Case Name: Crowell Hatch versus William Smith and Trustees
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1809-03
Citations: 4 Tyng 42
Docket Number: 
Parties: * Crowell Hatch versus William Smith and Trustees.
Judges: 
Reporter: Massachusetts Reports
Volume: 5
Pages: 30–38

Head Matter:
* Crowell Hatch versus William Smith and Trustees.
An assignment of the bulk of an insolvent person’s whole effects, to such of his creditors as would agree to receive it in full discharge of their debts, is void— although the description of the effects be general, so that it can be made certain —although the creditors retain their remedy against one, who has lent his name to the insolvent person, on his negotiable paper — although certain of the creditors assenting, have previously secured themselves in part, for their demands, by attachment — although the assent of some of the creditors is given by attorneys, whose authority does not appear — and although the registers of certain vessels, making part of the effects assigned, were not exchanged, until after a sale by the agents of the assignees.
Daniel D. Rogers, Samuel Brown, and John Lee, were summoned as the agents and trustees of Smith, the principal defendant, and the only question agitated in the case was, whether, upon the facts disclosed upon their examinations (a second having been made by direction of the Court), they were to be adjudged trustees.
Those facts were, in substance, as follows:—
The said Smith did, by an indenture of three parts, bearing date the 27th of February, 1805, a copy of which made a part of the answers of the trustees, between himself of the first part, the President and Directors of the Union Bank, Samuel Parkman, Daniel Sargent, Daniel D. Rogers, Cornelius Coolidge, John Lee, John Bishop, Joseph Head, “ and other subscribers hereto, bona fide creditors of said Smith,” of the second part, and Stephen Gorham, of the third part, in consideration of a release and discharge to the said Smith, by the said parties of the second part, of all their respective demands against him, and of one dollar paid him by them, grant, sell, alien and convey unto his said creditors, their heirs, successors, executors, administrators and assigns forever, the brig Orlando, her tackle, &c., supposed to be at sea or in foreign parts ; also one undivided moiety of the ship Columbia, her tackle, &c., supposed to be at sea or in foreign parts ; also the cargo of the said brig Orlando, and an undivided moiety of the cargo of the said ship Co lumbia, with which they respectively sailed from Boston for France, consisting of fish, tobacco, &c., if the said cargoes were not then sold, and if sold, then the proceeds of the sales thereof, [ * 43 ] whether such proceeds consist of * linens, &c., or of any other property whatever; also the brig Levant, and the barque Columbia, their tackle, &c., supposed to be at sea or in foreign parts, together with all their earnings by freight or otherwise, in the hands of any merchant, broker or agent in Europe, or elsewhere, subject, however, to the payment of any bills, that N. W. Appleton, agent of said Smith, had then drawn, or might thereafter draw, on Smith, or on T. Wilson of London, for the purchase of a cargo, or part of a cargo, for the said brig Levant, copies of the registers of each of the said vessels being annexed to the said indenture; also all the said Smith’s interest, right and title, in and to any policies of insurance on said vessels and cargoes effected in certain offices mentioned in the said indenture, the said Smith not to be held in any wise responsible, although the said vessels or cargoes, or any part thereof, be lost or damaged; also all his, the said Smith’s title, interest and estate whatsoever, in and to all lands lying in Charles-town, in the county of Middlesex, which he purchased of J. H., as by deed dated, &.C., of the heirs of J. M., as by deed dated, &c.; also to all his estate lying in Boston, aforesaid, viz. the house and land he then occupied, lying in Court Street, conveyed to him by the heirs of his late father, by deed dated, &c.; also the house and land in said Court Street, which he purchased at auction, of the heirs of Mrs.