Court Opinion

ID: 7127921
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:15:41.962164+00
Date Added: 2024-06-11T16:14:20.890825
License: Public Domain

Petition eor a re-hearing.
June 3.
These are cases of great importance to the country. A full decision on the subject of deeds of assignment,'has not heretofore been made by this Court. It seems to me, that no deed of this kind should be sustained, unless it devote the property conveyed, untrammelled, wholly and directly to the payment of debts. No other purpose should be allowed to creep into the deed. If this deed shall be sent forth bearing the commendation of this Court, with great respect for this high tribunal, I humbly think, that a debtor who had “ intent or purpose to delay, hinder or defraud creditors of their just and lawful actions, suits, debts, accounts” &c. withdraw his property from the reach of execution, and secure a good salary for himself in administering on his own effects, could not wish a better precedent or formula for such business.
Feeling a full conviction that such is the character of this deed, and that such would be the result, I cannot forbear, most respectfully, to ask the Court for a rehearing.
Wilcox, Dickerman & Co. had been in business but a few months, when, after sacrificing at auction in different parts of the country, a large quantity of goods, and filling their pockets with money, (see the depositions of Fabrique and Rice,) they commenced the operation of putting their goods beyond the reach of the law, by selling out to a young clerk in the store without money or any means to pay, and of “unsteady habits.” After having carried on this farce of doing business, in his name, at the same place, for about two rnonths,and find*256jnrr that this scheme was too shallow; when the actions at law of the complainants, had been brought, and six 0ther suits had been instituted by other creditors, and part of the goods attached in those suits, the plan of this deed was invented. This deed recites, that they were indebted to divers persons whose names are set forth in the instrument; but whether they were so indebted does not appear by any proof in the cause, although this matter is drawn in question by the different bills. It is true, there is proof that Wilcox, Dickerman & Co. were indebted to persons in the east, but it is not proved that they were indebted to these persons; nor are the amounts proved. Their word, then, only, is to be taken to show that the persons, whose counsel expressed a willingness that this deed should be made, and who were so far parties to the transaction, were creditors at all; and for the sums set down to them. The proof of indebtedness eastward, applies as well to the appellees, and to the six suits in chancery, as to the persons named in this deed. In truth, as these are the only persons shown to be creditors, it applies to them only.
Then, with the counsel of them who are said to be creditors, this deed is constructed, and the conveyance of all the property of the debtors is made to Vernon and Averill, compelling those creditors who had brought suits, to dismiss them, and come under the terms of the deed, or lose their debts altogether — and more; it provides especially for the defeat (not merely the delay) of the six suits in chancery commenced to enforce just debts. It is respectfully insisted, that this last mentioned provision does destroy the instrument ipso facto. The Court has said it was competent to provide the means to defend the suits on the question of jurisdiction of the Court. Why should the party sued be allowed to take upon himself to say whether the Court had jurisdiction or not? The Judge, the competent authority of the country, had decided that there was jurisdiction, and had awarded the restraining orders. If his judgment, set up against the organ of the law, can excuse him from the imputation of hindering and delaying creditors, then any one may release his property by the like deed from *257any attachment, and with impunity, and with judicial sanction, too, provide that' his property shall bé expended in the discretion of trustees to resist the law, coerce creditors to abandon their “lawful suits,” and come into terms which may place all pn equal grounds as to what shall be distributed to them. The impropriety of this liberty to the party to decide upon the juris’diction of the Court, has been fully exemplified.in these six cases: for, in truth, upon a hearing had, some time since, the Chancellor decided that the Court of Equity had jurisdiction, and granted the prayers of the bills. In the case of Mackie vs. Cairns, 1 Hopk. Rep. 373, the deed of trust provided — “ That if any of the creditors of the said William 'Cairns should have made any attachment of any property or debts theretofore belonging to him, which he had theretofore or by that assignment, assigned for the payment of his debts, such creditor should be excluded from all interest in any dividend, unless he should, previous to making the dividend which he might desire to accept, give up the attachment.” The Court of Chancery of New York, in reference to this clause, said — “This provision is clearly illegal, and vitiates the instrument which contains it. When a debtor thus transfers his property upon the condition that his creditors who are pursuing their legal remedies, shall relinquish those remedies, such a transfer is plainly made to coerce the pursuing creditors; it directly impedes the course of law and justice; and it must be void.” Page 404.
