Cook et al. v. Rogers, Garnishee of Bow.

SUPREME COURT-MICHIGAN.

The common law relating to assignments for the benefit of creditors is not a part of the State insolvent law, and is not suspended by the Bankrupt Law.

An assignment for the benefit of creditors is valid as against a judgmentcreditor who lays an attachment in the hands of the trustee, for it is not absolutely void.

COOK et al. v. ROGERS, Garnishee of BOW.

ON writ of error. On November 18, 1873, Albert Bow made a voluntary assignment of his property to Eli B. Rogers, for the equal benefit of all his creditors, no preferences being declared. Rogers accepted the trust and took possession. A few days later the plaintiffs commenced a suit against Bow in the Circuit Court, to recover a debt of some three hundred dollars they held against him.

On the institution of this suit they at once proceeded by garnishee process in the same court against Rogers. And being summoned to appear and make disclosure on such process, he appeared on the 16th of December, 1873, and made general denial. The plaintiffs then filed a series of special interrogatories to be answered by him, and on the 27th of the same month he appeared and answered categorically.

From these answers it appeared that Bow had assigned to him as before stated, that the personal property assigned was estimated as worth several thousand dollars, and the real estate from twelve to fourteen hundred. It also appeared that Rogers had no interest other than that of trustee, and that he was in possession of the assigned property when the summons was served upon him.

On the 27th of July, 1874, judgment was given in the principal suit against Bow for damages, two hundred and eighty-one dollars and thirty-one cents, and thereupon on the same day the garnishee suit against Rogers, Bow's assignee, was brought on to be tried before the court, without a jury, and it was expressly admitted that when Bow assigned he was indebted for more than one thousand dollars, upon

claims already due, and that Rogers received into his possession from Bow, under the assignment, and still retained, property exceeding in value the amount of the plaintiffs' judgment against Bow. The counsel for plaintiffs then prayed a finding by the court, and they likewise presented two propositions of law in the nature of requests to charge:

First. That plaintiffs were entitled to judgment against Rogers because the assignment was not in compliance with Ch. 234, C. L., entitled, "Of the powers, duties, and obligations of assignees of insolvent debtors under this title."

Second. That the plaintiffs were entitled to recover, because the assignment was void as contrary to and not in conformity with and made under the Bankrupt Law of the United States.

The court then made a finding of facts upon the disclos ure and admissions, and decided as matter of law that the assignment was valid, and passed the title of the property to Rogers in trust for Bow's creditors, and that the possession by Rogers of the property in virtue of the assignment gave no right to plaintiffs as creditors of Bow to maintain garnishee process against Rogers; and that Rogers was entitled to judgment for his costs and expenses, which were fixed at twenty dollars.

The plaintiffs excepted to the finding, and caused the case to be brought here on writ of error.

L. N. Keating and J. S. Galloway, for plaintiffs in error. First. If the assignment is void as to any creditor, garnishment will lie in his behalf. (Keep v. Sanderson, 2 Wis., 42; 12 Wis., 352.) So where the assignment is not in conformity with the State law. (Geisse v. Beale, 3 Wis., 367; Page v. Smith, 24 Wis., 368; Norton v. Reed, 6 Wis., 522; Mann v. Huston, 67 Mass., 250; Barton v. Tower, 5 Law Rep., 214; Chap. 234 Compiled Laws of 1871; Stout v. Keys, 2 Doug., 184; Edwards v. Mitchell, 67 Mass., 239.)

Second. The assignment not being under the provisions of the Bankrupt Law, and in conformity therewith, garnish

Cook et al. v. Rogers, Garnishee of Bow.

ment will lie upon the part of the plaintiffs. (Cooley's Limitations, 273, 2d note; Bump on Bankruptcy, 259, 260; Ogden v. Saunders, 12 Wheat., 213; Sturges v. Crowninshield, 4 Wheat., 122, 196; Hoyle v. Zacharie, 6 Pet., 635.; Adams v. Storey, 1 Paine, 79.) The Bankrupt Act ipso facto suspends State insolvent laws. (Matter of Reynold, 8 R. I., 485; Commonwealth v. O'Hara, 1 N. B. R., 86; Martin v. Berry, 2 N. B. R., 629; 37 Cal., 208; Griswold v. Pratt, 50 Mass., 16; Day v. Bardwell, 3 N. B. R., 455; 97 Mass., 247; Chamberlain v. Perkins, 51 N. H., 336.) A common-law assignment cannot have any greater effect than an assignment under the State insolvent laws; both are superseded by the passage of the National Bankrupt Act.

