Case ID: ohio-st_6/html/0612-01.html
Source: Caselaw Access Project
Author: {"author": "J. R. Swan, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Conkling & Shepherd v. Uriah P. Coonrod and Robert Crum.
    An assignment was made by an insolvent debtor, of his property, for the "benefit of all his creditors, containing a provision, “that the trustee shall sell and dispose of the property with convenient diligence, either at public or private sale, and for the best prices he can obtain therefor, for cash, or upon such terms of credit as he may deem advisable to convert the same into money to advantage for those interested in the premises, and to barter and exchange the same or any part thereof as he may deem proper for the benefit of the creditors of the assignor, and to dispose of the same in any manner whatsoever, as freely and lawfully as the assignor could do himself, which the trustee may deem advisable to do, tending in his opinion to convert the same into money directly of indirectly for the benefit of all ®inter- [612 ested under this assignment, and to collect all such debts and demands as may be collectible, and to settle, compound, and adjust, and to discharge the same for payment in cash or in property, or for part payment, only as aforesaid, any as well as all the claims and demands due, owing, or accruing due to said assignor, as well as the claims in which the said assignor has any interest whatever, and finally to make at his discretion any such disposition of the property hereby assigned and transferred, or any part thereof, as the said assignor could do himself before the execution of these presents.” Held:
    
    That the assignment is not, per se, fraudulent and void.
    That a sale of goods by the trustee on a credit of one, two, and three years is an abuse of discretion, and creditors can interpose and require a sale of the notes taken on such credit.
    It seems when a trustee is authorized to sell on credit, that a sale of real or personal property by the trustee, upon such credit as is authorized by law in the settlement of the estates of deceased persons, is not, in general, an ' abuse of discretion.
    Civil action. Reserved in the district court of Seneca county.
    The facts in this case, so far as it is necessary to state them, are as follows;
    On the 11th day of November, 1854, the defendant Coonrod, a dry-goods merchant of Tiffin, Ohio, claiming to be indebted to many persons in large sums of money, which he was unable to pay, made an assignment of all his property, consisting of a stock of goods and book accounts, to defendant Crum, in trust, for the benefit of his (Coonrod’s) creditors.
    The instrument of assignment authorizes the trustee “ to take immediate possession of the property hereby assigned, and sell, amd dispose of the same with convenient diligence, either, at public or private sale, and for the best prices he can obtain therefor for cash or upon such terms of credit as he may deem advisable to convert the same into money to advantage for those interested in the 613] premises, and to ^barter and exchange the same or any part thereof as he may deem proper for the benefit of the creditors of the said Coonrod, and to dispose of the same in any manner whatsoever as freely and lawfully as the said Coonrod could do himself, which the said Crum may deem advisable to do, tending in his opinion to convert the same into money, directly or indirectly, for the benefit of all interested under this assignment, and to collect all such debts and demands as may be collectible, and to settle, compound, and adjust, and to discharge-the same for payment in cash or in property, or for part payment only, as aforesaid, any as well as all the claims and demands due, owing, or accruing due to said Coonrod, as well as the claims in which the said Coonrod has any interest whatever, and finally to make at his discretion any such disposition of the property hereby assigned and transferred, or any part thereof, as the said Coonrod could .do himself before the execution of these presents.”
    The trustee is directed to pay out of the proceeds of the property “ all just and reasonable expenses, services, costs, and charges of executing this ■ assignment and of carrying into effect the trust hereby created, together with a reasonable commission or compensation to the said Crum for his own services in executing said trust.”
    With the residue, the trustee is directed to pay all the debts and liabilities of Coonrod, in full, if sufficient for that purpose; if not, then to pay the same pro rata. After payment in full, the balance to be returned to Coonrod.
    Crum accepted this trust, and it appears from his answer and deposition, that he took immediate possession of the property, and proceeded to collect the accounts, and while so doing, and while 'seeking an opportunity to sell the entire stock of goods, ho retailed, up to the 3d of March, 1855, about fifteen hundred; dollars’ worth to different persons, some for cash and some on credit, to be paid when called for.
    *The greater portion of the goods thus sold on credit was to the creditors of Coonrod, and to each an amount not to exceed their probable dividend under the assignment, and the remainder so sold was to responsible persons.,
    On or about the 3d day of March, 1855, the trustee sold all the remainder of said goods, amounting to about sixty-five hundred dollars, at the original New York cost, to Warren P. Noble, at forty-five cents on the dollar of the appraisement, taking his notes therefor at one, two, and three years, with interest after the first year, and without security.
    The trustee, in his deposition, states that Noble is abundantly, good and responsible for the amount of his purchase, and that the ■sale of the goods to him was the best that could be made or obtained for them in the condition they were in.
    After this sale, on the 5th day of March, 1855, Coonrod, by another instrument of writing of that date, referring to the assignment in trust above-mentioned, and expressing his fears that a perfect title to the property and effects attempted thereby to bo assigned might not have passed to the trustee, assigned and transferred all his property and effects to said Crum in trust for his (Ooonrod’s) creditors.
    This last agreement directs the trustee to take immediate possession of the property assigned, and with convenient diligence •convert the same, into money, either at public or private sale, collect the debts, and pay out the proceeds of the property in the same manner as provided in the first agreement.
    Crum accepted this trust and took and retained possession of the property under it.
    It appears 11 that the first assignment was satisfactory to one or more of the creditors of Coonrod, or that they simply made no objection to it; and the trustee, Crum, was notified *by plaint- [615 iffs that the first assignment was a fraudulent one, and that plaintiffs would not be concluded by its provisions, but would institute proceedings to have it set aside. This notice was given about two months before the execution of the second assignment.”
    The petition avers that the plaintiffs are judgment creditors of ■Coonrod; that the assignment was made with intent to hinder, de-, lay, and defraud the plaintiffs in the collection of their debt; and that its operation has that effect.
    Plaintiffs ask that the assignment be held as fraudulent and void; that the trustee be ordered to pay the amount due upon their judgment out of the assets in his hands; and for other relief.
    
