Eldridge, Dunham & Co. v. Phillipson

1. Attachment. “ Unfair preference.” A question of law. One of the grounds of attachment under the Oode of 1871 was that “ the debtor has assigned or disposed of, or is about to assign or dispose of, his property or rights in action, or some part thereof, with intent to defraud his creditors or give an unfair preference to some of them.” Whether a preference of a creditor by his insolvent debtor is “unfair” within the meaning of this sta'ute is not a question of fact to be left to the jury in a case, but is a question of law, to be determined by the rules laid down by the courts ns the law of the land, and to be solved by instructions of the trial judge applied to the facts proven in evidence. 2. Same. What is, and what is not, an unfair preference. No preference of a creditor by an insolvent debtor is “unfair,” under the statute above quoted from, unless it be fraudulent or illegal. And where the preference of a creditor by his insolvent debtor is bona fide, and neither expressly nor by implication, of circumstances reserves an interest in the property, or-something to be given in lieu thereof, to the debtor or a volunteer under him, it is valid in law; and the fact that the debtor may hope, through relationship, or from the generosity and friendship of the preferred creditor, that he will at a future time derive some benefit from the preference made, does not vitiate the same. The right to make such preference results from the dominion which the debtor, as owner, has over his property, and is a part of his proprietorship. 3. Same. Meaning of “ unfair.” Its omission from the Code of 1880. The word “unfair,” as used in the statutory provision above quoted, is synonymous with “fraudulent” or “illegal;” and the clause in that provision, “ with intent to give an unfair preference,” was surplusage, and its omission from the Code of 1880 leaves the law as it stood before.

Error to the Circuit Court of Chickasaw Couuty. Hon. J. A. Green, Judge. The case is sufficiently stated in the opinion of the court. In the case of Barney v. Scherling, 40 Miss. 320, the court has extensively considered the very point involved in this case, and has said that “ the question is not. whether the jilaintiff had probable cause for suing out the attachment, but whether it was in fact wrongfully sued out.” Again, in the case of Kuykendall v. Cocke, 41 Miss. 65, the court further consider the exact issue made by the traverse in this case, and say: “ It is not whether the facts stated in the affidavit for the attachment be true or false, but whether the attachment was wrongfully sued out; and hence, though the facts stated in the affidavit be false, yet if the plaintiff was led to believe that they were true, bv the conduct and declarations of the defendant, the attachment'should be sustained and the defendant be estopped to avail himself of his own'wrong in making- false statements to the plaintiff.” Now, from the foregoing cases it will be seen that the issue is not whether the facts are false or not, but whether the plaintiffs wrongfully — that is, maliciously and wickedly— sued out the attachment: whether the plaintiffs were led to believe by the conduct and declarations of the defendants that they were true. Now, the question is, did the conduct and declarations of the defendants create the belief that they were giving undue preference? If the plaintiffs fairly had such belief from the facts, then the attachment should be sustained. The belief vindicates the wrong. Then the question for the jury is one of fair belief; and testimony which does not stick to that, like the shirt of Nessus, is incompetent and irrelevant, and any charge that does not impinge so sharply as to produce friction upon that exact issue is erroneous. These are the main facts relied on : 1. Sale of storehouse. 2. Conveyance in trust of nearly $100,000 of assets to secure one party in the sum of only $37,000. 3. The declarations of Rafralsky, one of the defendants, to Davis, plaintiffs’ attorney, that he was authorized to collect, and sell, and receive the cash, and reinvest. If these facts could not create belief, I do not know why. Defendants do undertake to show that Rafralsky was not authorized to sell and collect and reinvest. But this amounts to nothing. Rafralsky said to Davis he had the power, and if it was false in fact, we had the right to believe him, and, believing him, plaintiffs had the right to act upon his declaration ; and, acting upon it, we are relieved from any wrong. But the deed of trust not only authorized the plaintiffs to suppose that Rafralsky told the truth, but, of itself, was a fact sufficient to produce a strong belief, taken especially in connection with the fact that Rafralsky was in ‘• apparent,” if not actual possession. Certainly, possession had not changed hands, and the right to sell and dispose of the goods remained with him. The trust deed is silent as to possession, and the testimony (oral) introduced to engraft conditions upon it was absolutely improper. Then the whole testimony was sufficient to create a belief; and if a belief fairly induced the attachment, then the wrong, if there was a wrong, was sanctified, and the verdict should have been for the plaintiffs. But there was no wrong. No man has the right to tie up nearly $100,000 of assets to protect one creditor in a debt of only $37,000, and to do so not only gives an unfair preference, but is a fraudulent conveyance. If fraudulent, it is an unfair preference. The time given before foreclosure suspended the ordinary remedy of plaintiffs, and they could only act to secure themselves by attachment. 