Case Name: M'BRIDE vs. D. & N. CROCHERON
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1817-07
Citations: 5 Mart. (o.s.) 105
Docket Number: 
Parties: M'BRIDE vs. D. & N. CROCHERON.
Judges: 
Reporter: Martin (Louisiana Term Reports)
Volume: 5
Pages: 105–145

Head Matter:
M'BRIDE vs. D. & N. CROCHERON.
East'n District.
July 1817.
A creditor who has given a respite, may site before the expiration of it, if the debtor becomes insolvent.
APPEAL from the court of the first district.
In the month of February, 1816, the defendants contracted a debt with the plaintiff. (all merchants of New York) to the amount of about twelve hundred dollars, for which the latter received their promissory notes, payable at a future day. Before, however, those notes became due, the defendants represented themselves in embarrassed circumstances, and obtained from the plaintiff and their other principal creditors, a letter of license, dated 19th June, 1816, to enable them to continue in business; each creditor giving in extension of the terms of payment, six, nine and twelve months. Accordingly, on the 14th of September, 1816, the plaintiff renewed those notes, which were then actually due, enlarging the credit, as just mentioned. But, a few days after their renewal, the defendants stopped payment, and altogether failed in. business; and on the 26th of September, 1816, assigned their estate to J. E. Haight, D. L. Haight, H. E. Haight, and E. Potter, junior.
The letter of license sets forth the embarrassment of the defendants; that if their pay ments are extended, they will be able to continue in business, and promptly pay their debts. It then stipulates, that if any creditor shall sue the defendants, or attach their property, "contrary to the true intent and meaning" of that instrument, such creditor shall forever lose his debt.
The assignment arranges the creditors in four distinct classes, making it the duty of the as signees to pay them in that order. The assignees are of the first class-the plaintiff is one of the fourth and last class of creditors, and to which the property of the assignors will not reach. After the above mentioned extension of credit, and shortly before the making of the assignment, the defendants shipped goods to the value of fourteen or fifteen thousand dollars, to New-Orleans, on their own account, consigned to Flower and Findley, the garnishees in this action.
The plaintiff, not choosing to come in under the terms of the assignment, which he was regularly notified to do by the assignees, followed the goods here; and on the 13th of November, 1816, attached them in the hands of the garnishees, for the whole amount of his debt-at which time, however, the renewed notes were not payable, although the terms of credit spec ified in all the old notes, which were so renewed, had, for some time, expired.
The district court sustained the attachment, and gave judgment for the plaintiff for twelve hundred and nineteen dollars, sixty-two cents, the amount of the renewed notes; and the defendants appealed.
Duncan, for the defendants.
This attachment was brought in violation of the agreement entered into by M'Bride, in the letter of license. We will endeavor to shew, that the assignment by the Crocherons did not destroy the letter of license, and that, therefore, the agreement of M'Bride is still in force. The counsel adduced, in the lower court, many cases to prove that, because one of the contracting parties is unable to fulfil his part of the agreement, the other is, to all intents and purposes, discharged. Admitting, for argument’s sake, that all these authorities are law, we contend they are not in the least applicable to our case. In those cases the party was completely and absolutely unable to perform his part of the contract-in our case it was not known whether the debtors could or not. This is the grand distinction, and which we submit with confidence to the court. At the time of this attachment being issued, it was im possible to say whether the Crocherons could pay their debts or not. The notes were not to be finally paid until twelve months had elapsed from September. In November this attachment was laid-after an interval of only two months. At that short period of time, it was impossible to determine whether there was such a disability on the part of the Crocherons as to exonerate M'Bride from his engagement under the letter of licence. To this day. this question cannot be settled; for not quite nine months have expired. But, in answer to this, we will be told that, though it was not certain at the time of the attachment whether these debtors could perform their contract; yet they made an assignment, which is proof of their insolvency. We deny that this is an infallible proof. We admit that a presumption of insolvency arises against the debtor; yet, on the other hand, with confidence we can assert, that a man may be declared insolvent, or a bankrupt, and yet, under all circumstances, not be one: for, at the time of being declares an insolvent or bankrupt, under a law, the debtor may be so situated as not to have his property under his control. It may be in different parts of the world, shipped on mercantile adventures. He is then obliged to have his situation known, and underdo a tem a tent- porary bankruptcy. This certainly will not appear to the court; a strange and unauthorized doctrine. Lord Mansfield declared in Rex vs. Town of Liverpoll, 1 Burrows 732-"That a man may be able to pay above 20 shillings, notwithstanding his being in strictness a bankrupt."That great man advanced a similar assertion in Dassel vs. Simpson, Dougl. 92-a man may become a bankrupt, and yet be able to pay 25 shillings in the pound.” On these authorities, and on the principle of the thing, we say, that because a man may make an assignment of his property, he is not to be considered as absolutely unable to execute his part of a contract. Our case is still stronger. We are not declared insolvent under an law; we made a voluntary transfer of our property, for the benefit of our creditors. It is a mere arrangement between ourselves and creditors, to relieve us from the many embarrassments in which we were involved: it is altogether a contract. We confidently say, that no case can be produced, which goes so far as to declare a man absolutely incompetent of fulfilling his engagements, because he assigns his property over to his creditors. On the contrary, we assert it to be but an arrangement for the benefit of the debtor, to enable him to discharge his debts, at a more auspicious time. It is made to assist us in our embarrassment, without exonerating him in the least from his engagements. unless the creditors have released the debtor altogether. We consequently say, that this assignment did not prove, that the Crocherons were in such reduced circumstances, as to render them wholly unable to satisfy their creditors; and that therefore, our position will not be affected by it, when we said that this attachment was brought without knowing, that the Crocherons could liquidate their debts.
