Case Name: Brinkerhoff, Trustee, et al. v. Tracy, Administrator
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1897-01-26
Citations: 55 Ohio St. 558
Docket Number: 
Parties: Brinkerhoff, Trustee, et al. v. Tracy, Administrator.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 55
Pages: 558–572

Head Matter:
Brinkerhoff, Trustee, et al. v. Tracy, Administrator.
Mortgage in trust for preferred creditors — Respective rights op . other creditors and mortgagor — Section 6344, Revised Statutes.
Where one, in embarrassed circumstances, makes and delivers a chattel mortgage to a third person, in trust for certain of his creditors, with the requirement that he shall sell the property at retail and apply the proceeds, to the claims of the preferred creditors until paid in full; and afterwards, with the consent of his other creditors, to continue to sell and apply the proceeds to their claims pro tata, and the property so mortgaged is largely in excess of the amount of the claims of the preferred creditors, the legal effect of such mortgage is to hinder and delay his other creditors within the meaning of section 6344, Revised Statutes, and no action for damages can be maintained by the mortgagor against the trustee for a failure to execute the trust.
(Decided January 26, 1897.)
Error to the Circuit Court of Richland county.
The suit below was brought by Philopena L. Harrison, to recover damages from the defendants for the breach of contract, set forth in the petition. The defendants demurred to the. petition. The demurrer was sustained by the common pleas; but, on error, was overruled by "the circuit court, and the case is brought here for a reversal of the latter court.
The petition is as follows:
“That the defendant, Roeliff Brinkerhoff, did on the 5th day of January, 1891, acting for himself • and as the agent of the defendant, The Mansfield Savings Bank, enter into a contract with plaintiff, in writing-, a copy of which is hereto attached, marked Exhibit A, by which contract the defend ant, Roeliff Brinkerhoff, promised and agreed for himself and for said bank, for a valuable consideration, and in consideration that the plaintiff would execute and deliver to defendant as trustee for. The Mansfield "¡Savings Bank and others, her chattel mortgage on the stock of goods consisting of dry goods, ladies’ and gents’ furnishing goods, notions and all of the goods and merchandise of every kind and description, together with all furniture and fixtures in and connected with the store then owned by her in Smith’s Opera House block, in Mansfield, Ohio, and thus secure a claim of about $5,300 held by the said .Mansfield Savings Bank, that he, the said Roeliff Brinkerhoff, for himself and for said bank, would accept a conveyance of said stock of goods, furniture, fixtures, etc., by said chattel mortgage and by the said contract, and that he would employ in the conducting of the business, and the sales to be made from said stock, Charles S. Harrison, a competent salesman, who had theretofore had charge of business and stock for plaintiff and was fully acquainted with it and the trade, to superintend the business and sales. That said business should be run, and enough of said stock and furniture and fixtures sold until sufficient amount had been realized to pay the claim, of said bank, and, if satisfactory to other creditors, until enough had been realized to pay all the creditors of plaintiff, and that after the payment of all her indebetedness, the balance of the stock, etc., or the proceeds thereof should be turned over to her. And she avers that said stock of goods, etc., were more than double in value the whole amount of her indebtedness, and that she was the owner of a large amount of real estate in addition to the goods, etc., above described.
“Plaintiff says that the Mansfield Savings Bank is a corporation organized under the laws of Ohio, and that at the time of the execution of said contract held a claim against her for about $5,300; that said Roeliff Brinkerhoff was and is, one of the largest stockholders of said bank, and that-he and various members of his family were, and are, the principle stockholders of said bank.
“That on the 5th day of January, 1891, at 3 o’clock, P. M., plaintiff did, in accordance with the terms and conditions of the contract above described, execute and deliver to the said defendant her chattel mortgage in accordance with the terms of said contract, which chattel mortgage was duly filed with the recorder of Richland county, at 3 o’clock of said day.”
“Plaintiff further says that by said chattel mortgage she turned over and delivered to defendant Roeliff Brinkerhoff, as such trustee and agent aforesaid, property of the cash value of $25,000, and that the said defendant, Roeliff Brinkerhoff, was placed in possession of the same at 3 o’clock of said fifth day of January, 1891.