-Thayer, as by deed dated, &c.; also a store No. 53 in State Street, which he purchased of J. H. and P. T. S. as by deeds on record will appear; also one half of a sugar-house and distil-house, situated, &c., formerly the estates of G. II and N. H. deceased; half a tract of land on Deer Island, in the county of Hancock, formerly the property of N. K. deceased, containing about 200 or 300 acres; also a tract of land in Winslow, in the county of Kennebeck, formerly the property of the heirs of J. N. deceased, which he, Smith, purchased at public auction, in Boston, 7th Nov. 1799, containing about 600 or 700 acres; to have and to hold all the said goods, lands, chattels and * tenements (subject, however, to [ * 44 ] all the encumbrances already made by the said Smith on the same), unto the said parties of the second part, their successors, &c., to their use and benefit forever, as tenants in common, in shares according to, and in the several proportions, their respective debts mentioned in a schedule annexed to the indenture, bear to each other ; also all and singular the several debts and demands, sum and sums of money owing to Smith, and specified in another schedule annexed to the indenture, to have and to hold, &c., in shares, &c., as above. Smith then constitutes the parties of the second part, their heirs, &c., jointly and severally, his irrevocable attorneys, for their use, and at their risk and expense, to sue for and recover the said debts. In consideration whereof, the said parties of the second part absolutely discharge said Smith from all their respective debts and demands against him ; but the indenture was not to operate to discharge the said Stephen Gorham as endorser of any notes or bil. of Smith, except that the property by the said indenture, assigned to the said creditors, should be credited to Gorham, on those notes or bills; nor was the release to Smith to be construed to preclude any of the parties of the second part, who had by legal process attached his property, from proceeding to judgment and execution against him, so far as to levy such execution on the property so attached.
After the said indenture was executed, the creditors named therein by their deed, appointed the said Rogers, Brown and Lee to be their agents, to receive, manage and dispose of the property so conveyed, for the use and benefit of the said creditors ; and the said agents had received, by virtue of that appointment, sundry goods and effects, of those mentioned in the said indenture, to the value of about 33,000 dollars, being the proceeds of the barque Columbia, the brig Orlando and her cargo, Smith’s moiety of the ship Columbia and her cargo, and the brig Levant.
[ * 45 ] *At the time of Smith’s delivering the indenture, he also *- -* delivered to the agents bills of lading of the cargoes of the Orlando, and of the ship Columbia. The Levant being then on a freighting voyage, and the cargo she brought home being the proceeds of her freight, Smith had no bill of lading thereof.
There was no understanding that, in case the property assigned by Smith to his creditors had exceeded their demands, the surplus was to result to his benefit; and in fact there would finally be a great deficiency. The several vessels assigned were, immediately on their arrival, taken possession of in behalf of the creditors, and after-wards sold by the agents; but no exchange of the certificates of registry took place before the sale.
The indenture did not contain an assignment of all Smith’s property, and this was well understood by the parties at the time of the transaction. All his creditors, who were known, among whom was the present plaintiff, were invited to become parties to the indenture, previously to its execution by Smith; but it was not after that offered to any one for his signature.
The real estates assigned were under mortgage, so that nothing had been realized from them, and from the whole proceeds of the property assigned, there was no prospect of any of the creditors receiving more than eight shillings in the pound, of their respective demands.
Dexter, for the plaintiff
contended that by the disclosure of these facts, the supposed trustees had not discharged themselves; and he insisted on several objections to the validity of the assignment exhibited in the case. As that it was uncertain as to the parties to it, being made between Smith of one part, and certain creditors named, and other subscribers thereto, or as the fact was, who might be coiné subscribers thereto. The whole property was conveyed to such as should actually execute the indenture, although it might be never so much beyond the amount of their just claims on Smith. — It was uncertain also as to the description of the subject * matter of the conveyance, as, for instance, cargoes of vessels [ * 46 ] abroad, without specifying of what they consisted, or even estimating their value, there being neither invoices nor bills of lading ; and in the case of the Levant and Columbia, whatever their after earnings by freight might amount to. — All the real estate lying in such and such places is conveyed, without description, or even a reference to the registry of the deeds, by which they had been conveyed to him. — Unliquidated balances of accounts are also transferred.