      
      George E. Seney, for plaintiffs,
    made the following points:
    1. The assignment in this case is not within the statute of 1853r because it shows no design to prefer one creditor and exclude another; but, on the contrary, it expressly appears it was for no such, purpose. See Hull v. Jeffrey, 8 Ohio, 390. This assignment must ’ therefore stand or fall upon the common law, subject to impeachment upon the ground of fraud.
    The plaintiffs are entitled to all the advantage due to their vigilance. Doremus v. O’Harra, 1 Ohio St. 45; Atkinson v. Tomlinson, Ib. 237.
    The court has no power to control this assignment by taking from it any of its illegal or fraudulent provisions, to the end that the trust itself, divested of all such features, may stand.
    An assignment void in part is void in toto. 2 Kent, 536; 6 Hill, 438; 2 Comst. 371; 11 Wend. 187; 9 Barb. 255; Swan’s Rev. Stat. 435.
    *2. The assignment of November 4th is fraudulent because:
    1. It gives the trustees power to sell upon credit. Swan’s Rev. Stat. 435; Vannest v. Yoe, Sandf. Ch. 4; Burdick v. Post, 12 Barb. 168; Barney v. Griffin, 2 Comst. 465; Nicholson v. Leavitt, 2 Seld. 510; Neally v. Ambrose, 21 Pick. 185; Hopkins v. Ray, 1 Met. 79; Woodburn v. Mosher, 9 Barb. 255.
    2. It gives the trustee power to sell at private sale. We think the-trust must fall for this reason, and refer the court to the case of Meacham v. Sternes, 9 Paige Ch. 390.
    3. It gives the trustee the power of barter and exchange. Plack v. Schemerhorn, 3 Bar. 646; Burrill on Assignments, 209, 210.
    4. It gives the trustee power to compromise debts. Murphy v. Bell, 8 How. Prac. 468; Woodburn v. Mosher, 9 Barb. 255; Hudson v. Bell, 3 Scam. 578; Grover v. Wakeman, 11 Wend. 187.
    5. It gives the trustee full discretionary power in aid of the specific-powers mentioned.
    The question to be considered is not whether fraud may be committed by the trustee, but whether the provisions of the instrument are such that, when carried out according to their reasonable and apparent intent, they will be fraudulent in their operation. Ward v. Tingley, 4 Sandf. 476. If an assignment is so drawn.that it must in its execution tend to hinder, delay, and defraud creditors, the legal presumption is that it was framed with that intent. The law presumes every man to intend the legal consequences which must naturally flow from his own voluntary act. When the legal effect of a conveyance is to hinder, delay, and defraud creditors, no matter what the actual intention may have been, it isa fraud in law, and the courts are so bound to declare it. Gibson v. Love, 4 Fla. 217. It is sufficient, *if the effect of the conveyance is to hinder [617 or delay creditors in the collection of their debts. Buck v. Sherman, 2 Doug. 176. An assignment to be valid, must be free from all provisions tending to hinder, delay, or defraud creditors. Burrill on Assignments, 236.
    It has been determined by high authority, that an assignment to a brother, who was irresponsible, was a fraud, in law, as to creditors —the selection of an insolvent person as trustee, is a fraud. Cormah v. Sedgewick, 1 Bar. Ch. 210. The assignor remaining in possession, has been determined to be a fraud. So the selection of an incompetent person. An assignment to a clerk, the debtor exercising authority, has been held a fraud. An assignment which directed the assignee to delay the sale of the property for the purpose of obtaining higher prices, has been decided fraudulent and void. Hart v. Crane, 7 Paige Ch. 37.
    The assignment is void by the statute of frauds, as to the creditors of the party making such conveyance. Brown v. Webb, 20 Ohio, 389; Peck v. Land, 2 Kelley, 1; Trotter v. Watson, 6 Humph. 509.
    When the object and intent of a deed is to hinder and delay creditors, and both.the grantor and grantee participate in it, the deed is void, as between a creditor and fraudulent grantee. Tatum v. Hunter, 14 Ala. 557; Johnson v. Brandis, 1 Smith, 263.
    The assignment of March 5, 1855, can not affect the rights of the plaintiffs to have the first set aside.
    After any of the trusts have been actually executed, it is too late to revoke an assignment. Burrill on Assignments, 419; Petrikin v. Davis, 1 Morris, 296. When an assignee accepts the assignment it operates as a conveyance. Hall v. Denison, 17 Vt. 310; Ingraham v. Kirkpatrick, 6 Ired. Eq. 462.
    This last assignment will not operate to defeat our right *to set [618 aside the first assignment, it being fraudulent. Brownell v. Curtis, 10 Paige, 210; Leach v. Kelsey, 7 Barb. 466; Browning v. Hart, 6 Ib. 91.
    In the Ohio statute of frauds and perjuries, the words hinder and delay, are omitted; this omission is not material. Any conveyance which materially hinders and delays creditors is fraudulent and void. Nicholson v. Leavitt, 2 Selden, 517; Burdick v. Post, 12 Barb. 168; Arthur v. Com. and Railroad Bank, 9 S. & M. 394; Burrill on Assignments, 386.
    In Wallack’s notes to American Leading Cases, Sheldon v. Lodge, 4 Denio, 217; Bodley v. Goodrich, 7 How. 277, the doctrine is declared to be, that an assignment that “ tends ” to hinder and delay, by its provisions, is not only'void, butfraudulent. See also Vernon v. Morton, 8 Dana, 247, 263; Cadogus v. Bennett, Cow. 434; Atkinson v. Tomlinson, 1 Ohio St. 237.
    
