Colorado § 6-10-104 - Assignment for all creditors.

§ 6-10-104. Assignment for all creditors.

A deed of general assignment of property by an insolvent, or in contemplation of insolvency, for the benefit of creditors, is not valid unless by its terms it is made for the benefit of all the insolvent's creditors in proportion to the amount of their respective claims.

Source: L. 1897: p. 95, § 4. R.S. 08: § 177. C.L. § 6244. CSA: C. 12, § 4. CRS 53: § 11-1-4. C.R.S. 1963: § 11-1-4. L. 2026: Entire section amended, (HB 26-1426), ch. 334, p. 2008, § 43, effective August 12.

ANNOTATION

Annotator's note. Cases material to § 6-10-104 decided prior to its earliest source, L. 1897, p. 95, § 4, have been included in the annotations to this section.

The rule under this section is not that the preferences fail and the assignment stands, but that the assignment itself fails unless it be in terms free from preferences. May v. Tenney, 148 U.S. 60 (1893).

At common law there was no restriction upon the right of a debtor to prefer creditors. Kellogg v. Thropp, 4 Colo. App. 470, 36 P. 447 (1894).

Subject to the statutory provisions governing general assignments, this common-law right remains unimpaired in this state. Kellogg v. Thropp, 4 Colo. App. 470, 36 P. 447 (1894).

Thus, right to prefer creditors remains unimpaired if debtor retains dominion over property. There is nothing in this section from which it can be implied that it was the purpose of the general assembly to prevent a debtor, insolvent or not, from securing or paying one of his creditors in preference to another while he retains dominion over his property, except as he undertakes to do so in a deed of general assignment executed pursuant to the statute. Kellogg v. Thropp, 4 Colo. App. 470, 36 P. 447 (1894).

Lawful preferences working no prejudice to creditors are allowed. Where one secures a lawful preference by its superior diligence before a bill of sale in its favor is executed, no creditor of the debtor is prejudiced by the conveyance, inasmuch as such a conveyance makes the same disposition of the proceeds of the attached property which the law would have made if the attachment suit had been regularly prosecuted to final judgment. At common law the debtor had an undoubted right to enter into such an arrangement with his creditor, and there is no sufficient reason why the assignment act should receive a construction which will interdict such arrangements, if they are entered into in good faith and are not conceived with a view of evading the provisions of the assignment law. Hayden v. Wellington, 63 F. 6 (8th Cir. 1894).

Moreover, a secured creditor having credited upon his debt the proceeds of his security has a right to participate with other creditors and upon an equal footing with them in the assets realized from the assignment to the extent of the unpaid residue of his debt. Nat'l Bank of Commerce v. Graham, 16 Colo. App. 498, 66 P. 684 (1901).

The purpose of this section is not to discourage or restrain the making of general assignments, but to inhibit partiality therein toward favored creditors. Campbell v. Colo. Coal & Iron Co., 9 Colo. 60, 10 P. 248 (1885).

The provisions of this section that are regulatory of voluntary assignments serve to protect creditors against each other and go to assure equality of distribution unaffected by any requirement or condition in respect of discharge. In re Carlson's for Music, Inc. v. Gould, 176 Colo. 172, 489 P.2d 1038 (1971).

Thus, ratable participation must be provided for. When one voluntarily undertakes by deed of assignment to avail himself of the statute, he must make express provision for the ratable participation by his creditors in its benefits, or the deed is void. Kellogg v. Thropp, 4 Colo. App. 470, 36 P. 447 (1893).

An instrument which, in form an irrevocable power of attorney and obviously intended to operate as an assignment for the benefit of all creditors equally and without preference is, at least when possession is taken thereunder, a common-law assignment for the benefit of creditors. McMinn v. Harrison, 93 Colo. 5, 23 P.2d 944 (1933).

When a deed of assignment is not made for the benefit of all creditors, and some of them are expressly and by intention excluded from its benefits, the deed cannot be upheld. Stevens v. Mosconi, 5 Colo. App. 484, 39 P. 348 (1895).

So a conveyance, unquestionably a general assignment, in form which contemplates the payment only two creditors is not only not for the benefit of all creditors, but avowedly for the benefit of the two, and would, therefore, have to be adjudged a void instrument. May v. Tenney, 148 U.S. 60 (1893).

Such an assignment, whether so intended or not, is fraudulent under this section as not being for the benefit of all the creditors if it makes those who are named and scheduled preferred creditors. Burchinell v. Mosconi, 4 Colo. App. 401, 36 P. 307 (1894).

Fraud and illegality must be pleaded in court below. Where it is alleged that an assignment in favor of certain creditors to the exclusion of others is in violation of this section but no fraud or illegality in the assignment is pleaded nor is any such question in any manner raised in the court below, it need not be determined on appeal whether such a defense can or cannot be successfully interposed. Marsh v. Cramer, 16 Colo. 331, 27 P. 169 (1891).

Furthermore, a preference by separate transaction shows intent to violate section. The fact that a preference is not provided for in an assignment itself, but by an arrangement or transfer outside of it and contemporaneous with it, shows the intent to evade and violate this section. Doggett, Bassett & Hills Co. v. Herman, 16 F. 812 (1883).

Where the preference is by actual delivery to the preferred creditors for the purpose of keeping it from passing to the assignee, the purpose of this section, which is equality among creditors, is defeated, and the courts are deprived of the means of enforcing its provisions. Doggett, Bassett & Hills Co. v. Herman, 16 F. 812 (1883).

Section does not invalidate bill of sale paying only part of debts if assignment act not relied upon. A bill of sale is not rendered invalid by the provisions of this section although it operates to transfer all of the debtor's property to a third party for the purpose of paying a portion only of his debts where it is apparent that the debtor did not intend to proceed under the assignment act or to take advantage of any of its provisions. Hayden v. Wellington, 63 F. 6 (8th Cir. 1894).

This section is not construed as prohibiting or interfering with the making of partial assignments; so far as the statute is concerned, such assignments are perfectly valid. Campbell v. Colo. Coal & Iron Co., 9 Colo. 60, 10 P. 248 (1885).

This section contains no provisions which can be held to preclude a citizen of this state from attaching the property of another citizen of the state, either at home or in a foreign jurisdiction, merely because the latter has become insolvent, and because such attachment may result in a preference. Schindelholz v. Cullum, 55 F. 885 (8th Cir. 1893).

Under the legislative enactment of 1881, had there been any attempt by the assignment to prefer creditors, such attempt would have been without effect to either prefer creditors, or to vitiate the deed, so as to defeat a ratable distribution of the proceeds of the entire estate among all the creditors. Campbell v. Colo. Coal & Iron Co., 9 Colo. 60, 10 P. 248 (1885); Ray v. Hiller, 11 Colo. 445, 18 P. 622 (1888).

Under the early statute, it was held that the fact that an insolvent debtor clearly attempted to evade this section by preferring certain creditors in separate transfers or instruments conveying portions of his property at or about the time he made a general assignment, if such fact was established, may be a reason for avoiding the preferences so given in a suit by or on behalf of injured creditors; but it was not a reason for declaring the assignment itself invalid. The assignment, this being the only objection thereto, might well be permitted to stand, and the property included be distributed ratably by the assignee among the creditors. Campbell v. Colo. Coal & Iron Co., 9 Colo. 60, 10 P. 248 (1885).

For early cases as to preferences, see Salsbury v. Ellison, 7 Colo. 167, 2 P. 906 (1883); Salsbury v. Ellison, 8 Colo. 157, 6 P. 217 (1884).