But the terms upon which the parties who had sued at law, as well as those who had sued in chancery, should give up their suits and abide by the division to be máde among them, are not just — if equal, not equitable or lawful. It is contemplated to stop the course of justice and place tfce property and effects of the debtors in the hands.of others to.be disposed of in an indefinite time — “to conduct said business,” says the deed: “the retail business” says the answer: and fpr which “the said Vernon and Averill shall each receive a salary at the rate of five hundred dollars a year so long as they shall act, to be paid out of the effects hereby assigned.” *258(In the transcript it is written three hundred, I have examined the original filed in the office of the Chancery Court, and know that it reads “Jroe” hundred, and I would ask for a certiorari if it could have any effect in the cause.) Not content with having laid out the conduct of the business by the year, or more, or less, the deed provides also, that they are authorized to appoint “an agent to conduct the business” under their supervision, and to pay him such salary as shall in their opinion be an adequate compensation for the services rendered, out of the property hereby assigned them, and to employ such other clerks as shall be necessary to carry on the business, and pay them such salaries as they may deem just and right, out of the said property or its avails.” This.is truly a deed of “hire and salary? not for the benefit of creditors.
The sum to be appropriated to resist the honest creditors in their six suits respectively, before mentioned, is to be under the discretion of the trustees. Can such provisions for carrying on the business, wasting the goods in salaries upon salaries — some of them in discretion— paying out sums at discretion, to defeat law suits justly instituted, be lawful and equitable terms, which creditors should be bound to accept, or lose their just demands? The counterpart of the deed makes it depend expressly upon the condition that the creditors shall “ consent to the provisions thereof.” And the counterpart goes on to say, “ that if a proportion of the creditors holding two thirds of the amount of claims named in said deed of trust, shall prefer a deed made immediately to themselves, then the deed aforesaid, of even date herewith, shall be delivered to the said Wilcox and Lynde, on their executing and delivering another deed to the said creditors (which said Wilcox and Lynde hereby obligate themselves to do, if required by said creditors, in the propertion as aforesaid,) immediately for said property, debts &c. which were conveyed by deed of this date.” Now, here is no provision whatever that those two thirds of the persons they call creditors, should hold the property, thus tobe conveyed to them, in trust; nor is there one word that implies a trust *259for the payment of debts. This is the whole provision. And yet this is one of the terms that must be also submitted to. But, admitting that there is a trust implied, who are to be the trustees? When will they make themselves known? When will they take the deed to themselves? Where will they reside, and to what place will they carry the property ? They are persons living in distant States, it appeal’s, out of the control of the nine sets of creditors who. had sued, and beyond the control of the Courts of this State. Surely such a provision as this is not fair, equitable, just and lawful; such as does not ‘hinder or delay’ creditors in their lawful suits. If this can be done, then creditors who have instituted suits must give, them up, although they may not know what is to become of the debtor’s property, except that they must see it is not all — that a great portion of it is not — to be devoted to the payment of his debts. To say the best of this provision, it is putting the debt- or’s property out of his hands for a time — placing it in a kind of abeyance, not to be touched by his creditors, either by execution or otherwise. Is not this delay? Does it not “ hinder lawful actions, suits &c.” in the language of the statute? 1 Stat. Law, 737. If the deed is impeachable for any of the objections mentioned; if it is void by the statute, in any part, it is void for the whole. See Mackie vs. Cairns, Hopk. Rep. before cited, and the same case in the Court of Errors, 5 Cowen's Rep. 580. This, upon a full view of all the cas.es, is now held to be the true doctrine in New York: such is the ancient doctrine; 3 Co. Rep. 78; Plowd. 54; Wimbish vs. Tailbois, Hob. 14; Norton vs. Simmes; Hyslop vs. Clark, 14 Johns. Rep. 458. The case of Murray vs. Riggs intimated the contrary, because the Court of Chancery could superintend, and see that justice was done in despite o.f the deed; but that case has been overruled by the cases Mackie vs. Cairns, and Grover vs. Wakeman, 11 Wend, Rep. 187.