“If a contract be fair in its creation, it shall not be affected by a subsequent event, which has thrown the advantage greatly or wholly on one side," is a position which has been most strenuously, and ably held by the most learned judges of England. In 1 Brown Chanc. Rep. 157, Mortenier vs. Capper, to the utmost extent, this principle of law is recognized. “Sale of an estate for a certain sum of money, and an annuity for life. The agreement being fair, a court of equity will decree a specific performance; though the party die before any payment of the annuity." 3 Brown’s Chanc. Rep. 605. Jackson vs. Lever & al. presents the same doctrine. “ A contract, that the one party shall convey an estate, and the other shall grant an annuity, shall be carried into effect, though the vendor died previous to any payment of the annuity," 2 Brown's C. Rep. 17, Henley vs. Acton, supports similar principles. To shew that the same doctrine has been held by other judges, we call the attention of the court, to 1 Atkins, 12, Gibson vs. Patterson & al. "Though the vendor of an estate, does not produce his deeds, or tender a conveyance within the time limited by the articles, the court does not regard this neglect, but will decree a sale notwithstanding."-Lord Macclesfield has said in 1 Peere Will. 728, Cann vs. Cann, "that solemn conveyances, releases and agreements, made by the parties, are not slightly to be blown off and set aside." In later times-only a few years past, the court of Chancery in England, has most unequivocally upheld a similar position. More particularly we refer this court, to 6 Vezey Jr. 340 Paine vs. Miller, and 9 Vezey Jr. 246.-These authorities, go to the full lengths, which we stated in the commencement; that a fair contract shall not be overturned by a subsequent event, which has given the one of the parties, even all the advantage. Apply this principle to our case, and it will be immediately seen, that the subsequent assignment by the Crocherons, did not destroy the letter of license. The letter of license, was an instrument of wri ting under hand and seal-entered in the most solemn manner, between the creditors and the debtor To set aside such an instrument, says Lord Macclesfield, is not to be easily done. It grants to the Crocherons, an extension of time, to enable them to discharge their debts. It contains the important proviso, that no creditor shall sue for his debt, under the penalty of losing it. This was then, a fair contract, for the advantage of each party. It in course of time, turns out that the Crocherons become too embarrassed, to proceed in business; and they make an assignment of their property, for the benefit of their creditors. Now here the advantage of the contract is not wholly on the part of the debtors; nor is it in strictness greatly so. They give up their property, and expect no benefit from it. But they ask from the creditors, the execution of their part of the agreement. Now will not this case be brought completely within the spirit, even the very letters of the authorities, we have quoted in our favor? Shall this “subsequent event" overturn this contract, fair in its creation, even when the advantage is not wholly on the side of the Crocherons ? We ask the court, if these cases will not completely bear us out, in saying that the letter of license is still in operation; and that consequently, M'Bride is bound by his own agreement?
But on the reason of the thing, why should the assignment overturn the letter of license? M'Bride, and the other creditors, must have known all the risks which they would have to run, in granting an extension of credit. Many accidents and misfortunes might happen, before the twelve months could have expired. Of this M'Bride must have been aware: yet he signs the instrument. In the letter of license, nothing is hinted about its revocation, in case of an assignment of property. M'Bride could not have supposed, that the law would authorize him to say that it was, when that law is undetermined. Every danger which a man in business could encounter, must have been in the mind of M'Bride, at the execution of this instrument. The Crocherons could not guarantee their solvency-this the creditors could not exact of them; for it would be in the highest degree unreasonable. But they would do every thing which could be done, to extricate themselves from their difficulties--all that industry and honesty could effect, would be performed by the Crocherons. If they must sink beneath their embarrassments, it was a misfortune which they must encounter. But if any injury could arise, it must be sustained by their creditors.They had all these in consideration, when giving the letter of license. These dangers and these accidents have occurred; and upon them the loss, if any, must be thrown.
Our first point was, that this attachment was issued in violation of the agreement of M'Bride. This difficulty will attack the counsel in the commencement of their agreement How to prove that a man can break his contract when he pleases, and thus render his engagements a nullity, requires all their learning and ingenuity. But the assignment is pleaded in bar. To this M’Bride is a perfect stranger. He disdainfully refused to accede to its laws. He alone wishes to overturn it. M’Bride alone steps forward; tenders in bar of the execution of his solemn agreement, an instrument with which he never had any thing to do-but which was an arrangement with other creditors, to his entire exclusion. To assist him in breach of duty-to support him in a most unwarrantable claim, he asks the interference of this court.
