Case ID: ohio_12/html/0315-01.html
Source: Caselaw Access Project
Author: {"author": "Read, Judge.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Roland G. Mitchell v. Charles W. Gazzam and Others.
    Where a creditor, with design to secure a preference for himself, receives, as trustee, an assignment of property from a debtor in failing circumstances and contemplating insolvency, he will he held to account for the property,, although he may have divested himself of it, after other creditors havo filed their hill under the statute to charge him as trustee.
    This is a Bill in Chancery, to review a decree of the Supreme-Court of Hamilton county.
    
      The original bill was filed by Gazzam and Butler, creditors of the late George H. Young, and set forth, in substance, that said Gazzam *310] and Butler, suing for themselves, and for such Mother creditors of the late George H. YouDg as might make themselves parties, had recovered judgments against G. H. Hill, administrator of Young, at ■the January Term, 1839, of the Superior Court, one for $334.64, and the other for $538.63, That Adams and Shaw, plaintiffs, recovered two judgments in the same court, one for $210.12, and the other for $299.67. That these judgments were for goods sold to Young when he was totally insolvent, though that fact was concealed.
    That, shortly after purchasing these goods, about the 1st of May, ’ 1838, Young 'secretly invited a few of his creditors to take goods from his store in payment of their debts, thus preferring them to complainants ; and, on the 6th of May, 1838, Young assigned all the residue of his effects, of every description, real and personal, to R. G. Mitchell, under pretence of securing some debt or liability not entitled in law or equity to any preference. That the property so ■assigned was more than sufficient to pay him, and he was to hold the surplus in trust for Young. Wo schedule or account was made or taken at the time said effects were delivered to Mitchell, who stated to plaintiffs that he had no idea of their value or amount.
    That, on the 8th of May, 1838, Mitchell, apprehending a suit by the complainants, took a written assignment from Young of all said property in trust; 1st. That .Mitchell should pay the charges of said assignments ; 2. To pay Mitchell in full; 3d. To pay such other debts of Young as Mitchell might prefer; 4th. To hold the surplus for the benefit of Young. This assignment Mitchell has refused to show ■to complainants, though he knew, when he took it, of their claim and •of Young’s insolvency.
    That Mitchell never claimed that Young owed him more than about $17,000 ; while the effects assigned were worth more than $30,000, besides the mortgages on real estate held by him, which had been executed long before, worth $50,000 ; so that, after paying himself, Miteh•ell would hold a surplus of more than $25,000, to dispose of arbitrarily.
    *That, after paying himself in full, Mitchell delivered over all the surplus effects in his hands to Hill, the administrator of Young.
    Mitchell, and Hill, the administrator of Young, were made defendants, and the complainants prayed for an account; that said assignment might he held fraudulent, and of no effect against them; that Mitchell might be held to account, as trustee, for a full proportion of their claims on Young, and for general relief.
    Mitchell answered — That, in the beginning of the year 1838, Young was indebted to him for payment; and Young stated, that the debts arising to him would more than pay all his liabilities, independent of his real estate; and that, from a recent account of stock, he found himself worth about $12,000 after paying his debts, and, thereupon, Mitchell took Young’s notes for the debt, payable in monthly instalments. In that way the debt had been reduced, by payments, to about $5,000 the 1st of May, 1838; but, in the meantime, he had indorsed for Young, at his solicitation, and repeated assurances of ability to pay, and of his willingness to give security against loss.
    About the 1st of May, 1838, Young expressed to Mitchell his fears, owing to the impaired state of his health, that he would not be able to take up the papers indorsed by him as they matured, and then offered to sell out to him his stock on very liberal terms, to take up said papers, which Mitchell declined. Shortly after this, Mitchell called on Young at his house, to which he was confined by ill health, and Young then informed him that, by advice of his physicians, he had resolved to give up business and leave the city ; and that he had determined to distribute his stock of goods among his city creditors. He showed a list of creditors, and a bill of the goods to be distributed, but Mitchell took no copy, and does not now recollect the contents. That portion of the goods designed for Mitchell were sent to him, and were invoiced, and passed to Young’s credit at their market prices, to wit, $6,807.90. Young sent to Mitchell, at the same time, a lot of refuse goods to be stored, amounting to $1,536, which, since his death, have been delivered *to the defendant, Hill, his administrator. At [318 this time, Young’s debt to Mitchell was $5,699.78, of which $2,782.95 was for goods sold him after the 1st of January, 1838, and $1,115,37 for coffee sold him the 4th of April, 1838. Indorsements for Young, $12,300 ; in all, $17,999.78.
    At the interview between Mitchell and Young, aforesaid, Young informed Mitchell that he then had no other way of providing for the papers indorsed by him, than by placing his notes and accounts in his hands for collection, and by lien on his real estate. And, in order to secure him against said indorsements, he then conveyed to Mitchell real estate estimated at about 10,000, above the prior liens upon it. He also placed in Mitchell’s hands his notes and accounts, amounting, nominally, to $13,765.25, and gave him a power of attorney, to act as general agent, and to collect and apply the proceeds of his business and debts to the discharge of Mitchell’s, and his other debts.
    On the 8th of May, 1838, Young’s health appeared to be rapidly declining, and he gave to Mitchell a written assignment of the debts before placed in his hands, to secure him; and, in order to insure to Young the speedy collection of his debts, etc., he gave Mitchell an irrevocable power to settle them, and, out of the proceeds, to pay the expenses and Mitchell’s liabilities, then all or any other debts, as might be right, and to account for the balance, if any, when demanded.
