Case ID: ohio-st_10/html/0435-01.html
Source: Caselaw Access Project
Author: {"author": "Brinkerhorr, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Morris L. Hallowell & Co. v. James Bayliss et al.
    Where a sale of goods is made by a debtor with intent, on the part of both the vendor and vendee, “to defraud creditors of their just and lawful debts,” and so within section 2 of the statute of February 19, 1810, “ for the prevention of frauds and perjuries,” and the debtor afterward makes a general assignment of all his property to a trustee for the benefit of all his creditors: Held, that the legal title of the general assignee and the equal equities of the creditors at large thereupon attached to the fund in. the hands of the fraudulent vendee, and so precluded any individual creditor from obtaining, subsequent to the general assignment, a special lien ■upon, or a preference over, others in the general distribution of such fund.
    
      ^Motion for judgment. Reserved in the district court of' Stark county.
    On the 25th of October, 1855, the plaintiffs, Hallowell & Co., filed their petition, in the common pleas of Stark county, against James Bayliss, John E. McLain, and George Harsh, defendants; and subsequently, Edwin Bayliss was made a party defendant, and an amended petition was filed, which is as follows :
    “ The said plaintiffs say that, at the November term, 1855, of said court of common pleas of Stark county, Ohio, they recovered a judgment in said court against the defendant, James Bayliss, for the sum of one thousand six hundred and sixty-six dollars and thirty cents, which judgment was founded upon the indebtedness-of said James to the plaintiff, existing prior to November 1, 1854 ; that the said judgment remains wholly unpaid and in full force, with the exception of the following payments which have been made thereon, to wit: November 21,1855, the sum of two hundred and sixty-six dollars and fifty cents; May 31,185C, the sum of four hundred and twenty-nine dollars and seventy-seven cents; that said James Bayliss has no property, either real or personal, and is utterly and notoriously insolvent.
    “ The plaintiffs further say that the defendant, James Bayliss,. has not real or personal property subject to levy on execution, and some time, either in the month of October or November, in the-year 1854, the said James Bayliss was the owner and in possession of a large stock of goods and merchandise in his store-room, and other places attached thereto,, in the town of Massillon, in said Stark county; that his pecuniary circumstances were then in a most deplorable and insolvent condition. That the said James Baylissabout that time, to wit-, in the month of October or November, 1855, sold, transferred, and delivered his entire stock of goods and' ■ merchandise aforesaid, amounting *to about thirteen thousand dollars, to the defendants, Edwin Bayliss and John E. McLain,, for a sum much below ther cost prices and actual value, to the injury and in fraud of his creditors. Thatthe defendants, John E. McLain and Edwin Bayliss, had then full knowledge of the pecuniary circumstances of the said James Bayliss to be of the character above stated. That said John E. McLain and Edwin Bayliss purchased said stock of goods and merchandise as aforesaid of the said James Bayliss, with the view and for the jmrpose of placing the same beyond the roach of the creditors of the said James Bayliss, and with 
      a view and for the purpose of hindering and delaying said creditors in the collection of their just and honest claims against the said James Bayliss, and with the intent to defraud said creditors. That said JohnE. McLain and Edwin Bayliss have, since the purchase ■of said stock of goods and merchandise as aforesaid, sold and disposed of the same, and appropriated the full amount of the avails ■of the same to their own use.
    “ Whereupon the plaintiffs ask judgment against the said John E. McLain and Edwin Bayliss for the amount of said, judgment, to wit, sixteen hundred and sixty-six dollars and thirty cents, with interest from November 12, 1855, less the following payments which have been made thereon, to wit: November 21, 1855, the sum of $286.52; May 12, 1856, the sum of $429.77, with interest on the respective payments from the date thereof, and for other proper relief.”
    To this petition the defendant, McLain, answered as follows :
    “ John E. McLain, one of the defendants in said cause, in answer to the amended petition of said plaintiffs therein, says that as to the judgment recovered against James Bayliss and the amount of the same at the November term, 1854, of the court of common pleas of Stark county, Ohio, as alleged in plaintiff’s petition, this defendant knows nothing, except from the allegations in said petition. This •^defendant admits that said James Bayliss, in the month of ■October, 1854, was the owner in possession of a stock of goods and merchandise in the town of Massillon, in said Stark county. Defendant further says, that said James Bayliss was the owner and in possession of said goods during, perhaps, the month of November, 1854. Defendant denies that, in the month of October, 1854, said James Bayliss sold, transferred, and delivered to this defendant and .said James Bayliss, his entire stock of goods and merchandise, or .that, in said month, said James Bayliss sold, transferred, or delivered to this defendant and said Edwin Bayliss, any property, real ■or personal.
