Case Name: Aaron McConnell, respondent, agt. Franklin D. Sherwood, sheriff, &c., appellant
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1880-01
Citations: 58 How. Pr. 453
Docket Number: 
Parties: Aaron McConnell, respondent, agt. Franklin D. Sherwood, sheriff, &c., appellant.
Judges: 
Reporter: Howard's Practice Reports
Volume: 58
Pages: 453–464

Head Matter:
SUPREME COURT.
Aaron McConnell, respondent, agt. Franklin D. Sherwood, sheriff, &c., appellant.
Assignment—what provisions in, render it fraudulent and void—Estoppel — not necessary to am, equitable estoppel that the pan’ty should design to mislead. '
If, as a matter of fact, it appears that the intent of the assignor in making the assignment was to enable him to make a compromise with his creditors, the assignment is fraudulent and void, though the terms of the . instrument do not empower the assignee to make compromises, and where the authority to do the act is conferred in express terms by the assignment itself it must be equally void.
Where the assignee in an assignment is given the right to use this power, if, in his opinion, it would promote the interests of the assignor, his creditors and the assignee are not permitted to show that he did not intend to avail himself of this power, or use this discretion.
The doctrine applied to assignments, like other instruments and conveyances, is that if two constructions are possible, one of which renders the instrument void and the other renders it valid, that construction is to be adopted which makes it consistent with law.
Where the assignment to plaintiff was upon the following trusts and conditions : ‘ ‘ First. To pay the costs and charges of these presents, and the expenses of executing the trust declared and set forth herein. To distribute and pay the remainder of said proceeds to all the creditors of the said party of the first part, for all debts and liabilities which the said party of the first part may be owing or indebted to any person, whatever; provided, however, that if there is not sufficient funds for the payment of all the debts of the said party of the first part, then the said debts are to be paid pro rata, or in proportion to their respective demands.” " Third. That the party of the second part may have the right to compromise with the creditors of the party of the first part, for all his debts and liabilities which the party of the first part may he owing or indebted to any person, or if, in the opinion of the second party, it would be advantageous to the party of the first part, and to the creditors of the party of the first part.” Then follows the usual residuum clause in favor of the assignor. The assignment, also, contains a provision that the assignee, in collecting the notes and accounts, may “ take a part for the whole when he shall deem it expedient
Meld, that this assignment should be construed as relating to the present tense and to the debts and liabilities of the assignor which existed or had been incurred at or before the making of the assignment.
Meld, also, that assignment, in this instance, was void upon its face as calculated to hinder, delay and defraud the creditors of the assignor. Held, further, that the assignment was void by reason of the provision contained in it that the assignee, in collecting the notes and accounts, may " take a pan't for the whole when he shall deem it expedient.”
Where the assignee, as he claims, with a view of aiding the sale of the balance of the stock, had purchased a small quantity of goods which he had added to the stock and which, at the time of the levy by the sheriff, was mingled with the residue of the stock and was being sold indiscriminately as part of the assigned stock; the sheriff was ignorant of the fact that any portion of the stock belonged to the plaintiff individually ; at the time of the levy he made no claim to the property except as assignee; he forbid the sale on the executions expressly in his character as the assignee, not claiming or pretending to have any other title to any of the property sold, nor but that the whole of the goods sold were portions of the goods'assigned to him under the assignment: Held, that the plaintiff is estopped from claiming, as against the sheriff, that he had any title to. the goods which he claims to have purchased with his own money and to belong to him individually, and not as assignee.
It is not necessary to an equitable estoppel that the party should design to mislead. If his act was calculated to mislead, and actually has mislead another who acted upon it in good faith, and in the exercise of reasonable care and diligence under all the circumstances, that is enough.
Fourth Department, General Term, January, 1880.
Oisrthe28th day of November, 1878,Ward B. YanHousen, who was a merchant doing business at Howard, Steuben county, New York, made a general assignment of his property to Aaron McConnell, the plaintiff in this action.
The assignment, after providing for payment of expenses of the trust and a pro rata distribution of the property to the creditors, has this provision:
“ Third. That the party of the second part may have the right to compromise with the creditors of the party of the first, for all his debts and liabilities which the party of the first part may be owing or indebted to any person, if in the opinion of the second party it would be advantageous to the party of the first part and to the creditors of the party of the first part.” Then follows the usual residuum clause in favor of the assignor.
