Field J., delivered the opinion of the Court
Terry, C. J., concurring.
The question presented for consideration in this case, relates to the validity of the mortgage executed by Deitz to Stanford Brothers, to secure his indebtedness to them, and to protect them from liablities incurred by their endorsements of his paper. Deitz was at the time insolvent, and the mortgage embraced his entire property. It is insisted, by the appellant, that the instrument, though a mortgage in form, is in fact an assignment for the benefit of certain creditors, in contravention of the statute, which prohibits assignments by insolvent debtors, and is therefore void. The object of the statute was, undoubtedly, to do away with all voluntary assignments by a debtor in failing circumstances, for the benefit of his creditors. Such assignments were generally made to some friend, who often held the property for the real benefit of the assignor, whilst ostensibly holding it for the benefit of the creditors. Debtors in failing circumstances resorted to this mode of placing their property beyond the reach of attachments, whilst, in fact, they reserved its use through the instrumentality of a convenient assignee. The difficulty of making the assignees, even when responsible, account to the creditors, was so great as to be seldom attempted; and, of course, when they were not responsible, the attempt was never made. These assignments thus became a fruitful source [275]*275of fraud, and it was against the evils thus jDroduced that the statute of this State was leveled. It was never intended to prevent an insolvent debtor from transferring his property directly to his creditor, either absolutely, in payment of his debts, or as security, by way of mortgage. An assignment, in the sense of the statute, must embrace a trust for others than the assignee. Without the creation of such trust, the conveyance directly to the creditor, with authority to him to sell the property transferred, and to apply the proceeds in discharge of the indebtedness to himself and the liabilities he has incurred, is only a mortgage, whatever its form, and is not within the letter or spirit of the statute. The assignee acquires only a specific lien upon the property. A trust, it is true, as to the surplus, results in favor of the assignor; but that arises from the nature of the transaction, as one of security. Such trust results in all cases of mortgage, but is not the object of their execution.
The authorities which sustain the validity of transfers, like the one under consideration, are numerous and decisive. In Vermont, there is a statute which prohibits all general assignments by debtors for the benefit of creditors, and yet, in Peck v. Merrill, (26 Ver., 686,) the Supreme Court of that State held that a transfer, by a debtor, of all his property directly to his creditors, to secure an indebtedness to them and liabilities incurred by them as sureties, was not in violation of the statute “It is evident from the authorities,” says the Court, “ that the transfer by a debtor of all his property does not, of itself, make what is termed a general assignment; but it must also be conveyed to trustees, to be held by them in trust for other creditors. If it is conveyed directly to creditors or sureties, for their benefit, and no trust is created for others, the transfer is then to be treated as a mortgage or pledge of personal property. In such case, there is no more impropriety in taking a lien on the whole of the debtor’s property than upon a part, provided there is not an unreasonable disproportion between the value of the property and the amount of the debt.”
By a statute of Mew Hampshire, no assignment, made by a debtor for the benefit of creditors, is valid, unless it provides for an equal distribution of his property among all his creditors, in equal proportions, according to their respective claims; and yet, in Low v. Wyman, (8 N. H., 536,) it was held that the pledge by a debtor of all his property for the payment of a particular debt was not an assignment, within the intent and meaning of the statute : “ The statute,” says the Court, “ could never have been intended to embrace a mortgage or a pledge of any or all of a man’s property for the security of a particular debt. A debtor has an undoubted right to convey all his property to one of his creditors, in ^satisfaction of his debt. The statute was not intended to prohibit such a preference. And, if he can convey all [276]*276his property in satisfaction of a particular debt, there seems to be no sound reason why he should not be permitted to pledge all his property to secure the payment of such debt.” A similar ruling "was made in Barker v. Hall, (13 N. H., 298,) where a debtor mortgaged all his property to secure the payment of a portion of his debts, leaving others unprovided for.
In Connecticut, a statute provides “ that all conveyances and assignments of any lands, tenements, goods, chattels, or choses in action, hereafter made, directly or indirectly, by any person in failing circumstances, with a view to his insolvency, to any person or persons, in trust for his creditors, or any of them, shall, as against the creditors of the person making such conveyance or assignment, be deemed and adjudged fraudulent and utterly void; unless the same be made in writing, for the benefit of all said creditors, in proportion to their respective claims, etc.;” and in Bates v. Coe, (10 Conn., 280,) the question arose whether a mortgage, executed by a debtor in failing circumstances, and with a view to his insolvency, of all his estate, to parties who had become endorsers upon his paper, to secure them against their liabilities, was fraudulent and void under the above provision of law; and it was held that the instrument was neither a conveyance nor an assignment, within the meaning of the statute. “ The prohibition,” says the Court, “is of conveyances and assignments. But, surely, a mortgage is not an assignment, for that passes the whole interest in the thing assigned; whereas, a mortgage creates a lien only in favor of the mortgagee. Hor is it a conveyance, within the meaning of that term, as it has been understood by jurists in Hew York, Massachusetts, Maine, and Connecticut, for the last thirty years, and by English Judges for the last half century.”