    Young died on the 27th May, 1838, and Hill was duly appointed his administrator; and, before suit, Mitchell delivered to him the-notes and accounts specified in schedule, being the residue of the personal effects received from Young, after satisfying his own claims, he only retaining a small balance to cover contingencies, and for which he is ready to account. The mortgagees, holding the first liens on the real estate conveyed to Mitchell, brought suit to foreclosure, and collect their debts. To these suits Mitchell, supposing himself paid as aforesaid, filed disclaimers, but asked the protection of the court for the excess of sales above the prior liens, if the proceeds of the goods and debts, applicable to his demands, should not be sufficient 319] *That an invoice of goods, which came to Mitchell’s hands as agent for Young, after the 5th of May, 1838, from Alter, Taylor and Dewey, amounting to $5,009.01, were replevied from him by them. Mitchell delivered to G. R. Shoenberger an invoice of nails, amounting to $811.50, being part of the goods sent him by Young, and took from him a bond of indemnity.
    The answer denies that Mitchell had knowledge of any secretmeeting of Young’s creditors, or that he told the complainants that he had no schedule of the goods sent him, or no idea of their value, or that he refused to show the papers mentioned, and also, that Young made the arrangements with him in contemplation of insolvency. On the-contrary he insists that he made them on account of his ill health that Young always represented himself solvent, and died in that belief; that he, Mitchell, believed Young solvent, and still believes his estate would have been solvent, if properly administered. That the design of said transfers and powers was, simply, to secure him against loss as creditor and indorser, and not to defraud any one. That other-creditors were secured, at the time, in a similar manner. That Mitchell had no knowledge, when he took the property, of the claims of the complainants, and he did not take it with any view to distribute it. or the proceeds, arbitrarily, but simply to secure himself, as he had a right to do, holding the remainder for whosoever might have the interest. And he insists, that the securing himself is no fraud upon creditors, but only the result of diligence.
    Hill, the administrator, did not answer.
    At the April Term, in the year 1841, the cause came on to be heard upon the pleadings, exhibits and proofs, before described; and, thereupon, the court decreed in substance as follows : That the debts, notes, book accounts and choses in action, specified in the assignment of the 8th of May, 1838, and, also, the conveyance of the three lots of ground mentioned in Mitchell’s answer, are an assignment in trust to the said Mitchell, under the act of 1838, for the benefit of all the creditors of Young, in proportion to their respective debts, and that the *said [320 Mitchell is bound to account, accordingly, to the creditors of Young; and, thereupon, the case was referred to a master to take such accounts, etc. And the said master reported on the 4th April, 1842, that the debts of Young, including interest to that date, amounted to $56,-939.87£. Young’s indebtedness to Mitchell was $28,468.60, of which he had received $27,267.60, and held claims, supposed to be worthless, for $835.97, having delivered every thing else to Hill, the administrator, who stands charged with $49,819.18, after deducting all his disbursements on account of the estate, and without charging interest.
    The complainant, in review, assigns the following :
    Petitioner submits to the court that there is error in the proceedings and decree aforesaid, to wit:
    First: That the real estate was included in the decree, though not included in the assignment of the 8th of May, 1838, and no part of the proceeds thereof ever came to the hands of the said Mitchell, and he should not have been held accountable therefor.
    Second : The merchandise, amounting to $6,807.90, was not included in the assignment of the 8th of May, 1838, but was previously delivered to Mitchell, as so much cash, in part payment of a debt, and, therefore, the decree should not have held him accountable therefor.
    Third : That the merchandise replevied by Alter, Taylor and Dewey, set forth in schedule, and the effects delivered to the administrator, ought not to have been included in the decree to account, because Mitchell never received any part of the proceeds thereof, nor were the same included in the assignment of the 8th of May, 1838.
    Fourth : Mitchell ought not to have been decreed to account for the outstanding notes, debts and book accounts, mentioned in the assign - meat of the 8th May, 1838, and specified in schedule, because that assignment was not made in contemplation of insolvency, nor with a design to prefer one or more creditors to the exclusion of others ; but, on the contrary, both Young and Mitchell considered Young solvent.
    The *evidence makes it at least probable that his estate, properly administered, would have so turned out, and the assignment only includes a small portion of Young’s entire effects ; for all which reasons said assignment is not within the act of 1838, referred to in the_ decree.
    Fifth : Because there is no proof or charge of actual fraud, which is wholly denied in the answer of Mitchell, and, therefore, a decree that he shall distribute to other creditors of Young, what was honestly taken to pay the debts due to himself, is contrary to equity.
    Much testimony was taken, the material parts of which, being stated in the arguments of counsel, and recapitulated in the opinion of the court, is, therefore, omitted.
    T. Walker, for complainant in review.
    The object of the original bill is to charge Mitchell, as trustee for the creditors of Young, under the 3d section of the chancery act of March 14, 1838, Swan’s Stat. 717, which is in these words: “ All assignments of property in trust, which shall be made by debtors to trustees, in contemplation of insolvency, with the design to prefer one or more creditors to the exclusion of others, shall be held to inure to the benefit of all the creditors, in proportion to their respective demands.”
