Francisco v. Aguirre

Paterson, J., dissenting.

I am unable to concur in the views expressed by the majority in this case. I think the j udgment should be affirmed.

It is not denied that the conveyance was void as to creditors, under section 3440 of the Civil Code; but it is claimed that the assignee acquired no greater right than the assignor had in the property at the time of the sale, — that the assignee is merely the representative of his assignor, and does not represent the creditors.

It must be admitted that under the common law of assignments ti e assignee stands in the place of the assignor, and can assert no right to the property which the assignor did not have, but the rule of the common law is not applicable here; the rights of the parties are *188to be determined under the statute relating to assignments for the benefit of creditors. The duties and powers of assignees under the statute are very different from the duties and powers of assignees at common law.

Section 3449 of the Civil Code provides that an insolvent debtor may execute an assignment of property to one or more assignees, in trust for the satisfaction of his creditors, subject, however, to the provisions of the code relative to trusts and fraudulent transfers; and section 3439 provides that “ every transfer of property or charge thereon made, every obligation incurred, and every judicial proceeding taken with intent to delay or defraud any creditor or other person of his demands, is void against all. creditors of the debtor, and their successors in interest, and against any person upon whom the estate of the debtor devolves in trust for the benefit of others than the debtor.” It cannot be questioned that the estate of the debtor in this case devolved upon the assignee in trust for the benefit of others than the debtor himself. The case is therefore within the letter and spirit of the statute. The transfer of the property was fraudulent; it was absolutely void as to creditors; and, as the statute declares, it was void as to the assignee, upon whom all the estate of Mrs. Edmonston devolved.

In Ingram v. Smith, 83 Cal. 237, the court said that the note there under consideration was “ void against all of Smiley’s creditors, and also the plaintiff, upon whom the estate of Smiley devolved for the benefit of the creditors.” It may be that this statement was mere dictum, but it is evidently in accord with the letter and the spirit of our statute. In Hanes v. Tiffany, 25 Ohio St. 552, the court said: “ It is, however, contended that as the mortgage is good against the mortgagor, it is also good against the assignee for the benefit of creditors; that the latter stand in no better situation than his assignor. The correctness of this position at common law is admitted; but not so under the statute. The mortgagee not having possession of the mortgaged property, the statute declares the mortgage void as *189against the creditors of the mortgagor. The assignee took the property under the assignment, and held it for the exclusive benefit of creditors. The mode of providing for creditors by way of assignment, in trust for their benefit, is recognized and regulated by statute; and we see no good reason why their rights may not be as effectually asserted through the assignee as they could be by judgment and execution in case there had been no assignment.” In Pillsbury v. Kingon, 33 N. J. Eq. 287, Mr. Justice Depue considered the leading cases bearing upon the question, and, among other things, said: “Ho rule of law is better settled than that a conveyance in fraud of creditors is good as between the parties to it. , ... It is equally clear that such conveyances are also unassailable by those who hold a derivative title from the fraudulent grantor, and in virtue of their title become simply representatives of his interest. .... The material question for present consideration is, whether those who hold by a title derived from the grantor, but who in virtue of that title become the representatives of the creditors of the grantor as a class,—as, for instance, the executors or administrators of an insolvent estate, or an assignee for the benefit of the grantor’s creditors, — will not be allowed, in the interest of creditors, to have a standing in court, to avoid the fraudulent grants and conveyances of the debtor for the benefit of his creditors. . ... In none of the cases was the decision placed on any language in the statute specially empowering the assignee to avoid the fraudulent conveyance of the assignor. In fact, neither of those statutes contained any express provision for setting aside conveyances of the assignor in fraud of creditors, and that fact was unsuccessfully pressed upon the attention of the court by the counsel, who argued against the authority of the assignee to exercise that power. The capacity of the assignee to appear in court for that purpose was in express words, or inferentially adjudged on the ground that the assignee of an insolvent was a representative of creditors, and, as such, was entitled to take, for their benefit, the *190same advantage of the statute of Elizabeth as the creditors might have taken.....In Bayard v. Hoffman, 4 Johns. Ch. 430, Chancellor Kent decided that an assignment of all the debtor’s estate, real and personal, in trust for all his creditors, included stock which the debtor had before that voluntarily assigned, to the injury of his creditors, and that the assignee might file a bill to set aside the fraudulent transfer for the benefit of the creditors.....An assignment under the act of the legislature of this state differs in most important particulars from an assignment made by a debtor at common law for the benefit of his creditors. Its title indicates the legislative purpose to establish a system for securing an equal and just division of the estates of debtors among their creditors, and that purpose is clearly evinced by the provisions of the act. At common law, a debtor might assign the whole or a portion of his property for the benefit of all or a part of his creditors. By our statute, an assignment under the act transfers all the property of the assignor, whether it be described in the inventory or not; .... and all preferences of one creditor over another are forbidden. At common law, an assignment by a debtor to his trustee to pay his debts might be rescinded by the mutual consent of the debtor and the trustee, where the creditors had not directed the assignment or assented to it, or changed tleir situation in consequence of it. A deed of assignment under the statute, executed, delivered, and accepted by the assignee, creates, ipso facto, a trust for the benefit of creditors, not to be surrendered or destroyed except by their consent, and a court of equity will execute it by appointing new trustees, if necessary. Under such an assignment, the trustee at common law was compelled to use the assignor’s name in suits to recover the'property, or upon the choses in action assigned. By the statute the assignee may bring suit in his own name.....Regarding the substantial nature of the transaction, the doctrine of the English courts, with respect to the representative character of the assignee of *191an insolvent, may very properly be applied in favor of an assignee under .the assignment act, and the latter be regarded as representing creditors so far as to enable him to take proceedings in their behalf to set aside conveyances in fraud of creditors, where such property is needed for the payment of debts. .... Nor will any embarrassment be experienced in the fact that the property which has fraudulently been conveyed away may be in excess of what is required for the payment of debts. As is indicated in the opinion of this court in Miller v. Mackenzie, such fraudulent conveyances will be set aside no further than is necessary for the satisfaction of the demands of creditors, and the surplus, if there be any, will not be restored to the fraudulent debtor, but will be returned to the grantee to whom the fraudulent conveyance was made.”

The statutes of New Jersey seem to be identical with our own on this subject. The reporter, in a note added to the report of the case just referred to, has collated a large number of authorities bearing on the subject, and shows that the preponderance of judicial opinion is in favor of the views expressed by the court. There is nothing in Shaw v. Glen, 37 N. J. Eq. 32, indicating an intention to overrule Pillsbury v. Kingon, 33 N. J. Eq. 299. On the contrary, the court spoke approvingly of the decision, but distinguished it from the case then under consideration, saying: But in cases unaffected by fraud, he (the assignee) is bound by the equities to which the property assigned was liable when it came to his hands from his assignor.”

Rehearing denied.