      Luther A. Hall and James Pillars, for the defendants :
    Where a debtor in contemplation of insolvency, and not of fraud, assigns his property to á trustee for the express benefit of all his creditors, our statute “ declaring the effect of assignments to trustees in contemplation of insolvency,” by its spirit and policy, lays its hand upon such an assignment, takes it aside from the operation of the principles of the act for the. prevention of frauds and perjuries, and controls it, even if the instrument of assignment contains provisions, or directions to the trustee, contrary to the policy of the law, or the 1‘ights of creditors, which he may follow, in the mere execution or carrying out of the trust. Swift v. Holdridge, 10 Ohio, 230.
    This assignment in trust, claimed only to be fraudulent (and that 619] simply in some of its incidents), must stand *and be executed. Harshman v. Lowe, 9 Ohio, 92; Hull v. Jeffrey, 8 Ohio, 390; Mitchell v. Gazzam, 12 Ohio, 315; Bancroft v. Blizzard, 13 Ohio. 30.
    To avoid a conveyance made to defraud creditors, both the grantor and grantee must be partakers of the fraud, or tainted with the fraudulent intent. But in this case, the cestuis que trust are not parties to the assignment. It is made only for their benefit. Their assent even is not essential to its validity. Neither is the trustee a party to it, in the strict sense of the word. He signed and sealed the instrument of assignment, but that was mere form. He has but a naked legal interest in the trust property, with no substantial advantage to himself from the execution of the trust.
    The law, therefore, can not consider him as participating in any fraud or fraudulent intent, so as to avoid the assignment. Vide 9 Ohio, 93.
    If an assignment of his property by an insolvent debtor to a trustee, in trust for creditors, contains any provisions or directions to the trustee, contrary to law or the rights of the creditors, in a proper action for that purpose, the court can control and modify the trust or the action of the trustee, purge the assignment of any objectionable feature, and leave the body of the trust to stand, and order the same, thus vastated, to be executed.
    It is only when the illegal provisions in a trust are indivisible from, and constitute the main object or body of the trust, that the whole will be .declared void. Tritt v. Crotzer, 13 Penn. St. 451; Greenfield’s Estate, 14 Penn. St. 480; Dupre v. Thompson, 4 Barb. S. C. 279; Humberston v. Humberston, 2 Vern. 737; 1 P. Wms. 332; Prec. Ch. 455; Hill on Trustees, 333, 334; Sheppard’s Touchstone, 87, rule 5; Darling v. Rogers, 22 Wend. 486.
    *This question, raised by the counsel for the plaintiffs, of [620 the power to sell upon credit, under assignments for the benefit of creditors, has been much discussed in New York; but in that state they have no such statute as our “act declaring the effect of assignments to trustees in contemplation of insolvency.” It will-be seen, on examination, that the decisions referred to, maintaining that such a power given to the trustee vitiates and avoids the whole transaction, were made expressly under the statute of frauds,'which is a transcript of the 13 Eliz. C. 5, and in which the words with intent to hinder or delay creditors, are its emphatic words.
    But there is still á conflict of opinion on this question in the courts of that state. Vide, 2 Comst. 365; 4 Sandf. 252; 11 Barb. 138; 22 Wend. 486; 2 Sold. 510; 1 Sandf. Ch. 4; 7 Paige, 272.
    The fact that the assignment gives to the trustee power to sell on credit, does not of itself indicate fraud. O’Connell v. Cruise, 1 Sup. Ct. Rep. (Cincinnati), 163, 167, 168.
    It is now too.late to raise this question; the sale had been made before this action was brought, and the purchaser is not a party to this action.
    The second assignment is not void, but operative as to its subject-matter — the notes and accounts. Burrill on Assignments, 277, 278, 292, 419, 420; Conkling v. Carson, 11 Ill. 503; 20 Conn. 98, 102; Small v. Sproat, 3 Met. 303; Hone v. Woolsey, 2 Edw. Ch. 289.
   J. R. Swan, J.

