Case Name: James M. Bradford v. Augustus Beyer et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1867-12
Citations: 17 Ohio St. 389
Docket Number: 
Parties: James M. Bradford v. Augustus Beyer et al.
Judges: White, Welch, Brinkerhoee, and Scott, JJ.-, concurred.
Reporter: Ohio State Reports, New Service
Volume: 17
Pages: 358–365

Head Matter:
James M. Bradford v. Augustus Beyer et al.
Where a debtor sold his goods for the purpose of defrauding his creditors, with the knowledge of the vendee, and took his note for the amount remaining unpaid, payable at a future day: Held—
1. That a creditor of such debtor might treat the sale as void, and subject the-goods to the payment of his claim; or he might compel the fraudulent vendee to account for the purchase price of the goods; but he can not have both remedies.
2. That where such creditor garnisheed the fraudulent vendee, but went no further with that proceeding, and also took an assignment of the note from his debtor after it became due, and then attached the goods for which the note was given, and received all the avails thereof not' held by prior attachments, the creditor can hold the vendee to account only as the debtor'of the vendor on the note for the goods.
3. The maker of the note may interpose the same defense against the assignee that he could against the payee, and may prove the-fraudulent consideration of the note, and thus defeat a recovery thereon.
Appeal. Reserved in the district court of Harrison county.
*On the 29th November, 1860, the defendant Beyer made his note at thirty days, and mortgage to Robert Caldwell, for $1,000. Caldwell immediately assigned the note to the plaintiff, Bradford,, to secure him for certain liabilities that he had assumed for Caldwell, and to hold for the security of Baker & Wright, and Joseph Coles, other creditors of Caldwell.
Afterward, on January 4, 1861, Caldwell assigned the remainder of the note to Price & Eowley, on claims against him on which they had issued orders of attachment.
The plaintiff brought suit, February 9, 1861, against Beyer, to subject the mortgaged premises to the payment of the amount due him, and to the other parties for whom he held the note and mortgage in trust.
The defendants Price & Eowley, with others, were made parties. They answered, setting up their claim to recover against Beyer, and prayed that the mortgaged premises might be subjected to the payment of their claim.
Beyer answered that the consideration for the note had failed j that it was given for goods sold to him by Caldwell to defraud his creditors, by whom the goods were seized and entirely lost to him.
The plaintiff recovered the amount due to him, and judgment was rendered for Beyer against Price & Eowley, who appealed to the district court. The case was reserved for decision here, upon the following facts found by that court, viz:
November 29, 1860, Caldwell, a merchant, sold to Beyer his stock of goods for the purpose of defrauding his creditors, and took therefor 320 acres of western land and Beyer’s note, payable in thirty days, for $1,000, on which this suit was brought. Beyer, at the the time of the sale, knew of the fraudulent intention of Caldwell. The land was furnished by Thomas Goodwin, who was also aware of said fraudulent intention.
The goods,were taken by Beyer and Goodwin, who commenced retailing them. Caldwell immediately assigned the note to Bradford, who was also aware of the fraud when he received the note, in security for the claims mentioned in the petition.
^December 5,1860, Price & Eowley, at the suggestion of Beyer, sued out an attachment against Caldwell, and garnisheed Bradford and Beyer. At that time Price & Eowley knew that the sale was fraudulent.
December 9, Beyer sold the goods on hand to Goodwin.
December 17, other creditors of Caldwell attached the goods in the possession of Goodwin.
December 26, Price & Rowley, by a second writ of attachment, levied on the goods.
On the same day, Beyer and Goodwin entered into an agreement, by which Goodwin released Beyer from paying the western land; and Beyer released Goodwin from the payment of all demands, upon the condition that Goodwin should pay him $2,800, if he should recover of the sheriff for the goods so taken in attachment, for which Goodwin agreed to prosecute with vigor to the fullest extent of the law. Goodwin immediately brought suit against the sheriff, but failed to recover, and no part of the $2,800 was paid to Beyer.
January 4,1861, Caldwell assigned the note in suit to Price & Rowley, subject to Bradford’s claim.
The goods were sold under the proceedings in attachment, and the proceeds were distributed to the creditors of Caldwell, of which Price & Rowley received $150. There is still due them $1,200.
The balance of the note, after deducting the amount of Bradford’s . judgment (which was $232.70), remains unpaid, and on September 21, 1865, amounted to $1,040.
J. G. Sanee, for Beyer:
Creditors have a right to the property of their debtor, as a means of satisfying their claims, and if he shall sell with intent to defeat such right, the sale, as to them, is void. They may pursue the property, wrest it from the hands of the vendee, and cause it to be sold for their benefit. If the property can not be come at, or if they are disposed to look directly to the vendee, equity holds him chargeable as trustee for the creditors, and subjects him to account to them for the value of the property. The right to have the property appropriated to the payment of their claims, is the only right *to which they are entitled, and this right is enforced either by seizing and selling the property, or subjecting the vendee to account for its value. If the creditors get the property, they will have gotten all to which they are entitled, and, in such case, there would be nothing for which the vendee should or could account. Having got the property and subjected it to the payment of their claims, the whole subject-matter of controversy between them and the vendee would have become exhausted. Such is the condition of the present case.