    Before there was any special legislation on this subject, insolvent debtors might not only make preferences by actual transfers of property, Barr v. Hatch, 3 Ohio, 527, but by means of general assignments intrust. Atkinson v. Jordan, 5 Ohio, 289 ; Repplier v. Orrich, 7 Ohio, part 2d, 246 ; Stevenson v. Agny, 7 Ohio, part 2d, 247. In this state of things the act of February 23, 1835, 33 Ohio Stat. 13, was passed, the first section of which provided, “ that all assignments of property hereafter -made by debtors to trustees in consideration [contemplation] of insolvency, and with design to secure one class of creditors and defraud [defer] others, shall be held to ensure [inure] to the benefit of all the creditors of the assignor, in proportion to 322] their demands.” One of the *judicial constructions of this provision is in Harshman v. Lane, 9 Ohio, 92, where it is held, that if the assignor alone have the fraudulent intent, the assignment is void as to the preference created. Another is in Hull v. Jeffrey, 8 Ohio, 390, where it is held, that this provision relates only to fraudulent assignments made to trustees, and not bona fide assignments to creditors. And the court say: “ Before 1835, fraudulent assignments, being void, any individual creditor might separately pursue his rights. By the statute of 1835, assignments to trustees were made the subject of equal distribution, if fraudulent. But since the statute of 1838, all assignments to trustees, whether fraudulent or not, if made in view of insolvency, are divided among all creditors. Conveyances, other than those made to trustees, are not affected by either statute.” The last construction is in Wilcox v. Kellogg, 11 Ohio, 394, where the-provision is held not to apply to absolute transfers.
    Such being the law, the material facts are these : — On the 1st of May, 1838, Young was indebted to Mitchell, for merchandise, about $5,000, and Mitchell was liable, as indorser for Young, for about $12,000 moro. The whole of Young’s debts at this time was about the sum of $45,000. Young had shortly before told Mitchell that the debts due him would more than pay all the debts he owed, and that he was worth a clear surplus of $12,000. His books showed a still larger surplus. But his health had been for some time declining, and he was now directed by his physician to relinquish business entirely. To effect this at once, he resolved, without consultation with Mitchell, to distribute his stock of goods among his city creditors. This was done on the 1st of May, 1838, To Mitchell he set goods, amounting to $6,807,90, which were passed to his credit as cash. Up to the time of thus suddenly closing his store, no one supposed Young insolvent; nor until his death, which took place on the 28th of May, 1838, was there any general reputation of insolvency. Ho himself died in the belief that he was solvent. On the 5th of May, being advised by his physician to leave the city, he selected Mitchell as his general agent, to' wind up his affairs. To this end he *executed [323 conveyances of his real estate, and a general power of attorney to sell, collect and pay debts. He also sent to Mitchell a quantity of refuse articles to be stored. On the 8th of May, 1838, finding his health rapidly declining, Young executed to Mitchell an assignment of his notes and book debts, amounting, nominally, to $13,765,25, together with an irrevocable power of attorney, to collect them and apply proceeds, 1st, to expenses ; 2d, to his own debts and liabilities; 3d, to other debts, as might be just; and, 4th, to pay balance to Young, accounting from time to time, as demanded. Shortly after, an invoice of goods, amounting to $5,009,01, purchased of Alter, Taylor and Dewey, arrived, and were replevied by them out of Mitchell’s hands. Mitchell gave up to Shoenberger a quantity of nails, amounting to $811.50, which Young had recently bought of him, taking his bond of indemnity, dated May 21st, 1838. After the death of Young, Mitchell, having nearly paid himself, handed over to Hill, his administrator, the refuse goods, appraised at $1,536.88, and notes and book debts, etc., amounting to $9,118.33. For the same reason he filed disclaimers to the various bills, filed to foreclose the mortgages on the real estate, and never received any portion of the proceeds of sale. On the trial of the replevin suit, there was a judgment in Mitchell’s favor, but he has not attempted to control it, considering it to belong to the administrator. Young’s estate is represented by the administrator to be insolvent.
    We are now prepared to take up the several errors assigned in the bill of review.
    First: The decree holds Mitchell accountable for the real estate. The evidence is, that it was sold uuder prior mortgages, and whatever surplus there was, went into the hands of the administrator. Mitchell never received one dollar. As a matter of fact, therefore, it is palbably inequitable to hold him accountable. It is the administrator who must account.
    Second : The decree holds Mitchell to account for the merchandise, amounting to $6,807,90. The proof is, that this was delivered and •324] received at its market value, as so much *cash, iu payment of a debt, several days previous to the power of attorney or assignment It was a totally distinct transaction, having no trust connected with it ; and, therefore, by the express language of the court, in Hull v. Jeffrey, and Wilcox v. Kellogg, before quoted, the statute of 1838 does not apply to it.
    Third : The decree holds Mitchell to account for the merchandise replevied from him by Alter, Taylor and Dewey. This is wrong for two reasons : first, it was not included in any of the assignments, having arrived after the last; and, secondly, it was taken from him by the strong arm of law, and no portion of the proceeds has since come into his hands. The decree holds him, also, to account for the nails which were delivered to Shoenberger. This is only important as a matter of principle, because Mitchell has a bond of indemnity. But it is wrong to hold him to account, for two reasons : first, because the nailg were part of the merchandise in the schedule which we have already seen is not within the statute of 1838; and, secondly, because they were delivered up in good faith to Shoenberger, in payment of a debt of Young for the purchase money, and, if any one is to account, equity requires that it should be Shoenberger himself. Also, the decree requires Mitchell to account for the effects which, prior to his suit, were delivered to Hill, the administrator. There can be no equitable pretence for this. These effects were property handed over to the administrator. By him they must be equally distributed. To that end he has given security. The creditors, therefore, have as little interest, as there is justice, in demanding that Mitchell shall account to them.
