Pope v. Brandon

2 Stew. 401

Opinion

By JUDGE COLLIER,

The record offers for our examination these topics:

1. The character of the deed from the President, Directors, & Co. to the plaintiff, and the sufficiency of its consideration. •

2. The lien created by a judgment upon real estate; its nature, how it operates, and when it begins.

3.- The legality of the Judge’s instructions to the jury.

I, The deed is a conveyance of all the property of the bank, for the payment of its debts, without preference or priority to its creditors. This being professedly the object of the deed, the Messrs Brandon’s, with regard to the property conveyed, are as favorably situated as any other creditors. And to ascertain whether they can- vary the situation assigned them in the payment of their demand, and subject the property transferred, to the satisfaction. of their judgment, without regard to other creditors, aré inquiries into the validity of the deed, which become material.

The deed is absolute', and beyond the control of the bank, and therefore does not require, as essential to its operation, the positive assent of any of its creditors. In this respect, there is art obvious dissimilarity between an assignment for the benefit of all creditors,' and one which provides only for those creditors, who consent to come in under its provisions. In the one case, the deed provides for no act to be done by the creditor; in the other, there is a provision requiring an express stipulation on his part to be paid as- it directs. The reasoning of the Court in Robinson v. Rapelye & Smith, recognizes this-distinction:

Footnotes

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a

. The right of a debtor to make a general assignment of his effects for the benefit of his creditors,- has not been controverted in argument; but it is insisted that such right does not extend to a trading corporation. On this point, no authority is cited; and as our own resources furnish us with none that favors the idea of a restriction of corporate powers in this particular, we must therefore consider it upon principle. The right of a debtor to vest his properly in trustees for the benefit of his creditors, results from the control which everyone possesses by law over his own estate. This control continues free from legal restraint until some one else acquires an interest in the same estate. It cannot be that a corporation is under greater restraint in regard to the use and enjoyment of its estate, than a natural person, unless a restriction is imposed by positive law, or may be inferred from its character, and the object of its existence. Chancellor Kent, in speaking of the powers and capacities of corporations, says, “ it was incident at common law, to every corporation, to have a capacity to purchase and alien lands, unless they were specially restrained by their charters, or by statute. Independent of positive law, all corporations have the absolute jus disponendiy neither limited as to objects, nor circumscribed as to quantity. This was so understood by the Court and bar in the modern case of the Mayor and Commonalty of Colchester v. Lowten.b And this common law right continued in England, until it was taken away as to religious corporations, by several restraining statutes in the reign of Eli zabeth.”c This, we believe to be a correct view of the powers of corporations on the point we are considering. But the right of the. bank in this case, to alien its estate, does not depend for its existence upon the common law; it is- expressly given by its charter, a and must be taken to exist without limitation as to object.

It is argued for the defendants, that it was not competent for the bank to make any disposition of its effects, which wouid relieve it from the liability to satisfy directly the judgment of the Messrs Brandon’s. To sustain this argument, we are referred to the 11th section of the char-ter, b which, after declaring the liability of the stockholders to the payment of the debts of the bank, concludes thus: “ but this provision shall not be construed to exempt the said corporation, or the lands, tenements, goods or chattels of the same, from being also liable.” This provision was doubtless introduced ex industria. The Legislature that enacted the charter, did not intend that the remedy against a stockholder should be exclusive of the appropriate remedy against the corporation; and lest it might be thus unnaturally construed by this provision, they declared the law, and did not introduce a new liability, or impose any restriction upon tbe bank in the disposition of its estate.

Again, the charter must be construed upon a view of all its parts, and such a construction given, as that every part may be operative, Ut res magis valeat quam per eat. If the 1 1-th section was to receive the construction insisted on, the 4th section, would, to some extent, be inoperative. They must be both thus construed: the4th is an authority to sell and dispose of the corporate estate; the 11th-makes that estate subject to thepayment of the debts of the corporation, until it is sold and disposed of, and thus construing them, each exercises its full scope and effect. Was reason necessary to illustrate further the fallacy of the argument we are examining, the inconvenience that would have resulted from thus uniting the powers of -the bank, interposes a powerful objection to its justness. It is essential to the prosperity of a banking institution, that ?t should be .permitted to marshall its resources, free from legislative control, further than policy would dictate. In -the progress of its negotiations, it may be compelled to receive real or personal estate, in discharge-of the liability of its debtors;, and if it were not allowed to change its property into an active capital, -its operations might be paralysed, its usefulness impaired, and its business rendered unprofitable. But this objection to the powers of the bank, need not be further examined, for it is apparent from a view of the charter itself, that it has no just foundation^-

The defendant’s counsel have impugned the deed oft asaignment, upon a suggestion that it is not sustained by a sufficient consideration. Chancery has lent its aid in some cases, which, are however rare, to avoid a contract founded on a gross inadequacy of consideration; but in these cases the inequality was so great as te shock the understanding of mankind, and to induce the belief that the transaction was fraudulent. It is very clear, that the deed from the bank to the plaintiff is not objectionable for gross inadequacy of consideration. The extent of the consideration is not set forth in the deed; it recites that the bank is indebted to sundxy individuals, in the sum of two hundred and eighty-four dollars, and eighty-four cents;, and that a large portion of their bills is yet unredeemed. These are directed, with all other debts of the bank, to be paid by the plaintiff. The nominal amount of the evidences of debt, and the estimated value of the property conveyed, is about sixty thousand dollars. Of the debts, twelve thousand dollars and upwards, will be lost by insolvencies. The plaintiff has, since the execution of the deed, paid and secured of the debts owing by the bank, about thirty-five thousand dollars, and it does not appear what amount is now due from it. This statement of facts may suffice to shew, that the suggestion of gross inadequacy of consideration, could it be entertained at law, is not sustained by the record.

