts of every description due to the firm; also all the assets of every kind of the late mercantile firm trading in Richmond under the style of Rogers, Adams & Co., which firm was composed of the said William H. Rogers, Samuel R. Adams and the said James E. '*Riddick; and all the interest of William H. Rogers in said last mentioned firm ; and all other assets and effects of the firm of Rogers, Riddick & Co., where-ever they may be. Upon trust forthwith to take possession of the said stock of goods, and to sell the same either at public or private sale, and upon such terms of cash or credit, and as a whole or in part, as he may deem most judicious and best calculated to realize the best prices for said goods; and for this purpose the trustee was authorized to employ such agents, auctioneers or salesmen as he might deem necessary, and to pay them a reasonable compensation for their services out of the trust fund. That the said trustee should proceed, as soon as practicable, to collect all debts due Rogers, Riddick & Co., or which form a part of the assets of Rogers, Adams & Co. ; and for this purpose to make such compromise adjustment of doubtful or disputed debts as might seem judicious under the circumstances; and also to sell and convey the real estate in Texas, in such parcels and on such terms as to cash or credit as might best realize the highest price for said real estate. And after paying all the expenses of executing the trust, to apply the trust fund to pay in full, if the fund was sufficient, and if not, pro rata, the debts mentioned in schedule B, annexed to the deed as preferred debts of the first class. Second, if a surplus should remain after paying the debts in schedule B, the trustee should distribute such surplus, pro rata, among all of such of the creditors of the firm of Rogers, Riddick & Co. and of the late firm of Rogers, Adams & Co. embraced and enumerated in the schedule marked C, and annexed to the deed, as should within sixty days after the deed should be admitted to record in the clerk’s office of the Hustings Court of Richmond, either in person or by some duly authorized agent, sign this deed, and thereby accept such ratable dividend in full satisfaction and discharge of the debt or debts due *to the person so signing by the said firms of Rogers, Riddick & Co. or of Rogers, Adams & Co. ; and thereby agree to release said several firms and the members thereof from all obligation in law or equity for said debts. And if any of said creditors should fail to sign the deed, and a surplus should remain after satisfying the debts embraced in schedule B, and such of the creditors in schedule C as should sign the deed, then such surplus was to be distributed, pro rata, among the creditors mentioned in schedule E, annexed to the deed. And the deed provided that the trustee should not be liable for an3' moneys other than such as should actually come to his hands in the execution of this trust; and that he should not be liable for any default or omission of any of the agents whom he might employ to aid him in the execution of the trust.
The schedule B, annexed to the deed, embraced debts amounting to a little over six thousand dollars; all of which were the debts of Rogers, Riddick & Co., except one of $325, which was a debt of William H. Rogers for house rent; and there was included in these an unascertained amount due to the trustee for money paid out by him for costs and for legal services, &c., for Rogers, Adams & Co. and Rogers, Rid-dick & Co. ; the whole amount did not exceed three hundred dollars, as stated by the trustee in his answer. The debts of Rogers, Riddick & Co. embraced in schedule C, of which the amounts are given, come to about $24,000, but there are a number of creditors named whose debts are not specified; the debts of Rogers, Adams & Co. amount to about $4,200. There is no schedule E annexed to the deed; but there is a schedule D, the debts embraced in which are estimated at between eight and ten thousand dollars.
This deed was admitted to record in the clerk’s office of the Hustings Court of the city of Richmond on the 30th of November, 1866.
*On the 29th of December, 1866, Gordon, Eellows and McMillan, and a number of others who were creditors of Rogers, Riddick & Co. filed their bill against Cannon the trustee, Rogers, Rid-dick & Co., Rogers, Adams & Co., Mrs. Mary Jane Rogers, and the creditors secured in schedule B of the deed, in which they charged that the deed was incomplete, fraudulent in law and void, and tended to hinder, delaj and defraud the plaintiffs. That it was incomplete in this, that it refers to and makes schedule A a part of the deed without appending it thereto. They charged that the deed was fraudulent in law: Eirst — That it .requires the creditors in schedule C to release and discharge the grantors, and also Samuel R. Adams, who is charged to be the only solvent member of the said firms, not himself being a party to the deed, or - conveying any property to meet the liabilities of said firms; and though the said grantors had not conveyed in the deed all their social and individual property. Second — In undertaking to satisfy the debts of Rogers, Adams & Co., which firm the plaintiffs averred were solvent and able to pay their debts, out of the assets of Rogers, Riddick & Co., believed to be insolvent; and at the same time to require a release by the creditors of the members of both firms. Third — In authorizing the trustee to appoint agents, &c., and at the same time relieving him from liability for any money or other thing received by them. And it was charged that the trustee had employed the grantors, or one of them, as his agents to take possession of the stock of goods and sell the same and receive the money. Eourth — -That schedule A not being annexed to the deed, the creditors have no means of forming an opinion as to the propriety of accepting or rejecting said deed; and that the power of appointment vested in the trustee gives to the grantors, or one of them, full control of the assets of Rogers, Riddick & Co., and takes from the trustee the *position he should occupy for the protection of the interests of debtors and creditors, and defeats the pretended object sought to be secured by the execution of the deed. And the bill further charges, that the trustee Cannon was a beneficiary under the deed, and a creditor of the two 'firms; and as such, preferred to the plaintiffs. And they insist, that the deed thereby becomes a mortgage, with all the equities of a mortgage attached to it. And they pray, that the trustee, his agents, &c., may be enjoined from selling any of the property attempted to be conveyed by said deed ; that the sheriff of the city of Richmond be appointed a receiver to take possession of said property unless the trustee, or some one else, should give security to have the property forthcoming to abide the decree of the court; that the plaintiff’s debts might be paid out of the property; and for general relief.
An injunction was awarded to enjoin E. Y. Cannon, his agents, and all others from paying or otherwise parting with the money derived from sales, or acquired in other manner, under the deed of trust mentioned in the bill, until the further order of the court.
