trust superadded, or assignments to take effect at a future. day.1

1 See the observations of Pearson, J., in Stimpson v. Fries, 2 Jones' Eq. 156. These instruments, however, are not exclusively peculiar to the Southern States. In Hendricks v. Robinson (2 Johns. Ch. 283), the assignments, which were directly to certain creditors, had a proviso that, if the debts and engagements secured by them were paid within a certain time, the assignments should be void; otherwise the assignees were to sell the property and apply the proceeds. And in an English case in the court of bankruptcy, the assignment, which was of all the trader's property, directly to a creditor, contained a similar proviso with a further stipulation that, until default in payment, the assignor should retain possession of the property assigned. Deeds of this character are spoken of by the court, in this case, as being "now of very frequent occurrence," but as seeming to have a tendency "directly opposed to the spirit and policy of the bankrupt laws." Ex parte Harvey in re Collins, 1 Bankr. & Insolv. R. 194, 197. In the Ohio case of Hoffman v. Mackall (5 Ohio St. 124), an assignment or unconditional deed of trust was distinguished from a deed of trust in the nature of a mortgage, in the following terms: "There is a manifest and well-settled distinction between an unconditional deed of trust and a mortgage or deed of trust in the nature of a mortgage. The former is an absolute and indefeasible conveyance of the subject-matter thereof, for the purpose expressed; whereas the latter is conditional and defeasible. A mortgage is the conveyance of an estate, or pledge of property, as security for the payment of money or the performance of some other act, and conditioned to become void upon such payinent or performance. A deed of trust in the nature of a mortgage is a conveyance in trust by way of security, subject to a condition of defeasance, or redeemable at any time before the sale of the property. A deed conveying land to a trustee as mere collateral security for the payment of a debt, with the condition that it shall become void on the payment of the debt when due, and with power to the trustee to sell the land and pay the debt, in case of default on the part of the debtor, is a deed of trust in the nature of a mortgage. By an absolute deed of trust the grantor parts absolutely with the title, which vests in the grantee unconditionally, for the purpose of the trust. The latter is a conveyance to a trustee for the purpose of raising a fund to pay debts, while the former is a conveyance in trust for the purpose of securing a debt subject to a condition of defeasance." Woodruff v. Robb et al. 19 Ohio St. 216; 1 Hilliard on Mortgages, 359. The court accordingly held (Bartley, J.), in this case, that "where the grantor in a deed of trust makes it in contemplation of insolvency, and authorizes the grantee, after paying the expenses of the trust, to make a pro rata distribution of the proceeds of the trust property among the grantor's creditors, such deed is absolute, and the conveyance is to a trustee for the purpose of raising a fund with which to pay debts, as distinguished from a deed of trust in the nature of a mortgage to secure debts."

2

CHAPTER II.

THE RIGHT TO ASSIGN; STATUTORY PROVISIONS RESTRICTING THE RIGHT TO ASSIGN AND REGULATING THE OPERATION OF ASSIGNMENTS.

§ 9. Debtor's Right to Assign.-"It would seem," observes Mr. Chief Justice Marshall,1 "to be a consequence of that absolute power which a man possesses over his own property, that he may make any disposition of it which does not interfere with the existing rights of others; and such disposition, if it be fair and real, will be valid. The limitations on this power are those only which are prescribed by law." The right to transfer is a necessary incident to the right of property itself, and rests on the same foundation with the absolute rights to acquire and enjoy; and its exercise, where the subject of it is free from the claims of others, is placed under no other restriction than such as the general policy of the law has imposed.

2

Where, however, property has become subject to the rights and claims of others, and particularly where the relation of debtor and creditor has been created, it becomes just and reasonable that the general power of disposition should be so far restricted and qualified as that conveyances and assignments by the debtor, especially of the whole or greater part of his property, should not be employed as means of preserving it for his own use or benefit, or of unduly protecting it from the remedies of his creditors.

§ 10. Fraudulent Conveyances - Bankrupt Law. - In order to effect this object, two systems have been devised in England, and have, from that source, been introduced

1 Sexton v. Wheaton, 8 Wheat. 229, 242.

22 Kent's Com. [326] 377; Id. [328] 370; 1 Bl. Com. 138.

into the jurisprudence of the United States. The first consists of statutory provisions which simply declare conveyances by debtors in certain cases to be fraudulent and void, and subject the property conveyed to the claims and remedies of creditors, as if no conveyance had been made, but interfere no further with the debtor's affairs. The other system is a body of regulations under which the whole of a debtor's property is, on the commission of certain defined acts, taken at once out of his hands by the law, and disposed of for the general and equal benefit of the creditors. The first of these comprises the provisions of those statutes. which are generally known as the statutes of fraudulent conveyances,1 and which operate without distinction upon all persons making transfers of property; the second is the system of the bankrupt laws, which is more confined in its operation.

The effect of the bankruptcy laws upon the right to assign property for the benefit of creditors will be considered in a subsequent chapter.

