Telford against Adams, 6 Watts 429

The opinion of the Court was delivered by Sergeant, J. The evidence in this cause seems to show, that although the plaintiffs appeared to be purchasers on the face of the invoices and of the consignments to their correspondents, yet in truth, they were not so, but were merely factors to dispose of the manufactured goods on account of the defendants, and give them credit for the proceeds, the defendants remaining liable in account for balances that should remain due for yarn sold to them, or responsibilities incurred by the plaintiffs. Why such an arrangement was made, was a matter of dispute.

The plaintiffs alleged, that it was a usual mode of transacting business, and called witnesses to prove instances in which goods were consigned by manufacturers to be sold on commission, and the same terms were employed. One of the plaintiffs’ witnesses, however, stated in his examination in chief, that ‘he always understood the shipments were made in that way, on account of the embarrassments of the defendants, and that he had heard conversations on the subject between Mr Allen and the elder Mr Telford.

Ho further stated in his cross-examination, that the plaintiffs, as he understood, made the consignments in their own name, to cover the property from the creditors of Telford, who was embarrassed. It was upon this view of the case, the defendant’s first point was proposed, and there being evidence in relation to it which the jury might have believed, the question of law was pertinent.

For, if the facts were as stated by this witness, the rule of law applied, that an arrangement made by the debtor and another, with a view to hinder or defeat his creditors, though it is voidable by them, yet it is binding between the parties themselves. It shall be as they have chosen to make it, and they will not be afterwards heard to allege, that it was a mere contrivance; different from the truth and facts of the case.

This rule appears to be founded on principles of public policy, and is intended to deter men from engaging in forbidden transactions, by refusing relief as between themselves, and leaving them in the position they have assumed. In the case of Sickman v. Lapsley, 13 Serg. & Rawle 224, the subject is considered by Mr Justice Duncan, and the decision of the court recognizes the principle. The answer of the court below does not seem to have given the defendants the benefit of the rule of law to which they were entitled.

The rule is admitted in the abstract to be correct, yet its application is denied, because the plaintiffs stood in the light of creditors themselves, and as such, had a right to secure a preference over other creditors. But it does not appear that the plaintiffs were creditors, except under the arrangement in question.

And besides, the question does not turn on the right of the plaintiffs to secure a preference, if done innocently, either according to the usual custom or otherwise; but supposing the arrangement were made with a design to cover the property from the defendant’s creditors, who might otherwise be induced to levy on it by execution, or to attach it elsewhere, would it not, though voidable as to creditors, be conclusive on the parties? For the reasons above given, it seems to me it would, and that the court ought so to have instructed the jury. The other errors assigned, are not sustained.

The answers of the court seem to be sufficient, and to be correct. Judgment reversed, and a venire facias de novo awarded.