Rogers, Riddick & Co. answered the bill on the first Monday in January, 1867. They deny all fraud charged in the bill. They say, that immediately upon the execution of the deed, the doors of their warehouse were closed, and, under the direction of the trustee, a complete inventory of their stock, at cost prices, was at once commenced, and has been since completed; a copy of which is exhibited with their answer; and they state the nature of their business and the circumstances which rendered some delay in preparing the schedule A unavoidable. That in the deed they endeavored to describe their assets as fully as possible; and that a complete schedule of the assets would have been annexed long since but for the proceedings instituted by the plaintiff; and that they had made every *effort, by letter, verbal communication and otherwise, to give the fullest information in regard to the assets, to every creditor interested in the deed. They deny that the members of the firm have kept back any part of their individual property; in fact, William H. Rogers is the only one who had any property, and the Texan land mentioned in the deed is all that he possessed. They deny that the assets had been put into „the hands of any one than by the trustee; all that he did was to employ William H. Rogers, under his own direction, to superintend the inventory of the stock, and the other two members of the firm were employed in arranging the goods for sale at auction.
They say further, that Samuel R. Adams, when he withdrew from the firm of Rogers, Adams & Co., took with him but fifty dollars ; that he has no property; and the assets of Rogers, Adams & Co. were all conveyed in the deed. That this firm is indebted to Rogers, Riddick & Co. for advances made to pay their debts; and is not solvent.
They say that the stock of goods conveyed in the deed, and which was inventoried at cost prices, at 112,008.45, has since been sold at auction, and has brought the gross sum of $9,200.
The trustee, in his answer, says, that as trustee, he took immediate possession of the stock of goods, and proceeded to sell the same on the best possible terms; and that he now has the whole net proceeds of sale under his control as trustee; that all the bills receivable of said firm were endorsed to him, and have been placed in bank for collection. That it is true he did employ William H. Rogers, as stated in the answer of the firm, because it was physically impossible for him to execute the trust without some agent; and that the authority given to Rogers has been most faithfully executed.
*The whole property of Rogers, Riddick & Co., and Rogers, Adams & Co., appears to have been conveyed in the deed. The partners, except Wm. H. Rogers, seem to have had no property of their own, and Riddick and Pendleton Rogers put no capital into the concern. Adams also appears to have had no property. As to the relative condition of the two parties, that of Rogers, Riddick & Co. seems to have been considerably the best.
On the 14th of March, 1867, the court, on the motion of the defendants, dissolved the injunction; and thereupon the plaintiffs applied to a judge of this court for an appeal, which was allowed.
Turner, Johnson & Guigon, for the appellants.
Steger & Sands, and Cannon, for the ap-pellees.
Deeds of Assignment — To Secure Creditors — Preferences. — It is firmly settled that apart from statute, a debtor, even in failing circumstances, until his property is specifically bound to the satisfaction of his debts, has an absolute right to dispose of it at his pleasure. He may give undue preference to a part of his creditors, or even to one, and such preference cannot be treated as a fraud. As authority for this proposition, see, besides the principal case, Alexandria, etc., Inst. v. Thomas, 29 Gratt. 490; Lucas, etc., v. Clafflin, 76 Va. 277; Williams v. Lord, 75 Va. 402; Sipe v. Earman, 26 Gratt. 566; Young v. Willis, 82 Va. 298; Long v. Meriden, etc., Co., 94 Va. 595, 27 S. E. Rep. 499; Skipwith v. Cunningham, 8 Leigh 271, 280, and cases cited; M’Cullough v. Sommerville, 8 Leigh 415; Dance v. Seaman, 11 Gratt. 780, 781; Wickham v. Lewis Martin & Co., 13 Gratt. 441, 444; Harden v. Wagner, 22 W. Va. 365; Clarke v. Figgins, 27 W. Va. 670; Williams v. Gillespie, 30 W. Va. 590, 5 S. E. Rep. 212; Fink v. Patterson, 21 Fed. Rep. 605; Marbury v. Brooks, 7 Wheat. 556, 5 L. Ed. 522, and note; Brooks v. Marbury, 11 Wheat. 78. 6 L. Ed. 423, and note.
The mere fact that the deed was made during the pendency of an action does not effect the validity of the deed in the absence of fraud. Paul v. Baugh, 85 Va. 958, 9 S. E. Rep. 329.
Same — Same—Release Clause. — And the debtor making such a deed of assignment may impose upon his creditors the condition that those who participate in the fund shall release him from the residue of their demands. Phippen v. Durham, 8 Gratt. 457; Long v. Meriden, etc., Co., 94 Va. 595, 27 S. E. Rep. 499; Robinson v. Mays, 76 Va. 708; Kevan v. Branch, 1 Gratt. 274; Skipwith v. Cunningham, 8 Leigh 291; Fink v. Patterson, 21 Fed. Rep. 605.
5ame — Same—Whole Property Must Be Conveyed.— But to render such a deed valid, the whole of the debtor’s property must be conveyed by it. Robinson v. Mays, 76 Va. 716; Paul v. Baugh, 85 Va. 960, 9 S. E. Rep. 329; Long v. Meriden, etc., Co., 94 Va. 596. 27 S. E. Rep. 499; Clarke v. Figgins, 27 W. Va. 671, 673; Skipwith v. Cunningham, 8 Leigh 291, 292; Phippen v. Durham, 8 Gratt. 464; Quarles v. Kerr, 14 Gratt 48.
Where, however, no release is required the failure to convey all the property does not vitiate the deed. Williams v. Lord, 75 Va. 400. And the debtor cannot assail the deed on the ground that all his property was not conveyed thereby. Robinson v. Mays, 76 Va. 708.
Any omission of property for the purpose of securing a substantial benefit to the debtor (except such property as may be exempt by law from distress or levy) conclusively shows an intention to hinder and defraud creditors. Paul v. Baugh, 85 Va. 961, 9 S. E. Rep. 329; Long v. Meriden, etc., Co., 94 Va. 597, 27 S. E. Rep. 499.