9 Smed. & M. 394; 11 Smed. & M. 468; 2 Cushrn. 106; 5 Gfeo. 655 ; 1 Cushm. 75; 4 Smed. & M. 229. Now, the efforts to show that the assets were of less value than they purported to be was incompetent, and should not have been allowed; because there was nothing in the trust deed, or in the declarations of Rafralsky to Davis, which in anywise impaired their asserted or apparent value, and 1 have shown that we have the right to act upon appearances. The fifth and seventh charges for the defendants below were grossly erroneous and misleading. The ground of attachment is that the defendants gave an unfair preference' to some of their creditors. The fifth charge is that an insolvent debtor may give a trust deed to one creditor, provided he reserves no benefit to himself therein. The seventh is that an insolvent debtor has a right to prefer one creditor over others, provided that there is no benefit reserved to himself by said preference. These charges do not state the law — at least not fully. A debtor may make himself liable to attachment in disposing of his property without reserving any benefit to himself, on the face of the instrument or otherwise. If the “ disposition ” operates an unfair preference, — which is precisely the ground here, —lie is liable to attachment, if no benefit be reserved to the debtor “ therein ” or “ thereby ” at all. If the charges had contained the additional statement also that the preference should not be unfair, they would not have been open to the objections now urged. According to these charges, no matter how unfair the preference given one creditor over others, if there was no benefit reserved to the debtor the “ disposition” would not authorize an attachment; which is directly in the teeth of the statute, and not the law in any case, particularly this one. Under these charges, the benefit must also be reserved on the face of the instrument. The jury evidently put that construction upon them, and that is not the law. A conveyance maybe made to so operate,'in fact, as to reserve or secure a benefit to the debtor as well where the reservation is not made as where it is made on the face of the “ disposition.” And that is what the evidence showed here : that the debtors were using the trust deed as a mask for their secret benefit, and to secure the same, whilst also operating an unfair preference. Effect being given to the words, “ or give an unfair preference to some of them,” contained in the statute, in the construction thereof, this transaction stands fully condemned. Any preference is unfair, within its meaning, which covers property, under the pretence of a preference, more than sufficient, reasonably managed, for the purpose. There can be no liberal or generous allowance for this purpose; it must be simply reasonable and just. What is an “ unfair preference,” as meant by the fifth ground of attachment provided in the Code of 1871? A man has the right to prefer one creditor over another if he chooses to do so. So long as he applies his property to the payment of his debts, the law cannot and does not complain. The statute does not denounce a disposition of the debtor’s property made with intent to give simply a “ preference ” to some of his creditors, but only a disposition of his property made with iutent to give an “ unfair preference.” What is meant by an unfair preference? It cannot mean a fraudulent preference, for such fraudulent disposition of a debtor’s property is condemned and made a ground for attachment in the preceding clause of the fifth ground, “with intent to defraud his'creditors.” In other words, here are two separate and distinct grounds of attachment, viz. : one, a disposition of property with intent to defraud creditors; the other, a disposition of property with intent to give an unfair preference to some of the creditors. Now, in construing a statute, every part should be regarded; and it should be so expounded, if possible, as to give some effect to every part of it. Now, if “ intent to defraud ” and “ intent to give unfair preference” mean the same thing, then one is superfluous and redundant; which conclusion, according to a well-known canon of construction, is to be avoided if possible. It is not to be presumed that the Legislature added the last clause needlessly and without a purpose. What, then, is meant by an “ unfair