first files the bill has no preference thereby over the other creditors. If several creditors who have judgments of different dates unite in a bill, they must be paid according to the seniority of their judgments out of the fund pursued, if realized from land, and according to the priority of delivery of their executions to the sheriff, if realized from personal property." 98 No distinction is drawn between the different classes of creditors. Where a conveyance is set aside by a decree in a suit instituted by a prior creditor, a subsequent creditor who has the same equity for having the property applied will share in the fund pro rata with existing creditors." If a creditor be guilty of actual fraud in obtaining a conveyance to himself, he is not entitled to come in parsi passu with the other creditors for a distributive share out of the property which was the subject of the fraud. 100 Thus, where a creditor has endeavored to obtain a fraudulent preference over the other creditors of an insolvent debtor, by procuring a conveyance to himself of all the debtor's property, and the other creditors have obtained a decree setting it aside as null and void, his claims will be postponed till the other creditors are satisfied.101 But where a fraudulent conveyance is set aside at the suit of creditors for reason not involving a charge of fraudulent intent or moral turpitude on the part of the grantee, the grantee will be permitted to share equally with the other creditors, upon condition, however, that he first surrender all the property which has come into his hands under the conveyance. Fraudulent conveyances being valid as between the parties thereto, and void as to creditors only to the extent in which it may be necessary to deal with the conveyed estate for their satisfaction, it follows that the grantee is entitled to the surplus remaining after the satisfaction of their claims.' 985 Gill & J. (Md.) 432 (1833). 99 63 Pa. 284, 289 (1869). 130 15 Iowa 489 (1864). 102 1017 J. J. Marsh, (Ky.) 523, 526 (1832). 102 68 Ill. 240 (1873); 3 Ind. 99 (1851). THE LAW OF DEBTOR AND CREDITOR (PART 3) ASSIGNMENTS FOR THE BENEFIT OF CREDITORS DEFINITION AND NATURE 1. An assignment for the benefit of creditors is a voluntary transfer, without compulsion of law, by a debtor of some or all of his property to an assignee or assignees, in trust, to apply the same or the proceeds thereof to the payment of some or all his debts, and to return the surplus, if any, to the debtor.' An assignment that includes all of the assignor's property is a general one; where only a part of the assignor's property is assigned, it is called a partial assignment. The former is the most usual species of assignment, and it has ever been held to be necessarily implied in the term voluntary assignment. Partial assignments are rare in practice; in some of the United States they are not allowed.' General assignments are especially the subject of consideration. Assignments for the benefit of creditors are of commonlaw origin; but, while they originated at common law without the intervention of any statute, they are, in some jurisdictions, so controlled by assignment statutes as to be distinguished as statutory. Modern assignment laws have greatly 1 Burr. Ass.. Sec. 2; 18 Pa. 333 (1852). 21 Paine (U. S.) 188, 195 (1822). 3 Am. & Eng. Encyc. Law (1st Ed.), Vol. 1. p. 816, note. For notice of copyright, see page immediately following the title page circumscribed the power of making these assignments as the assignor's voluntary act. This has particular reference to the choice of the assignee, the appointment being a temporary one in some states. In California, for instance, it is made to the sheriff, who notifies the creditors, and they elect the assignee. In New Hampshire, the assignment is made to the probate judge, and he appoints as assignee the person elected by two-thirds in number and a majority in value of creditors. In some of the United States, the statutes provide that the assignment shall be for the benefit of all the creditors equally; in others, preferences are legal. Independently of bankrupt and insolvent laws, or laws forbidding preferences, priorities and preferences in favor of particular creditors are allowed. Such preference is not considered inequitable, nor is a stipulation that the creditors taking under it shall release and discharge the debtor from all further claims." These assignments "come into being not by operation of law, or by force of any previous proceeding either by or against the debtor. They are contracts, and rest, like all contracts, upon the consent of the parties." But, it is held, "the deed of assignment is in no sense a contract between the debtor and his creditors, and it does not depend for its validity in law upon their assent. It is a means or mode which the statute permits to be adopted by an insolvent debtor, for the distribution of his estate among his creditors, and, so long as he has acted without fraud, in fact or in law, and has complied with the prescriptions of the act, his conveyance to an assignee, for the purpose stated therein, will stand and be effective. If the distribution is to be made unequally among the creditors, and some are preferred to others in payment, the assignment is not viewed by the courts with any favor, and it is only tolerated and upheld, when all conditions are met for the prevention of fraud.”’' Am. & Eng. Encyc. Law (2d Ed.), Vol. 3, pp. 5, 18. 