A question may be started respecting the validity of the assignment of the Crocherons. The decision of this is not necessarily involved in the main question. We are not afraid to meet it; and will endeavor to shew that, it is perfectly good. Many cases have decided, in direct contradiction to our opponent, that a man may, even in insolvent circumstances, give a preference to his creditors. We deny that the Crocherons were completely insolvent. But, admitting they were, we will exhibit to the court three cases which authorized them to make an assignment, granting a preference. In Small vs. Oudley, 2 Peere Will. 430; the court there held, that a debtor may prefer one creditor to another; nor is the time when the assignment is made material. This is the basis of all the decisions on that subject. In 8 Term Rep. 528, Lord Kenyon says that, "putting the bankrupt laws out of the case, a debtor may assign his effects for the benefit of particular creditors.” But, what we most rely upon are two cases this country-one in New York, and the other in Connecticut. 5 Johns. Rep. 412. "A debtor may, in insolvent circumstances, bona fide, give a preference to one creditor to the exclusion of others, and such preference, though voluntary, is valid, unless done in contemplation of an act of bankruptcy; and even if an act of bankruptcy be contemplated by the debtor, yet, if at the instance and application of a particular creditor, he pays such creditor, or assigns him property, such payment or assignment will be valid, as against the assignees of the bankrupt." This point is strongly laid down in 3 Day, 340, Hempstead vs. Starr. "A, on the eve of failure, made a general assignment of his effects, and gave immediate possession to B, one of his creditors, in trust, to the debts due to B and certain other meritorious creditors specified, and to pay over the surplus, if there should be any, to the creditors generally. C and B, creditors, not specially named, soon afterwards attached these effects in the hands of B, as the property of A, held that this conveyance was not by law fraudulent against the attachment of creditors." These cases completely nullify the assertion, that a man, in insolvent circumstances, cannot make a preference of his creditors. Now, let us see if this assignment was "wholly bottom- ed on fraud." Nothing can give a more satisfactory answer to this question than the evidence. Fraud must mean, cheating the creditors: it must be most positively proved, and never, in any case, presumed. Haight, a witness-a man entitled to the utmost credit, whose veracity has not been questioned by our antagonist-indeed his own witness solemnly deposes, that he was informed by the debtors of their intentions to ship these goods to New-Orleans-that they were not to be included in the assignment the assignment -and that the Crocherons declared at the time, the creditors should not lose a cent, even if it took up all the proceeds. Now, this evidence is uncontradicted, and we must therefore believe it Is there then any thing bearing the appearance of fraud in this? "The creditors should not lose a cent,” is the strongest proof of the honesty of these unfortunate men-"even if it took up all the proceeds,"-shews that they expected their shipment to this place would be more than sufficient to discharge their debts-if not, all should go to satisfy their creditors. So anxious were the Crocherons to do themselves and their creditors the fullest justice, that one of them comes to New-Orleans expressly to take care of the property, that every thing which could be, should be done to vend it to the greatest advantage, in order to relieve themselves from their embarrassments. If there is any thing like fraud in this, it must exist in the most religious transaction. But, to rake out fraud, subterfuge must be resorted to. Brewster, the clerk, swears that he never saw any entry of this shipment in the books of the Crocherons. He does not swear there is no entry; but Haight swears most positively there is one. Which will the court believe? And will they believe the assertion of counsel, that this entry might have been made just before Haight gave his desposition? Is there any thing through the whole evidence to authorize such an insinuation against Haight? The imagination of our opponent is too rich-it destroys his judgment.If there is nothing in the least resembling fraud in this transaction-if the law will permit the Crocherons to give a preference-the court will then say this assignment is valid. The opposite side have denied the validity of this assignment. So much the better for us. Then the letter of license is still in complete force. An invalid instrument cannot affect a valid one. M,Bride admits the validity of the letter of license. If so, it cannot in the least be touched by an instrument, void ab initio. Which ever way the case is put, the letter of license must be considered by this court as still in operation against M'Bride and the other creditors.
Our second point is this, that this attachment was laid before the debts were due, and, therefore, prematurely brought. It will be recollected, that the notes of the Crocherons were renewed six, nine and twelve months; only two months had expired when M'Bride commenced his action; he sued on the renewed notes, not pretending to have a right of action on the old ones, well knowing how shameful his conduct would appear in the eyes of the world. We admit the principle of law laid down by our antagonist, that on the debtor's insolvency all his debts are due in present, though the contract makes them payable in future. This rule of law is not applicable to our case. Those debts are proved under a commission of bankruptcy. or when the debtor is discharged under an insolvent act. Ours is neither-we make a voluntary assignment-we do not ask to be discharged under any law-we give up our property from our own will, and enter into this arrangement with our creditors, without being compelled by any law whatever. In the former case, the debtor is forced to do what the statute prescribes-he must give up every thing in the order fixed to his creditors-they are also compelled to come in and receive what is parcelled out for them. This is the distinction. In our case every thing is voluntary-no compulsion is or can be used on either side. Under such an assignment, these debts are not debita in present because there is no bankruptcy, no in solvency, but an arrangement between the debtor and his creditors. Were it necessary, we could refer the court to our statutes in relation to attachments; and, upon a comparison of the facts as sworn to by the plaintiff and those ad mitted by him in this appeal, we doubt not that the contradiction evident in the two would destroy the application to uphold their demand in this court.
