Case ID: ohio_11/html/0336-01.html
Source: Caselaw Access Project
Author: {"author": "Wood, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Edmund Wilcox and Jonathan Welch v. Charles F. Kellogg, David G. Williams, Milo G. Williams, and Ethan S. Williams, Administrators of Jacob Williams, deceased, et al.
    A transfer by a firm to one partner, bona fide, and by him to a third person in like manner, for valuable consideration, passes both the legal and equitable title to the property, against the creditors of the firm.
    The equity of creditors upon partnership property for debts due them, is only the equity of the partners in the property, and can only be reached through the partners.
    An absolute transfer of property does not come within the provisions of the act of February 23, 1835, relating to fraudulent assignments.
    This is a bill in chancery, from the county of Hamilton.
    The bill states that, at the February term of the court of common pleas, 1837, the complainants recovered a judgment, at law, against Charles F. Kellogg and David G-. Williams, partners in trade, under the firm of Kellogg & Williams, for the sum of $872.57, besides costs of suit, on a promissory note made by said Kellogg & Williams, due September 4, a. d. 1836; . and also for goods sold by the complainants to said Kellogg & Williams. That an execution issued upon said judgment, and was returned by the sheriff, no goods, chattels, lands, etc., found, whereon to levy, and that said Kellogg & Williams have no property within the reach of execution for the satisfaction of the aforesaid judgment.
    The bill further states that, in the month of October, A. D. 1836, and about the time the suit was commenced in which their judgment was obtained, Kellogg & Williams were in possession of a large stock of goods and wearing apparel of different kinds, in a store in Cincinnati, to the valuó of $6,000 or $7,000, debts due them to more than $2,000, besides other property. About that time, by some agreement between them, Williams took possession of the *goods, debts, and other property, and exercised the exclusive control, and undertook, with the proceeds of the property, to pay the debts of the firm, and, among others, that of the complainants; that, since that time, the said Williams has converted the goods and wearing apparel into money, either at public or private sale, or placed them in tho hands of third persons, for the purpose of covering and concealing them from the complainants, and to prevent them, or the avails, from being applied to the satisfaction of their judgment.
    The bill further states that Williams has paid none of the debts of Kellogg and Williams; that he has collected a large portion of the debts of the firm, but applied no part thereof to the payment of complainants’ judgment.
    It is also averred that Jacob Williams, Albert Kellogg, Thomas Johnson, William Little, and Horace S. Edwards, have in their possession some part of the goods, or the proceeds thereof, held under some agreement with the said David G. Williams and Jacob Williams, or one of them ; that after David G. Williams took exclusive possession of the goods, he transferred them, or some part thereof, to the said Jacob Williams, who has since controlled' the goods, but for the benefit of the said David G., and which goods ought to be subjected to the satisfaction of complainants’ judgment, etc.
    The bill prays, among other things, that David G. Williams and Charles F. Kellogg may sot forth, specifically, on oath, what amount of goods, clothing, and other property they had at the time the complainants’ note fell due, or at any time since, and' what disposition they have made of it, and, if sol'd, to- whom, and: for what consideration ; and that the other defendants may, in like manner, answer all and singular the premises charged; prayer for an injunction for satisfaction of complainants’ judgment, etc., and for other relief.
    To this bill David G. "Williams and Jacob Williams have answered fully, and their aitswers substantially agree. All fraud is denied. From those sources, it is in proof, that when David G. Williams went into the firm with Kellogg, he, Williams, furnished all the capital then advanced, except about *$400, which was advanced by Kellogg. That in order to raise the necessary funds to commence business, by the purchase of goods, Jacob Williams, the father of said David G., and his father in law, Phillips, indorsed his note to the Ohio Life Insurance and Trust Company, for $550. He had $600, and, with these sums, Kellogg proceeded to the east and purchased $3,000 worth of goods, about one-half on a credit of six and twelve months. After five months it became necessary to make new purchases; the business had not been profitable, but the said David G. Williams relied on the assurances of Kellogg that it would become so ; and, to keep up the credit of the firm, and to pay off the bills given at six months, the said David G. borrowed of Jacob Williams, his father, $1,000, on January 29,-a. d. 1836. Kellogg again went cast, bought $4,000 worth of goods, at six months’ credit. The purchases were too ■large, business dull, and the said David- G. was convinced the ■debts could not be paid from the business of the firm. He therefore took the property with the intention of closing the concern for the benefit of the creditors in good faith. He received of the firm $5,000 in goods, and $1,500 in book accounts, and repaid Kellogg $400, advanced by him, and $150 for his services. The said David G. then wrote to all the creditors in the east advising them of his apprehensions that their debts would not be met as -soon as duo, and asking further time, or offering to surrender the goods. His offer was declined by all except the complainants, who did not answer his letter. The said David G. then formed a partnership with Isaac Stokes, but it was unsuccessful; he was taken sick, and, when he recovered, he found the stock much reduced, and nothing on the books. He then determined to break up the concern, and transfer the goods to those who had advanced almost the entire capital, and accordingly did so.
    He was indebted to said Jacob Williams, besides tho $1,000 borrowed of him, for $224, ^before that time advanced to him, and $400 due on the note to the Life Insurance and Trust Company, paid or assumed by the said Jacob, in the whole, including interest, $1,627 ; also, in the further sum of $409 on a note discounted at the Franklin Bank of Cincinnati, and used by said David Gr., and paid by said Jacob. He therefore transferred the goods to said Jacob, on December 11, A. d. 1836, for his benefit, and, if anything remained, for other creditors, with no understanding nor belief that any part of the avails was to be returned to him. The goods were all sold by auctioneers, in Cincinnati, gradually, not forcing them into the market; and, after paying expenses, there is a balance still due to Jacob Williams from the said David Gr., of at least fifty or sixty dollars.
    Many of the allegations, and much of the proof, is omitted, not being, in the opinion of the court, essential to be considered, in order to correctly dispose of the case.
    The case was argued by Wright & Hodges, for the complainants, who cited Root v. French, 13 Wend. 570; Coddington v. Bay, 20 Johns. 651; Bay v. Coddington, 5 Johns. Ch. 54; 33 Ohio L. 13.
    V. Worthington, for defendants, cited Story on Part. 508; Hoxie v. Carr, 1 Sumn. 181; Phillips v. Cook, 25 Wend. 399; Ex parte Ruffin, 6 Ves. 119; 11 Ves. 3; 17 Ves. 514, 2 Ves. & Bea. 172.
    The discussion being chiefly as to the question of fraud, is omitted.
   Wood, J.