I hold that Price & Rowley can take nothing in this proceeding by virtue of the garnishee process against Beyer. They failed to follow it up, but sought to charge Beyer as the debtor of Caldwell •upon the note, and not as vendee.
But suppose the court may, in this case, regard the garnishee process against Beyer, what aid and strength does the claim of Price & Eowley, to recover the residue of the note, derive from such process?
A recovery upon the note could not be had in a suit by Caldwell against Beyer. Goudy v. Gebhart, 1 Ohio St. 262. The reason forbidding such recovery lies in considerations of public policy.
But it is argued that the garnishee process was' issued at the suggestion of Beyer, and that he is therefore estopped from setting up a defense against the note. It will be remembered, that at the time of such suggestion, Beyer was in possession of the goods, which were afterward taken by attachments, Price & Rowley participating in such taking. Good faith on their part, if they relied on the note, demanded that they should not wrest from Boyer the consideration of the note. They could elect either to waive objection to the sale, and seek an appropiation of the note to their claim, or to treat the sale as void and seize the goods; but certainly they could not do both.
But it is claimed in argument that the goods were not taken from Beyer. To this I say, that to take from Goodwin was, in effect, to take from Beyer.
Price & Eowley may not recover by virtue of the assignment of the note made to them by Caldwell. The note was ^assigned to Price & Eowley after maturity, and Beyer may set up the same defense that he might have done had the action been instituted in the name and for the use of Caldwell. S. & C. Stat. 862, sec. 3; Nellis v. Clark, 20 Wend. 24, affirmed in 4 Hill, 424.
J. M. Estep, for Price & Eowley:
The extraordinary assumption that Beyer, the guilty party, may set up his own fraud to defeat an honest creditor, the party sought to be defrauded, I utterly deny.
In what situation does Beyer stand in this case, that he should ask the court to allow him “ to take advantage of his own wrong,” by pleading his own fraud against Price & Eowley, the very parties sought to be defrauded?
A sale to defraud creditors is void, even though a full price be paid. 2 Kent’s Com. 513; Barr v. Hatch, 3 Ohio, 527 ; Brown v. Webb, 3 Ohio St. 259. The fraudulent vendee may thus lose the price or consideration paid and the goods too. But, in this case, he did not lose the goods. They wore attached after he sold them, by other creditors, but were not taken from him.
But it is no defense if he had lost the goods by reason of his fraud. 4 Hill, 432 ; 20 Wend. 37.
Price & Rowley having discovered the fraud, it is claimed they are in no better case because they thus have notice, and stand in Caldwell’s shoes. And thus the fraudulent vendee is to escape in all cases whore his part of the contract is executory. Such is not the law. The cases cited (1 Ohio St. 262, and 20 Wend. 24) do not sustain the claim.
As to the matter of notice, the creditor stands “on higher ground ” than an ordinary assignee with notice. Brown v. Webb, 3 Ohio St. 256; Montefiori v. Montefiori, 1 W. Bla. 363.
In the case of a fraudulent sale to defeat him, a creditor may set it aside, and follow the goods in the hands of the vendee. But this is not his only remedy. He may, if he can get at them, take the property and obligations in his debtor’s hands as the considertion of the sale.
This is not a case where the party is bound to make an ^election. The party intended to be defrauded may waive his right to set the sale aside, and take the proceeds of the sale (1 Parsons on Contr. 275, note c; Ayers v. Hewette, 19 Maine, 281; 1 Story’s Eq., sec. 270 et seq., and cases there cited) ; and in the case of a creditor, he may take both the property and the price paid. Price & Rowley, therefore, hadu. perfect right to treat this note as the property of their creditor, Caldwell, and subject it to the payment of their claim.
Beyer is estopped to make his unconscionable defense. 1 Greenl. Ev., sec. 207 ; 2 Smith’s Lead. Cas. 619, 642, 644; Dewey v. Field, 4 Metc. 384. The principle strongly applies in this case. The note is attached and garnisheed by the direction of Beyer. This was affirming its validity, and that there was no defense to it. It was done, too, while the goods were in his possession, subject to the process of Price & Rowley, and when, by attachment, they could have made their whole claim; for this was long before the other creditors took out their process. Having thus induced them to act ■upon his affirmance of a certain state of facts, he can not now set np a different state of facts to their injury.

Opinion:
Day, C. J.
It is conceded that the only controversy remaining undetermined in the case, is that of Price & Eowley against Beyer. It appears that they have a just claim of over $1,200 against Caldwell, who sold a stock of goods to Beyer for the purpose of defrauding his creditors; and that $1,040 remain due on the note Beyer gave for the goods. This sum they seek to recover of Beyer, to apply on their claim against Caldwell.