The assignment also contains a provision that the assignee, in collecting the notes and accounts, may “ take apart of the whole when he shall deem it expedients '
In December and January following, creditors of Van Housen, having obtained judgments against him, issued executions to the defendant as sheriff, under which he levied upon a portion of the assigned property, and in February, 1819, sold the same, after which the plaintiff brought this action for conversion of the property.
The defendant claims that the assignment is void on its face by reason of the provisions before mentioned, and void, in fact, because made to hinder, delay and defraud creditors.
The defendant proved various circumstances tending to show fraud in fact, viz.: Dating back the assignment and acknowledgment to November twenty-seventh, the day on which the first suit was brought; the assignor left in possession and allowed to sell until December second, accounting for only two dollars aggregate sales; employment of the assignor to sell the assigned property; the solvency of Van Housen when the assignment was made and undervaluation of the assets, and the property abstracted by the assignor.
The jury found a verdict for the plaintiff and a motion for new trial was made upon the judge’s minutes and was denied, and from that order and the judgment, this appeal is brought.
J- F. Parkhwrst, for appellant.
I. The assignment is void on its face by reason of the provision which gives the assignee the right to compromise with creditors. Special provision in an assignment always excites suspicion (Burrill on Assignments, page 229). Every provision in an assignment ought to be narrowly scanned and closely watched (Whalen agt. Scott, 10 Watts, 237, 244). An authority expressly given to an assignee to sell upon credit, avoids the assignment (Nicholson agt. Leavitt, 6 N. Y., 520; Barney agt. Griffen, 2 N. Y., 365; Whitney agt. Brows, 11 Barb., 198; Van Rossum agt. Walker, 11 Barb., 237; Litchfield agt. White, 3 Sandf. S. C. R., 545 ; Townsend agt. Stearns, 32 N. Y., 215, 216; Ogden agt. Peters, 21 N. Y., 23). Giving the right to the assignee to compromise with the creditors when he shall, deem it advantageous to the assignor and the creditors, renders this assignment void on its face. First. Because it gives the assignee the right to give preferences ( Wakeman agt. Grover, 4 Paige, 441; Grover agt. Wakemam, 11 Wend., 203; Burrill on Assignments [3d ed.], p. 310; Bump on Fraudulent Conveyances [2d ed.],p. 419; Bishop on Insolvent Debtors, 193; Hudson agt. Maze, Ill., 578 ; Smith agt. Leavitts, 10 Ala., 92; Works agt. Ellis, 50 Barb., 512; Keevil agt. Donaldson, 20 Kan., 165 ; Bennett agt. Ellison, 23 Minn., 242; Whitney agt. Kelley, 61 Me., 377; Smith agt. Hurst, 10 Hare, 30; Boardman agt. Halliday, 10 Paige, 227; Barnum agt. Hempstead, 1 Paige, 568). If, as a matter of fact, the assignment was made for the purpose of effecting a compromise with creditors, it is fraudulent and void, even though the terms of the instrument do not authorize a compromise (Works agt. Ellis, 50 Barb., 512; Bennett agt. Ellison, 23 Minn., 242). When, however, the authority to do the illegal act appears upon the face of the instrument it is conduswe evidence of the fraudulent intent, and the court must ■ hold the instrument void as a matter of law (Sheldon agt. Dodge, 4 Denio, 218 ; Nichols agt. McEwen, 17 N. Y, 22; Goodrich agt. Downs, 6 Hill, 438 ; Southard agt. Benner et al., 72 N. Y., 431; Cavanaugh agt. Beckwith, 44 Barb., 192; Benedict agt. Huntington, 32 N. Y., 223 ; Nicholson agt. Leavitt, 2 Seld., 520 ; Barney agt. Griffen, 2 Com., 365; Edgell agt. Hart, 9 N. Y, 219; Mittnacht agt. Kelley, 3 Keyes, 407); and the assignee is not permitted to show that he did not intend to avail himself of the authority' given him in the instrument (Barney agt. Griffen, 2 Com., 365; Boardman agt. Holliday, 10 