U.S. Supreme Court
Merillat v. Hensey, 221 U.S. 333 (1911)
Merillat v. Hensey
Argued March 17, 1911
Decided May 15, 1911
221 U.S. 333
Both courts below having found that no actual fraud was intended in this case, this Court considered only the question of constructive fraud.
Where, as in the District of Columbia, the assignment of a chose in action does not have to be recorded and there is no way in which constructive notice can be given, the assignment, if valid upon its face, is ineffective only in case of actual bad faith established by the facts.
Knowledge of one's own insolvency, except in cases provided by statute, does not render it illegal or criminal to prefer one creditor above another. Huntley v. Kingman, 152 U. S. 527.
The fact that the amount alleged to be due on an unliquidated chose in action is greater than the amount of the debt in payment of which it is assigned is not necessarily evidence of fraud against other creditors, and where the amount actually recovered is less than the amount of the debt, this Court will not disturb the finding of both courts below that there was no fraud.
Reservation to the assignor of surplus of a chose in action given in payment of a debt does not of itself constitute fraud in law. To be fraud in law, the reservation must be of some pecuniary benefit to the assignor chanrobles.com-red
at the expense of creditor and a prime purpose of the conveyance. Section 1120, Code of the District of Columbia.
The assignment of a mere chose in action, not subject to legal process and of uncertain value, given to secure an honest debt will not be set aside by this Court as fraudulent in law because the surplus, if any (there actually being a deficit), was reserved to the assignor by a separate instrument, for the recording of which there was no provision, after two courts have held that the assignment was not made with intent to hinder and defraud creditors and as matter of law had no such result.
34 App.D.C. 398 affirmed.
The facts are stated in the opinion. chanrobles.com-red