“Plaintiff says that the defendants, in violation of said contract and agreement by virtue of which said goods, furniture, fixtures, etc., were turned over to them on or about the 5th day of January, proceeded to ' Ashland county court of common pleas, and in violation of their duty toward plaintiff in the premises, f raudently procured a judgment against her, and had issued on said judgment an execution to the sheriff of Richland county, and had the same levied on said stocks of goods, furniture, fixtures, etc., and the same taken from the possession of said Roeliff Brinkerhoff, acting as aforesaid.
“Plaintiff says that the facts constituting the fraud in taking said judgment and the levy of the execution and defendant’s violation of said agreement are as follows:
“The said hank had agreed, on or about September 1, 1889, in consideration of the transfer to it of a judgment plaintiff had against Charles S. Harrison, for about the sum of $7,000 to loan the plaintiff a sum, the principle of which should not exceed $5,000, for three years, and that said defendants, on or about the 5th day of January, A. D. 1891, in consideration of said agreement of September 1, 1889, made the contract hereinbefore alleged and accepted the chattel mortgage, by the terms of which mortgage the sum owing said bank was not due until four months from the said 5th day of January, 1891. And she further alleges that the said defendants made said agreement, and procured her to execute and deliver the said chattel mortgage and the possession of the said stock of goods, furniture, and fixtures to them for, and in consideration of, an extension of four months as alleged herein of the time of payment of money owing to said bank, and she says there was nothing owing said bank at the time said judgment was taken that was due, and she avers that the defendants falsely and fraudulently represented to her that if she would put into the possession of said Roeliff Brinkerhoff said stock of goods, furniture and fixtures, that they would satisfy the claims of all her creditors, and carry on said business and sell said stock, etc., as in said agreement provided, but she says that said defendants did not intend to perform the said agreement, but on the contrary they falsely and fraudulently induced her to enter into it for the purpose of procuring from her the possession of said stock of goods, etc., and to hold possession thereof until they could secure the said judgment and levy.
' ‘ ‘That said judgment so taken against plaintiff in Ashland county was in favor of The Mansfield Savings Bank and that the said defendant, Roeliff Brinkerhoff was, at the time the judgment was so taken and at the time of accepting the trust herein-before stated, and entering into the contract before set forth was vice president of the said bank, and the active business manager of said bank, and that the said defendants caused the said sheriff of Richland county to take possession of the goods and property of plaintiff specified in said chattel mortgage, and of which defendant, Roeliff Brinkerhoff, was trustee and agent as aforesaid, and that they, the said defendants, neglected and refused to advise the creditors as to the value of the large amount of property thus held by them, or to advise them of the terms and conditions of the contract above set forth, and by his failure so to advise the creditors and his refusal to carry out the trust according to its true intent and meaning, all of creditors of plaintiff caused judgments to be taken against plaintiff and executions to be issued on said judgments and levies made on her said property.
“And the said defendants, instead of securing the services of competent parties to invoice said stock, and to superintend the sale thereof, caused the same to be done by persons wholly unfamiliar with the value of said property, and caused said stock of goods and property to be appraised greatly below its real value.
“And by reason of his violation of said contract and the manner of selling and disposing of said goods, and their failure to advise all other creditors of plaintiff of their said contract and the value of the property turned over to defendant as well as the value of the real estate of plaintiff, they caused the same to be sold at less than half its actual value by reason of which wrongful acts and fraud on the part of defendants, plaintiff has been damaged in the sum of fifteen thousand dollars ($15,000).
“Wherefore plaintiff prays judgment against defendants for the sum of $15,000, her damages so far as aforesaid sustained by her, and for costs of suit.
“A. J. Mack,
“Jenner & Tracy, “Attorneys for Plaintiff.”
EXHIBIT “A.”
“This agreement witnesseth:
“That, whereas Philopenia L. Harrison has this day executed and delivered to R. Brinkerhoff, as trustee for The Mansfield Savings Bank, Mollie V. Harrison, Hiram R. Smith and Jenner & Tracjr, her chattel mortgage on her stock of goods, consisting of dry goods and ladies’ and gents’ furnishing goods, notions and all of the goods and merchandise of every kind and description, together with all the fixtures and furniture in and connected with the store, now owned by her in Smith’s Opera House block, in Mansfield, Ohio.
“Now, it is agreed by the parties hereto, that the said trustee shall first pay off the indebtedness to the parties for whom he is a trustee, and all necessary expenses of running the business, together with the sum of $-- — - per month to Roeliff Brinkerhoff, Jr., for his services in taking possession, superintending the sale of goods and taking charge of the proceeds thereof, as the representative of the trustee, and it is further agreed that said trustee shall employ Chas. S. Harrison to superintend the sale of said stock of said goods, and that he shall receive twenty-five dollars per week.
