Court Opinion

ID: 6542273
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:16:42.037511+00
Date Added: 2024-06-11T15:55:52.069840
License: Public Domain

COCKRILL, C. J.  1. Assignment: When set aside for fraud of assignor. The first question presented is, whether a deed of assignment for the benefit of creditors shall be set aside on proof of a fraudulent intent on the part of the grantor alone. On trial the court declared the law to be that the deed should be invalidated unless the assignee, or creditors to be benefited by the deed, knew of the assignor’s fraudulent design, or had knowledge of such facts as would lead to its discovery. There are conflicting decisions in the courts of this country on the question. See 21 Am. Law Review, 901. The charge was, however, in accordance with the views announced by this court in Hempstead v. Johnson, 18 Ark., 123; Cornish v. Dews, Ib. 172, and Mandel v. Peay, 20 Ark., 325. These cases were followed by the supreme court of the U. S., and the rule they establish approved, in Emerson v. Senter, 118 U. S., 3. We are not at liberty to consider it an open question. The relation of the assignee to the contract of assignment is what gives rise to the difference of opinion on this question, If he is to be regarded as the agent of the assignor, or simply a volunteer, as some of the courts hold, why may not a creditor successfully pursue the property on showing that his debt was outstanding when the assignment was made and that the assignor was then insolvent, without regard to any special intent to defraud? But as all agree that this cannot be done, why should theassignor’s unaided and unknown design to defraud affect the validity of the instrument? The existing demands of the creditors are said by the courts in line with our own, to be a valuable consideration for the transfer; but the assignee is not treated as a purchaser in good faith in the sense of protecting his purchase against the prior equities of third persons, unless some further consideration enters into the contract. Bridgford v. Adams, 45 Ark., 136; Farguson v. Edrington, 49 Ark., 214; People’s Savings Bank v. Bates, 120 U. S., 556. Practically the assignee is regarded as a purchaser by all the courts, else he would be treated as a volunteer subject to have his title defeated at the suit of any creditor; but as the creditors are in no worse condition than they were before the the deed and nothing of value has been parted with as a consideration, he is said not to be an innocent purchaser. It may be that the rule adopted by neither line of conflicting decisions is throughout a logical deduction from principle, but is rather in accordance with the courts’ varying ideas of policy. We adhere to the line previously marked out by this court. Nothing is decided in Hunt v. Werner, 39 Ark., 70, contrary to that rule.  Act of 1887. The legislature has changed the rule announced by the court, for future cases, by enacting that “proof of fraud on the part of the assignor shall be sufficient to invalidate the assignment, whether the assignee knew of it or not.’’ Act March 31st, 1887. The act was passed after the appeal in this case was prosecuted. To permit it to affect this litigation, would be to hold that a contract which was legal when entered into can be invalidated by subsequent legislation. But that would be an interference with vested rights which are beyond legislative control. The act does not affect the determination of this cause, and the court did not err in its declarations of law.  2. Same: Preference of assume debt: Recitals of deed. It appears that some time before the assignment, a mer-chant named Little, who was in business under the style of Little & Co., sold his stock in trade to the assignors in consideration that they would assume the debts due by Little & Co. The deed of assignment seeks to give preference to these assumed -debts along with certain others. It is argued that this is a preference for Little’s benefit, and that, as the proof is that he was a party to whatever fraud the assignor sought to perpetrate, this attempted preference should avoid the deed. But Little is not a preferred creditor under the deed, nor is he mentioned as a creditor at all. The deed recites that the assignors are indebted to the parties who sold the goods to Little & Co., and the amount due each is given as in the case of the other creditors. Until a showing of fraud was made sufficient prima facie to overturn the deed, these recitals were evidence of their truth, and the assignee was not called upon to produce other evidence of the genuineness of the debts. Valley Distilling Co. v. Atkins, 50 Ark., 289; Hempstead v. Johnson, supra; Mandel v. Peay, Ib. There is nothing in the record to impeach the validity of these debts. The findings of the court are sustained by the evidence, and the judgment must be affirmed. It is so ordered.