    “ This defendant says that, on the 14th day of November, 1854, he and said Edwin Bayliss purchased a stock of goods and mer■chandise of the said James Bayliss, for the sum of seven thousand and forty dollars, for the payment of which they executed their three .several promissory notes, jDayablo to said James Bayliss or order, as follows : Twenty-one hundred and forty dollars in six months from ■date, and dated the 14th day of November, 1854; twenty-four hundred dollars in twelve months from date, and dated same date; and one note for twenty-five hundred dollars in eighteen months-from said 14th day of November, 1854. This defendant denies that said stock of goods and merchandise amounted to ‘ about thirteen thousand dollars,’ but alleges that said sum of seven thousand and forty dollars was a full and fair-price for all the goods- and merchandise so purchased of said James Bayliss. _ Defendant denies that said goods and merchandise were purchased below their actual value, or that creditors or anybody else were injured or defrauded by said purchase.
    “ This defendant most positively denies that he had any knowledge whatever of alleged insolvency of. said James Bayliss at the-time of said purchase, but, on the contrary, supposed that said James Bayliss had the ability to pay all his debts and liabilities. Defendant denies that he and Edwin Bayliss purchased said stock of goods of said James *Bayliss with a view and for the purpose-of placing the same beyond the reach of the creditors of said James Bayliss, or with a view or for the purpose of hindering or delaying said creditors, or the collection of their just and honest claims against the said James Bayliss.
    “ This defendant admits that he and said Edwin Bayliss have-disposed of and appropriated said goods and merchandise to their own use, as they had a perfect right in law to do. This defendant further says, that he and the said Edwin Bayliss have paid the-whole amount of the purchase price of said goods, being the aforesaid notes, and that the money derived from said sale and said notes was appropriated to the payment of the just and honest debts of said James Bayliss. And this defendant having fully answered, asks to be dismissed with his costs, and denies all fraud,” etc.
    The case having been appealed to the district court, and coming on for trial there, the parties filed the following agreed statement of facts :
    “ It is agreed between the parties in this case as follows :
    “ 1. That the plaintiffs recovered a judgment against JamesBayliss as set forth in the petition; that the amount is correctly stated, and that the claim upon which judgment was rendered, existed at the time of sale of goods to McLain & Bayliss.
    “ 2. That on the 13th day of November, 1854, McLain & Bayliss purchased the goods, and as the price of said goods, gave their negotiable promissorv notes to James Bayliss, as set forth in the-answer of McLain, and for the amounts stated, and that a fair price was paid for the goods.
    “ 3. That afterward, on said 13th day of November, A. d. 1854, James Bayliss made a general assignment to George Harsh, for the benefit of all his creditors, of the last two notes, together with all his other notes and accounts *and other property; except his household property and the first note given by McLain & Bayliss.
    “4. That James Bayliss took the first said note, got the same discounted before the assignment, and appropriated the proceeds to the payment of his bona fide debts. Twelve hundred dollars of the amount appropriated before, and the remainder after the assignment.
    “5. That the plaintiffs knew of the sale of the goods from James Bayliss to McLain & Bayliss, its terms, and the assignment to George Harsh; and that the plaintiffs received of George Harsh, November 21, 1855, $286.52; May 21, 1856, $429.77, being a pm rata sum due them, they knowing said sum to be of the proceeds of said assignment.
    “ 6. That McLain & Bayliss paid the notes when they became duo—two to Harsh, and the other to the holder.
    “ 7. McLain & Bayliss commenced disposing of said goods in the town of Massillon, and continued to do so for about eighteen months, when the last were sold, and during this time they replenished their stock twice by eastern purchases of goods, which were sold with the others.”
    And thereupon, by consent of parties, a jury was called, and under the directions of the court, the following questions were submitted to the jury, under the charge and directions of the court, to be answered by the jury as by special verdict:
    “Did James Bayliss sell and transfer, and did Edwin Bayliss and John E. McLain purchase and receive the goods mentioned in their answer, with a view for the purpose of placing the same beyond the reach of the creditors of the said James Bayliss?
    “Question 2. Was said sale and transfer made and received, with a view and for the purpose of hindering or delaying the creditors of James Bayliss in the collection of their claims against him? ”
    *To which several questions, after the arguments of counsol and charge of the court, the jury returned an answer, “Tes,” or in the affirmative. Whereupon, after the return of said verdict, the counsel for the plaintiff moved for judgment; and after argument of counsel and consideration by the court, the court finding that the questions involved were important and difficult to determine, on motion of the counsel for the plaintiff, it was ordered that the same be reserved to this court for decision.
    