We do not want the court to notice the "supposed title of the assignees." it was unnecessary for them to defend this action. The Crocherons not the assignees, are the defendants, and therefore the principle stated in Chitty's Pleading, 1 vol. 505, has nothing £o do with our case. This property, it is in evidence, was never to be included in the assignment; but to be left at the disposal of the Crocherons. All the Haights positively swear that this was the understanding of the parties, nor was there in this any thing. illegal or morally incorrect. It was to be under the control of the debtors that they might make sufficient out of it to enable them to liquidate their debts. Neither was it necessary to for- ward any documents to their consignee in this city. The very act of one of the Crocherons coming with the property superseded the necessity of this. It was under his direction he was the agent of the house, and he could deliver it to any person in this place whom he thought most entitled to confidence. The delivery of it by him would be a sufficient authority for the agent in this place to sell it and render the ceeds to the Crocherons. It was not then the apprehension of any fraud-if fraud could possibly exist-being detected, that no papers were transmitted to the garnishees, but the bare simple act of one of the debtors arriving here with it, rendered it wholly useless.
From what has been said, the court will immediately perceive the difference between our case and that reported in 3 John. 125, which the plaintiff has brought to his assistance. Item the concealment by the debtor was fraudulent, and nobody knew it but himself. In our case, the evidence will, we trust, satisfy the court that there was no fraud. Our assignees were creditors, and the legal guardians of the property of their debtors. They knew every thing that was done by the Crocherons, relative to the shipment of their goods to New-Orleans. They certainly would have done nothing which could have had a tendency to deprive them, of the payment of their debts. The facts in the two cases are different toto coelo, and no inference can be drawn by the court, from that in Johnson to the prejudice of ours.
We have thus given the two points, on which we rely for our defence, Many others could have been presented the court. We resist the demand of M'Bride, because we say, that his attachment was brought in contravention of a solemn agreement, and before the notes-the foundation of the action, were due. This Court will, we have no doubt, well consider the nature and extent of M’Bride’s demand. They will in their decision in this suit perceive, that an important principle is involved. We ask for nothing but justice, and we do say, that the demands of the creditor in this case, are not consistent with justice.
Stannard for the plaintiff.
The letter of license became inoperative, by the subsequent insolvency of the Crocherons, and the assign ment of their estate, and so was no bar to this attachment.
The assignment does not affect the rights of M'Bride, to receive payment out of the property attached.
I. It is a very general rule, that on the debtors insolvency, all his debts are due presently, although by the contract they are payable in futuro. This is an acknowledged principle. Now, the Crocherons became insolvent, and assigned over their estate, in September, 1816, which had the effect of making McBride’s debt due at that period. The attachment was issued in November following.
But, again: "according to the true intent and meaning" of the letter of license, the creditors, who had not accepted of the assignment, might well attach, What was that license? To enable the Crocherors to continue in business and pay their debts. Had they done so, the creditor could not have attached: but the moment they became insolvent, and assigned over all their estate, they put it out of their power to pay-they broke the conditions upon which the license was granted to them, and the creditor was no longer bound by it. And what is the legal construction of the license? The Crocherons represent themselves embarrassed. The creditors say to them, "if you will continue in business, and fairly and honestly pay your debts, we will give you further time to pay us." Upon these conditions they received the letter. Now, can it be contended, that they have complied with these conditions? If not, and they are not bound, and cannot be made to comply with their part of the agreement, shall the creditor be compelled to observe his? Was not their insolvency and assignment a complete destruction of their power, and a declaration of their intentions not to comply? Clearly so. In the courts of con mon law, this has been repeatedly so decided; and in 1 Pothier on ob. p. 2, ch. 3. art. 3, sec. 3, there is an authority in point. " The term granted by the creditor to his debtor, is founded on a confidence of his solvency-when that foundation fails, the effect of the term ceases;" and goes on to say that, in such case, the debt is immediately due. No principle can be more just as respects all concerned. It is the change of the condition of one of the parties, that releases the other: for when one of the contracting parties has put it out of his power to observe that part of an agreement to which he is bound, it would be extremely hard to compel the other party, to his certain ruin, to perform his. Something of this princple is found in every code of laws-in courts of equity too, it is fully established-as in the case of Drake vs. Mayor of Exeter, 1 Chancery Cases, 71, where the lessor covenanted with his lessee and his assigns, that upon the payment of cer- tain rents quarter-yearly, he would renew the lease. But the lessee became insolvent, and as- signed over his property to assignees. The lessor was called on to fulfil his part of the agreement, viz. to renew the lease, but which he refused to do, because the lessee, by his in- solvency and the assignment of his estate, had estate ha~ put it out of his power to fulfil his part