It must be borne in mind that Caldwell, and not Beyer, is the debtor of Price & Eowley. It is the property of their debtor only that they have the right to subject to the payment of their debt, and if he has sold it with intent to defeat that right, the sale, as to them, is void. They may pursue the property in the hands of the fraudulent vendee, and cause it to be sold for their benefit, or they may compel the vendee to account for its value. If they obtain either the property or its value from the vendee, their rights as to that property are exhausted. The law will aid them to subject the property *of their debtor, in the hands of a fraudulent vendee, or its equivalent, to the payment of their claim. But they can not obtain from the. vendee both the property and its value in money. That would be a double remedy. It would be imposing upon the vendee a penalty to which neither he nor the debtor is liable'. It would be a wrong against the vendee equal to that sought to be remedied.
It is not necessary to determine, in this case, what would be the rights or liabilities of a fraudulent vendee, when complicated by the claim of one creditor pursuing the property of his debtor, with that of another seeking to recover of him its price or value only. It would be clearly inconsistent for the same creditor, On the one hand, to claim the property on the ground of a fraudulent sale, and at the same time, on the other, admit the validity of the sale, and claim the value, or purchase price, of the goods. But this is, substantially, what Price & Eowley are doing in this case.
It is conceded, or on the facts found by the court it can not well be denied, that the sale Ijy Caldwell to Beyer was fraudulent as to the creditors of Caldwell, and that Goodwin purchased of Beyer with notice of the fraudulent intent, under circumstances that placed the goods in his hands, as to creditors, in substantially the same condition as if they had remained in the hands of Beyer. There is, indeed, no controversy but that the creditors of Caldwell might subject the goods to the payment of their debts, or compel the vendee to account for their value.
It will be seen that Price & Bowley are not, in this case, seeking to subject the goods to the payment of their debt, nor are they asking for an account; but they seek to charge Beyer as the debtor of •Caldwell on the note given for the goods. The fraud as to creditors, therefore, only becomes material by way of answer to Beyer's claim of exemption from liability on the note, grounded on the fraudulent sale. It is claimed, on the part of Price & Bowley, that, as Beyer was, in the first instance, garnisheed by them at his own suggestion, he is estopped from setting up a defense against the note.
When Beyer was thus garnisheed, he was in possession of the *goods for which the note was given. But without standing upon their garnishee proceedings, or, indeed, upon a subsequent assignment of the note, they attached the goods themselves, which were afterward sold, and Price & Bowley received a portion of the avails of the sale. Now, estoppels are mutual, and bind both parties. Good faith, moreover, on the part of Price & Bowley, if they relied on the note, demanded that they should not wrest from Beyer its sole consideration.. If, as creditors of Caldwell, they could elect either to waive objection to the sale and seek appropriation of the note to their claim, or to treat the sale as void and seize the goods, certainly they could not, as before stated, do both. Having taken the goods, it might with more propriety be claimed that they are thereby estopped from resorting to the note given for the goods.
It follows, from the principles already stated, that Price & Bowley, in electing to subject the goods to the payment of their claim, exhausted their rights against Beyer as the fraudulent vendee of their debtor; and that the most they can now claim of Beyer is, to charge him as the debtor of Caldwell on the note. This, indeed, is strictly what they attempt to do; and they base their claim on the garnishee proceeding and the assignment of the note.
It does not appear that the attachment proceedings against Caldwell and Beyer were ever pursued to judgment against either of them; and it would seem that Price & Bowley, instead thereof, relied on the assignment of the note to them. This, however, may not be material. As to the assignment of the note, it is shown by the findings, of the court, that not only did Price & Bowley have full knowledge that the consideration of the note was fraudulent,, but that it was assigned to them after its maturity. So that, whether Price & Rowley base their claim upon the garnishee pro cess, if that be available, or on the assignment of the note, in either case they stand upon such rights only as Caldw.ell has against Beyer; and he may set up any defense against them that he could against Caldwell. S. & C. Stat. 862, sec. 3.
It is shown by the facts found, that both Caldwell and Beyer were equally implicated in the attempt to defraud ^creditors, by the sale of the goods for which the note was given.
It has been settled in this state, that in actions on such instruments, where the parties areparticeps criminis, upon considerations of public policy, the defendant may prove the fraud and defeat a recovery. Goudy v. Gebhart, 1 Ohio St. 262.
It is scarcely necessary to add, that if the note had been negotiated before due to an innocent holder, in that case the rights of-the parties would stand upon a different footing. The obligation to pay the note in such case, even though the goods for which it was given had been taken by the creditors of the fraudulent vendor, would not arise because of the fraud, but by reason of the protection that the law affords to the indorsee. The same obligation would rest upon the maker of a note who was the innocent victim of a fraud,
It is not deemed necessary to notice, further, other matters discussed in argument, since, upon the principles already stated, it follows that Price & Rowley can not recover on the case presented.before us, and that judgment must be rendered in favor of the defendant Beyer.
White, Welch, Brinkerhoee, and Scott, JJ.-, concurred.