In Ohio, there is a statute which provides that all assignments of property in trust, which shall be made by debtors to trustees, in contemplation of insolvency, with the design to prefer one or more creditors, to the exclusion of others, shall be held to enure to the benefit of all the creditors; and, in Doremus v. O’Harra, (1 Ohio State Rep., 45,) the Suju’eme Court of that State observed: “ We suppose that the plain and obvious intent of the law was only to apply to those cases where the person receiving the assignment could be considered as standing in some relation as a trustee, either in terms or by fair implication, other than that which the mere taking of security for his debt would create.”
By a statute of Hew York, all conveyances and transfers of goods, chattels, or things in action, made in trust for the use of the person making the same, are declared to be void as against existing or subsequent creditors, (2 R. S., 136, § 1;) and in Leitch v. Hollister, (4 Com., 211,) an assignment, by an insolvent debtor, of a chose in action to certain of his creditors, for the purpose of [277]*277securing their demands against him, reserving the surplus to himself, was held valid. “ The conveyance," says the Court, “
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Field J., delivered the opinion of the Court
Terry, C. J., concurring.
The question presented for consideration in this case, relates to the validity of the mortgage executed by Deitz to Stanford Brothers, to secure his indebtedness to them, and to protect them from liablities incurred by their endorsements of his paper. Deitz was at the time insolvent, and the mortgage embraced his entire property. It is insisted, by the appellant, that the instrument, though a mortgage in form, is in fact an assignment for the benefit of certain creditors, in contravention of the statute, which prohibits assignments by insolvent debtors, and is therefore void. The object of the statute was, undoubtedly, to do away with all voluntary assignments by a debtor in failing circumstances, for the benefit of his creditors. Such assignments were generally made to some friend, who often held the property for the real benefit of the assignor, whilst ostensibly holding it for the benefit of the creditors. Debtors in failing circumstances resorted to this mode of placing their property beyond the reach of attachments, whilst, in fact, they reserved its use through the instrumentality of a convenient assignee. The difficulty of making the assignees, even when responsible, account to the creditors, was so great as to be seldom attempted; and, of course, when they were not responsible, the attempt was never made. These assignments thus became a fruitful source [275]*275of fraud, and it was against the evils thus jDroduced that the statute of this State was leveled. It was never intended to prevent an insolvent debtor from transferring his property directly to his creditor, either absolutely, in payment of his debts, or as security, by way of mortgage. An assignment, in the sense of the statute, must embrace a trust for others than the assignee. Without the creation of such trust, the conveyance directly to the creditor, with authority to him to sell the property transferred, and to apply the proceeds in discharge of the indebtedness to himself and the liabilities he has incurred, is only a mortgage, whatever its form, and is not within the letter or spirit of the statute. The assignee acquires only a specific lien upon the property. A trust, it is true, as to the surplus, results in favor of the assignor; but that arises from the nature of the transaction, as one of security. Such trust results in all cases of mortgage, but is not the object of their execution.
The authorities which sustain the validity of transfers, like the one under consideration, are numerous and decisive. In Vermont, there is a statute which prohibits all general assignments by debtors for the benefit of creditors, and yet, in Peck v. Merrill, (26 Ver., 686,) the Supreme Court of that State held that a transfer, by a debtor, of all his property directly to his creditors, to secure an indebtedness to them and liabilities incurred by them as sureties, was not in violation of the statute “It is evident from the authorities,” says the Court, “ that the transfer by a debtor of all his property does not, of itself, make what is termed a general assignment; but it must also be conveyed to trustees, to be held by them in trust for other creditors. If it is conveyed directly to creditors or sureties, for their benefit, and no trust is created for others, the transfer is then to be treated as a mortgage or pledge of personal property. In such case, there is no more impropriety in taking a lien on the whole of the debtor’s property than upon a part, provided there is not an unreasonable disproportion between the value of the property and the amount of the debt.”
By a statute of Mew Hampshire, no assignment, made by a debtor for the benefit of creditors, is valid, unless it provides for an equal distribution of his property among all his creditors, in equal proportions, according to their respective claims; and yet, in Low v. Wyman, (8 N. H., 536,) it was held that the pledge by a debtor of all his property for the payment of a particular debt was not an assignment, within the intent and meaning of the statute : “ The statute,” says the Court, “ could never have been intended to embrace a mortgage or a pledge of any or all of a man’s property for the security of a particular debt. A debtor has an undoubted right to convey all his property to one of his creditors, in ^satisfaction of his debt. The statute was not intended to prohibit such a preference. And, if he can convey all [276]*276his property in satisfaction of a particular debt, there seems to be no sound reason why he should not be permitted to pledge all his property to secure the payment of such debt.” A similar ruling "was made in Barker v. Hall, (13 N. H., 298,) where a debtor mortgaged all his property to secure the payment of a portion of his debts, leaving others unprovided for.