2

§ 11. Fraudulent Conveyances.-The statutory provis ions against fraudulent conveyances commenced in England as early as the reign of Edward III, but were not fully matured until the time of Queen Elizabeth, in whose reign two statutes were passed-the 13 Eliz. c. 5, and 27 Eliz. c. 4 -the former relating to creditors only, the latter to pur chasers. The provisions of the 13 Eliz. c. 5, to which we shall confine ourselves, and which is still in force in England, have been generally adopted throughout the United States. The preamble to this statute formally expresses its object to be "For the avoiding and abolishing of feigned, covinous, and fraudulent feoffments, gifts, grants, alienations, convey

1 Sometimes, though not with strict accuracy, called statutes of frauds.

2 Stat. 50 Edw. III, c. 6; Crabb's Hist. Eng. Law (Am. ed. 1831), 274; Stat. 3 Hen. VII, c. 4; Crabb's Hist. 440; 2 Kent's Com. [440] 547; and see post, Chapter XXV.

32 Kent's Com. [440] 548; 4 Id. [463] 510; 1 Story's Eq. Jur. § 353; see Hamilton v. Russell, 1 Cranch, 309.

ances, bonds, suits, judgments, and executions, as well of lands and tenements as of goods and chattels," &c.; "which feoffments, gifts, grants," &c., "have been and are devised and contrived of malice, fraud, covin, collusion, or guiles, to the end, purpose, and intent to delay, hinder, or defraud creditors and others of their just and lawful actions, suits, debts, accounts, damages," &c. And the statute itself proceeds to declare that "every feoffment, gift, grant, alienation, bargain, and conveyance of lands, tenements, hereditaments, goods and chattels, or of any of them," &c., made with such intent or purpose, shall be from thenceforth deemed and taken (as against that person or persons, their heirs, &c., whose actions, debts, &c., were or should be in anywise disturbed, hindered, delayed or defrauded) "to be clearly and utterly void, frustrate, and of none effect." These provisions have been considered by the highest authority to be only declaratory of the common law, which, in the opinion of Lord Mansfield, was so strong against fraud, that it alone would have attained every end proposed by the stat utes themselves. More will be said on this subject in another place.

2

§ 12. Classification of Assignments-Special or Partial Assignments. In tracing the history of the practice of assignments by debtors, we find that they are, for the most part, reducible under three principal divisions: first, transfers of some specific article, or one or more descriptions of property, directly to some favored creditor, and for his exclusive benefit; secondly, transfers of all or the greater part of the debtor's property to one or more pre

1 For the statute in full, and also the statutes of the various States, see Bump on Fraudulent Conveyances, Appendix, pp. 583 et seq.; Roberts on Fraudulent Conveyances, pp. 2, 3; and see post, Chapter XXV.

2 Co. Litt. 76 a, 290 b; Lord Mansfield, in Cadogan v. Kennett, Cowp. 432, 434; Marshall, C. J., in Hamilton v. Russell, 1 Cranch, 309, 316; Story, J., in Meeker v. Wilson, 1 Gall. 419, 423; Spencer, J., in Sands v. Hildreth, 14 Johns. 493, 498; 2 Kent's Com. [440] 548, note; Garland, J., in The United States v. The Bank of the United States, 8 Rob. (La.) 262, 402.

'Cadogan v. Kennett, Cowp. 434.

ferred creditors, either directly or through the medium of a trust; and, thirdly, transfers by formal deeds of trust, of all the debtor's property, for the benefit of all his creditors. All these descriptions of transfers have, at one time or other, been made the subjects of judicial investigation, and have been construed, by the courts in England and the United States, with reference either to the statutes against fraudulent conveyances or to the bankrupt laws, and, in some cases, with reference to both.

Assignments of the first description just mentioned, by which a debtor transfers some specific article of property, or some part of his effects, to one or more creditors, by deed or by mere delivery, and in the way of payment or security, when made by persons in solvent circumstances, and in a course of a trade or dealing, are in the nature of ordinary business transactions, and rarely give rise to questions of any kind. Where, however, the obligations of the debtor are large, and the portion of his means thus specially appropriated is considerable, and the rights of other creditors become thereby affected, and especially where the transaction is inconsistent with the prosecution of his business, or is expressly done with reference to or in contemplation of suspension, failure, or bankruptcy, questions frequently arise as to the validity of these special or partial assignments. In England, they have most commonly been tested by the bankrupt laws, under which they have in some cases been upheld, but more frequently avoided, as giving undue or fraudulent preferences, contrary to the spirit and policy of that peculiar system. The same rules have, for the most part, been adopted in the United States, in cases which have arisen under our bankrupt laws.1

'Under the present bankrupt law (§ 5128), in order to render a transfer void, certain facts must concur. The debtor must be insolvent, the transfer must be made with a view to give a preference to the creditor, the creditor must have reasonable cause to believe the person making the transfer to be insolvent, and that it was in fraud of the bankrupt act, and the transfer must be made within four (in cases of involuntary or compulsory bankruptcy, two, [§ 5130 a]) months before the filing of the petition by or against the bankrupt. Bump on Bankruptcy