Court Opinion

ID: 6675862
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:15:49.998328+00
Date Added: 2024-06-11T16:00:42.314914
License: Public Domain

Mr. Chief Justice Simpson,
dissenting. The material question in this case is, whether under the facts as stated in the opinion of the majority, and as found by the Circuit Judge, the mortgages executed by the defendant, David Morris, to E. H. Frost & Co., and to the defendant, Alexander Morris, can be declared void under section 2014 of the act entitled “assignments by insolvent debtors,” found in General Statutes of 1882, page 585. The Circuit Judge so held, and his ruling has been sustained by the majority of this court. In this judgment I am unable to concur for the reasons briefly given below.
Section 2014 of the assignment act is as follows: “Any assignment by an insolvent debtor of his or her. property for *408the benefit of his or her creditors in which any preference or priority is given to any creditor of the said debtor by the terms of the assignment over any other creditor or creditors, other than as to any debts due the public, or in which any provision or disposition of the property so assigned is made or directed, other than that the same be distributed among all creditors of the said insolvent debtor equally, in proportion to the amount of their several demands, and without preference or priority of any kind whatsoever, save only as to debts due the public, and save only as to such creditors as may accept the terms of such assignment and execute a release of their claim against the debtor, and except as hereinafter provided, such assignment shall be absolutely null and void and of no effect whatsoever.”
Previous to the passage of this act a debtor, whether he was insolvent at the time or not, could secure one creditor in preference to another, and this, too, in a general assignment for the benefit of creditors, or by an independent security, provided the preference was bona fide and free from any purpose to delay, hinder, and defraud his other creditors. This principle, whether wise or not, I have regarded as well established, and by a long and unbroken current of decisions in this State; in fact, so firmly as to have become almost a rule of property. And, further, I have understood it to be settled beyond controversy that preferences could only be avoided by a direct proceeding to that end, based upon allegations of fraud, either express or implied, instituted by a debtor whose claim had been judicially established, and who was without redress, except by the aid of the property covered by the preference. Mow, the question arises, how far has the assignment act of 1882 changed or modified these principles ? The important sections of that act are sections 2014 and 2015. As I understand these sections, they refer entirely to preferences made in assignments by insolvent debtors for the benefit of creditors generally. They do not touch preferences other than those contained in or connected with such general assignments. As to all other preferences by mortgages, judgments, and such like instruments not connected with a general assignment, they leave the law as previously established, such preferences being vulnerable or not, as the facts of each case *409might determine, either at common law or under the statutes of Elizabeth.
Before the assignment act, the law was abundant for vacating any and all fraudulent preferences. This act was not, therefore, intended to meet and destroy such preferences, but it was intended to prevent all preferences in a certain class of cases, whether fraudulent or not, to wit, in general assignments made by judgment debtors for the benefit of their creditors, and it was confined to such cases. This, as it appears to me, was the intention of the act, and this was its extent, as appears, first from its title, “assignments by insolvent debtors;” and, second, from the express terms of the two sections in which its purpose is presented, sections 2014 and 2015. Section 2014 says: “Any assignment by an insolvent debtor * * * for the benefit of creditors, in which any preference is given, * * * shall be null and void.” In section 2015 it is provided that: “If any person being insolvent, within ninety days before the making of any assignment * * * for the benefit of his creditors, shall give any preference to any creditor, * * * the same shall be void.”
Now*, to bring a case under either of these sections, unless we go beyond the terms of the act, the facts must show (1) an assignment for the benefit of creditors, (2) executed by an insolvent debtor, and (3) a preference given to one or more creditors over others contained in the assignment, or given within ninety days previous to the execution of the assignment. Can the mortgages in contest here be properly held to be preferences by an insolvent debtor, contained in an assignment for the benefit of creditors generally, or executed within ninety days before such assignment, and therefore null and void under the act, without regard to the fact whether said mortgages are fraudulent or bona fide ? There is no doubt as to the preference, and the insolvency of David Morris when he executed these mortgages is perhaps equally as apparent; but where is the assignment in which, according to the act, these preferences must either be found, or with which they must be connected within ninety days before its execution ? Where is the substance to which these conditions, one or both, must attach before the act becomes operative ? I do not find it *410in the evidence, or in the facts as stated, and therefore I cannot see how the act can apply.
These mortgages may have been founded in fraud, they may be wholly without consideration, and may have been intended to delay, hinder, and defeat the claims of judgment creditors of David Morris, and possibly under section 2016 of the assign, ment act, they may have been subject to attack by creditors even before obtaining judgment; and when a proper case is presented I shall not hesitate to go to the full extent of the law in uprooting fraudulent transactions. But the question of fraud is not presented here. These mortgages have not been vacated on that ground. They have been vacated because, in the opinion of the court, section 2014 of the assignment act has been violated in their execution, not in terms, but in spirit, and the question involved is the soundness of this conclusion. It is claimed that the object of the assignment act was to prevent an insolvent debtor from giving any preferences, and 'that -wherever and in whatever form this might be done, and whether bona fide or fraudulent, still it is void under the assignment act, and should be vacated by the courts. If this be so, the assignment act is, in substance, a bankrupt law, demanding upon insolvency a suspension of all business and a surrender of all assets, making it dangerous and useless to struggle for recovery. This might be a wise law, and one which, in the -end, would be best for all. But I do not think that the legislature intended the act in question to be so far-reaching, and therefore I fail to see its application to the facts of this case.
The case of Wilks v. Walker (22 S. C., 108), as it seems to me, falls short of this case, and therefore does not control it.
Judgment affirmed.