' The consideration was insufficient. The creditors were all enti tied to a distribution, pro rata, although it appears that some of them had attached, and might still go on to judgment and execution, while others had claims on Gorham for the same demands, and thus both these classes of creditors might receive twice the amount of their actual demands.
Another objection made, but not pressed, was that partners in trade had subscribed by their firm, and used but one seal; and that the indenture was in some instances executed by agents, whose authority to make a deed in the name of their principals did not appear.
The certificates of registry attached to the several vessels do no appear to have been changed, which was necessary to complete the transfer. New registers were never taken out until after the agents of the creditors had resold them for their account.
From these and other topics, Lexter argued that this indenture was fraudulent as against creditors, and he observed, that in settling the question, whether a deed was to be considered as fraudulent oi not, the Court would not look so much at the actual or supposed motives and intentions of the parties to such deed, as they would tc the deed itself, which might hereafter be brought as a precedent, in cases where the morality of the transaction would be more liable to suspicion than in the case now before them.
* Otis and Jackson, é contra.
This transaction being [ * 47 ] bona fide, and for the mutual benefit of all the parties to it, the Court will incline to support it, if no principles of law are opposed to it, and the objections raised against it can be satisfactorily answered.
The creditors, who were parties to the indenture, actually executed it previously to Smith. Their names were then all contained in the instrument before he executed it; and if any had signed it af terwards, it would have been a void act as to them. It is known now to the Court, and was then known to the parties, that the dividend of all the property conveyed would fall greatly short of the just demands of- the creditors.
For the description of the subject matters of the conveyance, it is in many of the cases as precise and definite as the circumstances admitted of, and where it is less so, as in the cases of real estate, reference is made to the deeds under which Smith held, and by a recurrence to them, a more satisfactory description can be obtained.
The release to Smith was a sufficient consideration for the conveyance ; and as to the objection that some of the creditors had made attachments, and others were still to hold Gorham as security, it is a sufficient answer that the parties had a right to make such a contract if they pleased, although, under it, some might obtain forty shillings in the pound, provided the bargain was íonáfide. But the fact before referred to, that, in truth, by all these means no creditor would finally obtain twenty shillings in the pound, effectually removes the objection.
It is not customary for merchants, who purchase vessels, tc take out new certificates of registry in their own names, until they are about sending their vessel to sea; nor is it either necessary or useful to do it sooner. But, at any rate, the validity of the transfer is not affected by the delay, the only effect of an informal sale being the depriving the ship of her national character as a vessel of the United States.
[ * 48 ] *In the English law, transactions of this kind are dis-L -* countenanced as contrary to the policy of the bankrupt system. But in this country, where we have no such system, nothing can be more honorable in an insolvent debtor, and his creditors, than an attempt on the part of the former to distribute his whole property, pro rata, among his creditors, or, on the part of the latter, to accept such distribution in discharge of their demands. Unless such a compromise, fairly and honestly made, is countenanced and supported, the effect will be, that the most unfeeling creditor gets his whole demand satisfied, while the more worthy and lenient ones are left without a farthing.

Opinion:
The opinion of the Court, except the Chief Justice, who did nol sit in the cause, was afterwards delivered as follows, by
Sedgwick, J.
The question is, whether the persons summoned are, upon their answers to the interrogatories put to them, to be ad judged trustees; whether, upon these answers, it appears that they have in their hands any goods, effects, or credits, which by law ought to be appropriated to the payment of the debts of William Smith, the defendant. This depends upon the nature of the transaction be tween Smith and his creditors, as it appears in itself, and as it is opened and explained by the answers.
