Jaffray v. McGehee/Opinion of the Court

by William Burnham Woods

United States Supreme Court

107 U.S. 361

Jaffray  v.  McGehee

The statute of Arkansas provides that the property assigned for the benefit of creditors shall be sold at public auction within 120 days after the execution of the bond required of the assignee.

The deed of assignment in effect authorized the assignee to sell at private sale, and at such time and in such manner as he should deem advisable and right. Under this power he could wait an indefinite time, and then sell the property at wholesale, or he could carry on the business of selling off the stock of goods in the ordinary way of retail merchants, and without any limit of time within which the sale should be completed. The powers conferred by the deed of assignment were, therefore, in direct opposition to the policy of the statute. It is true, the powers conferred on the trustee were subject to the supervision of the creditors. But this could only mean a majority of the creditors. The assignee was, therefore, authorized by the assignment to dispose of the property assigned in a manner different from that pointed out by the statute, and in disregard of the wishes and remonstrances of a minority of the creditors. The question presented is, therefore, this: Is an assignment for the benefit of creditors, which authorizes the assignee to violate the provisions of the statute regulating such assignments, valid and binding on the creditors of the assignor?

The contention of the appellant is that the assignment is valid, (1) because the discretion given the assignee by the assignment leaves him at liberty to follow the law; and (2) because, even if the assignment required him to administer the trust in a manner different from that prescribed by the law, only such directions as conflicted with the law would be void, and the assignment itself would remain valid.

We think that under the construction given the assignment law by the supreme court of Arkansas, in the case of Raleigh v. Griffith, 37 Ark. 153, these positions cannot be maintained. The assignment in that case provided as follows:

'The party of the second part [the assignee] shall take possession of all and singular the property and effects hereby assigned, and sell and dispose of the same, either at public or private sale, to such person or persons, for such prices, and on such terms and conditions, either for cash or upon credit, as, in his judgment, may appear best and most for the interest of the parties on cerned, and convert the same into money.'

It will be observed that the terms of the assignment did not prevent the assignee, in the administration of his trust, from following the directions of the statute in all particulars. He was at liberty to sell for cash at public auction, and within 120 days after the filing of his bond. But the assignment vested him with a discretion to do otherwise. The court declared the assignment to be void. It said:

'In providing for the sale of the property, the statute is disregarded in the deed of assignment; the assignee was authorized to sell at private or public sale, and for cash or credit. Under such provision it was in the power and discretion of the assignee to prolong the execution and closing of the trust for an indefinite period. The legislature deemed it expedient, as a matter of public policy, to require assignees, in general deeds of assignment for the benefit of creditors, to sell all property assigned to them, for the payment of debts, at public auction, within 125 days after the execution of the bond, on 30 days' notice of the time and place of sale.' And the court declared: 'The statute prescribes a mode of sale in this state, and dissenting creditors are not barred by a deed made in direct contravention of a plain provision of the statute.'

The effect of this decision is that the provisions of the statute respecting the sale of property assigned for the benefit of creditors are mandatory and not directory, (see, also, French v. Edwards, 13 Wall. 506,) and there are no conflicting decisions of the supreme court of Arkansas. This being the construction put upon the law by the supreme court of the state when the assignment in this case was made, it is binding on the courts of the United States. Brashear v. West, 7 Pet. 608; Sumner v. Hicks, 2 Black, 532; Leffingwell v. Warren, Id. 599. It follows that the assignment, which vests the assignee with a discretion contrary to the mandates of the statute, and in effect authorizes him to sell the property conveyed thereby in a method not permitted by the statute, must be void, for contracts and conveyances in contravention of the terms of policy of a statute will not be sanctioned. Peck v. Barr, 10 N. Y. 294; McGregor v. S. E. R. Co. 18 Q. B. 615; Jackson v. Davison, 4 Barn. & Ald. 695; Miller v. Post, 1 Allen, 434; Parton v. Hervey, 1 Gray, 119; Hathaway v. Moran, 44 Me. 67.

The result of these views is that the decree of the circuit court dismissing the bill, because the assignment in question was void on its face, was right, and must be affirmed.

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