But the facts which appear in this case outside of the deed, show it to be fraudulent. The grantors had been sacrificing their goods and filling their coffers with money, instead of paying their debts. They had just be*260fore this transaction made a most palpably fraudulent sale of their whole stock to Townsend, their clerk, which was well known to the trustees, and from which device the debtors were driven by a portion of the creditors. Having provided good salaries, they were determined to be availed of them; and accordingly Lynde, one of the grantors, kept the possession of the store as usual, and carried on the business of retailing goods, and collecting debts, as theretofore — the trustees were not seen to do any thing. The answer says, “ the sum received by retail after the conveyance, up to this time, (7th September, 1835,) is $2,890 12. The amount sold at retail not yet received, is $3,210 87. The amount received upon the books and notes transferred by the conveyance, is $1,637 92. Expenses incurred are $3,665 03.”
The residue of the goods, after having carried on the retail business from the 8th of November, 1834, until some time in April, 1835, were sold to Kellogg and Parker: so that this round sum, called so briefly, expenses,’ is made up of the good sums paid to Mr. Lynde, the grantor, and his clerks for their salaries-, rent for that short time, included! When did the debtor make as much money off the same capital? No doubt it was much more profitable to him than any other previous time of the short business of Wilcox, Dickerman & Co. If such things can be done, men have a ready mode, furnished at hand, by the form of this deed, to make money when they stop payment; provided they have any stock left from the auction hammer which they have set upon it themselves. How easy is it, when men find that a fraudulent deed they have made, is not regarded by a portion of their creditors, who have brought suits for their debts, to cancel that deed, and to convince a portion of their other creditors that a conveyance like this will yield them about as much as they, if they sued, could get by law, at any rate, and persuade them to assent to such a deed. When self-interest is operating; when there is talk of the sacrifice of property; when an equal distribution is preferred — it is not difficult to convince friends, who are to have a good salary, that no fraud is intended, although the distribution may be tram*261melled with salaries, useless expenses, and squanderings of the fund, and terms and conditions, such as are seen in this- .transaction.» The way to defraud creditors is eásily^opened, and-nothing-but a close standing by the statute, the words of which I have quoted in the first paragraph of this petition, will keep it shut. The form of this deed will suit the most corrupt agreement — will stay all lawsuits against a debtor, keep him in possession of his property, pay his friends for being his trustees, and keep his pockets filled with the proceeds of his effects. -The denial of fraud in the. answer, amounts to nothing, if circumstances appear which show the deed should not be sanctioned by the law. Res ipsa loquitur. When did either of your-Honors, in your experience at the bar or on the bench, ever know any party to a deed, acknowledge it to have been made in fraud? The law does not depend on the moral perceptions of the parties. Fraud in such cases is a question of law upon the facts, or it is a mixed question of law and fact. See 7 Cowen’s Rep. 301, Jackson vs. Mather. There must be some certain standard and test on the subject of these deeds. The denial in the answer was disregarded in the case of Grover vs. Wakeman, 11 Wend. Rep. 225. That a sacrifice of the property would have been made, had the goods been sold under execution, and that a greater amount of debt would be paid by the disposal of the property in this way, will not justify the deed. If this be so, why did this Honorable Court, in the cases of Ward &c. vs. Trotter &c. 3 Mon. 1, and Bucklin vs. Thompson, 1 J. J. Marsh. 