    Fourth : The decree holds Mitchell to account for the outstanding •notes, debts and book accounts, specified in the schedule, and transferred by the assignment of May 8th, 1838. It will be remembered that this was the only assignment made, using that term in its ordinary sense, and that it only purports to transfer the ehoses in action. If. then, Mitchell can be charged as trustee at all, it is of these ehoses in action, and these alone, since neither the merchandise nor the land are *within the statute. But is this assignment within the stat- [325 ute, as construed in Hull v. Jeffrey? We admit that it is an assignment, and that it creates a trust. But was it made “ in contemplation of insolvency? ” This means the same as a design to prefer a creditor ; for, unless insolvency be contemplated, there can be no occasion to make a preference. To secure a creditor is a very different thing from preferring him. A solvent man does the former ; an insolvent man the latter. The testimony shows, that Young not only considered himself solvent, but worth a large surplus, and that Mitchell had the same opinion. But, according to the case of Harshman v. Lowe, it would seem that the sole question is, as to the contemplation of Young. What, then, is the meaning of this word “contemplation,” as here used ? According to Webster, it is “ the act of the mind in considering with attention ; meditation, study; continued attention of the ■mind to a particular subject.” An act, therefore, is done in contemplation of insolvency, when insolvency forms the distinct motive or predicate of the act. It is not enough, that insolvency exists as a matter of fact; but it must be believed to exist; it must be before the mind ; it must be the inducement of the act. In Hull v. Jeffrey, the phrase used by the court is, “ in view of insolvency.” But whatever words we use it is quite certain that a man can not have insolvency in view or contemplation, when he does not believe that he is insolvent, 'but feels quite sure of the contrary, as was the ease with Young. The question is not, whether insolvency was possible or probable, or what Young ought to have thought respecting his affairs ; but what he did think. The testimony shows what he did think. We not only know that the idea of insolvency was not the motive of this assignment, but that ill health was. This renders it unnecessary to inquire, whether Young was, in fact, solvent or not. But wore this inquiry material,, the court will find in the Master’s report a strong probability, to say the least, that the insolvency of his estate has resulted from subsequent events and omissions. The history of the last five years is fully sufficient t.o account for any deficit, where a large portion of the assets-326] consists of *debts. But it is enough for us to know that Young did not act in 'contemplation of insolvency, and, accordingly, that the assignment is not within the statute.
    Fifth : The last error assigned is the general one, that the decree is contrary to equity. It is not pretended that Mitchell has been guilty of any fraud or dishonesty. All he has done is to obtain payment of an honest debt. Yet the effect of this decree is to take a large sum of money, thus fairly obtained, out of his pocket, and put it into the pocket of others. And there is one circumstance of peculiar hardship. The real estate, though conveyed absolutely, was in fact mortgaged. Such a mortgage Young had a right to make, and Mitchell to receive. There is no pretence that an ordinary mortgage is an assignment within the statute. Mitchell, therefore, had security in his hands, without reference to the assignment. But, relying upon the-assignment as sufficient to pay him, he gave up this mortgage security, by disclaiming all right. If, then, the court should hold him liable to share with others the proceeds of the assignment;, equity would require that he be restored to his mortgage security. This the decree does not do, and, therefore, it ought to be reversed for want of equity..
    Since writing the above, I have met with Pearce’s Case, 6 Law Be-porter, 261, (No. 6, for Oct. ’43,) which gives to the terms, " contemplation” and “ preference,” the same construction as I have given. I ask the attention of the court to this case.
    Jordan A. Pugh and W. R. Morris, for defendants in review.
    We submit to the court, whether, upon bills of review, the facts ought to be inquired into ? The English and American practice, and all the analogies of the law, are opposed to this course. The decisions of twelve men, whose habits do not qualify them to sift evidence, who-are entirely without judicial knowledge and experience, are final as to> the facts. Why should not the decisions of grave and learned chancellors be *also final? This may, perhaps, be considered by the [32T court a question not open, and we therefore proceed to the objeetionsurged against the decree.
    It must be obvious to the court, that if the whole transaction between Mitchell and Young comes within the purview of the act of 1838, the decree in this cause was properly rendered. The first, second, and third objections in Mr. Walker’s brief would then offer no ground for the reversal of the decree because, if Mitchell was a trustee, the creditors of Young, the beneficiaries of that trust, had a right to compel him to account for all the property -fthieh came into his possession as trustee. Whether Mitchell is to be held responsible for the value of this property is a question to be hereafter determined. If he has acted legally, and discharged all the duties of his offiee, he will not be held responsible. But the right of a beneficiary to compel, his trustee to show what disposition he has made of property intrusted: to him never has been, and can not be questioned.
    The act of 1838, upon which we rely, is in- these words : “ All assignments of property in trust, which shall be made to trustees, in contemplation of insolvency, with the design to prefer one or more creditors, to the exclusion of others, shall be held to inure to the benefit of all the creditors, in proportion to their respective demands ; and such trusts shall be subject to the control of chancery,” etc. Swan’s Stat. 717.
    Was this an assignment? Was it an assignment to a trustee? Was it made in contemplation of insolvency ? Was the design to prefer one creditor to another ? These are the only questions, and if the evidence resolves them-affirmatively, the case is within the statute.
