Jaffray v. McGehee - 107 U.S. 361 (1883)
U.S. Supreme Court
Jaffray v. McGehee, 107 U.S. 361 (1883)
Jaffray v. McGehee
Decided March 19, 1883
107 U.S. 361
1. The statute of Arkansas prescribing the manner in which property assigned for the benefit of creditors shall he sold is mandatory.
2. An assignment made in the state is void if it vests in the assignee a discretion in conflict with the provisions of that statute, and authorizes him in effect to sell such property in a manner which they do not permit.
The statutes of Arkansas contain the following provisions:
"SEC. 385. In all cases in which any person shall make an assignment of any property, whether real, personal, or chosen in action, for the payment of debts, before the assignee thereof shall be entitled to take possession, sell, or in any way manage or control any property so assigned, he shall be required to file in the office of the clerk of the court exercising probate jurisdiction, a full and complete inventory and description of such property, and also make and execute a bond to the Arkansas in double the estimated value of the property in said assignment, with good and sufficient security, to be approved by the judge of said court, conditioned that such assignee shall execute the trust confided to him, sell the property to the best advantage, and pay the proceeds thereof to the creditors mentioned in said assignment, according to the terms thereof, and faithfully perform the duties according to law."
"SEC. 387. Said assignee shall be required to sell all the property assigned to him for the payment of debts at public auction, within one hundred and twenty days after the execution of the bond required by this act, and shall give at least thirty days' notice of the time and place of such sale. And any person damaged by the neglect, waste, or improper conduct of such assignee, shall be
entitled to bring his action on the bond in the name of the state for the use and benefit of such person."
Gantt'a Digest, pp. 207, 208.
While these sections were in force, to-wit, on December 19, 1878, James C. Moss and John S. Bell, partners under the name of Moss & Bell, doing business as merchants at Pine Bluff, Arkansas, conveyed, by an assignment in writing, all their goods, wares, and merchandise, and choses in action to the defendant James M. Hudson, as trustee in trust for the payment of their debts. The deed of assignment preferred certain creditors, who afterwards became the complainants in this suit, and required the trustee to pay them in full if the proceeds of the property assigned should be sufficient for that purpose and if there should be any surplus to pay it share and share alike to other creditors. The powers conferred on the trustee were as follows:
"To sell and dispose of all of said property for cash as he should deem advisable and right, and to this end to use his own discretion, subject to the supervision of the creditors, . . . and to conduct and transact all of the business as he may deem proper in the exercise of a sound discretion, and as he shall deem most advisable for the benefit of creditors and their trust, and he shall have power to appoint such assistants, agents, and attorneys as in his judgment may be necessary to enable him to fulfill this trust,"
Hudson accepted the trust. On the 21st of December, 1878, he gave bond according to law, and filed in the office of the clerk of the probate court an inventory of the property conveyed to him by the deed of assignment. On the same day, McGehee, Snowden & Violett recovered in the court below a judgment against Moss & Bell for $10,992. An which execution was issued thereon Jan. 12, 1879, came that day into the hands of the marshal of the district, who levied it on and took into his possession the assigned goods and chattels and was about to advertise and sell them to satisfy the writ when the bill in this case was filed by the preferred creditors. The bill recited the foregoing facts and prayed an injunction against the marshal and McGehee, Snowden & Violett, forbidding them to interfere with the property assigned to Hudson, and that they might be decreed to return the same to him, &c.
The defendant demurred to the bill for want of equity. The circuit court sustained the demurrer on the ground that the deed of assignment was void on its face and dismissed the bill. The complainants thereupon appealed.