223, say, that, if it appeared upon the deed, that besides the intention to secure the payment of debts, the intention to prevent the creditors from sacrificing the property at their discretion, “by having it taken and sold under execution, in satisfaction of their debts, which it was lawful for them to do,” also appeared, this vitiated the deed. In the case of Ward Sfc. vs. Trotter fyc. the answers denied the fraud, and there were no depositions on that subject. In one clause the deed said, the transfer was made “ to prevent a sacrifice of his properly, which he deems ample for the payment of his debts;” and after having provided for the *262payment of the debts, it remarked, “ which (the deed) is expressly made and designed to secure the payment of his debts with said property, and avoid its sacrifice at the disci’etion of his creditors.” And this is every intimation in the case from which the intention to contravene the statute could be, or was pretended to be, inferred; yet, for this, the deed was rejected. In the case of Bucklin vs. Thompson, the report says — “ These depositions also state that the mortgage to Carneal was made bona fide, and was designed to secure the property from being sacrificed by creditors, and by giving James Johnson (the grantor) the use of it, exempt from forced sales by execution, to enable him to appropriate it and its profits most advantageously to the payment of debts; and that these mortgages had enabled him to pay at least fifty thousand dollars more than he could have paid without the protection and facilities afforded by them;” yet this good object, of paying fifty thousand dollars more of debt, did not justify the deed in the absence of any proof of direct fraud. If the facts, that a great sacrifice has been prevented, and that a much larger amount of debt has consequently been paid, or may be paid, shall exempt a deed from the imputation of hindering and delaying “ creditors of their just and lawful actions, suits, debts” &c. then, let the intention to do this which is right, appear on the deed, by all means. But if the law does not deem these things an excuse, what difference can it make whether the intention appears on the face of the deed, or otherwise in the cause?
Can any one doubt but that, in this case, the intention among other things, was to hinder the nine sets of creditors who had brought their suits? They relied on the law, to which they had appealed, instead of this deed, not providing all the property directly for the payment of debts. The object was to destroy their remedy, while benefit was made to the grantors and their friends.
It is respectfully insisted that the bills should not be dismissed, at any rate. The persons who are barely called creditors, but as to whose debts, it is contended there is no proof, do not stand on equal ground, as to the establishment of their debts, with those who have judg*263meats aad executions. Their deeds of acceptance. oí the trust are executed without the competent proof of any authority on the part of the persons calling themselves agents. The bills are for general relief. There is an amount of effects still behind, according to the answer of the trustees. They have, covered over by the general expression “expenses,” $3,665 05. What are they; lawful or not? Why might not an account be ordered of these matters of expense and outstanding debts, before the master, and relief granted, if relief should be proper upon the state of fact that may appear.
[By Judge Ewing.]
just, appear in a If the intent of a deed is to hinder and delay creditors, it is against the statute and void, tho’ made upon a good consideration, or fox the equitable pur pose of an equal distribution of an insolvent grant- or’s effects among his creditors. But to defeat the deed the fraudulent intent must he proved: it is not enough that it may be sus péeted. And if a good consideration, and an object apparently . . conveyance, a Chancellor should not imply a bad motive, upon slight grounds.
Where it appears on the face of a deed of trust, that the object of it is to prevent a sacrifice of a debtor’s property, that shows an intention to obstruct creditors in subjecting the property to their debts, and the deed is, ipso facto, invalid. So, also, if the same facts are established by proof aliunde.
Where the apparent purpose of a deed of trust was to secure a just distribution of the grantors’ effects among their creditors; and the trustees, being authorized to employ agents to assist them, retained one of the grantors for that purpose, the fair inference is — not that the deed was made for the purpose of securing to him a proiiatble employment — but Iona fide for the avowed object — especially when the deed was made at the instance of several of the creditors.
But I rely on the great principles involved, and ask for full relief.

Henry Pirtle.

Response to the Petition.
June 15.
The views presented in the petition, though plausible, have not changed the opinion of the Court; nor can we believe that a re-argument will have that effect.