“It is further agreed that after a sufficient amount has been realized to pay off the claims represented by said trustee and the expenses attending the same, that if it shall be satisfactory to the other creditors of Philopena L. Harrison, the said trustee shall continue to act under said chattel mortgage as trustee for all other of the creditors of Philopena L. Harrison, and that he shall continue to sell and dispose of said goods, furniture and fixtures, and that whenever the sum of one thousand dollars shall be in the hands of said trustee, a dividend shall be paid on the claims of each and all of the other creditors of Philopena L. Harrison not represented by said R. Brinkerhoff, trustee, and after the payment of all the indebtedness the remainder of said stock to be turned over to Philopena L. Harrison, her assigns or legal representatives.
“Signed by
“P. L. Harrison,
“R. Brinkerhoff, Trustee.”
Gummings c& McBride and B. Brinkerhoff, Jr., for plaintiffs in error.
We claim the circuit court erred in reversing the common pleas court and ordering the case remanded with instructions to overrule the demurrer for the following reasons, viz:
First — The cause of action, as shown by above quotation from petition, is based upon a contract that is void because it is a contract to hinder and delay creditors. The contract being void no action will lie, either for specific performance or for an action for damages against the party who fails to carry out its provisions.
Second — Stipulations tending to coerce the creditors into a compromise or release a part of their debts, or imposing other unreasonable conditions as the terms on which they are to be allowed to participate in the distribution of the trust fund, or reserving to the assignor the control and disposition of the uses to which the trust property is to be applied.
Third — The reservation of a use or benefit to the grantor or his family, or anyone not a creditor will invalidate the instrument. Huffman & Co. v. Mackall, et al., 5 Ohio St., 124.
Again it is a well established rule of law “that when an act done will necessarily have the effect of hindering and delaying creditors, the law presumes that it was done with fraudulent purposes and intent.” Hastings v. Jockers, 29 Am. State, 341; Dickson v. Dawson, 5 Ohio St., 223; Trimble v. Doty, 16 Ohio St., 118.
In a late Ohio report we find a case where an action was brought to enforce a specific performance of contract which the court held was one to hinder and- delay creditors, and dismissed the petition. Robinson, Exr., v. Robinson, 17 Ohio St., 480.
“The agreement set forth in the petition was fraudulent on the part of both the plaintiff and defendant, and a breach of it by either would * afford no ground for an action by the other.”
Goudy v. Gebbart, 1 Ohio St., 262; Randall v. Howard, 2 Black U. S., 585.
The parties are in pari delicto, as well as participes fraudis, and in such eases neither can maintain an action against the other upon the contract, or from any other consequences resulting from it, though it proceeds upon a repudiation of the contract. Robison v. French, 13 Metc., 24; Roll v. Raquet, 4 Ohio St., 419; 7 Ohio, 76; Moore v. Adams et al., 8 Ohio St., 372; McQuade v. Rosecrans, 36 Ohio St., 442; Kahn v. Walters, 46 Ohio St., 195; Jacobs v. Mitchell et al., 49 Ohio St., 601; Reed v. Reed, 49 Ohio St., 654; Emery et al v. The Ohio Candle Co., 47 Ohio St., 321.
No right of action can spring out of an illegal contract, and this rule applies, not only when the contract is expressly illegal, but whenever it is opposed to public policy. C. C. C. & I. R. R. v. Closser, 9 L. R. A., 754-760; Shirey v. Ulsh, 2 C. C. Rep., 401; Cowell v. Harris, 2 C. C. Rep., 404; Parsons on Contracts, Vol. 2, page 673; McNamara v. Garrett, 12 Am. St., 355.
The transfer of goods in payment of a preexisting debt is no consideration for the transfer as against the owner from whom the goods were obtained by fraud. Eaton & Co. v. Davidson, 46 Ohio St., 355.
As the consideration must have some value and reality, the assumption of a supposed danger or liability, which has no foundation in law, or in fact, is not a valuable or sufficient consideration, nor is the performance of that which the party was under a previous valid, legal obligation to do. 1st Parsons on Contracts, page 437.