A sale by a trustee, upon reasonable time of credit, taking the usual security, is an act of good faith, and is recognized by our laws relating to the settlement of the estates of deceased persons, and is frequently directed by the court. An absolute and inflexible rule, that a trustee for the payment of debts, 621] must at all times, and under all *circumstances, sell for cash, would not be for the interest of creditors. And if this be so, a provision in the trust deed in regard to credit, not specifically requiring a credit beyond what a court would sanction in the absence of such provision, can not, in our opinion, be deemed per se fraudulent. The courts of New York, however, hold that an assignment by an insolvent debtor, authorizing the trustee to sell “for cash, or upon credit, or partly for cash and partly for credit, as the trustee shall think reasonable and proper,” is fraudulent and void. Nicholson et al. v. Leavitt et al., 2 Seld. 510; Burdick v. Post et al., 12 Barb. 168. But this seems to be law peculiar to Now York; and the dissenting opinion of Brown, J., in the case of Burdick v. Post et al., above referred to, shows very conclusively to our minds that the decision of the majority can not bo sustained upon principle or authority, and we must refer to that dissenting opinion for the reasons upon which our own opinion is based.

An assignment requiring a credit to be given beyond that authorized by law on sales by executors and administrators would, in general, bo deemed conclusive evidence of an intent to hinder and delay creditors, and therefore void. And when the assignment, as in the case before us, gives the assignee a discretion as to credit, we arc of the opinion that a sale giving a credit beyond that authorized by law on sales by executors and administrators, would be an abuse of discretion; and in many cases the nature of the property and the state of the market, and other circumstances, would require the trustees to sell for cash, or on a shorter credit than executors or administrators are permitted to do.

Where, as in this case, the trustee has abused the discretion given 622] him., the creditors may require the notes taken *for the property to be sold, and may have such remedy against the trustee as the circumstances may require.

The other provisions of the assignment we do not think, per se, fraudulent.

Bartley, C. J., and Brinkerhoee, Bowen, and Scott, JJ., concurred.