Bnt the omission of a comparatively small amount, where all is substantially conveyed does not avoid the deed in the absence of fraudulent intent; for “the deed essentially complies with the requirements of the law.” Gordon v. Cannon, 18 Gratt. 387; Paul v. Baugh, 85 Va. 961, 9 S. E. Rep. 329; Long v. Meriden, etc., Co., 94 Va. 607, 27 S. E. Rep. 499; Skipwith v. Cunningham, 8 Leigh 271, 292; Phippen v. Durham, 8 Gratt. 465.
Same — Same-Same—Need Not Appear on Face of Deed. — it is not necessary that a conveyance should show on its face that it embraces all the estate of the grantor, but it is competent to prove that fact by evidence aliunde. Long v. Meriden, etc., Co., 94 Va. 597, 27 S. E. Rep. 499.
In Didier v. Patterson, 93 Va. 535, 25 S. E. Rep. 661, the court said: “Fraud may appear from the provisions of the instrument itself, or be proved by evidence aliunde. Whenever it is apparent on the face of the instrument, it is called constructive or legal fraud; and in such case, the fraud is adjudged by the law to be conclusively established by the provisions of the conveyance itself, and cannot be disproved by other evidence. Gordon et als. v. Gannon et als., 18 Gratt. 887; Hughes, Effinger & Co. v. Epling, ante, p. 424; and Bump on Fraud. Con. (4th Ed.) section 338. But mere badges of fraud, whether they appear on the face of the instrument or from evidence aliunde, may always be repelled by other evidence. Gordon et als. v. Gannon et als., supra; and Hickman’s Ex’or v. Trout, 83 Va. 478, 3 S. E. Rep. 131.”
Same — Same—Continuation of Business by Trustee. "Tn Harden v. Wagner, 22 W. Va. 364, it was said: “That it was provided the business should be carried on under the supervision of the trustee, by agents employed by him, until the property could be disposed of in an advantageous manner is rather an evidence of good.faith than of a fraudulent intent or purpose. Gordon v. Gannon, 18 Gratt. 387; Sipe v. Barman, 26 Id. 563; Marks v. Hill, 15 Gratt. 400.” See, in accord with this view, Ruffner v. Mairs, 33 W. Va. 663, 11 S. E. Rep. 7; Williams v. Lord, 75 Va. 401.
Same — Same—Retention of Possession of Property by Grantor. — In Shattuck v. Knight, 25 W. Va. 598, the court said; “If the property conveyed was a stock of goods, wares and merchandise, a provision on the face of the deed of trust, that the grantor should retain the possession thereof till sale, which is not to take place for a considerable time, would render the deed per se fraudulent, for the obvious reason that the mere holding possession of such a stock of goods could be of no possible advantage to the grantor or any one else, and he must have, when he executed such deed, intended to defeat its professed objects by selling the goods, wares and merchandise while in his possession and devoting the proceeds to his own use. The only obj ect, which he could have had in making such a deed of trust, must have been to delay and hinder his creditors by preventing them from seizing the property to pay their debts. (Kuhn v. Mack, 4 W. Va. 186; Garden & Co. v. Bodwing’s Administratrix, 9 W. Va. 121: Klee v. Reitzenberger, 23 W. Va. syl. 2, p. 749; Lang v. Lee, 3 Rand. 410; Janney v. Barnes, 11 Leigh 100; Sheppards v. Turpin, 3 Gratt. 374; Spence v. Bagwell, 6 Gratt. 444; Addington v. Etheridge, 12 Gratt. 436.)
“But if the provision in the deed of trust be, that the trustee in such a case may continue the business in order to realize the trust-fund and wind up the business, the deed is not fraudulent per se; and if the deed further provides, that the grantor shall attend to the business under the control and direction of the trustee, that provision will not render the deed of trust per se fraudulent. (Harden v. Wagner, 22 W. Va. syl. 8, p. 357; Marks v. Hill, 15 Gratt. 400; Gordon v. Garmon, 18 Gratt. 387.)"
See, in accord, Landeman v. Wilson, 29 W. Va. 725, 2 S. E. Rep. 215; Conaway v. Stealley, 44 W. Va. 169, 28 S. E. Rep. 796.
Same — Same—Postponement of Sale — Reservation of Profits to Grantor. — The deed is valid though the sale be postponed for two years and the grantor reserves the profits to himself in the meantime. Dance v. Seaman, 11 Gratt. 778. Indeed the time may be much longer and the grantor take the profits meanwhile. Lewis v. Caperton, 8 Gratt. 148.
Same — Same—Right of Partner to Hake Conveyance without Consent of Co-Partner. — In Hill v. Postley, 90 Va. 202, 17 S. E. Rep. 946, the court said: “This case (Anderson v. Tompkins, 1 Brock. 456) was cited with approval in M’Cullough v. Sommerville, 8 Leigh 415, in which case Judge Cab® said: ‘Following this high authority, I conclude that a partner has a right to convey the social effects (save real estate) to trustees, to pay specified creditors of .the firm, and this without the assent of his co-partner, where (as here) that co-partner resides out of the state, and the grantor is sole manager of the concern.’ The same principle was recognized in Gordon v. Gannon, 18 Gratt. 887. But in no case, of which we are aware, has the general rule, above stated, been impugned.”
See also, as to this point, Williams v. Gillespie, 30 W. Va. 590, 5 S. E. Rep. 212. But in Baer v. Wilkinson, 35 W. Va. 428, 14 S. E. Rep. 3, the court said: “I will remark that neither that case (Scruggs v. Burruss, 25 W. Va. 670) nor the leading case of Anderson v. Tompkins, 1 Brock. 456, nor the case of Sommerville v. McCullough, 8 Leigh 415, nor Forkner v. Stuart, 6 Gratt. 197, nor Gordon v. Gannon, 18 Gratt. 887, can be quoted as authority to sustain the position that an assignment like this, where there are two partners, one of whom has undertaken to convey the whole property of the firm by deed in which his individual debts, or debts other than that of the firm, are given priority, will be sustained, if made at a time when the co-partner, who is present or within easy reach, is not consulted, and does not concur in such deed. I find no authority in this state or in Virginia which would justify us in holding that such an assignment would be valid and effectual to deprive the creditors of the firm of their right to have the social assets applied to pay the social debts.”