Neither the promise to do a thing, nor the actual doing of it, will be a good consideration if it is a thing which the party is bound to do by the general law, or by a subsisting contract with the other party. Pollock on Principles of Contracts, page 161; Bartlett v. Wyman, 14 Johns, 260; Crosby v. Wood, 6 N. Y., 369; Am. and Eng. Ency. of Law, Vol. 3, page 834.
And a promise by the beneficiaries, in a consideration that he would resign, to cause the note and. mortgagee to be cancelled and surrendered, in addition to procuring him said allowance for his services, is void. Withers v. Ewinq et al.. 40 Ohio St., 400.
No benefit, profit or advantage in a legal sense resulted to the plaintiff, nor any detriment or loss to the defendant. The promise alleged, in point of legal obligation, was in no wise different than if it had been a mere naked agreement to extend the time for the payment of the entire amount due. Jenkins v. Clarkson, 7 Ohio St., 72; City of Cleveland v. Lenge, 27 Ohio St., 384.
A promise to extend the time of payment of g debt is void, unless founded upon a good consideration, and a payment of a part of the debt, or the interest already accrued, or an agreement to pay interest for the future, is not a sufficient consideration for such a promise; nor will the saving of a new obligation with additional security for a part of the debt, be a good consideration for a promise to extend the time as. to the residue. Parmalee v. Thompson, 45 N. Y., 58; Cobb v. Cowdry, 94 Am. Dec., 370.
No damages are recoverable for the breach of a contract made without consideration. Hemly v. Kier, 59 Cal., 138.
Under the above authorities, we claim the facts stated in the petition show that the contract was without consideration, and therefore no damages lie for a breach of it. Butterfield v. Cowing, 112 N. Y., 486.
Jenner, Jenner <& Weldon, for defendant in error.
It seems to .us that section 6344, Revised Statutes, has no application to the legal questions raised by this demurrer. There is no averment in the pleading that can be construed to mean that the plaintiff intended to “hinder, delay or defraud creditors.”
Nor was there any intention to delay any creditors, beyond what would naturally result from the appointment of a trustee, for under the very terms of the chattel mortgage and the written contract, all creditors were to be paid in full, by Roeliff Brinkerhoff, as trustee. If creditors not secured by the chattel mortgage, refused to allow Roeliif Brinkerhoff to act as trustee, then they had the legal right, under section 6343, Revised Statutes, as construed by the Supreme Court, to treat the transfer to R. Brinkerhoff as an assignment in trust for all creditors.
This question has been before the Supreme Court of this state so frequently that it seems to be hardly necessary to cite authorities, and yet we will take the liberty of referring the court to a few citations. Bloom et al. v. Noggle et al., 4 Ohio St., 45; Hyde & Co. v. Olds et al., 12 Ohio St., 591; Cross, Trustee, v. Carstens, 49 Ohio St., 548.
The language of the judge in the latter case, describes with accuracy the plaintiff in error, Roeliff Brinkerhoff, who became a trustee, by the terms of the chattel mortgage and his contract, when he took possession of the stock of goods by the terms of the same. And on page 568, the Chief Justice, after a review of earlier cases, uses this language: “In none of the contemporaneous decisions do we get an intimation, even, that the payment, or securing, of an honest debt by a failing debtor was unlawful, or was deemed an evil which called for legislative interference. ’ ’ And on page 569, this language: “In the many decisions upon the general subject from Atkinson v. Jordan, supra, to its last deliverance upon the question, (save in the overruled case of Mitchell v. Gazzam, 12 Ohio St., 315,) this court has not omitted to affirm the right of a debtor in failing circumstances, in good faith, to pay or secure one or more creditors in preferance to others.” We also cite the late cases of Pendery et al., v. Allen et al., 50 Ohio St., 121, and Gashe v. Young, 51 Ohio St., 376. These decisions are in line with the holding of this court extending over a period of more than fifty years, giving the diligent creditor the benefit of his diligence and the debtor managingandcontrolling his property, the right to prefer one or more creditors. And this is all Mrs. Harrison attempted to do, by her chattel mortgage and contract.
The duty of this trustee, for Mrs. Harrison and her creditors, after he had taken possession of the stock of goods is clearly defined in text books and adjudicated cases. 2 Story’s Eq. Juris., section 1268; section 1275; Perry on Trusts, section 847; 27 Am. and Eng. Enc. of Law, 245.

Opinion:
Minshall, J.