E. L. and M. B. Koon, for defendant.

First. A common-law assignment is valid irrespective of insolvent laws. (Beck v. Parker, 65 Penn. St., 262; Reed v. Taylor, 4 N. B. R., 710; 32 Iowa, 209; Maltbie v. Hotchkiss, 5 N. B. R., 485; 38 Conn., 80; In re Hawkins, 2 N. B. R., 378; 34 Conn., 548; Perry v. Langley, 1 N. B. R., 559; Bump on Bankruptcy, 259, 514.

Second. The authorities cited by counsel for plaintiffs in error, refer to assignments made under State insolvent lawshaving the same object in view as the Bankrupt Law, to wit: The distribution of the debtor's assets and his discharge from his debts-and can have no bearing upon the present case. And the authorities are conflicting as to whether the Bankrupt Law operated to wholly suspend or supersede all State insolvent laws, or had that effect only when proceedings under the Bankrupt Law were taken. (32 Iowa, 209; 1 N. B. R., 204; 1 N. B. R., 36; 7 A. L. Reg., 100, 105; 9 A. L. Reg., 304; 37 Cal., 208; 3 McLean, 494.)

GRAVES, J.-Bow's assignment was a common-law conveyance for the benefit of his creditors at large. It contained no preferences whatever, but provided for an equal distribution among all his creditors. There is no pretense that Rogers was not a suitable person to be assignee, and no

Cook et al. v. Rogers, Garnishee of Bow.

hint is made against his responsibility. No fraud is found or imputed. The surrender of his property by Bow for the equal benefit of all his creditors, by the voluntary assignment, in no way exonerates him personally, or discharges his obligations, or can shield his future gains.

The first proposition of law submitted to the court is most properly abandoned. It was without a shadow of force. The second is, however, insisted on, and it is the only point attempted to be maintained, and an elaborate argument has been submitted in its favor.

Were it not for the apparent confidence of counsel that it possesses merit, we should dismiss it without a moment's hesitation and affirm the judgment.

Upon the case as it stands before us, it must be taken as true that the assignment was an honest conveyance to a proper person, and honestly and fairly intended to secure the full payment of all the creditors at the same time, and within a reasonable period, if the property should be found sufficient; and if not, then to be distributed equally and ratably within a reasonable time among all the creditors.

Nevertheless, the plaintiffs prosecute this garnishee process under the State law against the assets so assigned and dedicated to all alike, and under such process insist upon their right, in the name of the Bankrupt Law and as a conse、 quence of its existence, to compel payment out of the assigned effects of their claim, in full and without delay, whatever may be the consequence to other creditors having equal equities, and without heed to the fact of sufficiency or insufficiency of the fund to satisfy the just demands of other creditors.

The proposition comes to this. Equal distribution of the property of the debtor pro rata is the main purpose which the Bankrupt Act seeks to accomplish, as we are told by the Supreme Court of the United States (Buchanan v. Smith, 7 N. B. R., 513; 16 Wall., 277); and yet a common-law assignment made to a proper person, and in perfect good faith,

Cook et al. v. Rogers, Garnishee of Bow.

and squaring exactly with the "main purpose" of the Bankrupt Act, is not only to be disregarded as void in a garnishee proceeding against the assignee in the State court, in the name and as a consequence of the existence of this act, but at the particular instance of parties, who, by the very proceeding itself in which and under which the claim is set up are solely aiming to disappoint and defeat such "main purpose," and secure to themselves present full satisfaction without the slightest regard to the equal claims of other creditors.

Before yielding to a proposition so extravagant we should certainly require very convincing proof of its solidity and force.

The argument in its favor is in substance this. It is settled by authority from which there is no appeal, that the existence of a Federal Bankrupt Law ipso facto suspends all State insolvent laws; that the common law prevailing in this State, on which voluntary assignments for the benefit of creditors are based, and to which they owe all their legal efficacy, is a part of the State system regulating and governing in cases of insolvency, and within the principle which causes a Bankrupt Act to work suspension of incompatible regulations, and hence no voluntary assignment for the benefit of creditors, however right, regular, and proper in all respects in the abstract, can have any force or validity whatever if made whilst a Bankrupt Law is in existence.

Without stopping to consider whether a garnishee proceeding before a justice, or in the Circuit Court, is a proper one for raising the question, and without pausing to notice several difficulties in the plaintiffs' case, it suffices to observe that the second term involved in their proposition, and which they cannot dispense with, is fatally infirm.

There is no proper analogy between insolvent laws, correctly so called, and those principles of the common law here which allow and sanction the conveyance of his property by a debtor for the equal benefit of all his creditors, and no such resemblance or relation as to warrant the conclusion