preference” ? Whether a preference is unfair or not must depend upon the intent with which it is given. If a debtor gives a preference to some one of his creditors simply because he would rather pay him than others, with no purpose to hinder or delay his other creditors, and reserving no benefit to himself, he does not bring himself within the statute. If, however, a debtor is insolvent, and appropriates his property to. the payment of one or more of his creditors, to the exclusion of others, intending and designing by so doing to hinder- and delay them in the collection of their debts, he does come within the statute ; for the intent with which he has acted was unfair, and it is the intent with which a preference is made which gives character to it. The distinction is between a transfer made solely by way of preference of one creditor over another, and a similar transfer made with a design to delay-other creditors in the collection of their debts. While the law permits an insolvent debtor to make choice of the persons he will pay, it denies him the right, in doing.it, to contrive that other creditors shall never be paid, or to use the debt of the preferred creditor to delay, hinder, and embarrass the other creditors in the enforcement of their demands. Such a preference may be given without reserving any benefit to the debtor himself. The reservation of such ulterior benefit, while it might be required to make out a case of “ intent to defraud” (though we do not sa}7 it is), certainly is no necessary ingredient in the intent to .give an “ unfair preference ; ” and the third and fifth instructions to the jury for defendants assuming that it is a necessary ingredient, we submit, were erroneous and calculated to mislead the jury, and did mislead them. The jury were authorized to say, on their retirement, “ The only thing for us to consider is whether Phillipson & Co., in their deed of trust, resexwed any benefit to themselves. If they did not, the attachment falls to the gx'oxxnd.” This was a false issue, axxd the jury could xxot but have been misled by it. 1. In this case the question is reduced to the considex’ation of one point — whether the jui-y found contrary to the evidence. Tlxe jury were the judges of the facts. The testimony submitted to them was legal, and it was their province to decide as to the weight thereof. This court has, times without number, refused to disturb a judgment when its correctness rested upon facts subxnitted to a jury. Believing, from all the testimony, as they had the light to do, that the attachment was wrongfully sued out, the jury so found, and their verdict will not be distux’bed. 2. The instructions given to the jui’y are correct, and chax’ge the law as laid down in Surget v. Boyd, 57 Miss. 485. There is only one questioxi for this coux’t to coxisider, to wit: Did the jui’y find coxxtrary to the law and the evidence? On this point, was the judgment so manifestly wrong as to warrant a reversal ? No moral fraud is charged ; on the contrary, plaintiffs in error so far indorse the integrity of defendants in error and the cestui que trust as to proffer to wait on the former until a sale of the goods would enable them to pay the claim sued upon, on their simple promise to pay it out of sales to be made, provided they would get the cestui que trust to agree that it might be done. And further : when informed that the cestui que trust was unwilling to become bound, and plaintiffs in error had ordered their attachments levied, they, at the request of defendants in error, instructed the sheriff to make simply a general levy that evening, leaving defendants in error in possession of the goods levied upon, without security, on the promise to deliver up the goods the next day or execute a bond for them. Can plaintiffs in error complaiu of the trust reposed by the cestui que trust in Rafralsky, when thejr were ready to trust him to the same extent, and did so trust him? The court will note that defendants in error were not left in possession of the goods; that Rafralsky,.as the agent of the cestui que trust in the deed of trust, and not as a member of the firm of T. H. Phillipson & Co., was selling the goods after its execution. The deed of trust is not fraudulent on its face, nor does it show an unfair preference for the benefit of the creditors named and secured. The testimony of Tucker and Moore shows that the amount of property conveyed was not more than enough to pay the debts of Alcus, Sherck & Autey, and Schenk & Buckson, the preferred creditors. The only testimony that plaintiffs in error have in any manner tending to show fraud or the invalidity of the trust deed is that of R. Davis. Now, we submit that the question was fairly submitted to the jury on the issue whether or not the attachment was wrongfully sued out, and their verdict was that defendants in error “ had not assigned or disposed of their property and rights in action, or some part thereof, to give an unfair preference to some of their creditors.”