In Connecticut, a statute provides “ that all conveyances and assignments of any lands, tenements, goods, chattels, or choses in action, hereafter made, directly or indirectly, by any person in failing circumstances, with a view to his insolvency, to any person or persons, in trust for his creditors, or any of them, shall, as against the creditors of the person making such conveyance or assignment, be deemed and adjudged fraudulent and utterly void; unless the same be made in writing, for the benefit of all said creditors, in proportion to their respective claims, etc.;” and in Bates v. Coe, (10 Conn., 280,) the question arose whether a mortgage, executed by a debtor in failing circumstances, and with a view to his insolvency, of all his estate, to parties who had become endorsers upon his paper, to secure them against their liabilities, was fraudulent and void under the above provision of law; and it was held that the instrument was neither a conveyance nor an assignment, within the meaning of the statute. “ The prohibition,” says the Court, “is of conveyances and assignments. But, surely, a mortgage is not an assignment, for that passes the whole interest in the thing assigned; whereas, a mortgage creates a lien only in favor of the mortgagee. Hor is it a conveyance, within the meaning of that term, as it has been understood by jurists in Hew York, Massachusetts, Maine, and Connecticut, for the last thirty years, and by English Judges for the last half century.”
In Ohio, there is a statute which provides that all assignments of property in trust, which shall be made by debtors to trustees, in contemplation of insolvency, with the design to prefer one or more creditors, to the exclusion of others, shall be held to enure to the benefit of all the creditors; and, in Doremus v. O’Harra, (1 Ohio State Rep., 45,) the Suju’eme Court of that State observed: “ We suppose that the plain and obvious intent of the law was only to apply to those cases where the person receiving the assignment could be considered as standing in some relation as a trustee, either in terms or by fair implication, other than that which the mere taking of security for his debt would create.”
By a statute of Hew York, all conveyances and transfers of goods, chattels, or things in action, made in trust for the use of the person making the same, are declared to be void as against existing or subsequent creditors, (2 R. S., 136, § 1;) and in Leitch v. Hollister, (4 Com., 211,) an assignment, by an insolvent debtor, of a chose in action to certain of his creditors, for the purpose of [277]*277securing their demands against him, reserving the surplus to himself, was held valid. “ The conveyance," says the Court, “ whatever may be its form, is in effect a mortgage of the property transferred. A trust, as to the surplus, results from, the nature of the security, and is not the object, or one of the objects, of the assignment. Whether expressed in the instrument, or left to implication, is immaterial. The assignee does not acquire the entire legal and equitable interest in the property conveyed, subject to the trust; but a specific lien upon it. The residuary interest of the assignor may, according to its nature, or that of the property, be reached by execution or by bill in equity. The creditor attaches that interest, as the property of the debtor, and is not obliged to postpone action until the determination of any trust. He is, therefore, neither delayed, hindered, nor defrauded in any legal sense." (See, also, Eastman v. McAlpin, 1 Kelly, 157; Richards v. Levin, 16 Mo., 596; Henshaw v. Sumner, 23 Pick., 446; Bishop v. Halsey, 13 Howard’s Prac. Rep., 154; Glen v. Grover, 3 Md., 312.)
The axithorities cited establish conclusively the validity of the transfer in the present case; and this is equally clear upon ¡principle. From the very power which a man possesses over own property, it follows that he can dispose of it in any manner he may see fit, which does not contravene the general policy of the law. That policy restricts the power of disposition, so as to prevent the withdrawal of the property from the claims of his creditors. It is no part of such policy to inhibit its application to the payment of one debt rather than another. It would, indeed, be unreasonable to deny, on the one hand, the right to give a preference by voluntary payment or security, and to allow, on the other hand, such preference to be acquired by compulsory process of attachment or execution. A conveyance, giving such preference, is not fraudulent, though the debtor be insolvent, and the creditor be aware, at the time, that it will have the effect of defeating the collection of other debts. To avoid the conveyance, there must be a real design on the part of the debtor to prevent the application of his property, in whole or in part, to the satisfaction of his debts. A creditor violates no rule of law when he takes payment or security for his demand, though others are thereby deprived of all means of obtaining satisfaction of their own equally meritorious claims. (Nicholson v. Leavitt, 4 Sand., 252; Covanhovan v. Hart, 21 Penn., 495; Warland v. Kimberlin, 6 B. Mon., 608; Kinnard v. Adams, 11 B. Mon., 102.)
In all the cases cited by the counsel of the appellant, the instruments declared to be void, created a trust in favor of parties other than the assignees. Thus, in Cheever v. Hays, (3 Cal., 471,) the assignment was of all the property of the assignors, in trust, for the benefit of all their creditors. In Groschen v. Page, [278]*278(5 Cal. Rep., 138,) the assignment was m ¿rest, for the benefit of such of the creditors of the assignors as would consent to an extension of time, or to a substitution of security. So, in the cases cited by the appellant, from New York and Yermont, the instruments created a trust, and the decisions in those cases have no application to a conveyance by the debtor directly to his credit- or, either in payment of or as security for his debt.
We are clearly of opinion that the conveyance, by way of mortgage to Stanford Brothers, is not an assignment either within the letter or spirit of the thirty-ninth section of the “Act for the relief of Insolvent Debtors and the protection of Creditors;” and does not create a trust for the use of the mortgagor, prohibited by the Statute of Frauds.
Judgment affirmed.
[Baldwin, J., having been counsel in the Court below, did not sit in the case.]