Cunningham v. Norton, 125 U. S. 77,
affirmed to the point that the act of the Legislature of Texas of
March 24, 1879, in regard to assignments by insolvent debtors for
the benefit of their creditors was intended to favor such
assignments, and that a provision in such an assignment, void in
itself, did not necessarily vitiate the assignment, or prevent its
execution for the benefit of creditors.
A provision in an assignment for the benefit of creditors that
the assignee shall at once take possession of all the assigned
property "and convert the same into cash" as soon as and upon the
best terms possible can hardly be construed into a discretionary
authority to sell on credit.
In Texas, an assignment for the benefit of creditors under the
statute may be made to more than one assignee.
This is an action of trespass brought in the court below by
Frederick Muller and Adolph Jacobs, assignees of the firm of Louis
Goldsal & Co., of Denison Texas, against
Page 132 U. S. 502
Anthony B. Norton, the United States marshal for the Northern
District of Texas, and the sureties on his official bond for
levying upon and seizing, under certain attachment suits in that
court, the goods, wares, and merchandise of said firm, which had
been assigned to the plaintiffs.
The plaintiffs in their petition set up the fact of the
assignment by virtue of which they assert title to the property,
reciting the main portions of the deed at length, set out the
details of the various levies under the attachment suits, and
prayed judgment for the amount and value of he goods levied on,
which was alleged to be something over $34,000. Upon demurrer to
the petition, the court below held the deed of assignment null and
void, and accordingly rendered a judgment in favor of the
defendants. 19 F. 719. To reverse that judgment this writ of error
is prosecuted.
The deed of assignment was as follows:
"Know all men by these presents that we, Louis Goldsal and
Benjamin Hassberg, doing business as merchants in Denison Grayson
County, Texas, under the firm name and style of 'Louis Goldsal
& Co.,' for and in consideration of the sum of one dollar to us
in hand paid by Fred. Muller and A. Jacobs, of same place, the
receipt of which is hereby acknowledged, and for the further
purposes and considerations hereinafter stated, have this day
assigned, bargained, sold, and conveyed, and by these presents do
assign, bargain, sell, and convey, unto the said Fred. Muller and
A. Jacobs all the property of every kind owned by us or either of
us, individually or as a firm, either real, personal, or mixed,
said property consisting of our stock of merchandise situated in
our place of business, known as 'Nos. 204 & 206, south side,
Main Street,' in Denison Texas, being composed of dry goods,
clothing, boots, shoes, hats, caps, trunks, valises, gents'
furnishing goods, showcases, book accounts etc., worth about
twenty-seven thousand dollars, and all other property owned by us
or either of us not herein mentioned, except such of our, or either
of our, property as is exempt from execution by the laws of the
State of Texas, and no other, to have and to hold unto them, the
said Fred. Muller and A. Jacobs, their assigns and successors,
forever.
Page 132 U. S. 503
This conveyance is made, however, for the following purposes,
to-wit: we, the said Louis Goldsal and Benjamin Hassberg, doing
business as aforesaid under the firm name of 'Louis Goldsal &
Co.,' are insolvent, being indebted beyond what we or either of us
are able to pay, and desire to secure a just and proper
distribution of our, and each of our, property among our creditors,
and this assignment is made in trust to the said Fred. Muller and
A. Jacobs for the benefit of such of our creditors only as will
consent to accept their proportional share of our estate and
discharge us from their respective claims, and for said purpose,
the said Fred. Muller and A. Jacobs are hereby authorized and
directed to take possession at once of all the property above
conveyed, and convert the same into cash as soon and upon the best
terms possible for the best interest of our creditors, and
execute and deliver all necessary conveyances therefor to the
purchasers, and to collect such of the claims due us or either of
us as are collectible, and to bring and prosecute such suits
therefor as may be necessary, and to execute and deliver all proper
receipts, releases, and discharges to our said debtors on the
payment of said claims, and to do and perform each and every act
and thing whatsoever requisite, necessary, and proper for them to
do in and about the premises for the proper and lawful
administration of this trust in accordance with the law, and the
said Fred. Muller and A. Jacobs shall pay the proceeds of our said
property according to law to each of our creditors as shall legally
consent to accept their proportional share of our estates,
property, and effects as aforesaid, and discharge us from their
respective claim, and no others, he first paying the expenses of
administering this trust, and a reasonable compensation to himself
for his services. "
Page 132 U. S. 505
MR. JUSTICE LAMAR, after stating the case as above reported,
delivered the opinion of the Court.
