Doggett, Bassett & Hills Co. v. Herman

16 F. 812

• Court: U.S. Circuit Court for the District of Colorado
• Decided: July 1, 1883
• Status: Published

Opinion

McCrary, J.

Upon the facts of this case as above stated the following questions arise: First. Was the assignment to Monheimer fraudulent and void ? Second. Did Babcock acquire a good title to the goods by virtue of his purchase from the assignee? By-the statute of.this state, “to regulate assignments for the benefit of creditors,” approved February 12, 1881, it is provided that a preference may be given in favor of servants, laborers, and employes of the assignor to the amount of not more than $50 to any one person. And it is further provided that “all the residue of the proceeds of such estate shall be distributed ratably among all other creditors; and any preference of one creditor over another shall be entirely null and void, anything in the deed of assignment to the contrary notwithstanding.”

The effect of this statute is, no doubt, to render preferences which are provided for in the instrument itself inoperative, while upholding the validity of the assignments; but the question here is whether a preference made by a delivery of part of the debtor’s estate to one or more of his creditors in payment of their debts will render the assignment void, where the two acts are simultaneous, or so nearly so as to constitute parts of one and the same transaction.

In the present case it appears that after the assignment was executed, but before the assignee had accepted or actually taken possession of the goods, the assignors, who were hopelessly insolvent, went to Babcock, one of their creditors, and informed him of the assignment, and proposed to turn over to him a part of the stock of goods, in full payment of his demand, before the assignee should take possession on the succeeding day. It was arranged that the transfer to Babcock should be made that night, in order to prevent the goods coming into the hands of the assignee. It would seem clear that this preference given to Babcock and the assignment to Monlieimer were parts of the same transaction. The assignment had been executed before the goods were taken out and delivered to Babcock, and possession was about to be delivered to the assignee. Babcock, knowing this fact, took the goods from the store to secure himself in full, to the exclusion of other creditors. The transactions were connected and blended together in such a way as to make it impossible in law to separate them. It cannot be said that the preference was given in good faith before the assignment was executed; nor can it bo claimed that Babcock took the preference in ignorance of the assignment. A transaction of this character is a plain violation of the statute above cited. If this assignment can stand, an insolvent debtor in this state may in one day, and by substantially one general arrangement, turn over- nine-tenths of his property to favored creditors, and one-tenth to an assignee to be divided among those not so favored. The fact that the preference was not provided for in the assignment itself, but by an arrangement or transfer outside of it and contemporaneous with it, shows the intent to evade and violate the statute; for, if all the property were conveyed to the assignee, and the preferences expressed in the assignment, the law would declare the preference void and the assignment good. All the property being within the control of the court in the hands of- the assignee, all the creditors could be protected in their rights. But where the preference is by actual delivery to the preferred creditors, for the purpose of keeping it from passing to the assignee, the purpose of the statute, which is equality among creditors, is defeated, and the courts are deprived of the means of enforcing its eminently just and equitable provisions. The assignment must be held to be void.

2. It remains to be determined whether the intervenor, Babcock, acquired a good title to the goods by virtue of his purchase from the assignee. That he had notice of the fraudulent intent of the assignors, and their purpose to evade the provisions of the statute, is apparent from the facts already stated. But it is insisted that the proof does not show that Monlieimer, the assignee, was a party to the fraud, and that, therefore, he acquired a good title, and conveyed a good title to Babcock. In our opinion it is not necessary, in order to set aside the assignment as fraudulent, to show that Monlieimer, the assignee, was a party to the fraud. The intent of the assignor in making the assignment is the material consideration in determining as to its validity in cases where it is assailed as fraudulent. The assignee is not personally interested; the real parties in interest are the debtor on one side and the creditors on the other. If a debtor conceives the purpose of defrauding a portion of his creditors, and an assignment of his property is a part of the scheme, it would, as it seems to us, be extremely unreasonable to hold that, by concealing his purpose from the assignee, he may be permitted to consummate his fraud as against the creditors, where the assignor himself selects the assignee and makes the assignment to him without the knowledge of the complaining creditors. We think the view here expressed is supported by the weight both of reason and authority. Burrill, As-signm. § 337, and cases cited.

As the assignment to Monkeimer was manifestly executed for the purpose of depriving these plaintiffs of their rights under the statute of Colorado, and thereby of hindering, delaying, and defrauding them in the collection of their debts, and as the intervenor, Babcock, had full knowledge of these facts, we must hold that as to him the assignment was unlawful and fraudulent, and passed no title to the assignee, and that Babcock does not stand in the light of a bona fide purchaser in good faith.

The result of these views is that the court finds the issues upon the intervening petition of William Babcock for the plaintiff in the attachment, and judgment will be entered accordingly.