    At the common law all fraudu ent assignments of property to trustees were void. The phraseology of the act of 1835 nullified the-intent of the legislature, and the common law in this respect was not changed. A strange perversion of the principles of honor and justice led mercantile men to prefer their indorsers ; those who had given them their credit, and enabled them to impose on others. To remedy this evil, the act of 1838 was enacted. It is obvious, if this act is not,, like *that of 1835, to become a mere nullity, that the fact that [328 Mitchell was a creditor of Young, and that no final instrument of assignment, embracing the whole property, was executed, can make no difference. It would be easy, in any case, to constitute a creditor the-trustee, or to' transfer the property without any formal instrument.
    It is clear that these acts of Mitchell and Young, the delivery of the ■goods, the conveyance of the real estate, the execution of the power of attorney, and the transfer of the notes, book accounts, etc., were all done with the same design ; that design was to place in Mitchell’s hands the whole of the property of Young, in order that he might be made secure, in any event, for the whole amount of his liabilities. The form in which this assignment was made can not be material. Any transfer of a right is an assignment. This was therefore an assign-, ment by Young to Mitchell.
    Was it an assignment of property to a trustee? The solicitor for the complainant admits that the transfer of the notes, book accounts, etc., was an assignment to a trustee. Property supposed to be worth $37,000. was transferred, and Mitchell’s claim was only $17 000. Was this “ delivered and received at its market value as so much cash in payment of a debt ? ” If the act of 1838 had not been in force, and Mitchell had received, what it was supposed at the time of the transfer he would receive, as the proceeds of this property, the sum of $37,000, could not the creditors of Young have compelled him to account in a ■court of chancery, and to disgorge ? If they could, then Mitchell must be a trustee; for that is the test of a trusteeship. The property ■conveyed consisted of notes, book accounts, etc., real estate and merchandise. It is admitted that the first were transferred to Mitchell ■as a trustee. How was the real estate transferred ? Absolutely? No I For after Mitchell had been paid his claim, and when the holders of liens upon this real estate filed their bills to subject this property, Mitchell filed his answer, disclaiming any interest. The real estate was transferred as we say the whole property was transferred, in order 329] that Mitchell might, in any event, realize *the whole of his liabilities for Young. If it were so transferred, then Young, or Young’s creditors, might call upon him for an account, and Mitchell was a trustee. It is said by the counsel for the complainant, that the merchandise in the schedule, amounting to $6,807.90, was “ delivered and received at its market value, as so much cash, in payment of a debt, several days previous to the execution of the assignment.” The time intervening between the delivery of these goods and the execution of the assignment is a matter of no importance. The interval is only three days, and Mitchell himself informs us that these transfers were all determined upon at one and the same interview, and that the taking of the assignment was an after thought, and was caused by the failing health of Young.
    The evidence shows, we contend, that the transfer of the merchandise was not intended to be more absolute than the transfer of the notes, or the real estate ; that in fact they were parts of one and the same transaction, with one and the same design. By the testimony of J Mitchell we find that goods were sent to Hartwell, Lawrence & Co., Southgate & Co., and several others, of which an account was taken, and a bill of prices made out; after these were delivered, the store was actually stripped, and the whole of its contents sent to Mitchell, of which no account whatever was taken. If this was a sale, why was this distinction made between Mitchell and these other creditors ? If the goods were passed as cash, why was no account of them taken on the part of the vendee? We see by the testimony of the same witness that the whole stock was sent at the same time, and under the same circumstances. Yet Mitchell says that a lot of refuse goods were sent to him merely to be stored. Jethro Mitchell says that all the-goods Mitchell received were refuse goods. Was the price of the goods intrusted entirely to Mitchell, the vendee ? Young, the vendor, was lying in the very jaws of death, and there was no person, on his part, to agree upon the cash value of this merchandise.
    But the conduct of Mitchell shows, conclusively,, that the goods were not absolutely sold to him. Why did he refuse to *purchase [380' four days before, when he says Young offered to sell his stock on very liberal terms ? Why did he deliver a portion of the goods, sent to him at the same time, and under the same circumstances, to the administrator of Young? Why did he say in his answer that he held a portion of these very effects subject to the order of the court? The merchandise thus delivered was all that Young had. Jethro Mitchell states that he had no other personal property. If this merchandise was absolutely sold to Mitchell at the market rates, why did Mitchell take from Young, on the 5th day of May, at the time when these transactions were determined upon, a power of attorney, authorizing him, as the agent of Young, to ship and sell the merchandise of Young? An absolute sale of this property of course would actually extinguish, so far as the property went, the debt of Young. If these goods were sold, we know they were the only property sold by Young to Mitchell. The remainder that passed to him passed conditionally, These goods could not have been sold, if the transaction were of such a nature that Mitchell might deliver them to other creditors, and satisfy his claim out of the other property, which was not sold, but passed to him as •trustee. A right to elect in such a ease could only be when all the property passed in the same manner. Why, then, did Mitchell, on the 24th of May, three days before Young’s death, deliver over a portion of this merchandise, which he now says was absolutely sold to him, and credited to Young at the market price, to Shoenberger, to pay the debt of Young ? Mitchell knew the merchandise was worth only $6,800, and that his liabilities for Young were $17,000. Why, then, was the transfer by Mitchell to Shoenberger to be valid and effectual in case he had sufficient property besides to discharge his liabilities for Young ? If the goods were sold to him, what right had he, we ask, so far as the goods went, to look to any property besides for the discharge of his claim? Hone whatever. Would the counsel of Mitchell have us believe that he munificently and generously donated to the Shoenbergers eight hundred dollars worth of property ? Yet it was a mere donation by Mitchell, if the goods were absolutely sold .881] *to him. And if this transaction was such as Mitchell’s counsel represent, why did Mitchell at that time betray such apprehensions in regard to the rights of other creditors of Young? It seems clear, therefore, that the merchandise passed, as did the other property, to Mitchell as trustee.
