1. Assignment for Benefit of Creditors. — A conveyance by an insolvent debtor of his property to a trustee for the purpose of sale and applying proceeds to the payment of his debts, so far as sufficient, with no defeasance expressed or possible from the circumstances, is an assignment and not a mortgage.
2. Case Adhered to. — Johnson v. Robinson, 68 Tex. 399, adhered to, in construing the statutes relating to assignments. Sayles' Civ. Stats., art. 65a.
3. Assignment — Preferences Void. — An assignment made by an insolvent debtor for the benefit of all his creditors, of all his property, comes within the statute concerning assignments for benefit of creditors; and any provisions for preference among the creditors will be treated as void. The facts indicated by the statute make the conveyance an assignment if shown, regardless of any purpose of the maker as to whether his conveyance should be an assignment under the statute or not.
4. Residence of Assignee. — That the assignee named is not a resident of the county in which the assignor resides will not invalidate the assignment. The statute as to residence is directory.
5. Failure to Give Bond. — Upon an assignee failing to give bond as prescribed by the statute he may be removed without notice. His failure vacates the appointment.
GARRETT, PRESIDING JUDGE, Section B.
By the instrument under which Burnette acquired his right to the possession of the stock of goods, Mainor, who was indebted to the various persons mentioned therein, undertook to transfer, sell, and convey the property to a trustee for the purpose of disposing of the same by sale and applying the proceeds thereof to the payment of his indebtedness as far as the same might be sufficient with the preferences indicated. It was not a chattel mortgage or deed of trust to secure a debt or debts due or to become due by the debtor, who conveyed the property, to the creditors named therein, as no condition of defeasance was either expressed or could be implied from the terms used. A proper construction of the instrument will show its effect to be a conveyance of the stock of goods absolutely to the appellee Burnette, thereby investing him with full and absolute title with a trust as to the proceeds for the purposes expressed. The grantor's intention was that the title should pass to and become invested in Burnette, with no power on the grantor's part to avoid or defeat it. The transaction was a direct application of the goods for purpose of sale and the appropriation of the proceeds to the payment of the indebtedness of Mainor, just as much as if A owed debts to B and C which he desired to pay, and delivered to D a horse, and directed him to sell the horse and with the proceeds to pay the debt of B first and then that of C in full if the proceeds were sufficient, but if not, to pay him whatever there might be. Because of any surplus to which A might be entitled no defeasance could be implied, since a defeasance would apply only to the title to the property. The instrument was therefore an assignment for the benefit of creditors. Johnson v. Robinson, 68 Tex. 399.
"Every assignment made by an insolvent debtor, or in contemplation of insolvency, for the benefit of his creditors, shall provide, except as hereinafter provided, for a distribution of all his real and personal estate, other than that which is by law exempt from execution, among all his creditors in proportion to their respective claims; and however made or expressed, shall have the effect aforesaid, and shall be construed to pass all such estate, whether specified therein or not; and every assignment shall be proved or acknowledged and certified and recorded in the same manner as provided by law in conveyances of real estate or other property." Sayles' Civ. Stats., art. 65a.
It was alleged in plaintiff's petition that Mainor was insolvent and in contemplation of insolvency, and that he had executed and delivered to the defendant a deed of assignment conveying for the benefit of all his creditors all of his property subject to execution. It is not necessary that these facts should appear from the face of the deed; they may be alleged and proved. An assignment made by an insolvent debtor for the benefit of all his creditors of all his property comes within the law concerning assignment for the benefit of creditors; and any provisions for preference among the creditors will be treated as void. If Mainor was insolvent and his intention was to convey all his property for the benefit of all his creditors, the instrument became a general statutory assignment, no matter how expressed, and his intention to create a preference in favor of some of them can have no effect. Nor do we think it can make any difference that he did not intend that the assignment should come within the law, if in fact it was made under such circumstances and in such manner as to bring it within the act concerning assignments for the benefit of creditors. The intention will be gathered from the instrument itself and the law which enters into it and becomes a part thereof. Every person's right to dispose of his property is subject to the law, and especially is the right of an insolvent debtor to make disposition of his property as he pleases hedged in and limited.
The instrument was valid as a general assignment for creditors under the statute, unless the fact that the assignee was not a resident of Montague County, in which the assignor resided, rendered it void. It is provided by the statute, that "every such assignee shall be a resident of this State and of the county in which the assignor resides or in which his principal business was conducted." Sayles' Civ. Stats., art. 65f. This question has never been passed on in this State. In the case of Johnson v. Robinson, 68 Tex. 399, it appeared from the face of the assignment that the assignees were residents of the State of Kentucky; but the instrument in that case having been held to be a partial common law assignment, it was not necessary to decide whether that fact would avoid it. We gather from the general purport of the act and the uniform construction thereof that assignments coming within its scope are to be upheld rather than strictly construed. No fraudulent act, intent, or purpose of the assignor or assignee can have the effect to defeat an assignment or to deprive the creditors consenting thereto from the benefit thereof, and any such fraudulent intent on the part of the assignee is sufficient cause for his removal. Sayles' Civ. Stats., art. 65f. All such assignments, however made or expressed, shall have the effect to provide for the distribution of all the assignor's real and personal estate among all his creditors in proportion to their respective claims. It has been held that the omission of property from the inventory, the failure to annex an inventory, the failure to include all of the creditors in the schedule, and the failure of the assignee to file a bond, will not avoid the assignment. In the case of Bachrack v. Norton, 132 United States, 337, cited by counsel for appellees as having intimated that the assignment would have been void if the statute had required the assignee to be a resident of the State, the question was not passed upon, and the court said: "Independently of a statute on the subject, we do not see why, as a mere matter of law, an assignment should be held void because the assignee is not a citizen or resident of the State where the assignment is made and the debtor resides, provided he complies with the conditions prescribed by law." Some of the States it seems have statutes which make the assignment void when the assignee is a nonresident of the State. Burr. on Assign., sec. 91, notes 7 and 8. We do not think, in the absence of an express declaration of the statute to that effect, that the fact that Burnette was not a resident of Montague County renders the assignment void, and we hold the provision of the statute with reference to the residence of the assignee as directory and not mandatory. If he failed to comply with the conditions prescribed by law for the management of the trust, he would be subject to removal.
The statute does not require that notice shall be given of the application of creditors to have an assignee appointed on the failure of the assignee named in the deed to file a bond within five days. By analogy to the law by which administrators and guardians are removable without notice, the office is treated as vacant on account of the failure to file the bond as required, and another person is appointed. Article 650, Sayles' Civil Statutes, is a provision for the removal of the assignee and the appointment of another in his place. When the assignee named in the assignment fails to file a bond it is not a question of removal, but rather of declination or refusal, and if the creditors see proper to take advantage of it they may have an assignee appointed. Appellant was appointed in accordance with the statute, and had authority to bring and maintain this suit.
We conclude that the court below erred in sustaining appellees' demurrers to plaintiff's petition, and that the judgment should be reversed and the cause remanded.
Reversed and remanded.
Adopted February 16, 1892.