The validity of the above deed, in view of matters apparent on
its face, constitutes the only question for consideration. We think
that question is determined by the principle laid down in
Cunningham v. Norton, 125 U. S. 77, which
reversed
Page 132 U. S. 506
the judgment on the authority of which the one now under review
was rendered by the court below. That case involved, as does this,
the validity of an assignment under the Texas statute just referred
to, which was sought to be set aside on account of a provision in
the deed alleged to be not in conformity with that statute. The
assignments in the two cases are very similar, the main difference
being that the one in the
Cunningham case contains two
provisions, neither of which occurs in the instrument under
consideration. The first of these provisions reserves to the
assignor the surplus of the property assigned after the payment of
all the debts of the consenting creditors. The second expressly
authorizes the assignee to sell such property on credit according
to his discretion. This last provision, however, was not called to
the attention of the court in that case. The main contention was
that the deed in controversy was rendered void by the clause
directing the assignee to pay over to the assignor the surplus
after paying in full all the creditors who should accede to the
deed. This Court decided that the said clause did not affect the
validity of the assignment, but was itself alone invalidated by
reason of its being in violation of the statute. The decision was
based upon the general construction of the whole act, taken
together, in view of the main object designed to be subserved by it
and of the decisions of the Supreme Court of Texas upon many of its
express provisions, in which line of decisions the court indicated
its full concurrence. That policy the court declares to have been
the appropriation of the entire estate of an insolvent debtor to
the payment of his debts, and, as a means thereto, to favor
assignments, and to give them such construction that they may
stand, rather than fall; that its manifest purpose was to provide a
mode by which an insolvent debtor, desiring to do so, may make an
assignment simple and yet effective to pass all his property to an
assignee for the benefit of such of his creditors as will accept a
proportionate share of the said property and discharge him from
their claims; that it further manifests the intention to transfer
to the assignee all the property of the debtor for distribution
among all the creditors; that no act of the assignee or of the
Page 132 U. S. 507
assignor after the assignment is made, or preceding it but in
contemplation of it, however fraudulent that act may be, shall
divest the right of the creditors to have the trust administered
for their benefit in accordance with the spirit of the statute, and
that therefore the provision reserving the surplus to the debtor
after payment of the debts to the consenting creditors, even though
conceded to be not in conformity with the requirements of the
statute and therefore itself void, does not vitiate the assignment
or prevent its execution for the benefit of the creditors, as
provided in the statue.
These principles apply with controlling force to the assignment
in the case at bar. The ingenious argument of the counsel has
failed to point out any distinguishing features in the two
cases.
The first ground upon which this deed is assailed is the
following clause therein:
"The said Fred. Muller and A. Jacobs are hereby authorized and
directed to take possession at once of all the property above
conveyed, and covert the same into cash as soon and upon the best
terms possible for the best interest of our creditors,"
which language the court below, and the counsel for the
defendants, claim is an authority to the assignee to sell upon
credit. We do not think that such is a correct or fair
interpretation of the clause, taking the whole instrument together,
and construing it with reference to the purpose manifest in all its
other provisions. A positive direction to "convert" the property
assigned "into cash as soon and upon the best terms possible for
the best interest of our creditors" can hardly be construed into a
discretionary authority to sell on credit without doing violence to
the well established rule that the power to sell on credit will not
be inferred from language susceptible of a different construction.
Burrill on Assignments, § 224. But even if we concede that the
construction contended for be correct and that the clause thus
construed is in contravention of the statute, it will not, as this
Court has decided, operate to annul the assignment, in which all
the creditors may have an interest. In
Kellogg v Muller,
68 Tex. 182, 184, this very point we are now considering was
presented and
Page 132 U. S. 508
decided by the court in the following language:
"The first exception to the deed is that the deed authorized the
assignee to sell the property assigned on a credit, and is
therefore void. The provision to which we are cited in support of
the exception is as follows."
"That so soon as said inventory is complete, the said Frederick
Muller, as such trustee aforesaid, shall thereafter, with all
reasonable dispatch, proceed to sell and dispose of said goods,
wares, and merchandise, and furniture, and collect said book
accounts and bills receivable, converting the same into cash, or
its equivalent."
"It may be doubted if this can be construed to empower the
assignee to sell for anything but money. . . . But however this may
be, even if a badge of fraud, it is not sufficient to authorize the
court in holding the deed void upon its face,"
citing
Baldwin v. Peet, 22 Tex. 708.
In the assignment before us, all the property conveyed by it is
in terms devoted to the payment of the creditors of the insolvent
debtor. The judgment of the court below adjudging it to be void
upon its face because it permitted a sale on credit was
erroneous.
The second objection, that the deed was not made to one
assignee, does not require any extended comment. Under the common
law, an insolvent debtor was permitted to make an assignment to a
single individual or to several. Burrill on Assignments § 91. It is
true, the Act of March 24, 1879, speaks only of an assignee, but
the statutory rule of construction in force in Texas is "the
singular and plural number shall each include the other unless
otherwise expressly provided." Rev.Stat. Tex. (1879), Art. 3138,
subdivision 4. Under this rule, and keeping in mind the policy of
the statute of 1879 regulating assignments, we do not think the
deed of assignment in this case void for the second reason
assigned.
For the reasons given, the decree of the court below is
reversed and the case remanded with directions to take such further
proceedings as shall not be inconsistent with this
opinion.