      Upham, Schaefer, and Thurman, for plaintiffs.
    
      Bierce & Pease, for defendants.
   Brinkerhorr, C. J.

With a view to a decision of this case upon its real merits, and notwithstandiiig the exceptions which have been taken in argument, by counsel for defendants, to the phraseology of the questions resolved by the jury, we will consider the case as if the finding of the jury had brought it within the express terms of our statute of frauds; viz., that the sale and transfer of the stock of goods by James Bayliss to Bayliss and McLain, was “ made and obtained with intent to defraud creditors of their just and lawful debts.” The statute declares that such sales “shall be deemed utterly void and of no effect.” And yet nothing is better settled, than that this sweeping clause of the statute is necessarily subject to no inconsiderable limitations. Webb v. Brown, 3 Ohio St. 246. As between the parties to the sales, they are not void. Nor is it true, without qualification, that they are void as against creditors. They are void as against such creditors only as are able, by means of some kind of legal process, to fasten upon the property, or its proceeds, while in the hands of the fraudulent vendee. While the property or its proceeds are in the hands of the fraudulent vendee, the property may bo seized by process in favor of creditors, or if ho have not the property but its proceeds in his *hands, he is held, by operation of law, as a trustee, to the extent of its fair value, in favor of creditors who shall, by legal proceedings, assert their claim upon them, and will be compelled to a rigid account for such proceeds. But however fraudulent the original purchase may have been, if the vendee, before the rights of a creditor are in any way fixed by legal process or proceeding, honestly restore to the vendor, either the property itself or its iull and fair value—and a fortiori,, if, in addition to this, these fair proceeds are by the vendor applied to the payment of his honest debts— the vendee is exhonerated from further liability. To these principles the cases are full and clear. Webb v. Brown, supra; Swift and Nichols v. Holdridge, 10 Ohio, 230; Thomas v. Goodwin, 12 Mass. 140; Lamb v. Stone, 11 Pick. 527.

In this case, the plaintiffs having commenced proceedings to charge Edwin Bayliss and McLain, as trustees of the fund in their hands, before the payment of the last two notes given by them for the purchase price of the goods, the latter would be compelled to .account to the plaintiffs for the value of the goods purchased, less the amount of the first note, which had been paid before the commencement of these proceedings, were it not for the fact that, before the commencement of these proceedings, the general assignment to Harsh, for the benefit of all the creditors, intervened.

A copy of the assignment to Harsh is not in the case, nor are we otherwise informed of its exact terms; but in the agreed statement of facts it is said to have been “ a general assignment of the last two notes, together with all his other notes and accounts and other property, except his household property and the first note given him by McLain and Bayliss.” Now the said “first note” was discounted and went toward the payment of debts; and we are not .authorized to presume, in the absence of both allegation and proof, that the reservation óf “household property” included anything more *than what was by law exempt from execution. We conclude, therefore, that the assignment to Harsh was what the agreed statement calls it, “a general assignment” of all his property, for the benefit of all his creditors. If so, the legal title of the general assignee, and the equal equities of the creditors at large, attached to the fund in the hands of the fraudulent vendees, and so precluded any individual creditor from obtaining, after the general assignment, a special lien upon, or a preference over others in the distribution of, such fund; and when Edwin Bayliss and McLain paid to the general assignee the balance of the full value of their fraudulent purchase, as it is conceded they did, we think, they were exonerated from any further responsibility in the premises.

This view of the case relievos us from the necessity of passing upon the effect of the receipt by the plaintiffs of their proper distributive share under the general assignment.

. Motion overruled, and petition dismissed at the plaintiffs’ costs, its to Edwin Bayliss and John E. McLain.

Scott Sutlifp. Peck, and Gholson, JJ., concurred.