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UNION BANK CHICAGO v. KANSAS CITY BANK

decided: May 19, 1890.

UNION BANK OF CHICAGO
v.
KANSAS CITY BANK



APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF MISSOURI.

Author: Gray

[ 136 U.S. Page 229]

 MR. JUSTICE GRAY, after stating the case as above, delivered the opinion of the court.

The claim of each plaintiff being for less than $5000, and the amount in dispute, therefore, insufficient to give this court jurisdiction of the whole case, our jurisdiction is confined to answering the questions of law presented by the certificate of division of opinion between the judges before whom the case was heard in the Circuit Court. Rev. Stat. §§ 650, 652, 693; Act of February 16, 1875, c. 77, § 3, 18 Stat. 316; Dow v. Johnson, 100 U.S. 158; United States v. Ambrose, 108 U.S. 336; Jewell v. Knight, 123 U.S. 426.

The determination of these questions is governed by the law of Missouri, where the deed of trust was made, and the parties to it resided. In ascertaining the construction and effect of section 354 of the Revised Statutes of the State of 1879, which is supposed to affect the case, it is important to bear in mind the law of Missouri as it existed before those statutes were enacted.

The Supreme Court of Missouri in 1852, speaking by Mr. Justice Gamble, said: "It is not necessary to quote books for the purpose of showing that a debtor in failing circumstances may give a preference to one or more of his creditors to the exclusion of others; and that such disposition of his effects is not impeachable on the ground of fraud, because it embraces all his property;" and accordingly hpheld assignments by insolvent debtors of all their property to pay particular creditors. Cason v. Murray, 15 Missouri, 378, 381; Richards v. Levin, 16 Missouri, 596, 599.

[ 136 U.S. Page 230]

     It was also well settled by the decisions of that court, that each partner, by virtue of the relation of partnership, and of the community of right and interest of the partners, had full power and authority to sell, pledge or otherwise dispose of all personal property belonging to the partnership, for any purpose within the scope of the partnership business, and might therefore, without the concurrence of his co-partners, mortgage the partnership property by deed of trust, to secure the payment of a partnership debt; Clark v. Rives, 33 Missouri, 579; Keck v. Fisher, 58 Missouri, 532; although one partner, without the concurrence of his co-partners, could not delegate to a stranger the right of the partnership to administer the partnership effects, and therefore could not make a general assignment of all the property of the partnership for distribution by the assignee among the partnership creditors, retaining no equity of redemption in the partnership. Hughes v. Ellison, 5 Missouri, 463; Hook v. Stone, 34 Missouri, 329.

The statutes of Missouri restricting voluntary assignments have always been construed rather strictly by the Supreme Court of the State.

By the earliest statute upon the subject, "in all cases in which any person shall make a voluntary assignment of his lands, tenements, goods, chattels, effects and credits, or any part thereof, to any person, in trust for his creditors or any of them, it shall be the duty of the assignee" to file an inventory of the assigned property in the office of the clerk of the Circuit Court of the county in which the assignee resides. Missouri Rev. Stat. of 1845, c. 10, § 1; reenacting Act of February 15, 1841, § 1, Missouri Laws of 1840-41, p. 13.

In the Revised Statutes of 1855, c. 8, § 1, that section was reenacted, and at the end of the chapter this section was added: "§ 39. Every provision in any assignment, hereafter made in this State, providing for the payment of one debt or liability in preference to another, shall be void; and all debts and liabilities, within the provisions of the assignment, shall be paid pro rata from the assets thereof."

The Supreme Court of Missouri repeatedly and uniformly held that, taking those two sections together, § 39 only prohibited

[ 136 U.S. Page 231]

     preferences among the creditors designated in an assignment, either of the whole or of part of the debtor's property, but did not invalidate partial assignments for the benefit of some of the creditors of the assignor, and was so far inefficient to prevent preferences among creditors; and the court observed: "If the legislature wish to strike at the root of the evil, they must go back to an old principle of the common law, which permits a debtor to prefer one creditor to another, and which privilege can be effected in a variety of modes other than those referred to in our statutes concerning ...


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