Paige, 223 ; Goodrich agt. Downs, 6 Hill, 438). Second. It is contrary to the policy of the assignment law, that the assignee should be made the agent of the assignor for buying releases from the creditors for the assignor (2 Edmond’s Statutes, p. 140, sec. 1; Wilson agt. Robertson, 21 N. Y, 587; Durham, agt. Whitehead, id., 133; Whitney agt. Kelley, 67 Me., 379; Wyles agt. Beals, 1 Gray, 233; id., 239). A trustee cannot deal in his own behalf in the trust funds or property (Holdridge agt. Gillespie, 2 John. Ch., 30; Ackerman agt. Emmott, 4 Barb., 626 ; Chapin agt. Weed, Clarke, 464); nor even as agent for a third person (Hawley agt. Cramer, 4 Cow., 717; Gould agt. Gould, 36 Barb., 270); and purchases in such case accrue for the benefit of the cestui gue trust (Culburn agt. Morton, 1 Abb. Ct. App. Dec., 378). The court will not enforce it for the benefit of the trustee, even with the consent of the cestui gue trust (Monroe agt. Allaire, 3 Cal., 320). A trustee buying a debt against the estate can only be allowed the amount actually paid (Quackenbush agt. Leonard, 9 Paige, 334). He cannot be permitted to use information gained as trustee for buying in property for himself (3 Atk., 37; 3 P. Wms., 249; 1 Salk., 155); nor will he be permitted to act for his own benefit in any contract upon the subject of the trust (Green agt. Winter, 1 John. Ch., 26 ; Vanhorne agt. Ford, 5 John. Ch., 388). An assignee will not be allowed to buy up the claims for himself (In re Marquand, 57 How., 477). Third. The power to compromise vitiates the assignment because it authorizes the assignee to delay the distribution of the estate, in defiance of the court and for the benefit of the assignor (McCleery agt. Allen, 7 Neb., 21; Nicholson agt. Leavitt, 2 Seld., 520; Works agt. Ellis, 50 Barb., 512; Boardman agt. Halliday, 10 Paige, 223; Goodrich agt. Downs, 6 Hill, 438; Barney agt. Griffin, 2 Com., 365; Benedict agt. Huntington, 32 N. Y, 223; Brigham agt. Tillinghast, 3 Kern., 215; Dunham agt. Waterman, 17 N. Y., 19). Fourth. These provisions illegally affect and control the ordinary discretion which the Assignee must use as incident to the trust in disposing of the assets (Dunham, agt. Waterman, 17 N. Y., 19). Fifth. These provisions vitiate the assignment, because they authorize the assignee to pay the expense of making or attempting the compromise out of the estate (Sewall agt. Russell, 2 Paige, 176; Mead agt. Philips, 1 Sandf. Ch., 83; Planck agt. Schermerhorn, 3 Barb. Ch., 614; Nichols agt. McEwen, 17 N. Y, 22; In re Marquand, 57 How., 477; Mackie agt. Cairns, 5 Cow., 579).
II. The assignment is also void because of the provision authorizing the assignee in collecting the notes and accounts to take “ a part for the whole wjien he shall deem it expedient” (Litchfield agt. White, 7 N. Y., 438 ; Burrill on Assignments, p. 14; Hutchinson agt. Lord, 1 Wis., 286; Bump on Fraudulent Conveyances, p. 414; Olmstead agt. Herrick, 1 E. D. Smith, 310; Metcalf agt. Van Brunt, 37 Barb., 621; Woodburn agt. Mosher, 9 Barb., 255; Dow agt. Platner, 16 N. Y., 562).
III. If the court shall hold the assignment void the only question remaining will be whether the plaintiff may still recover for the sixty dollars worth of property which he bought and mixed with the assigned goods. If one having charge of the property of others so confounds it with his own that it cannot be distinguished, he must bear the inconvenience and distinguish his own property or loose it (Hart agt. Ten Eyck, 2 Johns. Ch., 108; Lupton agt. White, 15 Vesey, 432). The plaintiff is estopped by his own conduct from now claiming it individually (Dezell agt. Odell, 3 Hill, 215;. Young agt. Bushnell, 8 Bosw., 1; Plumb agt. The Cattaraugus County Mutual Ins. Co., 18 N. Y., 394; Welland Canal Co. agt. Hathaway, 8 Wend., 483; Smith agt. Hill, 22 Barb., 656).
Bumsey <& Miller, for respondent.

Opinion:
Talcott, P. J.
