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Judd v. J.W. Forsinger Co.

Decided: July 31, 1936.


On appeal from a judgment of the District Court for the Fifth Judicial District of the county of Union.

For the appellant, William F. Hanlon (Charles E. Miller, of counsel).

For the respondent, Martin P. O'Connor.

Before Justices Heher and Perskie.


The opinion of the court was delivered by

HEHER, J. Moneys in the hands of appellant, Central Railroad Company of New Jersey, asserted to be the property of the debtor, J.W. Forsinger Company, were seized under a writ of attachment issued out of this court on December 7th, 1933, at the suit of the respondent, the creditor. Judgment for the latter was subsequently entered, and for the purpose of executing the judgment by the appropriation of the attached moneys to its satisfaction, he caused a writ of scire facias to be issued.

There was a motion to quash the scire facias upon the ground that the judgment debtor, on February 28th, 1933, prior to the issuance of the attachment, by deed of trust executed and delivered at the city of Chicago, in the State of Illinois, the situs of its principal place of business, assigned all its property, real and personal, including, so it is said, the moneys here attached, to assignees for the benefit of its creditors; and the decisive question, it is agreed by counsel for the litigant parties, is whether this assignment is valid.

The insistence of the respondent judgment creditor is that the deed of trust contravenes the provisions of the pertinent statute of the State of Illinois, where the assignment was made and delivered and the assignor is domiciled, and, as well, the public policy of this state declared in our Assignment act (1 Comp. Stat. 1910, p. 114), as amended by chapter 234 of the laws of 1928 (Pamph. L., p. 410), and our judicial pronouncements on the subject, in that it authorizes the assignees to grant a preference to the assignor's attorney, and "to give consignment or other creditors priority over general creditors in the distribution of the assets of the estate," and provides that "their decision in connection with the foregoing shall

be final and binding." It is pointed out that our statute (section 1) provides that such assignment shall be made for the "equal benefit" of the debtor's creditors, "in proportion to their several demands, to the net amount that shall come to the hands of such assignee for distribution, and all preferences attempted to be made in such assignment of one creditor over the other, or whereby any one creditor shall be first paid or have a greater proportion in respect of his claim than another, shall be deemed fraudulent and void, and shall render such assignment void." 1 Comp. Stat. 1910, p. 114. It is also urged that in several other particulars, such as the provision prohibiting the sale in bulk of the debtor's assets without notice to all the creditors and the consent of a creditor's committee therein appointed, and that permitting the assignees to continue the business, the deed of trust is violative of the provisions of the Illinois statute; and that the failure of proof of the recording of the assignment, as required by that statute, rendered it ineffective as to respondent.

Ordinarily, the validity of an assignment for the benefit of creditors is determined by the law of the state in which it is made. It is the general rule that a voluntary assignment for the benefit of creditors of all the chattels and other movables of a debtor, valid in all respects where made, is effective there and in other state jurisdictions to transfer all the interests in the chattels and other movables of the debtor, provided the law or declared public policy of such state is not thereby infringed. A state in which a chattel of the debtor is situate may grant a preference respecting it to local attaching creditors or decree that all creditors shall have a common equal interest therein. Varnum v. Camp, 13 N.J.L. 326; Frazier v. Fredericks, 24 Id. 162; Moore v. Bonnell, 31 Id. 90; In re Browning Brothers, 66 N.J. Eq. 302; Van Winkle v. Armstrong, 41 Id. 402; Green v. Wallis Iron Works, 49 Id. 48; Hutcheson v. Peshine, 16 Id. 167; Conflict of Laws, A.L.I., ยง 263; 5 C.J. 1165 et seq.; Beale's Conflict of Laws 987. Professor Beale notes, however, that a chose in action, having no actual situs, is effectually assigned and

will be so recognized in every jurisdiction, when it is validly assigned by the law of the state of the debtor. See, also, 5 C.J. 1169. Although not expressly authorized by our Assignment act, it would seem that the giving of priority to consignment creditors, or those of like status, is not violative of its general scheme and policy. It has been held that where the assignor has been entrusted with goods or money in a fiduciary capacity, and still possesses the property or has appropriated it, or the proceeds thereof, to his own use, it is entirely proper to provide in the assignment for an appropriate preference of the debt or obligation thus arising. See Smith v. Perine, 121 N.Y. 376; 24 N.E. ...

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