of the agreement-that is, to pay the rent: and the court of chancery ruled, that the refusal was properly made; and, as the lessee could not comply with his part of the agreement, would not compel the lessor to renew the lease. This case is certainly very much to the present argue ment. So in Willingham vs Joyce, 3 vesey's Chan. Rep. 168-bill for a specific performance of an agreement to grant a lease to the plaintiff -on evidence of his insolvency, the court would have dismissed the bill with costs, unless the matter had been compromised, on the ground that the plaintiff had put it out of his power to observe his part of the agreement, to pay rent, by becoming insolvent; and so the parties were discharged. And going upon the same reasoning, it has ever been held, in equity, that a failure of the consideration of a contract, by a subsequent contingent event, to which the agreement, from its nature, was subject, is a good reason for not compelling the party not in fault, to comply with his part of it; as in Stent vs. Bailies, 2 Peere Williams' Rep. 217, where the contract was for the sale of shares in the Lustring Company. Afterwards, before the fransfer was made, a scire facias issued to repeal the patent granted to this company; and, at the same time, a proclamation was published, forbidding transfers. The company never afterwards opened their books, nor was there any prospect of their doing so. The seller brought an action on the articles in a court of law, and obtained a verdict; upon which the purchaser filed a bill in equity, for an injunction. Sir J. Jekyl, master of the rolls. "It is against natural justice, that any one should pay for a bargain which he cannot have; there ought to be a quid pro quo but, in this case, the defendant has sold the plaintiff a bubble, a moonshine:- and a perpetual injunction was decreed, on the ground that, it being out of the defendant’s power to afford the plaintiff that benefit which the contract was intended to secure, the plaintiff should not he compelled to perform his part alone. There was an appeal from this decision; but the lord chancellor confirmed the decree. The case of Pope vs. Roots, i Bro. P. C. 370, is also full to the same purpose. There J. S. in perfect health, agreed to sell his estate to B. in consideration of an annuity for life; before the conveyance, however, but after it ought, by agreement, to have been executed, J. S. died. On a bill brought by B. for a specific performance of this agreement, the court dismissed it, because it was impossible for J. S. (being dead) to have the benefit of the annuity. B. would have nothing to pay, and yet would get the whole estate, which would be unjust; and the court said it was a clear rule, that where one party, by the conduct or misfortunes of the other, could not have the benefit of his part of the agreement, he shall be put in as good a condition as the other, and law and equity will take care that neither party shall suffer by the mis- fortunes or frauds of the other. Now, it must gratify the court to be able to apply those very just and equitable principles to this case, parti- cularly as it appears that there is only property sufficient to pay the first and second classes of creditors; and M'Bride being one of the fourth, will lose his claim entirely, unless he is paid out of the property attached.
Thus much being advanced in support of the first proposition, before reasons are attempted to prove that the assignment of the Crocherons cannot affect M'Bride in the present action, a preliminary question arises, whether the suppos- ed title of the assignees under the assignment, will be noticed by this court, inasmuch as it is not pleaded, and the assignees are not before this court as parties to the suit? Now, it appears by the affidavits only, that an assignment has been made. By the plea, the letter of of license alone is relied on, in bar of the attachment. Will this court notice the alleged title of the assignees, inasmuch as they have not pleaded? It is believed not. Matter of defence going to avoid the action, ought to be pleaded. 1 Chitty on Pleading, 505. But why? That the opposite party may know to what he is required to answer. Is not the civil law the same? Here the pleadings do not in- form the attaching creditor that the assignment will be relied on in defence against the attachment; and his counsel cannot know any thing of it-as between the creditor and the assignees there is no contestation, and the court cannot decide the disputes of persons not regularly litigating in a suit in court. But if the court overrules this objection, which is made only be- cause it may lessen the labors of the court, let us see whether it can make any difference in the ultimate decision of the cause. We are willing to investigate to the utmost stretch of the defence. Then,
II. Goodfaith is the basis of all mercantile dealings-but it is due to the character of this transaction to say, that it was bottomed in fraud, fraudulent from beginning to end. And what effect does fraud produce? It vitiates all convitiates ait cou tracts, all proceedings-it destroys the most solemn judgment of a court of competent jurisdiction. The Dutchess of Kingston's case, Hale's Hist. of the Com. Law, 39, note 31.
We must look to the character of this assignment, which we are now supposing duly pleaded; for it is admitted, that if it was a bona fide transfer of the property attached, the attachment ought to be dismissed. The rule undeniably is, that where personal property is assigned in a sister state, or elsewhere, according to the laws of the place where the transfer is made, a creditor cannot afterwards attach that property. The rule with respect to real property is directly opposite; but we have no concern with that.
Now, whether the assignment be good or not, as affecting the claims of creditors, will depend principally on the laws of New-York, and the motives of the party making the deed.
A recurrence to the evidence is necessary. Fraud is discoverable throughout.
