Court Opinion

ID: 6676708
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:16:39.188561+00
Date Added: 2024-06-11T16:00:43.441024
License: Public Domain

Mr. Justice MoIver.
I concur in the conclusion reached by Mr. Justice McGowan. While it is quite true that in some of the text books and cases general expressions may be found to the effect that a partial assignment, in which releases are exacted as a condition of preference, is fraudulent and void, yet it seems *530to me that a careful examination of the cases will show that such an unqualified statement is unwarranted either by reason or authority. On the contrary, the true rule to be deduced from the cases is, that such an assignment is good and valid, unless some actual fraud is intended, or the property not embraced in the assignment is concealed from the creditors, or some benefit is reserved to the debtor, either by way of express provision or by a resulting trust. The vice in such an assignment consists — not in the fact that it is partial, nor in the fact that it exacts releases from the accepting creditors, nor in both combined — but it must be found either in the fact that there was an intent to defraud, or in the fact that full information was withheld from the creditors to enable them to elect whether they should accept the terms of the assignment, or in the fact that a benefit was reserved to the debtor at the expense of his creditors.
There can be no doubt that if Hamel & Co. had offered one of their creditors a note of one of their customers for an amount less than the debt due such creditor, upon condition that he would discharge the debt, and such offer had been accepted, the transaction would have been perfectly legal and open to no objection. Now, if a transfer of a portion of the partnership assets to a single creditor, upon condition of discharging his debt, would be legal, it is difficult to understand why a transfer of all the partnership assets to all of their creditors, upon the same condition, should not be equally legal; and this is precisely what this deed of assignment was intended to accomplish. There is no pretence that there was any intention to defraud — there is no evidence that there was any suppression or concealment of any property from the creditors, for the deed only purports to transfer the partnership property, and it is not pretended that any of that was omitted; and there is no reservation of any benefit to the debtors, for the deed expressly provides that no part of the assets shall be returned to the assignors until all their debts shall be paid in full: not only debts due to the accepting creditors, but also to those who do not accept. In this respect the assignment in question differs widely from those which came under review in some of the cases cited in support of the judgment below. In this case the creditors are not debarred from partici*531pation in the proceeds of the assigned assets except upon condition of releasing their debts, but they are only debarred from preference over other creditors.
I can very well understand that an assignment which provides only for such of the creditors as will accept the terms offered— the execution of releases — and, in the event of their refusal of such terms, not only deprives them of any participation in the assigned assets, but provides, either expressly or by operation of law, that such assets shall revert to the assignor, may be regarded as an objectionable mode of coercing a creditor to accept any terms that his debtor may choose to offer. But where, as in this case, precisely the same terms are offered to all of the creditors, which, if declined by any one of them, does not defeat his right to enjoy any benefit under the assignment, but only deprives him of a preference which he could otherwise have obtained, it is not easy to understand how it can be said that any coercion is put upon the creditor by the debtor. There can be no doubt that in a general assignment of all of the debtor’s property, such provisions as this assignment contains would have been perfectly legal and valid, even under the provisions of section 2014, General Statutes, which was designed to limit the previously existing rule in regard to preferences ; and I do not see why such provisions should invalidate a partial assignment where there is no intentional fraud, and where no facts are concealed from the creditors which are necessary to enable them to determine intelligently whether they will accept terms offered, and where no benefits are reserved to the debtor.
The omission from the assignment of the separate property of the individuals composing the partnership could not operate to hinder, delay, or defeat the claims of the plaintiffs or any other non-accepting creditors ; for so soon as they recovered their judgments, there ivas nothing to prevent them from proceeding to levy on and sell such property just as if no assignment had been made.
Time will not permit a review' of all the cases cited to sustain the doctrine that a partial assignment exacting releases as a condition of preference is void, and I must confine myself to such of our own cases as are supposed (erroneously, I think) to sustain *532that proposition. In LePrince v. Guillemot (1 Rich. Eq., 187), the assignment purported to cover the debtor’s whole estate, whereas, in fact, he owned other property in the State of New York which was concealed from the knowledge of his creditors, and the deed was set aside, not because it was a partial assignment in which releases were exacted, but because the concealment of the extra-territorial property was a fraud. It was, in fact, a false representation to the creditors, made for the purpose of inducing them to release, and thus to secure a benefit to the assignor by misleading the creditors. So in Gadsden v. Carson (9 Rich. Eq., 252), the real ground of the decision was that there was actual fraud. As is said by the Circuit Chancellor, w'hose decree as to this point was affirmed by the Court of Appeals : “l cannot shut my eyes to the fact that there has been evasion and concealment in regard to this matter.” There was also another feature in that assignment w'hich seems to have had some influence in producing the result, and that ivas that Carson, without embracing in the assignment any of the assets of the firm of Carson, Belser & Co., still required that the creditors should release that firm also, and this was properly regarded as imposing such unjust, harsh, and onerous conditions upon the creditors as would vitiate the assignment. It is true that in delivering the opinion of the Court of Appeals Johnston, Ch., does use language which seems to imply that a partial assignment exacting releases would be void, because, simply, of its partial character, on the ground that “a debtor who surrenders only a part of his property has no right to exact a release as the condition of his creditor’s acceptance.” But the only authority cited in support of the doctrine is LePrince v. Guillemot, supra, which, as we have seen, was decided upon the grounds of actual fraud, and Jacot v. Corbett (Chev. Eq., 71), which was not a case of a partial assignment at all, and was decided upon the ground that the debtor had reserved a benefit to himself, by providing that in no event should the accepting creditors be entitled to receive more than foi’ty per cent, of their claims, and that any surplus which the assigned assets might yield above that amount should be returned to the assignor.
I do not think, therefore, that there is any authority, in this *533State at least, for the unqualified proposition that a partial assignment of a debtor’s property, in which releases are exacted simply as a condition of preference, followed by provision that the balance of the assigned assets which may remain after satisfying the preferred creditors shall be applied to the payment of the claims of the non-accepting creditors pro rata, is void; and.I think it might be shown that the weight of authority elsewhere will not sustain such a proposition.
It will be observed that I lay no stress whatever upon the fact that the provision in this deed of assignment, requiring releases as a condition of preference, had become entirely inoperative long before any attack was made upon this deed by the failure of all of the creditors to accept within the time limited, and hence that the deed, when attacked, w'as practically, and, in fact, nothing more than an assignment for the benefit of creditors without any preference; for, as is said by Duncan, Ch., in Jacot v. Corbett, supra, and acted upon by this court in Claflin v. Iseman, 23 S. C., 416 : “The character of the transaction must be determined by the interests of the parties at the time, and not by subsequent events.”
It seems to me, therefore, that the Circuit Judge erred in holding this deed of assignment void, and that his judgment should be reversed and the complaint should be dismissed.