Horsey v. Stockley

Citations

• 4 Del. Ch. 536

Syllabus

<p>Stockley paid for Horsey, who was insolvent or in failing circumstances, fifty per cent, of his debts, to a portion of his creditois, in full satisfaction and discharge of their claims, without having an assignment of them. After-wards, Horsey gave his judgment bond to Stockley for the full amount of the debts so paid, on which judgment was entered in the Superior Court and execution issued, on which the real estate of H orsey was sold by the Sheriff and bought by Stockley. Afterwards, the creditors of Horsey obtained judgments against him, and sought to avoid the judgments against him, and sought to avoid the judgment of Stockley and to reach the proceeds of the real estate in the Sheriff’s hands. Held,</p> <p>1. That the transaction constituted a legal discharge, and not a purchase of the debts of the creditors so paid by Stockley.</p> <p>2. That it did not constitute an illegal or fraudulent preference of creditors, within the statute against fraudulent insolvency, unless it was done by both of them with the intention either of defrauding the other creditors or of coercing them into a compromise on like terms.</p> <p>3. That the party so paying the debts to a portion of the creditors should only be reimbursed, in the Court of Chancery, the amount actually paid by him in the discharge of them, with interest, out of the proceeds of the sale of the real estate in the hands of the sheriff; and the balance should apply to the judgments subsequently recovered against the debtor by his other creditors.</p> <p>Our law recognizes two distinct policies with respect to the liquidation of a failing debtor’s estate, and one is the policy of giving to the creditor the benefit of his diligence as against other creditors, so long as the debtor keeps control of his property by not making an assignment. If no assignment be made, the debtor may prefer an honest creditor, though he be in failing circumstances, even to the extent of all his property, but the moment he makes an ass