Court Opinion

ID: 6314290
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:21:46.961728+00
Date Added: 2024-06-11T08:59:11.849350
License: Public Domain

The opinion of the court was delivered by
Smith, J.
It appears, from the case submitted to this court for their opinion, that John Stoddart, and the firm of Moore, Myers, and Company, had considerable dealings together, and that they were desirous of mutual accommodation, which was afforded by lending to, and endorsing notes for each other, and which proved, as is often the ease, ruinous to both parties. Hence, it became necessary for them to execute assignments for the benefit of their creditors. The former, on the 21st day of February, 1820, made a general assignment to Thomas Fletcher, and on the 25th day of the same month, executed another of the same nature to the same person, and to Jacob Butz. On the 7th day of March, 1820, the latter executed an assignment to William Allen and Richard Rowley, for a similar purpose, containing, however, a provision in favour of certain creditors, whom they preferred, and a further provision in. favour of general creditors, who should within sixty days, execute a release to them. At the time of executing this assignment, Moore, Myers, and Co., were indebted to John Stoddart, *263in the sum of twelve thousand and sixty-one dollars and thirty-eight cents, exclusively of certain accommodation notes, and endorsements, existing between them. A release, as stipulated by Moore, Myers, and Co., in their assignment, was executed to them by the assignees of John Stoddart, within the time prescribed. When Moore, Myers, and Co., executed their assignment, there were outstanding, in the hands of third persons, a number of notes, some of them drawn by John Stoddart, and endorsed by Moore, Myers, and Co.; and some drawn by Moore, Myers, and Co., and endorsed by John Stoddart, a part of them for the use of the former, and a part for the use of the latter. The notes mentioned in the case stated, marked A., were in the hands of the holders there mentioned, and were for the use of Moore, Myers, and Co. These holders did not execute a release to them, but thought proper to resort to the estate of John Stoddart; and, after the time for executing the release had expired, those notes were distributed among the creditors under an arrangement between John Stoddart’s assignees and his creditors, and paid by the said assignees with John Stoddart’s estate. They are the notes, on which the assignees of John Stoddart claim a dividend, and for which this suit is brought against the assignees of Moore, Myers, and Co. The question then is, can the assignees of John Stoddart recover a dividend from the estate' of Moore, Myers, and Co., on the above mentioned notes? A debtor, may, by an assignment to others, dispose of his estate in trust, for the use and benefit,of his creditors; in such an assignment, some creditors may be, and often are preferred, whilst others are postponed; and, however hard this may appear to be, yet the law is so; lex ita scripta, and we must take it as we find it. Assignors too, like the present, generally consider drawers and endorsers of accommodation paper, entitled to a preference: it is considered as due, under an honorary obligation, and is almost always given. The terms under which the preference is to be received, are prescribed by the assignor, as the lawgiver, in his deed of assignment, and a compliance with them, on the part of him, who is to have the benefit of the preference, is required. These principles are not controverted. Moore, Myers, and Co., in their assignment of the 7th day of March,' 1820, preferred certain creditors, and took care besides, to prefer general creditors, who should, within a certain limited time, (sixty days,) execute a release to them; directing that whoever complied with this stipulation, should be entitled to the benefit of the fund allotted to such general creditors; but that such of them as did not execute the release required by the assignment, should not be entitled to any part thereof, and, in short, should not beCreditors” of Moore, Myers, and Co., as to that particular fund. The holders of the above-mentioned notes, were general creditors of Moore, Myers, and Co.; they did not, however, exe~ *264cute the release to them as stipulated in their assignment, but, resorted to the assignees of John Stoddart, or his estate, for payment of the notes. Nor was this all: after the time for executing the release to Moore, Myers, and Co., had expired, these same notes, under a general arrangement, between the assignees of John Stoddart, and the creditors of John Stoddart, were paid by his assignees with the estate assigned to them, and distributed among the creditors of John Stoddart. If, then, the assignees should be permitted to recover in this suit, it would be for the use of the creditors of John Stoddart, and, as I think, give rise to a double dividend. Be this, however, as it may, it is evident to my mind, that under the express terms of the assignment, the notes were nota debt, for which the plaintiffs could claim a dividend by virtue of the assignment, nor could the holders of them, although creditors of Moore, Myers, and Co., because they