This is an action brought against the sheriff of Steuben county for the seizing and conversion of certain personal property, constituting a stock of goods with which one Ward B. Van Housen had been carrying on business, a merchant at Howard in said county.
On the twenty-seventh day of November, the said Van Housen, being pressed by his creditors, made and executed an assignment to the plaintiff, of all his goods and effects for the benefit of all his creditors fro rata, and the plaintiff accepted the said assignment and gave the necessary security under the statute, and assumed to go on and sell and dispose of the said goods and merchandise by virtue of the said assignment, and while he was so engaged the defendant, as sheriff of the county and by virtue of several executions to him issued and delivered, levied upon so much of the said stock as remained unsold, and thereafter proceeded to sell so much thereof as was necessary to realize the amount of the said executions.
The assignment to the plaintiff was upon the following trusts and conditions:
" First. To pay the costs and charges of these presents and the expenses of executing the trust declared and set forth herein. To distribute and pay the remainder of said proceeds to all the creditors of the said party of the first part, for all debts and liabilities which the said party of the first part may be owing or indebted to any person whatever; provided, however, that if there is not sufficient funds for. the payment of all the debts of the said party of the first part, then the said debts are to be paid fro rata, or in proportion to their respective demands.
" Third.-That the party of the second part may have the right to compromise with the creditors of the party of the first part for all his debts and liabilities which the party of the first part may be owing or indebted to any person, or if, in the opinion of the second party, it would be advantageous to the party of the first part and to the creditors of the party of the first part.
"The rest, residue and remainder, if any there be after paying said costs, charges, expenses and debts as aforesaid, the said party of the second part is to pay over to the said party of the first part, his executors, administrators or assigns."
• Sundry objections are made to the validity of this assignment. It is urged that the assignment is void because it does not confine the distribution of the amount realized from the assigned property to the payment of such debts and claims as existed against the assignor at the time of the assignment, but authorizes the payment of debts which might be afterwards contracted by the assignor. If this be the true construction! of the assignment it would undoubtedly be void for that, reason; but it is doubtful whether this can be the true meaning and construction of the instrument.
The doctrine applied to these assignments, like other instruments and conveyances, is that if two constructions are possible, one of which renders the instrument void and the other renders it valid, that construction is to be adopted which makes it consistent with law, wires magis valeut guamgpereot, and we think it reasonable to construe this assignment as relating to the present tense and to the debts and liabilities of the assignor which existed or had been incurred at or before the making of the assignment (Brainard agt. Dunning, 30 N. Y., 211; Townsend agt. Stearns, 32 N. Y., 209-214).
The clause, however, by which the assignee is authorized to compound with the creditors of the assignor for any sums for which he may be indebted to any person seems to fall within the condemnation of the adjudged cases, especially the leading case of Wakeman agt. Grover (4 Paige, 23) and Grover agt. Wakeman (11 Wend., 187); see, also, Boardman agt. Holliday (10 Paige, 227) and Dunham agt. Waterman (17 N. Y., 9). .
If, as a matter of fact, it appears that the intent of the assignor in making the assignment was to enable him to make a compromise with his creditors, the assignment is fraudulent and void, though the terms of the instrument do not expressly empower the assignee to make compromises, and where the authority to do the act is conferred in express terms by the assignment itself, it must be equally void ( Works agt. Ellis, 50 Barb., 512; Bennett agt. Ellison, 23 Min., 242).
It has a tendency to coerce the creditors to accept less than the full amount of their debts and to release the debtor. The assignee in this assignment is given the right to use this power if, in his opinion, it would promote the interests of the assignor and his creditors, and the assignee is not permitted to show that he did not intend to avail himself of this power or use this discretion (Barney agt. Griffin, 2 Comst., 365; Goodrich agt. Downs, 6 Hill, 438).
True, a debtor, while he remains in the possession and control of his property, may compromise with any or all of his creditors, but when he makes an assignment of all his property he has put his property out of his hands and possession, so as to be screened from the process of the law by which collection can be enforced, and being beyond the reach of legal process he may the more easily operate upon the fears of his creditors, and induce compromises by them which they might not submit to if his property were in his own possession and open to the action of legal process. " The only ground upon which the validity of voluntary assignments can rest is, that they contemplate nothing but a distribution of the debtor's property to his creditors in some way." As was said by senator Tracy in,Grover agt. Wakeman (supra), "the only safe rule is to regard every assignment which operates to delay creditors for any purpose not distinctly calculated to promote their interests, as contrary to the statute of frauds." We are, therefore, of the opinion that the assignment in this instance was void upon its face, as calculated to hinder, delay and defraud the creditors of the assignor.
