In Mississippi, an insolvent debtor may make a general
assignment of his property for the benefit of his creditors, with
preferences.
A deed by an insolvent debtor in Mississippi to secure sureties
on his note made in advance of, and in contemplation of, a general
assignment for the benefit of creditors is valid under the laws of
that state, although containing a provision that the grantor shall
remain in possession until the maturity of the note.
A payment by an insolvent debtor of a debt due to his wife, in
advance and in contemplation of a general assignment for the
benefit of creditors, does not invalidate the subsequent
assignment.
The taking of supplies and of money for family use from the
store of an insolvent trader by his wife does not invalidate a
general assignment for the benefit of creditors subsequently
made.
In March, 1882, one S. H. Gunter, a merchant who had been for
many years engaged in business at Sardis, in Mississippi, was
largely indebted to the complainants and others, and, being unable
to pay them in full, made a general assignment of his property of
every description, except such as was exempt from execution, to one
S. G. Spain, as trustee, for their benefit, which was recorded the
same day. The assignment preferred certain of the creditors, who
are named in a schedule annexed. Among them were the complainants,
Estes, Doan & Co., merchants at Memphis, in Tennessee. The
Page 122 U. S. 451
sum due them was $13,587.68, but they were preferred only to the
amount of $10,000. Their claim grew out of advances of cash and
supplies furnished to Gunter. There is no question as to its amount
or justice. On the same day, and immediately preceding the
execution of the assignment, Gunter executed a deed of a house and
lot in Sardis to one J. G. Hall, as trustee, to secure the firm of
Boothe, Rice & Carleton, who were sureties upon his note, held
by the Bank of Sardis, for $1,000, due on the first of December,
1882. This deed was to be void if the note was paid at maturity;
otherwise the trustee was, on the written request of the sureties,
to take possession of and sell the property at public auction,
after due notice, and apply the proceeds to its payment. Any
surplus was to be returned to the grantor. It the property should
at any time "become endangered" as a security, the trustee was at
liberty to take possession of and hold it until the debt was
discharged by payment or by sale of the property, but until
demanded by the trustee, the grantor was to hold the same subject
to the deed of trust. This deed was also recorded on the same day,
and a few minutes before the assignment.
At the same time, Gunter transferred and delivered to several of
his clerks and employees certain notes and accounts in payment of
his indebtedness to them. It was also in proof that Gunter was
hopelessly insolvent; that for twelve days before he made the
assignment he knew of his condition, and contemplated making the
assignment; that during this time he gave to his wife the sum of
$900 in payment of an alleged indebtedness to her, and she was
permitted to take money from the drawer of the store, and that more
goods than usual were carried from the store to his house.
Soon after the assignment and deed of trust were recorded, the
defendants Bickham & Moore, who were also creditors of Gunter,
sued out an attachment against him in the Circuit Court of United
States for the Northern District of Mississippi, which was levied
on the property assigned by Gunter to Spain, as trustee. This
attachment was followed by attachments of other creditors, and the
property was seized by the marshal. Spain, the assignee, thereupon
renounced his trust
Page 122 U. S. 452
and refused further to act. Thereupon the complainants, Estes
& Doan, who were much the largest creditors of Gunter, filed
their bill against Bickham & Moore and other attaching
creditors, setting forth the assignment of Gunter to Spain, his
debt to them, the several attachments levied, and the refusal of
Spain, the assignee, to act, and praying the court to appoint a
trustee in his place, to direct the enforcement of the trust, and
to enjoin the attaching creditors from further proceeding with
their suits. Bickham & Moore and other defendants answered,
charging that the assignment was fraudulent and void but admitting
that Spain refused to act as trustee or assignee. Proofs were
taken, and upon the hearing, the court held that the assignment was
fraudulent and void, and accordingly entered a decree dismissing
the bill with costs. From this decree the complainants have
appealed to this Court.