    This, then, was an assignment of property to a trustee. Was it made in contemplation of insolvency ? And, first, what is the meaning of this term insolvency ? It is defined by McCulloch to be a term used in mercantile law, to designate the condition of all persons unable to pay their debts according to the ordinary usages of trade. .2 McCulloch Com. Dic. 65.
    The decisions of the English courts upon the meaning of this term, as used in their acts of bankruptcy, are precisely in point. In the case of Bayley v. Schofield, 1 Maule and Selwyn, 338, the court held that when a creditor of a bankrupt had sued out a writ against him, but did not proceed upon it, but afterwards received from him a bill of exchange in part payment of his debt, after being apprised that there had been a meeting of his creditors, and that the bankrupt’s affairs at that time were in such a condition that he was only capable of paying the demands of his creditors by instalments, although he was assured by the bankrupt’s agent that they would come round, he was liable to refund the proceeds of such bill to the assignees of the bankrupt, as a payment not in the usual course of trade, and upon notice of his insolvency.
    In Shone v. Lucas, 3 Dowling and Ryland, 218, (16 English Cora. Law 166,) the court decided that insolvency, within the meaning of the bankrupt laws, does not mean an inability to pay twenty shillings on the pound, when the affairs of a bankrupt shall ultimately be wound up, but a trader is in insolvent eireumstanees when he is not in a condition to pay his debts in the usual and ordinary course of business.
    In the case of Herrick v. Borst, 4 Hill’s N. Y. 650, Cowen J., commenting upon the meaning of this term, says ; “ Take the alternative of this charge, that a man is to be considered insolvent when his debts can not be collected out of his property by legal process. This is the common case, of which *a man says, I can pay all my debts if [332 my creditors will let me alone. ' Is that solvency? His creditors probably will not let him alone, or, if they will, has he that general ability to pay of which we have been speaking ? It depends upon the forbearance of his creditors,-whether he shall go through. Such a man Mr. Bell considers as more particularly insolvent. The case he puts is of a man who can not proceed without some general arrangement with his creditors — some indulgence given in point of time— some consent that his payments shall be made in small portions. ‘ A person in this state,’ he says, ‘ is truly insolvent; and it does not follow that he is not insolvent because, in the end, his affairs may come round, and he may ultimately have a surplus on winding them up.’ 2 Bell’s Com. 162. If his funds be not sufficient to meet collections by process, it follows that he can not go on without the arrangement of which Mr. Bell speaks. This may be either negative or positive; tacit or express; the status of the debtor is effectually the same in either case.”
    If the court should adopt this definition of the term, Young was •insolvent at the beginning of the year 1838, and this insolvency was known to Mitchell, for he, in his answer, states : “ About the beginning of the year 1838, Young was indebted to respondent for sundry goods sold him, in about $9,000, part of which was then due, and the residue maturing ; respondent pressed Young for payment, and security, and was informed by him that the debts due him were more than sufficient to discharge all his liabilities, independent of his real estate, but, owing to the pressure of the times, they could not be immediately collected, and that, from a recent account of stock, he found himself worth about $12,000 after paying all his debts. Being satisfied at the time with the statement, respondent took Young’s notes for the whole of his demands, payable in monthly instalments.”
    The case is within the statute if only Young contemplated insolvency. Harshman v. Lane, 9 Ohio, 910. And whatever definition may be given to this term, the evidence will be found to satisfy it. 333] Young’s property at the time was *inadequate to the payment of his debts ; as a matter of fact, we know that his estate will not pay fifty cents on the dollar, even if this decree be enforced. Must not a man be held to know his own condition? And if Young knew he was insolvent, then this was an assignment in view or contemplation of insolvency. But there is other evidence. Young was generally reputed to be insolvent six weeks before his death. Jethro Mitchell says he-believed him to be insolvent, and thinks he informed his brother of this opinion. Mitchell, in his answer, says that the reason assigned by Young for his offer to sell his stock to Mitchell on the first of May was, that he had no other means of providing for Mitchell’s liabilities. And at the interview of the fifth of May, Young told Mitchell that he bad no other way to secure him but by making these transfers. How is it possible to contend, in the face of these facts, that Young did not contemplate insolvency ?
    A man is certainly “ to be held insolvent when his debts can not be collected out of his property by legal process.” This is the definition most favorable to the complainant. I would ask then how is it possible for a debtor, having many creditors to large amounts, to transfer all his property to one creditor, without contemplating insolvency ? A man must be held to intend the direct and necessary effect of his own act, and the direct and necessary effect of such a transfer would be insolvency.'
    If the transfer was made in contemplation of insolvency, of course the design was to prefer one creditor to another.
    We insist, therefore, that the case is within the statute; and that there is no ground for the reversal of the original .decree.
    Wright, Gorrín, and Miner replied.
   Read, Judge.