Same — Same—Some Debts Invalid — Effect as to Valid Debts. — In Craig v. Hoge, 95 Va. 282, 28 S. E. Rep. 317, it was said; “Though one or more of the debts secured be eliminated from the deed for any cause, or the deed be set aside as to them, it remains unimpaired as to the valid debts which are secured. Skipwith v. Cunningham, 8 Leigh 271; Billups v. Sears, 5 Gratt. 31; Gordon v. Cannon, 18 Gratt. 423; and Burrill on Assignments (6th Ed.), sec. 82, and note 2."
See also, Ruffner v. Welton, etc., Co., 36 W. Va. 259, 15 S. E. Rep. 53.
Same — Same—Release Required by Debtor — What Deed Should State.J — In Fink v. Patterson, 21 Fed. Rep. 606, it was said: “A debtor may require of creditors a release from that part of their claims not provided for in a deed of assignment, if he conveys in the deed all his property; and if in the deed he gives the creditors all the information in regard to his condition which they ought to have in order to determine whether or not to accept the terms of the deed and to release what it does not provide for. Unless a deed requiring such a release does do this, the law pronounces it invalid and void. Gordon v. Cannon, 18 Gratt. 388.”
And also, in Shufeldt v. Jenkins, 22 Fed. Rep. 367, the principal case was cited as holding that a deed imposing a release should show upon its face all that the creditors ought to know.
The principal case is cited as authority for each of the propositions above laid down, and in many of the cases given above. See generally, monographic notes on “Deeds of Assignment'” and “Fraudulent and Voluntary Conveyances.” See also, note in 3 Va. Law Reg. 297, 298.

Opinion:
MONCURJ5, P.
Whatever may be the law and course of judicial decision in other States on the subject, there can now be no doubt but that in this State, a debtor in failing circumstances may make a valid assignment of his whole estate (subject, however, to existing liens thereon), for the benefit of his creditors, in such order of priority as he may choose to prescribe in the assignment; and though his estate be insufficient for the payment of all his debts, he may lawfully subject it, in the first place, to the payment in full of such of his debts as he may choose to prefer, and then to the payment pro rata of the claims of such of his other creditors as may, in a limited period, (which should be reasonable,) accept the terms of the assignment, and release him from all further or other liability on account of said claims. And such an assignment may be valid, even though it do not direct any surplus which may remain after satisfying the claims of the accepting and releasing creditors to be applied to the payment of his other debts, or ' any of them; or even though *it direct any such surplus to be paid to the debtor himself.
That such is the settled doctrine in this State, is abundantly shown by the cases of Skipwith's ex'or v. Cunningham, &c., 8 Leigh 271; Kevan & als. v. Branch, 1 Gratt. 274; and Phippen v. Durham & als., 8 Id. 457. Whether the doctrine be sound in its origin or not, it ought to govern our courts until otherwise provided by the legislature. As was said by Allen, P., in an opinion concurred in by all the other judges, in Dance & als. v. Seaman & als., 11 Gratt. 780: "It would disturb many titles if the principles heretofore established and sanctioned by the practice of the country were now to be questioned. , If inconvenience results from the construction heretofore given to the statute against fraudulent conveyances, the remedy should be administered by the law-making power. An act of the legislature would operate prospectively, and men could regulate their transactions so as to conform to its provisions. But a decision of the court giving a new and different rule of construction, would have a retroactive, and, therefore, an unjust operation."
Of course, if there be any intention on the part of the debtor, in executing the assignment, to delay, hinder or defraud creditors, &c., it is void as to such creditors, by the express declaration of the statute ; saving only the title of a purchaser for valuable consideration, and without notice of the fraud. Ho appearance of fairness on the face of the assignment can ,give effect to it in such a case. Rraud may be proved by the deed itself, or by evidence aliunde. When proved by the deed itself, it is called constructive, or legal fraud, and cannot be disproved by evidence aliunde. Mere badges of fraud, which sometimes appear on the face of the deed, and sometimes from evidence aliunde, unlike constructive or legal fraud, may always be repelled by other evidence.
*In this case it certainly does not appear that there was any actual intention to delay, hinder or defraud creditors. If actual fraud be charged ip the bill, it is positively denied in the answer, and there is no evidence in the record tending to prove it, but the contrary. Indeed, the bill seems to state a case only of constructive or legal fraud.
Then the question we have to consider is, Whether the deed of trust in this case is void according to the doctrine settled by our decisions before referred to?
