Mackintosh v. Corner

Alvey, J., delivered the opinion of the Court. This is an appeal from a judgment of condemnation in an attachment proceeding, wherein the appellant made claim to the property attached, as trustee for the benefit of the creditors of the defendant, by virtue of a deed of trust executed on the 11th of February, 1860. The deed is one that conveys all the property of the debtor, and provides for creditors generally, after the payment of the trust expenses, and all lien debts, giving preference to those only who will release the debtor within a given time. Such deed, by the 13th section of Article 48 of the Code, is declared valid, and is not liable to be set aside either at the suit of any insolvent trustee, or at the suit of any creditor.

The preference given is such as is not only allowed by statute, but by ⁶⁰⁶ the common law; it being well settled that a debtor in embarrassed circumstances may prefer one creditor to another; and the exaction of a release is but a condition upon which such preference is made. But with regard to the deed in this case, it is suposed that because there is no affidavit appended to it of the bona fides of the consideration, it is therefore void as to the personal property, as against creditors, under th£ 51st section of the 24th Article of the Code. That, however, is a mistake. The requirement of the affidavit is only in those cases of transfer of personal property contemplated by the 39th section of the same Article, where the vendor, mortgagor or donor shall remain in possession of the property conveyed, and the conveyance is adverse to the creditors generally of the grantor.

The affidavit in such case being required for the protection of creditors, and bona fide purchasers without notice, there could be no reason in requiring it to a conveyance like the present. In cases of this character the consideration for the. assignment is the preexisting obligation to pay debts gener-/ ally, and there needs no proof of its bona fides or sufficiency, and is not therefore within the meaning and intent of the law. As against the trustee, claiming for the benefit of all the creditors, certainly no creditor of the grantor can allege himself to be prejudiced by the want of the affidavit. The deed is for his benefit, in common with all the other creditors; and although preferences are made in the order and priority of payment, no particular creditor is concluded by taking under the assignment from impeaching any of the debts attempted to be secured by it, and showing fraud and collusion in such of them as may stand in his way and the pa/ment of which would operate to his prejudice.

Hence, if it be true as alleged in this case, that the prior mortgage debts are collusive and fraudulent, and should not therefore be paid, it will be competent to the appellees, and others in like position, to show such fraud and collusion, and thus defeat those claims as against the trust fund arising under ⁶⁰⁷ the assignment. But it by no means follows that because some of the preferred debts may be fraudulent, and therefore void, that the assignment itself, intended as it is for the benefit of all the creditors, should be declared a nullity. Some of the debts claiming priority of payment may be founded in fraud, and still the general assignment be good as to all debts that are bona fide. Indeed, it is the duty of the trustee under such an assignment, as it is the duty of an insolvent trustee, to resist