Court Opinion

ID: 6314020
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:20:37.115741+00
Date Added: 2024-06-11T08:59:11.249270
License: Public Domain

The opinion of the Court was delivered by
Gibson, C. J.
Were it not for the agreement to the contrary, the plaintiff’s lien would certainly have been discharged by the sheriff’s sale. The Messieurs Krumbhaar, however, had power to sell, subject to it; and they actually sold in performance of an agreement to' buy the property themselves, or bid it to a price that would ensure satisfaction of this and another incumbrance from the proceeds, with a proviso that they should continue to bind till they were paid. They bought it in; and, by force of the agreement, the lien was an incumbrance on it while it remained in their hands.* They have made a general assignment with the usual preferences ; and the single question is, whether the assignees in trust for the creditors, hold discharged of the lien, as purchasers without notice, and for valuable consideration. It is not doubted, that they are invested with the title, and that the lien, ■ apparently discharged by the sale, and deriving its actual force from a private agreement, was essentially a secret one; but it is contended, that the assignment gave notice of it, or disclosed what would, by inquiry, have led to it. It indeed contains a provision for mechanics’ liens by name; but such provision by the owner of a title, acquired through a judicial sale, points rather to personal than to real security, and intimates not the conditions on which it was given. The object being avowedly to procure a title, pursuant to a previous purchase, may have induced the vendee to assume the liens as personal liabilities, in consideration that the creditors would not interfere with the sale; and this shows, that to provide for them as personal charges, even by the name of liens, is not necessarily or naturally inconsistent with a previous extinction of them as such. The vendee’s responsibility might well be supposed to have been accepted as a substitute for them; and whatever is sufficient to direct an inquiry, must point distinctly' to the object of it. It seems, therefore, that there is not enough in the case to affect the creditors with actual or constructive notice; but are they the purchasers for valuable consideration ?
*492It is conceded, that they have not released; and that the interests of the parties remain as they were at the date of the assignment. The assignees, being instruments selected by the debtor, and having no beneficial interest as such, stand in no personal or distinctive equity; for though a pecuniary consideration is always inserted in the deed, where they are not creditors, (the necessity of which, to protect the transaction from the statutes of Elizabeth,) is shown in *Roberts on Fraudulent Conveyances, 429, and recognised in Howry v. Miller, (3 Penn. Rep. 381,) it is merely nominal, and not that substantial sort of equivalent which gives a claim to something in return. Then equity, if any, must be the equity of the creditors represented by them; and what substantive or formal advantage have these surrendered in compensation of the benefits expected from the assignment? None are pretended. Neither are they placed in the category of purchasers by their character or position. That they are not protected as such by the recording acts, was declared in Heister v. Fortner, (2 Binn. 40;) and though it was said in Petrie v. Clark, (11 Serg. & Rawle, 377,) that the extinguishment of a debt is a valuable consideration for a thing taken in satisfaction of it, the acceptance of it as a security without astipulation for forbearance, was held to be otherwise. So also in Ramsay’s Appeal, (2 Watts, 232,) creditors were held to stand exactly in the equity of their debtor. I know of no case in which the abstract existence of debts was held to be a valuable consideration for a transfer of property to trustees for distributive payment, except Bayley v. Greenleaf, to be presently noticed. In Lord Paget’s Case, (1 Leon. 194,) it was held, that the mere destination of property to payment of the grantor’s debts, by a general assignment to a stranger, is not a consideration even to raise a use on a covenant to stand seised, and consequently, not to pass even the legal title; and there is therefore nothing to sustain it, under the statutes of Elizabeth, against a creditor or a purchaser, though it is good against an heir. Leech v. Leech, (Ch. Ca. 249). But where the creditors are party to the deed, there is a clear valuable consideration in the forbearance of suit and mutual accommodation expressed by the terns, or implied by the nature of the transaction. Roberts on Fraud, Con. 431. In the case before us, the creditors, not having become parties to the transaction, by performance of the condition, which alone could make them so, were bound in the meantime to no forbearance or accommodation whatever. In Bayley v. Greenleaf, however, an equitable lien of admitted obligation betwixt the vendor and vendee, was not enforced against assignees in trust for the vendee’s creditors. In Pennsylvania, such a lien is rejected altogether; but admitting the general existence of it, in that case the question was, whether *493the creditors were exempt from it as purchasers. For aught that appears, they had relinquished nothing in compensation of the benefits of the trust; nor had they elected to look to it for satisfaction ; and though the assignment could not prejudice them, it was held to divest the vendor’s lien for purchase-money. The reasoning of the Chief Justice, in delivering the opinion of the Court, is unsatisfactory on principle and authority. . Analogous decisions-on assignments in bankruptcy and statutory insolvency, were admitted to be adverse to his conclusion; yet though no essential difference betwixt one of these and an assignment by act *of the party was pointed out, a distinction was taken on the ground that, by the latter, creditors are purchasers for a specific consideration. What advantage or thing they are supposed to part with in the one case, in order to make them so, which they do not part -with in the other, was not attempted to be shown. The truth is, they part with nothing. Before satisfaction or release, the reclamation of a preferred creditor is unimpaired ; and the exertion of the debtor’s power to provide for him, is consequently gratuitous. The intended preference is a gift of his dominion, which enables him to pay in the order that pleases him; and the thing destined to payment, whilst unappropriated, continues in the hands of Ms agents, subject to the equities which adhered to it in his own. The appointment of a trustee is in fact no more than a substitution of the hand to pay. Preferred creditors are not more meritorious than the creditors of an intestate, who stand in his place; the difference in other respects being that the trustees succeed to the title by-act of the party, and the administrators succeed to it by act of the law; but, in either case, without a beneficial act done-or prejudice suffered. When the trust is- executed, however, the money cannot be followed; but, as was intimated in Heister v. Fortner, the creditors must cease to be so, before they can be purchasers. Here.the trust remains unexecuted; and as the creditors will not be put in more unfavourable circumstances by the-enforcement of the lien than if the assignment had not been made, nothing has moved from them that can prejudice them, or benefit the debtor; and they are consequently not purchasers of its benefits.
Judgment affirmed.
Cited by Counsel, 4 Wharton, 502 ; 5 Id. 183 ; 8 Watts, 49 ; 2 Barr, 371; 3 Id. 76, 138; 4 Id. 437 ; 5 Id. 78 ; 10 Harris, 316; 11 Id. 227; 8 Casey. 475; 6 Wright, 393; 9 Id. 156; 14 Id. 79 ; 4 P. F. Smith, 201; 8 Id. 79; 10 Id. 207, 306.
Cited by the Court below, 6 Watts & Sergeant, 282; 5 Barr, 158.
Cited by the Court, 5 Wharton, 205 ; 3 Watts & Sergeant, 256 ; 6 Id. 331; 1 Barr, 104; 5 Id. 107, 138; 9 Id. 60; 1 Harris, 245 ; 2 Casey, 111; 8 Id. 129; 1 P. F. Smith, 211; and followed 7 Watts & Sergeant, 374.
See also, 2 Grant, 218.

 See 8 Watts, 50; 3 Watts & Sergeant, 260; 6 Id. 284; 9 Id. 104; 5 Barr, 244 ; 8 Id. 297; 2 Harris, 13 ; 10 Id. 317; 11 Casey, 182; 4 Wright, 176 ; 6 P. F. Smith, 52.