In order to maintain the validity of such a deed, or, at least, that part of it which provides for the payment of debts on the terms of the execution of a release by the creditors, it is necessary that all, or substantially all, the debtor's estate should be conveyed by the deed. Skipwith's ex'or v. Cunningham, &c.; Phippen v. Durham & als.; ubi supra. The debtor is permitted by such arrangement to protect his future earnings from the pursuit of such of his creditors as may enter into it, but not a portion of his present property. "He may protect his person, indeed, by a fair composition, and a surrender of all his property, but he cannot protect a part of that property by giving up another part. Such an attempt is fraudulent and void." 8 Leigh 292; Quarles & als. v. Kerr & als., 14 Gratt. 48. But it is not necessary for the deed to show on its face that all the estate of the debtor is conveyed. That fact may be proved by evidence aliunde. In neither of the cases of Kevan & als. v. Branch & als., and Phippen v. Durham & als., did it appear on the face of the deed that all of the property of the debtor was conveyed. , In Phippen v. Durham & als. all of the debtor's property was not in fact conveyed, yet so nearly all as to bring the case within the operation of the rule. The amount omitted was too small to show that it was omitted for the purpose of securing any benefit to the debtor. The omission *must have been from inadvertence. What invalidates a deed in such cases is, an intention to delay, hinder or defraud creditors, &c. ; and unless there be such an omission of property in the deed as shows such an intention, it is not material. Any omission of property for the purpose of securing a substantial benefit to the debtor (except such property as may be exempt by law from distress or levy), conclusively shows such an intention.. In the case we have in hand, it plainly appears on the face of the deed that all of the partnership property of the grantors was conveyed, but not that all of their individual property was conveyed. In order to bring the case within, the operation of the rule before referred to, it was necessary for the deed to convey all of the individual property of the grantors, as well as all of their social property. Ror though the debts provided for were only partnership debts, yet they bound the partners personally, and the release stipulated for by the terms of the deed was a release not only of the firm of Rogers, Riddick & Co., and Rogers, Adams & Co., but of the members thereof individually. It sufficiently appears on the face of the deed, that the two tracts of land in Texas thereby conveyed, were the individ-' ual property of W.r H. Rogers; but it does not appear on the face of the deed that he had no other property, nor that his companions had no individual property. The evidence in the record shows that W. H. Rogers had no other individual property than the land in Texas, and that his co-partners in the said firms had no individual property at all of any value. The deed, therefore, strictly complies with the rule which requires that all the property of the grantors should be conveyed in such a case.
•But it is objected, that the deed not only requires that the grantors should be released, but also that Samuel R. Adams, who is.,not a grantor, should be released. If'the property of the firm of Rogers, Adams & Co. was properly ^conveyed for the purposes of the deed' — a question which will be hereafter considered — it seems to follow that he ought to be released from the debts of that firm, as well as the other partners.
Again it is objected, that the deed is incomplete in this, that it refers to and makes schedule A a part thereof, whereas it was not attached or appended thereto before the execution of the deed. There was no necessity for such a schedule to give effect to the deed — the property thereby conveyed being sufficiently described therein for that purpose. Skipwith's ex'or v. Cunningham, &c.; Kevan & als. v. Branch; Phippen v. Durham & als., supra; Lewis & als. v. Caperton's ex'or & als., 8 Graft. 148; Brashear v. West, 7 Peters R. 608, 614; Burrill on Assignments, 276-278, and cases cited. The deed does not refer to schedule A as being actually annexed thereto, but only states that an inventory of the stock will, as soon as practicable, be taken and marked schedule A, and annexed to the deed, "which schedule, when so annexed, is to be taken as a part of this deed. ' ' It was inconvenient to make out the schedule in time to be annexed to the deed before its execution, but it was made out immediately thereafter, and filed with the answer of Rogers, Riddick & Co. "in this case within about a month after the execution of the deed, and nearly a month before the expiration of the period of sixty days named in the deed.
Again, it is objected to the deed, that it ' 'undertakes to release the trustee from all liability except for money actually received by him; thus releasing him from all responsibility in the selection of his agents, or for the supervision of their actions; enabling him to be guilty of gross and wilful negligence, to appoint incompetent and corrupt assistants without any responsibility ; . and attempting to compel the creditors to sanction this unlimited grant *of power over the effects, under penalty of being excluded from any enjoyment of The fund." And it is said that, under the deed, the trustee has the power to employ, "and actually does employ, one of the grantors to manage and control the business, to sell the assets and collect the moneys due; his employee admitting himself by the deed to be insolvent and irresponsible. These clauses in the deed they claim to be inconsistent with, and tending to defeat, the objects of the deed, and as such render the deed fraudulent and void."
The deed does authorize the trust "to employ such agents, &c., as he may deem necessaty, and to pay them a reasonable compensation for their services out of the trust fund;" and does provide, "that the said trustee shall not be liable for any moneys, other than such as shall actually come to his hands in the execution of the trust; and that said trustee shall not be held responsible for the default or omission of any of the agents whom he may employ to aid him in the execution of the trust."
There is nothing very unusual in these provisions, which are inserted out of abundant caution, at the instance and for the protection of the trustee; and they do not very materially, if at all, vary the legal liability of the trustee. Burrill on Assignments, 227. The employment of agents by a trustee is often necessary to enable him to execute the trust, and such necessity existed in this case. He is bound to select fit agents, and to hold them to a strict and prompt responsibility for their acts; and having discharged this obligation, he is not liable for any loss arising from their acts or defaults, even though there be no clause of exemption from such liability in the deed. Such a clause of exemption as is contained in the deed in this case does not discharge him from his obligation aforesaid. While he is not responsible "for any moneys other than such as shall actually come to his hands in the execution of his *trust," he is responsible for his negligence in not appointing fit agents, and in not holding them to a proper account.
But, after all, such a clause could only be material as a badge of fraud, and as tending to prove that there was an understanding between the debtor and trustee, that the debtor should continue to use and enjoy his property, notwithstanding the deed. If such was the fact, the deed would of course be fraudulent. But if such was not the fact, if the clause was only inserted out of abundant caution on account of the trustee, it could have no effect on the validity of the deed. If the creditors were not satisfied with it, or with such an exemption as it might be supposed to afford to the trustee, they might have another trustee appointed in his place. In this case it clearly appears in the record that the clause was not inserted in the deed for any undue or unlawful purpose, and that no evil whatever has resulted from it. The trustee has a right to employ agentsi when necessary, even without an express power in the deed for that purpose, and being bound to employ the most suitable persons as such, may employ the debtor himself when he is the most suitable person for the purpose. In Marks & als. v. Hill & als., 15 Gratt. 400, it was expressly stipulated in the deed that one of the grantors should be the agent of the trustee to make sale of the goods, which agency might be terminated at any time by either one of the preferred or any three of the deferred creditors, and yet the deed was held to be valid. See also Burrill on Assignments, 185, 472, and cases cited in the notes. In this case, the debtors were employed as agents by the trustee, and the record clearly shows that the3r were the most suitable persons for the purpose, and that benefit, and not injury, resulted to the trust fund from their employment.
