Pfeifer & Co. v. Dargan

The opinion of the court was delivered by

The only matter presented by the appeal in this case, is the construction of an insolvent debtor’s assignment for the benefit of releasing creditors. The question is whether, by the terms of the assignment, the whole.proceeds of the assigned estate were to be distributed among such creditors as *48proved their debts in a certain time, and agreed to release, in accordance with the condition attached to the assignment, to the extent necessary to satisfy the debts due to them by the assignor. If such is the proper construction of the instrument of assignnient, the plaintiff is not entitled to recover in this action, as the whole fund is insufficient to satisfy the releasing creditors, and the Circuit judgment is erroneous.

But the plaintiffs, who are the respondents, contend that by the terms of the assignment the releasing creditors can only receive their ratable share of the assigned estate, estimating, for the purpose of ascertaining that proportion, the whole amount of the indebtedness of the estate, and that such proportion of the assigned estate as would have gone to the non-releasing creditors, had they consented to release, according to the terms of the assignment, is a fund undisposed of, and, accordingly, subject to-the claims of creditors generally. The Circuit Court sustained the claim of the plaintiffs and gave judgment accordingly.

The assignment, after transferring the estate to an assignee, proceeds to declare the trusts upon which the same is made, and directs that so m.uch of the proceeds thereof as shall be available for that purpose shall be paid “ in equal and ratable proportions to all the creditors of the said Herman Schwerin, upon notes or accounts or obligations of any character, as shall render in the same to the said John W. Dargan, and establish the same within-ninety days from the date of these presents; and who shall, at-the time of rendering and establishing said demands, signify and accept, in writing, that the dividends so to be reeeived shall be-a free and full discharge of their said claims and demands against the said Herman Schwerin ; and, upon the payment of said dividends, shall grant such full and final release and discharge.”

The assignment then proceeds to exclude from its benefits all creditors who shall neglect or refuse, within the prescribed time,, to establish their demands and signify the consent previously provided for.

Considering this part of the assignment independently of the concluding clause of the instruiñent, under which the point of difficulty has arisen, it is clear, that the intention was to divide the whole estate among a certain class of creditors, namely, such-*49as should prove their demands and signify the requisite consent within the time prescribed. The direction to divide, ratably, among “ all of the creditors ” * * * “as shall render,” &c., can receive no other construction than that the rate of distribution was to be established with reference alone to the class provided for, consisting of such as could prove their debts and signify the proper consent in due time. It is presumably the intention of the assignor, in assignments of this class, that his whole estate shall go to such creditors as he dioses to prefer, to the extent necessary to satisfy their demands against him. The motive of the creditors in releasing is, ordinarily, to gain an advantage over non-releasing creditors, or, what is equivalent, to prevent releasing creditors from gaining such advantage over him. That advantage usually consists in the fact that releasing creditors generally take the whole estate, if necessary, to satisfy their demands. There is nothing in that part of the assignment, already considered, that indicates a different intention from that just mentioned as usually characteristic of assignments of this class.

Unless the remaining clause of the assignment has the effect to fix on the instrument a different intention, that already stated must stand as its clear purpose.

The assignment concludes as follows: “ In case any of my creditors shall refuse or neglect to accept of the provisions of this assignment, the dividend which would be applicable to their demands, shall remain in the hands of said assignee, subject to such order as the court may make in the premises regarding the same.” The direct sense of this clause is that the assignee shall not apply that portion of the estate which would have been the share of non-releasing creditors in the event that they had complied with the condition of the assignment without the aid of the court. The proper recipients of this part of the estate were not pointed out in this clause, therefore there is nothing in its direct effect to conflict with the designation of such persons made in the former part of the instrument.

Is there a necessity for extending this direct sense of this clause in the manner contended for ? If there is such a necessity it must be created by the instrument itself. In the first *50place there is no hiatus in the expression of the intention of the assignment, to be supplied constructively, as the previous portion of the instrument had fully declared the trusts in that respect. In the next place, the clause under immediate examination can take full force and effect, without any enlargement by implication. There is a clear purpose that can be ascribed to it, sufficient to account for its introduction. It might well be that creditors entitled to prove their debts and signify their consent to release might be prevented from so doing without fault or neglect on their part and under circumstances which would raise an equity for them to be let into the benefits of the arrangement notwithstanding the want of strict compliance with the express requirements. As the provisions that deprive the non-releasing creditors of an interest in the proceeds of the assigned estate are in the nature of a forfeiture, and, as such, equity might, in a proper case, relieve against them, it was eminently prudent to enable the assignor to demand the aid of the court in ascertaining the existence of such forfeiture and not compel him at the peril of risk and expense to pre-judge such questions. It is evident, then, as neither the instrument at large nor the particular clause under consideration make any demand for the enlargement, by implication, of the sense of that clause, having full and complete operation without it, there is neither reason nor justification for so doing.

Nor is there any reason for a resort to implication arising from the fact that conditional preferences, having a compulsory effect upon creditors, are rather permitted than favored. If the instrument left a doubt of its intention, the effect of favor or disfavor might make a difference in the character of the inferences drawn to supply such doubt; but disfavor is no ground for injecting into an instrument that which is not demanded by its language or fair import. To go to the extent of raising out of a clause, subsidiary to the main purpose of the instrument, an implication not demanded by such clause, which shall have the effect to unsettle the express terms employed in that part of the instrument, the office of which is to create the trusts, is not warranted by the principles of construction, and, if defended on the ground of disfavor for such assignments, would place the *51principle of favor and disfavor in the light of an arbitrary power of dispensation.

The construction that has just been placed upon the assignment is in harmony with the presumable intent of the assignor. He would not, as we must assume from the nature of the condition of the assignment, have annexed the condition except as affording a motive for releasing. If, then, the releasing creditor could get no more by releasing than he would get by equal division among all creditors without any condition annexed, he has no motive for releasing. A construction that would destroy the motive for releasing would destroy the purpose of the condition, and cannot be ascribed to the mind of the assignor, nor does it result from the principles of law, for, as held in this state, they permit the use of such conditions in the assignment of insolvent debtors.

It must be concluded that it was the intention of the assignment that the proceeds of the estate, available for that purpose, should be divided ratably among such creditors as are entitled to be regarded as having complied with the condition of the assignment, and, consequently, the Circuit decree must be set aside and the cause remanded for further proceedings in conformity with the principles hereinbefore laid down.