It is contended by the complainants, that the whole proofs disclose a fraudulent attempt to place this property beyond the reach of creditors. If so, the complainants arc entitled to relief. The law, says Mr. Justice Wilmot, breaks through all the forms with which fraud may surround itself, and exposes it, odious and hateful, to the public gaze. *At law, however, it has become a truism, that fraud must be proved. In equity, it is sometimes said, the rule is not so strict, but it is nevertheless certain that the evidence of facts and circumstances must be such that it can reasonably be inferred, or else, in legal parlance, it does not exist.

The substantial facts relied upon in the case at bar, by which fraud is attempted to be fixed upon the transaction, are:

1. The ties of blood between David Gr. and Jacob Williams.
2. That David Gr. transferred the property, about the time he had reason to suppose the debts of the firm of Kellogg & Williams would be pressed for collection.
3. That he wrote to the eastern creditors, requesting time for payment, which, it may bo claimed, was a device to put them off their guard, until he could dispose of the property.
4. That an amount much larger than the debt due to Jacob Williams was transferred to -him.
5. That it was sold at auction to pay this debt.

It is recognized as a suspicious circumstance, when a debtor, in failing circumstances, passes his whole property into the possession of his near relations; but in this case, the consideration is proved to have been bona fide, beyond dispute, over $2,000 cash advanced. This transfer was legal, if honest, at any time before the law had taken the property into its custody, whatever might be the circumstances of David Gr. Williams. In writing to the eastern creditors for time, the letters show he offered to surrender the property, if the creditors desired it, but they declined. The amount transferred was directed to be sold gradually, at auction, not forced, and did not bring sufficient to pay the debt; and in cities, the auctioneer is a convenient and proper channel through whom property of this descripiton will frequently sell to the best advantage.

We do not, therefore, after the most mature deliberation, find evidence sufficient to declare this transaction fraudulent.

It is contended, however, that the complainants being creditors of the firm of Kellogg & Williams,' the debts of which *firm Williams had assumed to pay, they had a lien upon the partnership property, into whosoever hands it might pass, which might be enforced in equity. Is this so ? It is laid down in Story on Part., see. 358, that while the partnership is solvent and going on, creditors have no equity against the effects of the partnership; neither have they any lien on the partnership effects for their debts. There being no lien, and no equity in favor of creditors against partnership effects, it follows they are susceptible of being legally transferred bona fide, for a valuable consideration, to any persons whatever, and as well to other partners as mere strangers. The equity of creditors upon partnership property is, when sifted, as laid down in the books, only the equity of the partners, and can only be reached or worked out, as it is said, through them. It appears to me, then, clearly, if these goods passed, on the dissolution of the partnership of Kellogg and Williams, to .David G. Williams, bona fide, and for a valuable consideration, from him again, to Williams and Stokes, and from them to David G-. Williams, and thence to Jacob Williams, in the same bona fide manner and for a like consideration, they are beyond the reach of the complainants.

But it is said, the transfer to Jacob Williams is fraudulent, under the act of February 23, a. d. 1835, being an assignment in trust. But this is clearly not so. It.is an absolute conveyance to pay Jacob Williams his debt, and is not, therefore, within the provisions of that act. Bill dismissed.