Page 122 U. S. 454
MR. JUSTICE FIELD, after stating the case as above, delivered
the opinion of the Court as follows:
It appears from its opinion in the record that the court below
held the assignment of Gunter for the benefit of his creditors to
be fraudulent and void on these grounds: 1. because of the
execution of the trust deed to Hall to secure the sureties on his
note held by the Bank of Sardis; 2. because of the payment of the
$900 to his wife, shortly before the assignment, for a debt which
he claims to have owed to her; 3. because he permitted her to take
money from the cash-drawer, and 4. because more supplies than usual
were taken from the store to his house shortly before the
assignment.
The answer to these objections is readily given, and it appears
to us conclusive. The laws of Mississippi allow an insolvent debtor
to make a general assignment of his property, in which one or more
of his creditors may be preferred to others.
Page 122 U. S. 455
The assignment is not invalid, therefore, because of the
preferences given. In
Eldridge v. Phillipson, the supreme
court of that state said:
"The right to make a preference results from the dominion which
the owner has over his property; it is a part of his
proprietorship. The law has not said he shall divide his estate
ratably among his creditors. It has left to him the discretion to
act as he will, provided only he acts with the honest intent to pay
a valid debt, and does not, under cover of such a disposition,
stipulate for a benefit to himself."
58 Miss. 270, 280.
Nor did the deed to Hall to secure the sureties on the
assignor's note affect the validity of the assignment, though made
in contemplation of it. Such security might have been provided in
the assignment itself. The assignor had a right to use his property
to protect parties who had become his sureties, as well as to pay
existing debts. Until the assignment, he could dispose of his
property in any way he may have thought proper, so that he did not
thereby defraud any of his creditors.
The court below seems to have concluded that the two
instruments, the assignment and the deed to Hall, should be
considered together, and, as the deed contained a proviso that the
grantor was to remain in possession of the property until the note
matured, and the sureties should request the trustee to take
possession of the same, there was such a reservation for the
benefit of the grantor as rendered the assignment invalid. The deed
was in fact a mortgage of the property to secure against a
prospective liability, and in such cases it is usual for the
grantor or mortgagor to remain in possession of the property until
the maturity of the obligation and a sale of the premises. Standing
by itself, the deed was not open to any serious objection. And even
that reservation was defeated by the assignment, which included the
property in question with other property of the assignor, and
provided that the assignee should take possession of the same and
sell and dispose of it with all convenient diligence. The
assignment was subsequent to the deed, and carried all that could
in any way be considered as a benefit secured by the deed to the
assignor.
Page 122 U. S. 456
The creditors were not, therefore, in any way hindered or
defrauded by the alleged reservation.
There is nothing in Gunter's payment to his wife of the $900
which can affect the validity of the assignment. Gunter's testimony
is all that there was on the subject, and he testifies that she
received the money from her grandfather, and that he borrowed it
from her, and used it. His statement is not contradicted. Under
these circumstances, he was not blameworthy in paying to his wife
the amount he had used belonging to her. But, as counsel well
observes, if that payment were fraudulent, it would not vitiate a
subsequent assignment. A fraudulent disposition of property does
not of itself impair a subsequent general assignment. The assignee
may sue for its recovery, and if successful, it will be for the
benefit of the creditors precisely as if it had been included in
the assignment.
Wilson v. Berg, 88 Penn.St. 167;
Reinhard v. Bank of Kentucky, 6 B.Mon. 252.
The same observation may be made as to the alleged taking of
money by Mrs. Gunter from the cash drawer and of his sending
supplies from the store to his house. She was a clerk in the store,
and took the money from the drawer in the course of business, and
supplies for Gunter's house were generally taken from the store. It
was quite natural, therefore, that he should take needed supplies
before the assignment was executed. There is no evidence that the
supplies were excessive or unreasonable, but even if they were,
that fact would constitute no ground for setting the subsequent
assignment aside.
From a consideration of the whole case, we are clear there is no
just ground shown by the record for disturbing the assignment. If
follows that the decree below must be
Reversed and the cause remanded for further proceedings in
accordance with this opinion, and it is so ordered.