The assignment purports to convey all the personal estate of the Crocherons. They do not say in the body of that instrument, that any thing is reserved. The creditors too are to be paid according to the good will and pleasure of the Crocherons. Who are they who endeavor to destroy the rights of others, the rights of their own creditors, all of whom have equal rights? But they presume to say, unless there is property more than enough to pay the first class, (most favored) the second shall have nothing- and so on. The evidence shews that there is barely enough to pay the first and second classes. Have insolvents, even honest insolvents, a right to make this discrimination? A debtor may, to be sure, in the ordinary course of trade, when solvent, and not in contemplation of bankruptcy, pay one creditor in preference to another; but in no other situation-never has be that right in contemplation of, or after insolvency. Here the Crocherons completely failed, and then assigned their property to some creditors, in preference, and to the exclusion of others. Will the law uphold such a conveyance? "It never entered into the mind of a judge to say, that a man in contemplation of bankruptcy, and more especially after complete insolvency, could sit down and dispose of his goods to particular creditors." Lord Mansfield. Thus, in the case of Ogden & Thomas, assignees of Cummings vs. Jackson, 1 Johns. N. York Rep. 373-3: Cummings, having become insolvent, assigned to Jackson, a creditor, certain goods in payment of his debt. The assignees, however, afterwards brought this action of trover, to get back the goods. The court gave judgment for the plaintiffs, on the ground of fraud, against the other creditors, saying that "it would not be permitted that a person insolvent at the time, should parcel out his estate to such creditors as he may see fit to prefer." And the court added, that to do so, was contrary to the genius of the law, which required an equal distribution. A great number of cases have been decided in other states, and in England, where the common and bankrupt law obtained, analogous, to the laws of New-York. It is thought sufficient to notice one or two leading cases on the subject, decided in Great-Britain. Harman vs. Fisher, 1 Cowper's Rep. 126, is one of them. There the question was, whether an insolvent might lawfully give preference to some of his creditors? and it was held by the whole court, that a person in insolvent circumstances, or absolutely insolvent, could not do so; that it could only be done in the ordinary course of business, where the party was solvent at the time, or thought himself so. and not in contemplation of bankruptcy. "What," said Lord Mansfield, "is the nature of the transaction upon the face of it?-it is in terms, that he, (the insolvent) means to give a preference. This the law does not allow." So in the case of Linton, assignee f a bankrupt, vs. Bartlet, 3 Wilson, 47-8. The bankrupt, being in insolvent circumstances, assigned over his estate in preference to some of his creditors. This was held to be fraudulent and void-"that it was partial and unjust to all the other creditors" -and the court declared the assignment void. And, again, in the case of Rust, assignee, &c. vs. Cooper, 2 Cowper. 635. This is cited particularly, because the object and motives of the party making the assignment, were very similar to those of the Crocherons. The bankrupt had made an assignment to his creditors; but so that a part of them only could take any benefit under the assignment. He was insolvent at the time. The court looked into the motives of the insolvent, and said-"In the present case there is not a single thing but what is a step towards fraud, and a proof of an intended preference; and to support it, would be to overturn the whole system of the bankrupt laws. The present, therefore, is a fraudulent assignment upon all the other creditors, and all the laws concerning bankrupts." Let the learned counsel say, how this case and the one before the court differ.
But, in truth, what are the pretensions for shutting M'Bride forever out of payment? Is it the honorable conduct of the Crocherons and the Haights, their assignees? Let us see. The whole transaction shews that the object was to defraud the creditors out of the goods shipped to New-Orleans. It was never intended that they, or the assignees, should have any control over those goods. It was never intended that the general creditors should have any of the avails of that very heavy shipment. Every thing was transacted in the dark. Three Haights are made assignees, adding Potter, a very correct young man, by way of giving false colors to the business. He was to be made the dupe. These couscientious Haights all swear that the goods in question were not intended to be included in the assignment, but that the Cro-cherons intended to keep them under their own control-and one of the Haights confesses that he was promised payment out of the proceeds. But Potter, and all the other creditors, supposed that the assignment covered all the property of the insolvents. Now, was there ever a more gross fraud? The combination is too apparent to be passed unnoticed. "Make us your assignees; and, that your creditors may be satisfied, and suppose all is fair and honest, let the assignment appear to convey all your property; but you must keep the shipment to New-Orleans a perfect secret, and pay us out of the proceeds -then the surplus you may have; but take care that the creditors know nothing of it." Accordingly, no entry whatever was made in the books of the Crocherons of this very heavy shipment-all is done behind the backs of the creditors-even their confidential clerk, then book-keeper, (Brewster) who did their business, was kept ignorant of this meritorious transaction. What does he swear? "He never made, or saw any entry made, of the shipment to New-Orleans." This is not counteracted by the evidence of one of the Haights, who swears that the books are in his possession, and that "there is an entry." Very true-it was easy to have the entry made but a moment before he took the oath-so he says, there "is" an entry: but the artifice is too shallow to impose upon this court. This is not all-the insurance offices of New-York refused to insure, Why? Because they dare not write to the offices for insurance. This would be making the matter too public-and no bill of lading could be shewn, as the goods were shipped in such private silence that the captain of the vessel must not be trusted with the secret, and so was not required to sign bills of lading. One of the Haights acknowledges that he cautioned the Crocherons, that the creditors would find it out-i. e. find out the ship ment to New-Orleans: and it turns out in evidence, that some of the goods of the Haights accompanied this very shipment, and were embarked in the same enterprize. As they could not trust to the captain to sign bills of lading, they could send no document here to the garnishees to present to the captain on his arrival, to get possession of the goods; therefore it was found necessary to despatch one of the Croche-rons with the goods on board.