Again it is objected, that the deed, being made to a ^creditor in trust to secure his own demands, is a mortgage, to which the right of redemption is incident, and the creditor trustee cannot sell by the mere authority of the deed, and without resorting to a court of equity.
This is an objection which does not strike at the validity of the deed, but only at the power of the trustee to act as such. The trustee, being the agent of both parties, debtor and creditor, ought to be an impartial person; and generally the creditor is supposed not to be such a person, and will not be permitted to act as trustee, especially in regard to real estate, though the deed provide for his doing so. Chowning v. Cox & als., 1 Rand. 306. It seems not to have been jet decided by this court that this principle extends to personal estate. 1 homax's Dig. last ed. 423. Moore's ex'or v. Aylett's ex'or, &c., 1 Hen. & Mun. 29. Though the reasons assigned by the court in Chowning v. Cox apply as strongly to personal as to real estate. 1 Tuck. Com. book 2, p. 104. But the debtor may sanction and confirm a sale, even of real estate, made by his creditor as trustee, and will be considered as having done so by being present at the sale, and making no objection. Taylor's adm'rs, &c. v. Chowning, 3 Leigh 654. And it is not perceived why, if the debtor has no objection, the co-creditors of the trustee should have any. Generally the interest of all the creditors is the same, so far as relates to the execution of the trust, and would be safe in the hands of any of them as trustee. In this case the trustee had a comparatively small claim, which was included in the first or preferred class of debts secured by the deed, and there seems to be no good ground of objection to his acting as trustee. There can be no doubt about the sufficiency of the trust fund to pay the preferred debts. The sale of the goods has already been made, with the sanction and concurrence of the grantors in the deed, and the proceeds are more than enough to pay the preferred debts. *So that whatever just ground of objection, if any, might once have existed to the action of Cannon as trustee, it can now no longer exist.
Again it is objected, that the deed requires the creditors to release without information as to the assets or liabilities.
When creditors are put to their election, whether they will accept the provision made for them by the debtor in an assignment of his property, and give him a release, or be excluded from the benefit of the assignment, it is reasonable that the deed should give to the creditors all the information in the power of the debtor, as to the nature and value of the property conveyed, and the amount of the debts intended to be provided for, and a reasonable time to obtain such information as the deed may not afford, and to make up their minds deliberately and understandingly whether they will accept or reject the offer made to them. If this be not, when it can conveniently be, done, the omission might at least be a badge of fraud, though it might not in itself amount to legal or constructive fraud. In this case, it seems that all the information was given by the deed which could, under the circumstances, conveniently be given in regard to the subject conveyed and debts provided for; and the necessary means were immediately taken and diligently pursued by the trustee and grantors to give the speediest and fullest information in their power to the creditors, who might easily have obtained, within the period limited by the deed, all the information necessary to enable them to make their election properly. The period limited by the deed, sixty days from the date of its recordation, seems to have been reasonable under the circumstances, and as long as was given in some other cases in which the deed has been sustained. In Skipwith's ex'or v. Cunningham, &c., four months after the date of the deed was the period limited. *In Kevan & als. v. Branch, three months was the period. In Phippen v. Durham & als., the period was but thirty days from the date of the deed. In neither of these cases was there any schedule annexed to the deed; nor, in the first, were the creditors, except those of the first class, named in the deed. There seems, therefore, to be no good ground of objection to the deed in this case on account of any defect of information which it gives as to the assets or liabilities.
The next and last objection is, ' 'that by the terms of the deed the partnership assets of Rogers, Riddick & Co. go pro rata to pay the debts of Rogers, Adams & Co., without any estimate of the debt or assets of either;" so that the plaintiffs, "creditors of Rogers, Riddick & Co. were, therefore, either compelled, by signing the deed, to consent to the misappropriation of the social assets of the debtors to the paj'ment of the debts of Rogers, Adams & Co., or by refusing to sign, to cut themselves off from all benefit of the assets of the debtors. ' '
The counsel for the appellees "admit that it was a defect in the deed to dispose indiscriminately of the assets of these two concerns," but they say that "it is a mistake to suppose that such a defect invalidates the deed. Ror precisely this mistake was corrected in the case of McCullough & als. v. Sommerville, 8 Leigh 415; and the deed was so reformed as to apply properly the several kinds of assets." On the other hand, the counsel for the appellants insist, that that case differed essentially from this; that'"in that case, there was no requisition for release; the creditors were not required to sign the deed under penalty of entire exclusion from the assets of their debtor." "The creditors of Rogers, Riddick & Co. were cut off, by the very terms of the deed, from obtaining such an equitable reformation of the deed as obtained in McCullough & als. v. Sommerville. They were required to release their debtors, ^'Rogers, Riddick & Co., and at the same time to consent (by their acceptance of the deed) that the assets of Rogers, Riddick & Co. should go, pro rata, to the payment of the debts of Rogers, Adams & Co., and that, too, without even knowing what the debts of Rogers, Adams & Co. were."
There can be no doubt but that it was competent for the grantors in this deed to convey the said effects of Rogers, Adams & Co., notwithstanding Adams, one of the firm, did not join in the deed, in trust to secure the payment of the debts of the,firm, or any of them, either pro rata, or in such order of priority as they thought fit to prescribe. McCullough & als. v. Sommerville, 8 Leigh 415; Anderson v. Tompkins, 1 Brock. R. 456; Harrison v. Sterry, 5 Cranch's R. 389; Burrill on Assignments, pp. 43-64, and the cases cited.