6 Bish. Ins. Debt., Sec. 104. 5 Bouv. Law Dict., citing 41 Me. 277 (1856); 9 Ind. 68 (1857); 8 Conn. 505 (1831); 16 III. 435 (1855); see subtitle Preferences infra. 2. Under the California civil code, an insolvent may in good faith make an assignment for the benefit of creditors with or without the consent of the latter; and when such an assignment is made, the creditors must either avail themselves of the assets without preferences or not at all." Generally, in the United States, assignments for the benefit of creditors are required to be executed only by the assignor and accepted by the trustee; the express assent or joinder of the creditors as parties to the making of the assignment is not regarded as essential to its validity. In England, the rule is different, and the assignment is revocable until the creditors have assented to it. However, in asserting what it veiws as the true doctrine, an authority says: "The books make a wide distinction between a transfer directly to a creditor and one to a trustee for creditors. In the latter case, the assent of the trustee, by acceptance of the trust, renders the assignment irrevocable. That fulfils the requirement of two parties and an agreement of minds, and the assent of the beneficiaries is not necessary to the validity of the assignment. It creates a trust, and they may assent and claim its enforcement after attachment, execution, or garnishment." In both England and the United States, it appears to be affirmed that when an assignment is made, not to a stranger, a mere trustee, but to a creditor in trust for others, this makes the required assent of all to the assignment, or that no other assent than that of the creditor to whom the assignment is made is necessary. When the assignment is manifestly for the advantage of the creditors, with no provisions prejudicial to thein, their assent will be presumed, unless the contrary appear, though they do not join in the deed of assignment." The nature of general assignments is further explained in considering the requisites." 87 Cal. 453 (1891). Am. & Eng. Encyc. Law (2d Ed.), Vol. 3, p. 62, citing 154 Ill. 227 (1894); 8 Ch. Div. (Eng.) 744 (1878). 10 Burr. Ass., p. 427. 11 Am. & Eng. Encyc. Law (2d Ed.), Vol. 3. p. 63, citing 17 Mass. 552 (1822); 3 McLean (U. S.) 177 (1843); 13 Cal. 242 (1859). 12 See subtitle Requisites infra. PARTIES WHO MAY ASSIGN 3. The right to make a general assignment of all a man's property results from that absolute ownership which every man claims over that which is his own." Every debtor has a legal right to assign property for the security of the debts due by him, and so far from such act being reprehended by the law, it is justified and approved." The competency to make an assignment results from the competency to incur debts." The rule as to mental capacity governs in the case of assignments just as it does in the case of contracts generally. Every person who has capacity to contract has power to pass property to a trustee in making an assignment for the benefit of creditors. Therefore, any person of sound mind, not under legal disability, may make such an assignment. An assignment by an infant is voidable, not void; the act may be ratified when the infant comes of age." An insane person or a person laboring under extreme intoxication is not capable of making a valid assignment. A married woman, under the statutes in most states, can make a valid assignment. A testamentary trustee, that is, one to whom the testator has devised his property, with power to sell it, and with the proceeds to make such investments, and do such acts incident to the carrying on of the business in which the testator had been engaged as he might deem judicious, has no right to assign the property for the benefit of creditors." Nor may an administrator make such an assignment of the estate which he has been appointed to administer.1 A corporation, unless prohibited from doing so by its charter or an express statute, has the power to make a general assignment in trust to a trustee for the benefit of its creditors, just as an individual has." So, also, à limited 137 Pet. (U. S.) 608, 614 (1833). 142 Gall (U. S.) 557 (1815). 15 37 Mich. 237 (1877). 16 Ibid. 17 154 Pa. 307 (1893). 18 41 Pa. 297 (1861). |