Now, we think it does appear, that a more fraudulent, a more corrupt transaction never came before a court of justice-and will this court suffer the parties guilty of those frauds to take advantage of them to the injury of a bona fide creditor, who has parted with his goods in faith of the honesty of the purchasers, but who have combined to deceive him? Shall they be suffered to pocket fourteen or fifteen thousand dollars? The assignment purports to convey all their goods. Thus their creditors were to be quizzed out of this very considerable sum- go without a farthing. But this concealment operates very differently from what they contemplated. It is a fraud-and as to their creditors, makes the assignment absolutely void- as in the case of Duncan vs. Dubois, 3 Johns. New-York Cases, 425-6-7, where the insolvent the insolvent kept back from the knowledge of his creditors a claim which he had on the United States for revolutionary services. It was held fraudulent, and the assignment and discharge of the insolvent void, because "it was a fraud upon the creditors to withhold that claim, so that he might afterwards appropriate the result of it to his own use."
Then it is submitted, that the subsequent insolvency and assigmnent of the Crocherons did away the letter of license, and restored the claims of M'Bride as they would have been, had that instrument not been made and his notes renewed-that supposing the court will recognize the claims of the assignees, the assignment under which they can alone claim, (supposing it to include the goods in question) is fraudulent and void -that if it did not convey those goods, it was a fraudulent concealment-and that makes the assignment void: and, what is very mate- rial in the latter case, these goods remained the property of the Crocherons, and of course subject to this attachment. But, if it be said that the goods in question were conveyed by the assignment to the assignees, a further answer is, that the subsequent possession and control of the Crocherons, independent of other frauds, makes the deed absolutely void as against crecte. ditors. The case of Mace vs. Cadel, 1 Cowper's Rep. 233, went upon this ground, and decided that, if a man convey his goods to a third person, yet keeps the possession or control, it is void, as being fraudulent, according to the doctrine in Twine's case, 3 Coke, 81.
We mighthere rest the case; but the counsel for the defendants having taken some different positions from those on which we have discussed the merits of this controversy, it is fit to notice them.
It is admitted,that if the property assjgned by the Crocherous is insufficient to pay all their debts, that then the letter of license is destroyed by the assignment-and the force of the autho- rities proving that position, is not questioned. But, it is said, that this case may be distinguish- ed from that class of cases-and how? Because, say the counsel, "in those cases the party was unable to perform his part of the contract; but that, in the case at bar, it is not known whether or not the property assigned by the Crocherons is sufficient to pay all their debts." That the law is as admitted and proved from authority, there is no doubt; but the gentleman is mis- taken in point of fact. The court wil1 see from the testimony, that three witnesses expressly swear, that there is not property more than suf- Eastern District July 1817. ficient to pay the first and second classes of creditors-and there are no less than four classes, and M'Bride is one of the fourth. How, then, could it be said, that it does not appear that the estate will not pay all the debts of the Crocherons? The evidence was not recollected. If M'Bride does not get payment here, of course he never can hope for it.
Then authorities are cited which, it is said, prove that, "if a contract be fair in its creation, it shall not be affected by a subsequent event, which has thrown the advantage greatly, or wholly, on one side." Now, if any judge had ever said so, it would prove nothing here; for there is evidence enough to shew, that the letter of license was not fair in its creation. Perhaps no court exists that would not say, that this instrument was procured from the creditors with a view to the fraudulent transfer, concealment, &c. which so rapidly followed the date of the letter of license, and have been proven. But, in truth, these authorities do not support the counsel's position-far from it. They prove a contrary doctrine-for, in a note to the case of Mortimer vs. Copper, 1 Brown's Chan. Rep. 257, it is declared by the court, that the case of Cass vs. Randall, 2 Vernon's Rep. is badly reported, aud is not law; and, it is added, that that at case, is the only one which supports the position taken by the opposite counsel; but that, as the reporter mistook the decision, it is not an authority. And, as to the case in Brown’s Rep. the counsel have not fairly cited it. The court will discover that it is not an authority to the extent they suppose. It is opposite to their principles-for the chancellor ordered an in quiry into the value of the estate, and put the party in the same situation as he would have been, had not the old man died. So that there is no authority-there can be none-shewing that, if the debtor become insolvent, he may still compel his creditors to observe their part of a contract which, from its terms, they only stipulated to perform on condition, that the insolvent would perform his. The decisions, and the reason of the thing, are conclusive against it.
The expression of judges in Brown, 733, and Douglass, 92, that a man may become insolvent, and yet his estate pay twenty shillings in the pound, may be true, yet has nothing to do with this case-for here the evidence is positive, that the estate of the Crocherons is insufficient to pay more than the first and second classes of creditors.
As to the authorities cited to shew that an insolvent may legally prefer one creditor to another, there are cases in which it may be done, but not to the extent to which the counsel suppose.