Nor can there be any doubt but that it was competent for the grantors in this deed to convey the social effects of Rogers, Adams & Co. in trust for the payment pro rata of the.debts due by said firm, to such of its creditors as should, within the period limited, sign the deed, and thereby accept such ratable dividend in satisfaction of said debts, and agree to release the said firm and the members thereof, from all liability on account of the said debts respectively. If partners convey all their social and individual property for the payment of their debts, there is the same reason for authorizing them to prefer such of their creditors as will give them a release, as there is for authorizing an individual, who conveys all his estate for the payment of his debts, to give such a preference. It cannot be necessary to cite authority to sustain so plain a proposition. The case of Pearpoint v. Graham, 4 Wash. C. C. 232, stated in Bur-rill on Assignments, p. 47, assumes the proposition without question, and is decided upon such assumption. There was a question in that case whether *the assignment was valid, being executed by one only of the partners; but the learned judge thought it had been ratified by the other partners, and so became the act of the firm; and on that ground it was sustained.
Nor can there be any doubt but that it was competent for the grantors in this deed to convey by one and the same deed, instead of by different deeds, the individual estate of W. H. Rogers ' and the social effects of Rogers, Riddick & Co. and of Rogers, Adams & Co., in trust for the payment of a debt of W. H. Rogers and debts of the said two firms respectively. If authority be required for so plain a proposition, it may be .found in the case of McCullough & als. v. Sommerville, 8 Leigh 415; so that if in this case the net proceeds of the effects of Rogers, Riddick & Co. had been devoted in the first place to the payment of debts of that firm, and the net proceeds of the effects of Rogers, Adams & Co. had been devoted in the first place to the payment of debts of that firm, the arrangement would have been legal and valid, notwithstanding the condition of release on which the payments might be directed to be made.
Nor can there be any doubt but that if there had been no release clause in this deed, it would have been legal and valid, notwithstanding it directs the proceeds of the individual property of W. H. Rogers, and the social effects of Rogers, Riddick & Co. and Rogers, Adams & Co. to be applied indiscriminately to the payment of a debt of W. H. Rogers and debts of said firms. McCullough & als. v. Sommerville, 8 Leigh 415, is an express authority for that proposition, according to which case, the court of chancery in such a case will reform the deed, according to the probable intent of the grantors and the justice of the case, and apply the individual fund in the first place to the payment of the individual debt, and the partnership funds in the first place to the payment of the partnership debts ^respectively, observing the order and preference established by the deed. The coui-t held in that case, that though the deed neither mentioned the partnership, nor distinguished the social effects and social creditors from the individual property and individual creditors of the grant- or, but purported on its face to convey his individual property, for the payment of individual creditors named in the deed, in two classes, according to a certain order and preference therein established, yet it was not fraudulent, either in fact or in law. "Was this deed fraudulent?" enquired Judge Carr in that case. ' 'There is no evidence in the record to establish the fact; nothing to show an intention to withdraw the effects of the firm from the creditors, or by any covin or collusion to disappoint their claims. On the contrary, the whole property, of every kind and description, not only of the firm, but of the individual partner McCullough, is conveyed; thus stripping himself and the firm (so far as the grantor could), of every atom of property, and subjecting it to the payment of the creditors named. And when the bill is filed, to take this fund from the trustees and put it under the guardianship of the court, to he administered by the court, he promptly answers, assenting to the measure, and praying that the court would forthwith order a sale of the whole subject; stipulating only that the proceeds shall be applied to the favored creditors. This surely evinces that there was no fraud in fact, either perpetrated or intended. But it is said that there is fraud in law — fraud in the attempt by one partner to convey all the property of the firm, and to devote this property to the payment of specified creditors, without giving his co-partner any voice in the matter; and moreover, in jumbling together the separate and social funds, and directing the separate and social creditors to be indiscriminately paid according to the list. Ret us look at these objections in their order." *And after disposing of the 1st, he proceeds thus in regard to the 2d: "And though the deed does not devote the social fund exclusively to the social creditors, and the separate fund to the separate creditors, does it comport with the mild and beneficent spirit of equity, for this cause (the result, doubtless, of ignorance and mistake), to annul the deed? Is it not better to reform it, by throwing each class of creditors upon its own fund, and thus reach the real justice of the case, and probable intention of the grantor? This is a power of frequent exercise in equity ; one instance of which is in reforming joint bonds and making them operate as joint and several; upon the reasonable presumption that either through fraud, ignorance or inadvertence, the meaning of the parties has not been carried into effect. ' '
Now the only remaining question — and the question on which this cause depends— is, Does the release clause, as it is called, make any difference? There was certainly, In this case, no fraud in fact, "either perpetrated or intended. ' ' There was certainly none in law, in the conveyance being made by two only of the three members of the firm of Rogers, Adams & Co., nor "in jumbling together the separate and social funds, and directing the separate and social creditors to be indiscriminately paid," or, rather, to be paid without expressly discriminating between these classes of creditors ; for the deed does not direct them to be paid "indiscriminately." Is there any in law, in requiring the deferred creditors to give a release, as the condition on which they are to be allowed to participate in the benefit of the deed? Why should there be? Why may not a court of chancery reform the deed in this case as well as in the case of McCullough & als. v. Sommerville, according to the probable intent of the grantors and the justice of the case, and apply the individual fund in the first place to the payment of the individual debt, and *the partnership funds in the first place to the payment of the partnership debts respectively? The counsel for the appellants argue that that case differs essentially from this, in the fact that "in that case there was no requisition for a release; the creditors were not required to sign the deed rrnder penalty of entire exclusion from the assets of their debtor." "The court, in deciding upon the deed (in that case), found no difficulty in separating the social from the individual assets, and the social from the individual debts. But no such question," as the counsel further argue, "can arise or be adjudicated here." "The creditors of Rogers, Riddick & Co. were cut off, by the very terms of the deed, from obtaining such an equitable reformation of the deed as obtained in McCullough & als. v. Sommerville. They were required to release their debtors, Rogers, Riddick & Co., and at the same time to consent (by their acceptance of the deed), that the assets of Rogers, Riddick & Co. should go pro rata to the payment of the debts of Rogers, Adams & Co., and