Smith being insolvent and unable to pay all his creditors, distressed by suits, and his property embarrassed by attachments, desirous of extricating himself on the one hand, and willing, on the other, to satisfy his creditors, as far as he could, a project was formed for this purpose. By it an indenture was to be made of three parts, of himself, of such creditors as would accede to his proposals, and of Stephen Gorham. On the part of Smith (provided, before he signed it, there was a general assent on the part of his creditors), an assignment of what we must.understand to be the bulk of his property, and probably all except his household furniture, to * be equally pro rata paid to and among such creditors as [ * 49 ] should become party to the contract. The creditors, who had other security beside the assignment, were to retain it. The creditors were to release Smith; and Gorham, who, in one way or another, was responsible for the negotiable paper of Smith, was still to remain so. The indenture being formed conformably to this general intention, it was assented to, and executed by Gorham. All the creditors who were known, except an instance of a foreign debt, which will be particularly noticed hereafter, were applied to, and among the rest the present plaintiff. They generally assented, and executed the indenture. The plaintiff refused. After the execution by the creditors, the instrument was returned to Smith, and he executed it. Now, here was a great deliberation, apparent fairness, and n j corrupt intention among any of the parties. There was no resulting trust for the benefit of Smith, or any one else; for it is sworn that it was understood at the time, that the assignment of Smith was intended to operate as an absolute conveyance of the property, to the use of such creditors as were parties to the contract. It appears, too, that the amount of the debts due from Smith greatly exceeds the value of the property conveyed for their satisfaction. For, however obscure or uncertain the evidence might be as to this latter fact, before answers were made to the last interrogatories, which were put after the argument, by those answers it is rendered sufficiently certain. And it has been determined that such answers, upon the question of trustee or not, must be taken to be true.
As independent of the policy and provisions of a bankrupt law (and none such now exists here), it is certain that it is lawful for a debtor to pay one or more creditors, to the exclusion of others, and lawful for the latter so to receive, provided it be done fairly and honestly ; and as it is conceded that in this case the intention was in conscience fair and honorable, it is important * to [ * 50 ] examine the several objections to the transaction, by which it was intended that it should be concluded that it is so opposed to the principles or policy of the law, that the contract ought not to be carried into effect.
There was certainly nothing wrong, when Smith found himself in .nsolvent circumstances, to disclose his situation to his creditors, and to propose to pay them, in equal proportion, as far as his ability extended ; and to obtain therefor a discharge from his debts. On the part of his creditors there was nothing iniquitous in acceding to such a proposal. And if there were any of Smith's creditors, who disliked the terms which were offered, and preferred the chance of obtaining satisfaction by other means, it was competent and right for them to refuse. But there seems no good reason why such refusal should prevent Smith and the other creditors from executing an accommodation, which appears so humane and just. Still, however, if any of the reasons, offered on the part of the plaintiff, are available to the purpose, for which they were intended, — to show that the contract is void, as it respects the creditors who are not parties to it, — the plaintiff must prevail, and the persons summoned as trustees, adjudged to be so.
The several facts and arguments, relied upon and urged for this purpose, have been deliberately considered by the Court.
The first objection, as understood by us, is, that at the time the indenture was written, it was uncertain what number of the creditors would close with the proposal, and of course to what proportion of his debts the whole of his property conveyed would be appropriated ; and that, to fix the nature and character of the transaction, we must carry our minds to the point of time when the proposition was made, by being reduced to writing.
As to this objection, we must recollect that the proposition was intended to be made to all the creditors; that Smith with-[*51] held the execution of it until he should *know its success ; and that, at the time he did execute, the great bulk of his debts were made the subject of it. And it may be added, that every deed receives its validity from the execution; and whether it is, or is not a lawful contract, must depend upon the circumstances then existing, Now I see nothing, so far as this objection extends, which, at the time the deed was executed, can be a just reason for saying that the contract shall not be carried into effect; but, on the contrary, the motives appear perfectly just and reasonable.