We think, also, that the assignment in this instance, was probably void by reason of a provision contained in it and not before quoted, viz.: That part of the assignment which, in authorizing the assignee to collect the debts and accounts due to the assignor, empowers him " when the party of the second part shall deem it expedient so to do," to take a part of the whole debt, in other words, conferring upon the assignee the power to compound for the debts due to the assignor, if he (the assignee) shall deem it expedient. Though an assignee may exercise such a discretion in a proper case, still, on the settlement of his accounts, his action in that respect is open to the examination of the creditors and of the court, and may by them be challenged for negligence, improvidence or interested motives; whereas, by this assignment it seems to have been intended that the " discretion" of the assignee shall solely determine the question whether he will accept a part instead of a whole of the debt due to the assignor, and to substitute such discretion as the final and sole arbiter in the premises in place of the rules of law and the opinion of the courts (Townsend agt. Stearns, 32 N. Y., 215, 216).
It seems that the plaintiff, as he claims, with a view of aiding the sale of the balance of the stock, had purchased a small quantity of sugar, some kerosene and a chest of tea, which he had added to the stock and which at the time of the levy was mingled with the residue of the stock and was being sold by Yan Housen and the plaintiff indiscriminately, as part of the assigned stock. The sheriff was ignorant of the fact that the plaintiff had made those purchases, and of the fact that any portion of the stock belonged to the plaintiff individually. At the time of the levy the plaintiff did not claim any title to any part of the property except the chest of tea which he stated to the sheriff belonged to him individually, saying: " You have got a chest of tea here which belongs to me individually, I suppose you have no objection to my taking it ? " And by the sheriff's consent he took the chest of tea, making no claim to any other property except as assignee. The plaintiff also, before the sale, demanded the property levied on as assignee, saying: " I came to make a demand of you, as assignee, of those goods." And the sheriff having no knowledge or intimation of any claim on the part of the plaintiff that any part of the goods seized was claimed by the plaintiff, except as assignee of Van Housen under the said assignment, went on and sold the stock, including the said sugar and kerosene, as the property of Van Housen.
The sale was duly advertised, the plaintiff attended the sale and was present at the sale most of the time. He forbid the sale on the executions expressly in his character as the assignee of Van Housen, not claiming or pretending to have any other title to any of the property sold, nor but that the whole of the goods sold were portions of the goods assigned to him under the assignment.
Under these circumstances it would be manifestly inequitable and unjust now to allow the plaintiff, as against the sheriff, to set up that he owned, individually, a small portion of the goods levied on by the sheriff and assumed to be a part of those owned by Van Housen. By his silence on the subject the sheriff was misled and induced to believe that all the property levied on and sold, except the chest of tea, was property embraced in Van Housen's assignment. "A man who will be silent when his conscience commands him to speak shall not be permitted to speak when his conscience commands him to be silent."
We think the plaintiff is estopped from claiming, as against the sheriff, that he had any title to the kerosene and sugar, which he claims to have purchased with his own money and to belong to him individually, and not as assignee (Thornton agt. Blanchard, 4 Comst, 303; 3 Hill, 215 ; 15 Wend., 474; 20 id., 268; Dows agt. Morewood, 10 Barb., 183; Smith agt. Hill, 22 Barb., 656; People ex rel. Knapp agt. Reeder, 25 N. Y., 302; Roth agt. Wells, 29 N. Y., 471).
It is not necessary to an equitable estoppel that the party should design to mislead. If his act was calculated to mislead, and actually has mislead, another who acted upon it in good faith, and in the exercise of reasonable care and diligence, under all the circumstances, that is enough (Man. and Traders' Bank agt. Hazard, 30 N. Y., 226; Roth agt. Wells, 29 N. Y., 486).
We think, therefore, that the plaintiff was not entitled to recover for the sugar and kerosene claimed to have been added to the stock after the assignment. And the assignment being, in our judgment, void in law, upon its face, the judgment and order denying a new trial must be reversed.
Judgment and order reversed and new trial ordered, costs to abide the event.