that, too, without even knowing what the debts of Rogers, Adams & Co. were." Now this is a plausible argument; but is it not a petitio prin-cipii? When the grantors made the deed in the terms in which it is written, the case of McCullough & als. v. Sommerville fixed its construction, and required it to be read as if it had been written so as to apply the individual fund in the first place to the payment of the individual debt, and the partnership funds in the first place to the payment of the partnership debts respectively. Suppose it had, in fact, been so written — can there be a doubt but that the deed would have been valid? But the legal construction of the deed as actually written is the same. Why, then, should there be any more doubt in this case than there was in that, but that the deed is valid? What reason can there be for saying that the intention of the grantors is different where there is a requisition for a release, from what it is *'where no such requisition exists — that the intention is literal in the one case, and not in the other? The deed in McCullough & ais. v. Sommerville could not legally take effect if construed literally, and therefore it was construed according to the probable intent of the grantor and the justice of the case. The deed in this case cannot legally take effect if construed literally, and for the same reason it ought to be construed according to the probable intent of the grantors and the justice of the case. If it was proper in McCullough & als. v. Sommerville to act upon the rule of construction which was established in that case, a for-tiori, it is proper to follow it in this case, after the lapse of more than thirty years since that decision was made. -It is a fair and reasonable, and not a forced or strained rule of construction. The deed conveys the assets of two firms in trust to secure the payment of the debts of both, without expressing any discrimination. Why may it not be construed distributively — redendo singula singulis — soas to require the assets of each firm to be applied, in the first place, to the payment of the debts of that firm? Such a construction would seem to be consistent with the terms of the deed, and is necessary to make it valid and effectual. It ought, therefore, to be adopted — ut res magis valeat quam pereat. In McCullough & als. v. Sommerville there was no bill filed to have the deed reformed on the ground of mistake. The deed was treated in the pleadings as devoting the social and individual effects indiscriminately, according to its apparent literal import, to the payment of the social and individual debts. But to have so construed it would have been to make it void, and therefore it was construed distributively, according to the probable intent of the grantor and the justice of the case. To be sure, the court in that case speak of reforming the deed, but that seems to be an inapt expression, and what was done was rather to construe *than reform the deed. The court has no more right to change the contract of the parties in a deed which contains no condition of release than in one which does, and has no such right in either case. But if the court did intend to reform the deed in that case, to "reach the real justice of the case and probable intention of the grantor," by analogy to the instance referred to by Judge Carr of "reforming joint bonds, and making them operate as joint and several," then the same principle applies to this case, notwithstanding the condition of release contained in the deed.
Before I close this opinion, I beg leave to remark, that I came into court with strong predilections against that course of our own decisions which has tended to maintain the validity of such a deed as that which is now in question — I mean a deed containing what is called "the release clause, " or a condition for a personal release of the debtor upon a conveyance of his estate for the payment of his debts. I was strongly inclined to concur in the views expressed on this subject by Chancellor Kent and Justice Story, besides other distinguished jurists. Perhaps my previous practice had tended to lead-me into this line of thought and preference. In the case of Phippen v. Durham & als., which came up for decision shortly after I came into the court, I took occasion to express this original inclination of my mind; but I felt myself bound to bow to the authority of the case of Skipwith's ex'or v. Cunningham, &c., and I therefore concurred in the decision which was made in Phippen v. Durham & als. The longer I have remained in the court, the more convinced I have become of the value of the rule of stare decisis. And I regard the rule as especially valuable in its application to cases arising under the statute of fraudulent conveyances. No man can read Burrill on Assignments, in which all or nearly all the cases on this subject are collected, ^without being struck,, if not confounded, by the great conflict among them. Not only does this conflict exist between the decisions of one State and those of another, but often the decisions of the same State are conflicting in themselves. Courts, after going in one direction, have veered about and gone in another until the legislature has had to interpose and solve the difficulty. Now it seems to me to be wise for us to follow the course of our previous decisions, and leave it to the Legislature, if that course be wrong, to make a change. The propriety of doing so is clearly shown by the remarks of Judge Allen, in Dance & als. v. Seaman & als., 11 Gratt. 780, which I have already quoted.
I will further remark, that I feel in full force the argument founded on the supposed hardship of excluding the plaintiffs and other non-accepting creditors from any participation in the benefits of the deed in this case, when there was so much apparent doubt and difficulty as to the construction and effect of the deed, and the consequence of accepting its terms. But the supposed hardship arises, not from the peculiar terms and effect of the deed in this case, but from the law, which authorizes a debtor in failing circumstances to give preferences in the distribution of his. estate among his creditors, and to require a personal release as a condition of receiving the benefits of any such preferences. Such a debtor, not having estate enough to 'pay all his debts, may, of his own mere will and caprice, convey his estate for the payment of' a portion of them, leaving the rest wholly unprovided for; and the creditors thus excluded would have no legal right to complain. A fortiori, it would seem, creditors to whom an election is given to participate in the benefits of the deed, but who decline to accept its terms, have no such right to complain. No doubt which may exist as to the construction of the deed, nor any difficulty which may arise in ^making an election, can affect the case, if the meaning of the deed can be ascertained, and it was not intended to delay, hinder and defraud creditors. The circumstances which create the doubt or difficulty may tend to prove, and even be in themselves sufficient to prove, such an intention, and make the deed void; but if no such intention existed, the deed is valid. It is not enough, therefore, for the appellants to show that it was doubtful, or at least not certain, when the deed in this case was executed, whether the principle decided in McCullough & als. v. Sommerville would apply to it. Parties are presumed to know the law. And though the presumption is often not founded in fact, it is yet necessary, and well established in law. The deed being valid, and its construction settled by the decision just referred to, the accepting creditors are entitled to the benefit thereof accordingly, to the exclusion of the non-accepting creditors.
The foregoing views bring me to the conclusion' that there is no error in the order dissolving the injunction which was awarded in this case, and that it ought to be affirmed; which is the only question presented for the decision of this court on this appeal.