Case ID: ohio-st_32/html/0590-01.html
Source: Caselaw Access Project
Author: {"author": "Day, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Lahm et al. v. Johnston.
    1. An assignment for the benefit of creditors, devotes all the property covered by it to the creditors who have their claims allowed pursuant to the act regulating the administration of assignments, to the exclusion of those who do not.
    2. In an action by a creditor whose claim has been duly allowed, on an assignee’s bond for a failure to account for any of the property assigned, the amount of recovery can not be limited to an amount proportionate to the whole amount of the claims of all the creditors, including those not allowed, as required by the statute, but the amount of recovery must be controlled by the proportionate amount of his claim to the whole amount of those only which have been presented and allowed pursuant to the statute.
    Error to the Court of Common Pleas of Stark county; reserved in the district court.
    The original action was brought by "William Johnston against John Lahm, U. R. Feather, and H. R. Wise, in the Court of Common Pleas of Stark county, on a bond for $50,000, given by Lahm, as assignee of Nixon & Co., with the other defendants as his sureties, conditioned that the said Lahm should well and truly, and according to law, perform all and singular the duties devolved upon him in the acceptance of the trust, and truly and correctly account for and pay over all moneys that came to his hands as such assignee.
    The assignee .entered upon the discharge of his duties, April 20, 1871, and received a large amount of property under the assignment. On the 2d day of September, 1871, the plaintiff presented his claim of $1,100 against the assignors, duly verified by his oath, to the assignee for allowance ; but the same was rejected by the assignee. He thereupon brought suit against the assignee for its allowance pursuant to the statute, and the court ordered the assignee to allow the claim as a valid one against the assets of Nixon & Co. in his hands.
    After more than eight months had elapsed from the time of the acceptance of the trust by the assignee, the plaintiff demanded payment, which was refused by the assignee. The plaintiff thereupon caused a citation to be issued by the probate court to compel him to settle and account for the assets in his hands as such trustee, which he neglected and refused to do. The assignee .having transferred all the assets back to the assignors, the plaintiff brought this suit on the bond.
    According to the inventory filed by the assignee, the assets of Nixon & Co. that came to his hands amounted to $77,252.32, and the debts amounted to $238,098.02, as shown by the books of the company. Only about $40,000 of the debts were presented to the assignee for allowance pursuant to the statute.
    As to the disposition of-the property, the assignee testified, on the trial, as follows:
    “ On the 13th day of July, a. d. 1871, about three months after I was appointed trustee, the creditors who represented at least. $236,000 of the indebtedness of said Nixon & Co., came to me in person and exhibited to me their claims, and requested me to reconvey and redeliver to said Nixon & Co. the property and effects included in their'assignment, and gave me written releases from all liabilities or damages on account of tlieir claims, if I would so redeliver to said company the property assigned by them. As there were only about $2,000 of debts against said company not so represented, and as Nixon & Co. agreed to protect me against any liabilities on .their account, I consented to, and did, on the said 13th day of July, reconvey and redeliver to said company all the property assigned by them, except about $400, the costs of administration.”
    On cross-examination of the witness, defendants offered to prove that legal and valid debts of Nixon & Co., amounting to $198,000, over and above the $40,000 which had been presented to the trustee duly sworn to according to law, and which existed at the time of the assignment of Nixon & Co., were presented to the trustee by the bona fide creditors of Nixon & Co. before the time had expired in which creditors had to present their claims, verified according to law, under an arrangement they had with Nixon & Co. to have the assignment vacated, and the property reconveyed to Nixon & Co., but did not propose to show that said $198,000, or any part thereof, had been verified according to law, and admitted that they were not; whereupon the plaintiff objected to the admission of said testimony, which objection was sustained by the court; to which opinion of the court the defendants excepted.
    Defendants also, ’on cross-examination of said witness, offered to prove that the assets of Nixon & Co., in the hands of the assignee, would not have paid over thirty cents on the 6dollar of the indebtedness of said company, had the trustee gone on and executed the assignment, and settled up the estate, and had the creditors presented their claims verified according to law; whereupon the plaintiff objected to the admission of said testimony, which objection was sustained by the court; to which ruling of the court the defendants excepted.
    And thereupon the defendants offered to prove that the assets of Nixon & Co., in the hands' of the assignee, would not pay over thirty cents on the dollar of the indebtedness of Nixon & Co.; whereupon the plaintiff objected to the admission of said testimony, which objection was sustained by the court; to which ruling of the court the defendants excepted. :
    “ "Whereupon defendants asked the court to charge the' jury that, in ascertaining the amount due the plaintiff, they must find the value of the assets assigned by Nixon & Co., and the amount of the indebtedness of the company, and that the plaintiff will be entitled to recover only bistro rata share of such assets; which the court refused to charge; but the court did charge the jury that, in arriving' at the amount of damages, they should find the aggregate amount, of the debts of Nixon & Co., that had been pre- ■ sented and filed with the defendant, Lahm, as assignee, with an affidavit made and filed therewith, setting forth that the; said claim or claims were just and lawful, and showing what collateral or personal security, if any, the claimants' had or held for the same, or that he had no security whatever; then find the amount of assets in the hands of, or-that came to the hands of, the defendant, Lahm, as assignee of Nixon & Co.; then find the amount that defendant could have paid upon each of said claims presented as aforesaid; and that they should consider no claim except it was filed and sworn to, as stated, as entitled'to participate in the distribution of the said assets or fund, and that the amount so due on plaintiff’s claim would be the amount of his damages in this action ; to which refusal and charge the defendants excepted.”
    The jury returned a verdict in favor of the plaintiff, for the full amount of Ms claim, upon which the judgment was rendered; thereupon the defendants prosecuted their petition in error in the district court, to reverse the judgment, on the ground that the common pleas erred in its rulings in regard to the admission of testimony, and in its charge to the jury.
    The case was reserved in the district court for decision in the supreme court.
    