We readily concede, that if the intention in the execution of a deed, be to hinder ¿nd delay creditors, that such intention entering into, and producing its execution, being against the statute and bad, will vitiate the whole deed, though it be made upon a good consideration, or for the just and equitable purpose of securing an equal distribution of the effects among all the creditors. But such bad motive or intention must be made to appear by proof, and not be left to rest upon suspicion or conjecture only. When the consideration is good, and the terms equal and just, the Chancellor *264should not, upon-slight grounds,. imply a bad motive. When it appears on the face of a deed of trust, that the motive for. making it, was to prevent a sacrifice oí the property, a bad motive is shown — a motive to obstruct the ordinary process of law in the subjection of the property'to the payment of debts, which vitiates the whole deed. So, if that motive and intention be proved aliunde.- In the case before ,us, the bad motive or intention. is not apparent -on .the’ face of the deed; nor is it proved out of the deed- The counsel for the defendants infers that the motive and intention was to withdrawthe property from'the action of the law, and provide “ salaries for friends, and a comfortable support for the debtors.” We infer that the motive and intention was to do equal justice to all of his creditors.; and charity would authorize the inference of the Court. It could not be expected that the trustees would take upon themselves the trouble and responsibilities of the trust, without some compensation, and it does not appear in proof, that the salaries allowed were unreasonable. Nor does it appear what compensation was paid to Lynde, or that it was unreasonable, or that he misapplied the funds. Nor has it been shown in proof that the trustees misapplied them; and if they did, by themselves or agents, they are responsible. Nor does it appear in proof, that salaries for friends, or provision for the debtors, entered into the motive or intention oí the parties, in the execution of the deed, further than as a just compensation for services to be rendered in carrying out the objects of the trust, with most advantage to all the creditors. And any inference that any other intention existed, is repelled by the proof, that the deeds were made at the instance of some of the creditors, and by the counsel and direction, and under the special superin tendance, of an attorney, who ffad the possession and. control, for collection, of much the largest amount of all the claims due. The inference deduced by the counsel as to the object and intention of the deed, is not only unauthorized by the facts proven, but would impute to the attorney a faithless, if not corrupt, *265disregard of the interest of the clients, whose claims had been entrusted to him for collection.
Any man may defend himself if sued; and where failing traders as signed all their effects for the benefit of their creditors,and authorized the trustees to defend certain attachment suits, that had been instituted against them, no inference of fraud arises fiom the fact that the trustees were au thorized to pay the expenses of defending out of the assigned effects — the debt- or’s only means. Nor does the fact that the defence proved unavailing, malte any difference.
Nor can the provision which is made in the deed, out of the effects assigned, for the payment of the expenses of defending the attachments, or for the indemnity of friends who were to become bound for them, be deemed vicious.
Every man has an unquestionable right to make defence to any suit which may be brought against him. And the right is as unquestionable where it is made to the remedy sought, the mode and form of proceeding, or jurisdiction of the Court, as to the merits of the controversy. In making defence, expenses must be incurred, and those expenses must be paid out of the means which the debtor possesses. To say that the application of any of the means of the debtor to that object, is fraudulent and void, would be virtually to deny him the right of defence.
Nor can this right be made to depend upon, or be impaired, or the fair and honest assignment of a portion of his effects to such an object be rendered fraudulent, by the subsequent determination of the Court against his defence. If so, the transfer of a horse, or the payment of a suit of clothes, to a lawyer for his fees, in making the defence, would be fraudulent, and especially if the Court happened to decide against the defence which is set up. The assignment for this object, like all other assignments upon good considei-ation, must be left to depend, for its validity, upon the motive and intention of the party in making it; which is to be established as a fact, and cannot be deduced from the determination of the Court upon a question of law against the validity of his defence, about which an honest diversity of opinion may exist, even among lawyers, and more especially among those who have never made the law their study. By a defence, a creditor may be hindered and delayed in the- speedy collection of his debt, but it is a hindrance and delay incident to the exercise of a right, on the part of a debtor, and in the course of the administration of justice; which cannot be imputed to the defendant as fraudulent, without proof.
The suretyship undertaken, by the trustees, a good consideration to uphold the deed oí trust in this case.