It is said that we admit the validity of the letter of license, and that if we destroy the assignment, the license precludes M'Bride from recovery. Let us see if this is so. 1. Too much is taken for fact, because we do not admit the validity of that instrument. 2. But, if we did, would that have the supposed effect? By no means; because, by reason of the fraudulent concealment of this property, &c. as to the Cro-cherons, the assignment is a nullity, with respect to creditors who dissent from it. It is upon this principle, that the Crocherous shall not be allowed to avail themselves of their own wrongs -and we did not suppose that the gentleman would anticipate what was never intended, and could not be argued with safety in a court of law. But the assignees have got possession of the estate; and, by this time, have paid away all the proceeds, though nothing has been re- ceived by M'Bride.
It is next advanced, that M'Bride attached, on the renewed notes, before they were due: But this is not so-he attached for his debt, un- der all the circumstances of the case, disclosed in evidence to this court. The opposite counsel admit, that on the debt- or's insolvency, all his debts are due presently: indeed, that principle of law, is too well tested to be denied; but how do they attempt to get over it;-why say the counsel, "here the Croch- erons, have not taken the benefit of any bank- rupt, or insolvent law; therefore we do not know that they are insolvent. Again, they forget, that their witnesses swear, that the estate will only pay the 1st and 2d classes of creditors. Are they then not insolvent?
To recapitulateThe letter of license was granted by the creditors of the Crocherons, upon the condition, that they should continue in business, and pay all their debts. This condi- tion they have broken, by making a general as- signment of their property; which shews their inability to pay, or why make the assignment? But the concurrent testimony of all the witnes- ses is, that they are only able to pay the first and second, out of four classes of creditors- of which last, M'Bride is one, and of course can get nothing but from this attachment. 2. The property in question was excepted out of the assignment, and was not transferred to the assignees; but still continues to be the proper- ty of the Crocherons. This concealment of a large portion of their property, was a fraud up- Eastern District July 1817. M'B ui~ on the creditors. The Crocherons shall not be allowed to avail themselve of, or benefit by their own wrongs. In truth, this was the very reason why M’Bride, after the transaction came to light, would not accede to the terms of the assignment. Had he not done so, he could never hope for payment. 3. As that property still belongs to the Crocherons, the letter of license being a nullity, has not M’Bride a right to recover payment of his debt, out of the property attached?

Opinion:
Mathews, J.
delivered the opinion of the court. This case is in many respects, similar to that of Ramsey vs. Stephenson, lately decided in this court, ante 23. The debtors, in both cases appear to be insolvent, and attempted to assign their property to trustees, for the payment of their debts. The deeds of cession, in both instances, contain stipulations, by virtue of which the creditors are classed, and a preference is given to some, in exclusion of the rights of others. In the case alluded to, the assignment is of all the property of the debtor, without limitation. In the one under consideration, although from the evidence, it would seem that the defendants and appellants expressed, in their deed of assignment, an intention to con vey all their property; yet, it is stated by the assignees, who are witnesses in the case, that the deed, having reference to a schedule annexed thereto, nothing passed by it, except what is designated in the schedule; so that the property here attached by the plaintiff and appellee, was left under the dominion and control of the defendants and appellants.
The plaintiff's claim is opposed on the ground, that the respite granted by him, jointly with several others, who executed a letter of license, as it is termed, had not expired at the inception of the present suit: and further, that according to the stipulations of that instrument, he has forfeited every claim to payment, by an improper and premature prosecution.
The letter of license, was executed on the 19th of June 1816. On the part of the creditors, it purports to grant an indulgence to the debtors, by allowing them a term of payment, for debts then due, in consideration of their inability to pay immediately. On the 20th of September of the same year, the defendants stopped payment, and assigned their property to some of their creditors, for the purpose already stated. It appears from the testimony of these assignees, that the amount of the property ceded, is not sufficient to discharge the debts, due to those whom the debtors thought proper to class as privileged creditors.
No claim to the property attached having been put in, under the assignment, there is but one question to be decided. Is the plaintiff and appellee exonerated from the obligation imposed upon him by the letter of license, in consequence of the subsequent conduct of the defendats and appellants, and was he so, at the inception of this suit?
The defendants may justly be considered, as having been insolvent, at the time of exeuting the deed of assignment, and even so at the inception of the suit: and from the evidence, we believe that they were in insolvent circumstances at both these periods. The principles of law, cited from Pothier and other authors, on which the district court, seems to have founded its judgment, are strictly applicable to this case, and no doubt can be entertained of their soundness. They are common to every question of bankruptcy, or insolvency. In cases of failure, creditors, even when the time of payment has not yet expired, are entitled to receive dividends of the insolvent's estate. In other words, the debt becomes payable, by the insolvency of the debtor. The debt being thus payable, the creditor has a right to pursue all legal remedies to pursue all legal remedies in his power for the recovery of it; and may, in case of a voluntary assignment by the debtor, to some of his creditors, if he be not a party to such an agreement, seize on any property not actually delivered, under such an assignment, as we have already determined in Ramsey vs. Stephenson; and certainly with equal, or greater propriety, may be proceed against any property not claimed by the assignee, or pretended to be conveyed by the deed of assignment. This being the situation of the property, attached in the present suit, there is no error in the decision appealed from.
It is therefore, ordered, adjudged and decreed, that thejudgment of the district court be affirmed with costs.