This bill seeks to review a decree of the Supreme Court of Hamilton county, charging Mitchell, as trustee of all the property and effects which he received from one George H. Young, for the benefit of Young’s creditors, under the act of 1838.

*Gazzam and Butler filed a bill in behalf of themselves and other creditors of the late George H. Young, charging that they had recovered judgments against G. H. Hill, administrator of Young, at the January term, 1839, of the Superior Court of Cincinnati, and, also, that Adams and Shaw had recovered judgments against the ad- . ministrator of said Young.

That Young, shortly before his death, in contemplation of insolvency, and with a design to prefer some creditors over others, and-especially Mitchell, had, in various forms and in different ways,, assigned and transferred all his property, of every description, to Mitchell. The bill prayed that Mitchell should be compelled to-account for all such property, and that its proceeds should be distributed amongst all the creditors of Young, as the statute directs.

The court decreed Mitchell to account, and that distribution should, be made amongst the creditors in pursuance of the statute.

The errors assigned, are in substance—

First: That certain real estate was included in the decree, for which-Mitchell should not account.

Second : That there was a transfer of merchandise to the amount of $6,807.90, made in payment of a debt due from Young to Mitchell,, which should not have been included.

Third: That there was certain merchandise received by Mitchell after the death of Young, which was replevied by Alter, Taylor and Dewey. That Mitchell never received any part thereof, and was not,, therefore, bound to account.

Fourth : That Mitchell should not have been compelled to account for an assignment of notes, book accounts, etc,, because this assignment was not made in view of insolvency.

Fifth: That there is no proof of actual fraud, and, therefore,. Mitchell should not be held to account, etc.

These are all errors founded in fact, and we feel compelled toaeknowledge the impropriety of the practice in this state of converting bills of review into mere rehearings. Bills of review should be confined to the correction of errors in law, apparent upon the face of the record, except in eases of leave, *upon newly discovered [335-testimony. But even under our objectionable practice, which can only be tolerated because of many years continuance, we should feel ourselves disinclined, except in clear cases, to disturb decrees resting upon-, facts which have once been found.

The object of the act of 1838, under which this bill is filed, amendatory' of the act directing the mode of proceeding in chancery, was to cut off all preferences, by debtors in failing or insolvent circumstances, of favored creditors, and to secure a fair distribution to all the creditors in proportion to their respective demands.

Fquity delights in equality, and the courts will construe this act-most liberally, to accomplish its object. True, it does not prevent a debtor from making actual payment by an absolute transfer of property in payment. But if, in contemplation of insolvency, and with a design to prefer one creditor over another, the debtor assign his property to such creditor, or any other person, in trust, to satisfy the debt of such creditor designed to be preferred, and to account for the application of the property so transferred, or the residue after the payment of such debt, it matters not what may have been the manner or form of such transfer, the court would look to the substance of the thing done, and hold such- creditor, or other person receiving such transfer, a trustee for all the creditors. The court will not require fraud to be proven against the assignee. A mere design on the part of the debtor, in contemplation of insolvency, will bring such assignment within the statute. The statute will not permit a debtor in failing circumstances, in contemplation of insolvency, to interpose between himself and his creditors a trustee to secure a preference to some creditors over others. The situation of the debtor making the assignment, and the design with which he made it, must be gathered from all the circumstances of the case. It is the motive, design, and situation of the assignor, and not the motives of the assignee, that give character to the assignment, and bring it within the operation of the statute.

*Counsel have labored [to define] the meaning of the term insolvency. In the mercantile sense, it means a person unable to pay his debts according to the ordinary usages of trade. But in the broad •sense used by the statute, it means a person whose affairs have become so deranged that he is unable to pay his debts as they fall due; and if, from such a deranged state of his affairs, and the sense of inability to meet his moneyed engagements, he should transfer his property to a trustee to pay his debts, we should regard such assignment as made in contemplation of insolvency, and within the meaning of the statute.

It is contended that the person making the assignment must believe that his property, at the time he makes the assignment, is not sufficient to meet his debts. To permit a person, who is unable to meet his debts, who owes large amounts, and is, in faet, hopelessly insolvent, to make a valid assignment to secure a preference of one creditor over another, because the person making such assignment entertained a vain and unfounded hope or belief that something would be saved to himself from the wreck after the satisfaction of his debts, would, in most cases, wholly defeat the object of the statute. It is difficult to conceive, even to the most hopeless insolvents, that some turn of luck will not secure them at least a fragment of their broken fortune. The statute rests upon a more solid foundation, and will not permit a person, who is insolvent and unable to meet his debts, to divest himself of his property, by an assignment in trust, to prefer certain creditors. But, in the present ease, Young not only transferred his property under such circumstances as to bring him within the statute, but Mitchell was acquainted with his situation, and took the transfer to prefer himself. Mitchell had, from a long course of dealing with him, been familiar with Young’s business for some time. As early as 1835, his brother went into Young’s employment, as clerk, for the first year: subsequently, he acted as his book keeper, and was book keeper at the time of these assignments. In the beginning of 1838, Young owed Mitchell, for merchandise, ¡$9,000. Mitchell pressed for payment. Young gave his *notes, payable in monthly instalments, and made [33? actual payments, so as to reduce this amount to $5,000. But, in the mean time, Mitchell had become responsible for Young, as indorser, to the amount of $12,000. Thus, on the first of May, Young owed Mitchell $17,000. The master’s report shows that, at the same time, Young’s debts amounted to about $56,000. Young was hopelessly insolvent. Jethro Mitchell, the brother of Roland G-. Mitchell, and the book keeper of Young, says he thinks he informed his brother of this fact. Young’s health had become entirely broken down, and his physician had directed him to quit business, at the peril of his life. Young, at this time, being confined to his house by sickness, Mitchell called upon him, and was informed that he intended to distribute all his property amongst his creditors. A few days prior to this, Young had offered to sell to Mitchell, but his offer was declined. He also told Mitchell he had no means of meeting his indorsements, except by an assignment of notes, book accounts, etc. Young did distribute some goods among his creditors, and sent to Mitchell about $6,000 worth, which were passed to Young’s account.

On the 5th of May, 1838, Young executed to Mitchell a general power of attorney, conferring upon him full authority to control both his real and personal estate ; to ship goods ; to buy and sell ; to collect and compromise his debts ; in fact, in all the business of Young, and over all his property, to exercise as full power as could Young himself.

