In the Matter of the General Assignment of Charles S. Bryce to Francis O. Boyd for Benefit of Creditors

In the Matter of the General Assignment of Charles S. Bryce to Francis O. Boyd for Benefit of Creditors. (Decided January 5th, 1891.) Under the provisions of chapter 503 of Laws of 1887 that, in all general assignments for benefit of creditors, any preference (other than for wages, etc.), shall not be valid except to the amomit of one-third in value of the assigned estate left after deducting such wages, etc., and costs, etc., and should said one-third of the assets be insufficient to pay in full the preferred c'aims to which they were applicable, then said assets shall be applied to the payment of the same pro rata, if different classes of preferences are created by an assignment, the whole of such one-third of the net assets may be applied to the first preferred claim, although insufficient to pay such claim in full; as the only limitation intended by the act is the restriction of the quantity of the debtor’s estate which he may apply to claims preferred by him. Appeal from an order of this court. Application for confirmation of the report of a referee on the accounting of Francis O. Boyd as assignee for benefit of creditors of Charles S. Bryce. The order made thereon, confirming the report, directed the assignee to apply one-third of the net assets towards the payment of a claim of Ross & Kearney, which was the claim first preferred in the assignment. From that portion of the order, William A. Bryce, another preferred creditor, appealed. William D. Veeder, for appellant. John S. V. Arnold, for Ross & Kearney, respondents. [MAJORITY — Bischoff, J.] Bischoff, J. The sole question to be determined on this appeal is as to the right of the court, under the provisions of the Laws of 1887, chapter 503, to direct the application of one-third of the net assets of the assigned estate towards the payment of the claim of the first preferred creditor, where the assignment creates several classes of preferences, and sucli one-third of the net assets is insnfficient’to pay the first preferred claim in full. The language of the statute referred, to is as follows: “§ 30. In all general assignments of the estates of debtors for the benefit of creditors hereafter made, any preference created therein (other than for the wages or salaries of employes under chapter three hundred and twenty-eight of the laws of eighteen hundred and eighty-four and chapter two hundred and eighty-three of the laws of eighteen hundred and eighty-six) shall not be valid except to the amount of one-third in value of the assigned estate left after deducting such wages or salaries, and the costs and expenses of executing such trust; and should said one-third of the assets of the assignor or assignors be insufficient to pay in full the preferred claims to which, under the provisions of this section, the same are applicable, then said assets shall be applied to the payment of the-same pro rata to the amount of each of said preferred claims.” However much the practice of debtors in failing circumstanbes to give preference in payment to some creditors to the exclusion of others, by assignments for the benefit of creditors, may be condemned, the common law right to make such preferences has always been conceded to exist (Riggs v. Murray, 2 Johns. Ch. 565; Grover v. Wakeman, 11 Wend. 187; Boardman v. Halliday, 10 Paige 223; Goodrich v. Downs, 6 Hill 438 ; Webb v. Dagget, 2 Barb. 9; Barney v. Griffen, 2 N. Y. 365; Nicholson v. Leavitt, 6 N. Y. 510). And any statutory interference with such right must, therefore, be strictly construed (Taylor v. Mayor, etc., 82 N. Y. 10). Thus, in the consideration of the limitations upon the debt- or’s right to. apply his property towards the payment of preferred claims, contained in chapter 503, Laws of 1887, only that which may be fairly deemed .to have been the intendment of the legislature by the strictest interpretation of the statute should be held applicable; and all rights not abrogated in express terms, or by necessary implication, must, therefore, be regarded as still subsisting. It is apparent from a careful and unbiased reading of the statutory provision above referred to, that the only limitation intended was to restrict the quantity of the debtor’s estate which he may desire to apply in payment of the claims of creditors preferred by him, and that the common-law right of the debtor to create distinct classes of preferred creditors, and to provide that his assets shall be applied towards the payment of one class, in preference to an inferior class, is in no sense disturbed. That is to say, notwithstanding the statutory provisions above referred to, the debtor may still direct the application of one-third of the net assets towards the payment of the claim of one preferred creditor, before such assets shall be applicable to the payment of the claim of a second or third preferred creditor. The language, “ any preference shall not be valid, except to the amount of one-third in value of the assigned estate,” is equivalent to saying that one-third of the assigned estate may be applied towards the payment of any preferred claim. The subsequent provision that, in the event that said one-third of the assets shall be insufficient to pay the preferred claims in full then said assets shall be applied to the payment of the preferred claims pro rata, has reference only to the case where such preferred claims belong to the same class, and are equally preferred in the order in which the one-third of the net assets are directed to be applied, but does not contain any inhibition upon the debtor to direct the order or manner in which so much of his assets as may be properly applicable fdr that purpose shall be distributed among his preferred creditors. The order appealed from should be affirmed, with costs. J. F. Daly, Ch. J., and Pryor, J., concurred. Order affirmed, with costs. '