      
      W. C. Pippitt, for plaintiff in error.
    
      A. L. Jones, for defendant in error.
   Day, J.

The right of the plaintiff below to recover is not disputed. The controversy relates to the amount of the recovery. It is conceded that the assignee neglected and refused to account for any of the trust property, as required by the condition of his bond. The statute provides that “ any person injured by the misconduct or neglect of duty of the assignee in regard to said trust, may bring an action thereon, in his own name, against the assignee and his sureties, to recover the amount to which he maybe en titled by reason of the delinquency.”

The question then is, how shall the amount be arrived at, to which the plaintiff was entitled by reason of the delinquency of the assignee. The amount of the assignors’ indebtedness greatly exceeded that of their assets; but the amount of the assets in the hands of the assignee exceeded that of all the claims which were presented to and allowed by him when he transferred all the trust property back to the assignors. This action of the assignee, it is true, was in compliance with the request of a large majority of the creditors ; but, so far as shown by the record, was not consented to by the plaintiff.

It is claimed, in behalf of the defendants below, that the plaintiff was entitled to recover so much only as he would have received if the trust property in the hands of the assignee had been distributed to all the creditors of the assignor in proportion to their respective claims. This position can be sustained only upon the assumption that an assignee is bound to distribute the assets pro rata among all the creditors, whether their claims are presented and allowed, as required by the statute, or not, and that the creditors, whose claims are so presented and allowed, acquire no rights superior to those who do not conform to the requirements of the law. This claim is untenable. In Haskins v. Alcott, 13 Ohio St. 210, it was held that the “ assignment devotes all the property covered by it to the creditors presenting tbeir claims in pursuance of the statute;” that the act in relation to assignments “ regulates the administration of the assets assigned, and points out the mode in which a participation therein may, and indeed must, be sought;” and that “ if a creditor does not acquiesce, his claim and his remedies thereon still remain, save that he can not appropriate the assigned property to its payment, except in the manner and proportion therein prescribed.” This is undoubtedly a correct exposition of the statute. The creditors, then, who proved their claims, and had them allowed, pursuant to the statute, and w'ho did not release their right in the trust, were, to the extent of their respective claims, entitled to the property assigned, to the exclusion of those who did not acquiesce in the assignment, and have their claims allowed under the law, and -who had, moreover, relinquished whatever contingent right they might have had under the assignment.

The several rulings of the court below were substantially in accordance with this view of the case.

Judgment affirmed.