On the 8th of May, Young executed a bill of sale to Mitchell, for the goods he had before sent him on the 1st of May, amounting to......'....................... $6,807,90

On the same day he transferred to Mitchell, to pay his own debt first, and then to apply in satisfaction of other creditors, notes and book accounts, amonuting to $18,765.25

On the 5th day of May he transferred real estate, valued at 10,000.00 Refuse goods, of which no account was taken, had been sent to Mitchell, worth about................................ 2,000.00

*Mitchell received also, by virtue of these transfers, an invoice of goods from Alter, Taylor and Dewey, amounting to................................................... 5,009.01

Amounting, in all, to............................... $37,582.16

Thus, in the space of a few days, Mitchell, by virtue of irrevocable powers of attorney, assignments, transfers óf real estate, delivery of goods, notes, book accounts, etc., receives from Young all his property, of every description, amounting to more than $37,000 to satisfy a debt of $17,000.

Mitchell is a shrewd business man, although esteemed an honest one. He was fully aware of Young’s circumstances. He seems to think that, with proper management, Young had sufficient property to pay his debts. But he knew, also, that it is the experience of all business men, that a failing house, with an immense debt hanging over it, seldom meets its debts, but that creditors usually suffer. And in view of all the facts we are not permitted to doubt, for a moment, but that the object of both Mitchell and Young was, by these transfers to Mitchell, at all events to secure Mitchell, and give him a preference over other creditors ; and that the property was transferred to Mitchell by Young, in contemplation of insolvency, within the meaning of the statute. We can not find that any part of this property was received in actual payment of a debt, but that Mitchell was bound to account for the whole of it to YouDg, as a trustee, both as to its application, and for the residue, if any, after the payment of the debts. Why, then, should not Mitchell be compelled to account for all the property so received, and to distribute it under the statute ?

It is contended that Mitchell should not account for the merchandise-bought by Young of Alter, Taylor and Dewey, which Mitchell received after Young’s death, because Alter, Taylor and Dewey replevied the merchandise, although, at the trial, Mitchell obtained judgment in his favor ; nor for the amount of the real estate, because, in suits to foreclose some mortgages which existed upon it before it was transferred to Mitchell, *Mitehell disclaimed any interest, and did not [339 receive the balance of the money arising on the sales, after the satisfaction of the mortgages ; nor for such goods and effects as he passed over to Young’s administrator ; nor for the amount of goods received of Young, which he transferred to Shoenberger, in payment of a debt due from Young.

The reply to this, is, that the legal title in this property, having become vested in Mitchell by his own act, under such circumstances that the law charges him as trustee for the benefit of all the creditors, the statute makes him responsible for the whole property. If he squanders it, or improperly surrenders it up, or applies it to a use different from the one designated by the statute, he is held responsible.

When a creditor takes an assignment or transfer of the property of an insolvent debtor, to obtain a preference over other creditors, the statute interposes and fastens his responsibility, and the courts will be careful to compel him to execute the trust.

If a man wishes to escape difficulties of this sort he should not attempt to have himself preferred to his neighbors, but should, upon the more equitable principle, where there is to be a common loss among the creditors, bear his fair proportion. In Mahon et al. v. The State of Ohio, 10 Ohio, 232, the principle is expressly recognized, that the law, in cases of this character, exacts a most rigorous account; and, unless the trustee should have repented of his error, and divested himself of the property so assigned, by restoring it before the rights of creditors fasten, by their obtaining judgment at law, and filing a bill to subject such property to the satisfaction of debts, such trustee will be held to account for the whole of such property.

Mitchell is rightly charged with the amount of goods transferred by him to satisfy a debt due to Shoenberger. Because Mitchell, being the trustee for the benefit of all Young’s creditors, would not be authorized in such manner to prefer Shoenberger, by making full payment of his debt with property liable to distribution among all the creditors. Of this Mitchell seemed to be aware, and took from Shoenberger a bond of indemnity.

*In the replevin suit of Alter, Taylor and Dewey, Mitchell [340 recovered judgment for the value of the goods so replevied.

On foreclosure of the mortgages upon the real estate transferred to Mitchell by Young, Mitchell disclaimed all interest, and has not received, nor attempted to control, the proceeds.

Mitchell also handed over to the administrator of Young, refuse goods, amounting to $1,536.88, and notes and book accounts to the amount of $9,118.33. All this was done by Mitchell for the express reason that he had satisfied, or very nearly so, his own debt.

The moment Mitchell has received the full benefit of the trust, so far as he is concerned, he attempts to avoid all further trouble and responsibility by shifting off the remnant, after he had obtained payment of his own debt out of the bulk of Young’s estate, upon the administrator, to satisfy other creditors. This the law will not permit, but holds him to a strict execution of the trust he voluntarily assumed for his own benefit, to obtain an advantage and preference over other creditors.

If Mitchell wishes to indemnify himself, he must look to the judgment in his favor, in the replevin suit of Alter, Taylor and Dewey ; to the proceeds arising from the sale of the real estate transferred by Young ; to the administrator to whom he handed over a portion of the property, and to the indemnity bond of Shoenberger.

There is no foundation for the complaint that the court did not render decrees against those persons to whom Mitchell had handed over portions of this property. Mitchell denied no aid in the execution of the trust when his own debt was to be paid. Having assumed this trust for his own benefit, the law steps in and compels him, without any divided responsibility, to execute it for the benefit of others entitled.

Bill dismissed at complainant’s costs, and decree affirmed.