The legal validity of the deed is also questioned by the defendant’s counsel, upon the supposition, that the plaintiff is both grantor and grantee. It is certainly a correct proposition, that one person cannot occupy at law both these ■situations at the same time, in regard to the same object. But the objection in this instance, it is apprehended, is founded upon a misconception of the nature and effect of the assignment made by the bank. It supposes that Leroy Pope assigns to Leroy Pope, when, in truth, the President, Directors & Co. make a conveyance in their corporate character to the plaintiff. The interest which he had in the property conveyed to him was different from that which he had in property that belonged to him in his individual capacity. Nothing is more usual than for a corporation to derive property by purchase, from a corporation.a Transactions between persons thus circumstanced, have been always recognized, and in principle they appear to us unobjectionable. The converse would establish tire doctrine, that' a bank could not coerce the collection of a note discounted against one of its stockholders, because he was a creditor; or, that a corporator could not sue the corporation, because he was a constituent part of it. This may be considered strange, yet it is a legitimate deduction from the argument. The deed, so far as the record discloses, is free from any objection of actual fraud, and, as we have shewn, is not in itself constructively fraudulent; hence the property in question could not have been sold under the Messrs Brandon’s execution, unless the deed from the bank may be invalidated by an objection other than that of fraud.

2. The deed of assignment to the plaintiff, bears date on the day when the term of this Court commenced, at which the judgment in favor of the Messrs Brandon’s was rendered ; but the judgment was not rendered until the first day of February, more than twenty days thereafter. From these facts, it is argued for the defendants, that the judgment relates retrospectively to the first day of the term, and from that period created a lien on the real property of the bank, in favor of the Messrs Brandons, which it was not competent for the bank to divest by its transfer on that or any succceeding day. It is a well settled rule of the common law, that a judgment operates to restrain the control of the debtor over his real estate, so as to defeat its satisfaction; but this rule, it is believed, does not give to a judgment a retrospective operation against a bonafide assignee. The reason of the rule is founded upon' the supposition, that the proceedings of a Court of record, are of public •notoriety; and that he who purchases real estate after judgment, purchases with a knowledge of its existence. To give, effect to purchases, under such circumstances, would be a fraud upon the judgment creditor. The reason, it is apparent, will not extend to give judgments a lien from a period of time anterior to their rendition; for until then, the purchaser cannot be advised of its existence, and consequently cannot be held to have purchased in fraud of a judgment creditor; cessante ratione, cessat ipsa lex.

The argument of the retrospective influence of judgments is predicated upon the idea, that, as the whole term is considered in law as but one day, every thing done during the term must relate to its commencement. This conclusion does not necessarily follow. It is true that the term of a Court is for some purposes but one day; as a plea put in on the last day of the term, is a plea of the first day of the term, and upon this idea of continued sitting of the Court, Judges may alter and amend their judgments in the same term. This fiction, like all others, which the law acknowledges is designed to advance, but never to defeat the purposes of justice. In jictione juris, semper consiste moquitas. To give a retroactive effect to a judgment, would be rather subversive than promotive of justice, as a purchaser could not be constructively advised of it, until it had an actual existence. So particular have the Courts been in adjusting the question of priority, between the fair purchaser and the judgment creditor, where the deed of sale and the judgment bear date of the same day, that inquiries are allowed to ascertain the precise period of the execution of the one, and the rendition of the other.a Having shewn that a judgment can only operate prospectively against a fair purchaser, we are brought to the third and last point of inquiry.

3. Whatever of plausibility dr force of argument may be brought in aid of the instructions of the Judge to the jury, these arguments must not be here considered and discussed. They were brought to the view of this Court, in 'Robinson v. Rapelye fy Smith, decided at thelast term, and in that case fully and satisfactorily examined. In reviewing them, the Court in its opinion, says, “ no act of the trustees can affect the assenting creditors, unless they, in some degree, contributed to it, because the trustees are only agents for the assignors.” The deed of assignment in that cause provided for the assent of the creditors, by the execution of the deed, many of whom executed it. This provision constitutes the most material difference between that case and the present; yet the principle embraced in the quotation from that opinion, applies here. And let it be conceded that the plaintiff, as trustee, should have proposed to secure to the Messrs Bran-dons, a rateable amount of their judgment, and omitted this duty; the assignment for that cause could not be avoided, unless it appeared, that in this neglect of duty, the plaintiff was influenced by his assignors; a circumstance which the Judge seems not to have noticed. For this reason, the instruction is erroneous; and for the additional cause, that it supposes the plaintiff was obliged by the deed to offer to secure to the Messrs Brandons a rateable portion of their judgment, when no other obligation was imposed than to pay their judgment pari passu, with the other creditors. We have been more prolix in expressing ouropin ion than Was necessary to a decision of the question im* mediately before the Court, and have considered the material points discussed, which it appeared from the evidence in the record might come up, should the case be remanded. We have taken this course, as it was intimated from the bar, that, shonld the judgment here be adverse to the defendants on all the points introduced in argument, it would put an end to further controversy.

It is the result of our conclusions upon all the points, that the judgment be reversed, and if the defendants desire it, that the cause be remanded.

Judgment reversed,-

Ante page.-8®-

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1 Ves. & Bea. 226,237 240, and 244.

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2 Kent's com.227.

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Laws of AI. p. 34, section 4‘

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Laws of Al. 39'

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Waring v. Cataw. Co. 2 Bay. 109.

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Ex parte Stagg. 1 Nott & Me- or ’