A conveyance ¡ip parently valid, Cannot be deeméd fraudulent, merely because the same grantors had previously made a conveyance of the same property, which was abandoned as fraudulent and void. The provision in ¡a deed of trust, made for thebenefit of creditors, that if two thirds of them concurred in desiring it, the deed should 'be cancelled, and one made to themselves directly,is an evidence of fairness, rather than of fraud, in the deed.
We have no doubt of the validity of the assignment, for the indemnification of the sureties of the debtors in the bonds executed under the orders of the Chancellor. The bonds were executed to secure the very debts, the collection of which the defendants are charged specially, with the intention to hinder and delay by the assignment. The undertaking by the sureties is to have the attached goods forthcoming, to abide the decree, or to pay and satisfy the same. It was, therefore, surely not wrong to execute them, and,-if so, not wrong but strictly right and proper to secure those who became bound as sureties, by the assignment of the attached effects, or any others in trust to them. Such assignment must be deemed, from aught that appears, for a fair and legitimate purpose, and upon a good and-valuable consideration. And the assignment, so far from imposing any unequal or unjust terms or restrictions upon the attaching creditors,actually provides the means of securing them,in case they are successful in the prosecution of their suits. The case of Mackie vs. Cairns, 1 Hopkins, 373, has no application to the facts in this case.
Nor can we sanction the doctrine intimated, that, because Wilcox and Lynde made an unsuccessful effort to convey away their property fraudulently to Townsend, that every subsequent conveyance from this fact must be presumed to be fraudulent, however fair it may be shown to be.
The provision in the deed for the conveyance of the effects directly to the assenting creditors, it seems to us was perfectly fair, equal and warrantable.
It was inserted, no doubt, upon the anticipation that the creditors generally would come in and assent to the provisions of the deed. And which might well have been presumed, a.s it enabled them to take their ratable share of the proceeds, and left them still at liberty to pursue their legal remedies for the coercion of the balance of their debts. And in case they did come in, it was known that the value of the assigned effects would fall far short of the amount of their debts; and that being the case, the debtors were willing to assign all to them, to be managed by themselves,and the proceeds *267divided ratably, among them, in satisfaction of so much of their debts. They were left at liberty to consult their own interest as to the best mode to be adopted for making the most out of the effects; and it was to be presumed that they would adopt the best course, as, at best, they would fall far short of satisfying their debts.
The assent of ere-of trust made by their benefit may be given by the attorney holding their claims: for within the scope maybe nferred that they sanctioned what was thus for their ben.
And whether they took the goods to. Philadelphia, or the Moon, to make sale of them, was a matter with themselves, and could surely not furnish grounds for imputing fraud to the assignors, no more than if a horse or slave or any other property was transferred to a creditor to go towards the payment of his debt. And it has turned out that-the amount of the debts of those who have come in greatly exceed the value of the effects.
There is nothing in the objection that, the terms of the deed of assignment have been accepted and assented to by the attorney of a part of the creditors, who had in charge the collection of their debts. The acceptance is for the benefit of the clients, and it will be presumed has been sanctioned by them, if it could not be regarded as within the legitimate powers of the attorney, in the discharge of the trust confided to him. It secures the ° . ,-,i , ,. . ~ payment of apart of their debts, and divests them or no right to pursue their remedies for the residue.
This provision in the deed for the assignment of the effects to the creditors, so far from bearing on its face the impress of fraud, is another strong evidence that the intention was not to provide “salaries for friends” or “a provision for the debtors” in the mode of assignment adopted. For so soon as two thirds of the assenting creditors concurred, the assignment is to be made to them directly. And they would soon concur if they found it to their interest to do so.' And so soon as they did, the duties and responsibilities of the trustees would cease, and with them “ their salaries” and the “ comfortable provision for the debtors.” We intend only to assert the proposition that, the record does not present a-case which will warrant the inference of a fraudulent intent in the execution of the deed, in opposition to the *268opposing circumstances of fairness and equality exhibited in the proof.
From the facts shown in the record, we think there is no ground for retaining the bills longer. To do so, from our view of the record, would be to encourage the procrastination of litigation, without benefit to the complainants below, and with injury to the assenting creditors.
The petition is therefore overruled.