The point made on the demurrer is that the agreement for the breach of which the action is brought, was made to hinder and delay creditors, and no action will lie for the breach of it. There is no averment in the petition from which it can be inferred that it was made in con- temptation of insolvency. If that were so, then there is no question but that under section 6343, Revised Statutes, it would have inured to the benefit of all the plaintiff's creditors; and the only remedy she would have had, in such a case, would have been to have caused it to be administered, by the appointment of a proper trustee, in the probate court of the county. The agreement attached to the petition tends to suggest that it was made under such circumstances; but in the absence of a positive averment or admission of that kind, a court would hardly be warranted in drawing such inference from it. But though the mortgage was not made in contemplation of insolvency, still does it not appear from the agreement of the parties, that it was made to hinder and delay creditors, within section 6344,'Revised Statutes, as claimed by the demurrant? We think it does, and that no action will lie on behalf of the plaintiff for the breach of it for this reason.
Prom the petition it appears that the plaintiff, at the time named, made and delivered a chattel mortgage on her stock of goods, and on the furniture and fixtures, in her store in Mansfield, Ohio, to Roeliff Brinkerhoff, in trust for certain of her creditors, among whom was the Mansfield Savings Bank, its claim being about $5,300. By the agreement made at the same time, the property so mortgaged was placed in the possession of the mortgagee, to be disposed of at retail in the usual vay, he employing certain persons named to attend to the business. The business was to be so run until enough should be realized from the sale of the property to pay the claim of the bank, and the other preferred creditors, and then, if satisfactory, to her other creditors, it was to be con tinued until enough had been realized to pay all her other creditors ; and for any balance he was to account to her. The property so mortgaged to the trustee Brinkerhoff, is averred to have been of the cash value of $25,000 and double the value of all her indebtedness. It is also averred that she had a large amount of real estate in addition to the property so transferred, but it is not averred that it was sufficient to satisfy the claims of her other creditors. Now what was the necessary effect of this mortgage as to the creditors, not provided for in it. If the mortgage, as to them, was a valid one, they could not touch a dollar of the property covered by it, until the preferred creditors were paid, although the value of the property was double the amount of all her indebtedness. As to this property they could take no steps to subject it to their claims, during the continuance of the trust. The legal effect of this mortgage was, then, to hinder and delay her other creditors, in any effort to obtain from any part of the property included in the trust mortgage, satisfaction of their claims — although largely in excess of the claims of those preferred by it. It is not like the case where a debtor, in failing circumstances, prefers a creditor by executing to him a mortgage on property as a security for his debt. This may be done. Cross, Trustee, v. Carstens, 49 Ohio St., 548. But in such case the mortgage must be directly to the creditor, and not to another for his use ; and the creditor must deal with an eye single to his own interests. Dickson v. Dawson, 5 Ohio St. 218; Pendery v. Allen, 50 Ohio St., 121. Here the mortgage is to a trustee for the use and benefit of certain of the creditors of the mortgagor — and all others are hindered and delayed with respect to the property mortgaged, until the favored creditors are satisfied by the execution of the trust. If what a debtor does in disposing of his property necessarily tends to hinder and delay his creditors, the law presumes that his intention corresponded with his act, and adjudges all such acts as contrary to its policy. A court in such case can afford him no relief from the consequences of his act, nor sustain any action in his favor founded on any agreement in regard to it. Trimble v. Doty, 16 Ohio St., 118; Pride v. Andrew, 51 Ohio St., 405; Emery v. Candle Co., 47 Ohio St., 321. As said by Boynton, J., in McCortle v. Bates, 29 Ohio St., 419: "It is one of the oldest rules of the common law, that contracts contrary to sound morals, or against public policy, will not be enforced by courts of justice — ex facto illicito 'non oritur actio / and the court will not enter on the inquiry, whether such contract would, or would not, in a given case, be injurious if enforced. It being against the public interest to enforce it, the law refuses to recognize its claim to validity."
The legal duty of the trustee, Brinkerhoff, was, under the circumstances disclosed by the petition, to have filed the agreement with the mortgage in the probate court, and have had the trust administered as an assignment for rhe benefit of all the creditors of the plaintiff; for such, in law, was its legal effect. But neither he nor the prefer led creditors were under any legal duty to the mortgagor to carry out the agreement. And whatever right of action accrued from the course puisued by them, accrued to the creditors and not to Mrs. Harrison.
Judgment of the circuit court reversed, and that of the common pleas affirmed.