The next objection is, that the description of the property conveyed is general, and not so specific that the amount can be known; that the freight earned by the Levant and the Columbia; the two cargoes assigned without invoices, bills of lading or valuations; debts described as due generally from four insurance offices; and the real estate lying generally in Boston, Charlestown, and the district of Maine, are all general. And it is said, that if such a general assignment of property shall be held to be effectual in the case of an insolvent debtor, it will be easy so to cover it as to protect it against his creditors.
To this I answer, that in all the instances pointed out, as the foundation of the objection, the several subjects are so referred to, that, on investigation, every particular might be easily known; and that therefore the maxim, Id cerium, est quad cerium reddi potest, is a sufficient answer to the objection . And besides, by the answers, we have every particular displayed to us that is necessary to be known.
It is also objected, that by the indenture the creditors, who are a party, do not release their debts; but that Gorham is still holden responsible in all instances in which he has lent his name to Smith upon his negotiable paper.
I can hardly perceive any force in this objection, as coming from the plaintiff, because it seems to me to point to the hardness of the contract as it respects Smith. *But I do not [ *52 ] perceive that, in any view, it was not a reasonable provision ; for if the creditors were willing, upon the considerations which influencéd them, to release Smith, I cannot perceive why they might not consistently retain any collateral security they had from Gorham; and more especially, as they will not from both be able to receive the full amount of their debts.
It was further said, that the provision which was made secured to certain creditors the benefit of their attachments, and also admitted them to participate, in an equal proportion, in the proceeds of Smith's property, with the other creditors; and that this is a circumstance which ought to be considered as decisive against this contract; because thereby the attaching creditors might receive more than the amount of their debts.
What would be our opinion, provided, upon the whole case, it ap peared that the attaching creditors would receive a sum over and above the amount of their debts, it is unnecessary now to determine. That this question might be fully within the view and contemplation of the Court, was a motion for directing the additional interrogatories. From the answers to those interrogatories, it appears, not only in fact, that no creditor will by any means receive lhe full amount of his debt, but that, at the time of entering into the contract, there was no expectation that any would. There is not, then, any surplus, beyond satisfying bona Jide debts, which may not be retained with good conscience.
Again, it was said, that the indenture was executed by agents and attorneys, who could not bind their principals, unless they were authorized by deed to do it; and that it does not appear that they were so authorized.
To this it may be answered, that it is either the deed of the attorney, or of the principal. If the attorney was not duly authorized, it must operate as his deed , and if not directly a release to Smith, it must be construed as a covenant for his security; and that if he was willing to rely upon it, and was satisfied with it, [ * 53 ] it is not a circumstance, * for which the plaintiff has a right to object. But we are all of opinion that, as this case is before us, we ought to presume that, when one undertook to act as attorney, and did so act, he was duly authorized .
Another objection is, that the registers of the vessels assigned were not exchanged, at any time after the assignment, and before the sale by the agents of the creditors.
This objection cannot avail, because we are all satisfied that an exchange of a register is not necessary, in the sale of a ship, to transfer the property in it; and that all the effect of not obtaining a new register is, that the ship loses the privileges of an American bottom.
There is but one creditor, the foreign house, that was not invited to join in the contract; and from the answers in this regard, it appears that that house has in its hands more than sufficient to satisfy the debt due to it; and by the answers, the persons summoned must appear to be trustees within the statute, or they must be discharged.
Upon the whole, we do not think that the contract between Smith and his (reditors can be construed to have been made with an intent to defeat or delay his creditors; but to us it appears to have beer entered into fairly and bond Jide; and that therefore the supposed trustees must be discharged.
Livingston vs. Delancey, 11 Johns. 365; 13 Johns. 537; IS Johns. 97. — Crosby vs. Allen, 5 Greenl. 453. — Whitaker vs. Sumner, 9 Pick. 308.
No action can be maintained upon the deed, against one who signs, as attorney in the name of the principal. Ballou vs. Talbot, 16 Mass. 461. — Loi.g vs. Colburn, 11 Mass. 97.
Herring vs. Polly, 8 Mass. 113.