had not executed the release required; and, not complying with the terms of the assignment, had not entitled themselves to the benefit arising from the particular fund. In 6 Serg. § Rawle, 401, it was held, that the preference is not to the creditor, but the debt. Here it is reasonable to infer, that no debt was intended to be preferred, but such as the assignor should be discharged from. It would be unreasonable to give any one the benefit of the assignment, who could not secure him from liability to the notes in the hands of the holder. The consideration of the assignment, was personal exemption from the debt, and the assignor would not have the benefit of this consideration, if the notes could be brought against him by any one. The plaintiff alleges, that the holder could not release the assignor, without releasing him (the plaintiff,) at the same time. This is a strange objection coming from him, who could have obviated that consequence, by an arrangement with the holder. Even if he could not, it does not follow that he should be let in on the fund. The debtor had a right to make his own terms; and if the plaintiff was not in a situation to comply with those terms, it is his misfortune; but it gives himno ground to complain. It is no doubt the interest of the debtor now, that the plaintiff should come in on the fund. But it was not so at the time of the release, the period when the rights of the parties vested. It certainly was not, because.the debtor was then exposed to the notes in the hands of the holders: and the plaintiffhaving since taken them up, can acquire no right, which he had not then. The assignees of John Stoddart stand in no better situation, than the holders, from whom they have derived their title, and who cannot, by making over to others such notes, thereby impart to them a benefit, to which they themselves were not entitled. These notes, on the 7th day of May, 1820, when the sixty days had expired, being the property of certain holders, if the assignees, to whom they were delivered by the several holders, were per-. *265mitted to receive a dividend, their situation would be better than that of the holders, if they had not parted with the notes. Such advantages the law does not recognise. The holders having resorted to another fund for payment, cannot, after this, transfer the notes to one, who, as a general creditor, had complied with the terms of the assignment, by executing a release for his own debts, so as to enable him under this release, in which the debt created by these notes was not embraced, to come in, and claim a part of a fund for them which the holders would have had no right to claim or demand. The right to receive a dividend cannot be made better by negotiating the notes after the sixty days mentioned in the assignment, had expired.
In this assignment, we have the words “ creditors,” and it is contended, that endorsers for their endorsements, or drawers for Stoddart, are creditors within the true meaning of the assignment; and this, whether they were compelled to pay the notes or not. It would be so, if Stoddart had held the notes at the time of the assignment, or had then received them for a valuable consideration; he would in that case, have stood in the situation of a creditor, and would have been entitled to receive a dividend on the notes; but at the time of the assignment, or at the time of the signing of the release, Moore, Myers, and Co., were not indebted to the estate of John Stoddart, or his assigns on these notes—no debt existed then, for his assignees obtained the notes after the sixty days; and upon what principle they could come in as creditors under the assignment, and claim a dividend, I am really at a loss to conceive. No debt was existing at this time, by or from either party,—no cause of action then existed by Stoddart’s assignees against Moore, Myers, and Co.: their cause of action arose after the assignment, and arose by their taking up endorsed paper of a debtor, after they had executed a release of all actions and all causes of action existing on the 7th day of March, 1820; not of causes of action, which should exist thereafter, as on the 7th day of May, 1820. An endorser or transferee, who did not entitle himself to the notes, by actually paying for them before the assignment, cannot be a creditor within its terms. I helieve no instance can be produced, where an endorser of a note was ever entitled to sustain a suit, when no payment was made by him. In the case of a bankrupt, an endorser being in the nature of a surety, cannot prove a debt under the commission, unless he has actually paid the money before the bankruptcy. 1 Hen. Blacks. Rep. 641.
I apprehend the remedy which the plaintiffs have upon these notes, is against Moore, Myers, and Co., or John Stoddart, personally; but to the fund in the hands of the assignees of Moore, Myers, and Co., they have not entitled themselves. My answer to the proposed question, .therefore, is, that the assignees of John *266Stoddart are not entitled to a dividend from the estate of Moore, Myers, and Co., on the notes, which were taken up by them, after the time of the assignment and release. Judgment is therefore to be entered for the defendants.
Judgment for the defendants.