Cohen & Co. v. Morris & Co.

Jackson, Chief Justice. This is a bill filed by certain creditors of Oohen & Company against them and Zacharias and Nevin, their assignees — 317 — •of all their stock of goods, etc., praying that the assignees Re enjoined from proceeding with their trust, and that a receiver be appointed to take charge of it, etc. 1. The complainants are not judgment creditors, but they are cestuis qui trust under the deed of assignment, and in the schedule of creditors their names appear, and the amount of their respective debts. They are not preferred creditors, but interested in a just administration of the trust, the collection of assets, and the appropriation thereof, so as to have their share, if anything remains after the preferred creditors are paid. Equity has jurisdiction of this class of trusts as of all others. In Burrill on Assignments, 3d ed., chapter forty-four, par. 491, it is said that if the assignee be remiss in collecting and rendering the assets available, the proceeding is by bill in equity. And the same principle is announced in 2 Story Eq. Jur. §1047. Indeed it must be so from the plainest reasoning. The creditors, whether preferred or otherwise, if named in the deed of assignment are cestuis qui trust, and the assignees are their trustees. Shall these trustees abuse their trust with impunity, mismanage and waste the only assets to which the creditor can look for payment, and is there no remedy for those in whose behalf the assignment was made ? Could not one of the preferred creditors call these trustees to account; and if so, why should not one who, though not preferred, is interested in having all the assets ■collected and protected, that he may get a part of what remains after the preferred creditors are paid ? But it is useless to press argument on the point, as this court has recognized the principle. 38 Ga., 167, 170, 171. It is alleged here that one of the assignees is a near relative of the assignors, and has been clerk, if not partner; that both are selling the goods at inadequate prices; that the assignors and debtors take part in the sales; and that the whole management is contrary to right and wasteful of the assets entrusted to them for the benefit of complain — 318 — ants; and particularly it is alleged that another Zacharias,, the father of the discharged assignee, and of one of the> assignors and the father-in-law of the other, is the attorney in fact of the non-resident preferred creditors, and receives and sends them, beyond jurisdiction of the court,, the proceeds as fast as realized. 2. Have these complainants the right, thus being properly in a court of equity, to the strong equitable interference by injunction and receiver? Upon principle, it would seem that they have. If a, trustee mismanages the property entrusted to him, and is-still persisting in the mismanagement of it, he ought to be-stopped in some way from such mismanagement. How is his course to be arrested otherwise than by a writ of injunction restraining the wasteful and illegal conduct, or by a change of the trustee by appointing a receiver, an-officer of the court, to take charge of the business and manage all under the supervision of chancery ? If the court of chancery may interpose at all with the-management, it is quite certain that the court below exercised the power as favorably to the debtors and their assignees as could have been done. The order complained of removes one of the assignees who is intimately connected with the partners and charged to be in full complicity with them, and- invesis the other with the full control of it, appointing him receiver, and requiring a small bond in the sum of twenty-five hundred dollars from him. The assets, are much larger, the debts very heavy, the debtors insolvent, the assignee removed equally so; and the order appears to us to be mild and discreet, oppressive to nobody,, certainly not to the debtor^ and the remaining assignee appointed receiver. It can work no harm to any one interested, and brings the whole management under the eye-of the court under the deed of assignment, so that the-court may see that it is judiciously and honestly carried out by one of the trustees, who is merely converted into a receiver and is, in fact, a trustee still. — 319 — Before made receiver, lie was subject as trustee to equitable supervision; now lie becomes a quasi officer of the court, and is subject to closer scrutiny. That is practically all the difference between the two characters he sustains 'to the cestuis qui trust, and this change became absolutely necessary to do equity. . Why retain the bill at all, if 'the proceeds of sale go beyond the jurisdiction óf the' -court ? These creditors have the right to attack the Iona fieles of the debts of those preferred. What good will that -do, if the money be beyond the jurisdiction of the court, and they have it ? 3. But this case, we think, rests lipón another equity. 'The deed of assignment is assailed in so far as it reserves, through counsel fees, a benefit to the assignors, and because some preferred creditors have no just claims ; and though these complainants are not judgment creditors, yet they are recognized in the deed as creditors, and the amount of their debts is also recognized therein. Their names ap■pear in the schedule, and the amount of the indebtedness -of the debtors to them. So that, the amount being ■acknowledged by the debtors, there is no necessity for a judgment to fix that amount. As against partners, who are insolvent as a firm and individually, a general creditor who brings a bill for himself and all who choose to join, ■it is held in New York, may have the remedy by injunction and receiver, as against the partners, assignees, and third persons, where the debt is undisputed, and the deed is assailed as made to hinder and delay creditors. 10 How. Pr. R., 225, 461; 15 Ib., 395; 9 Ab. Pr. R., 127. Besides, in the case at bar, it is alleged and proved by •affidavits that as late as November, 1882, goods were sold by these complainants or some of them on representations of solvency by this firm; that these representations were distinct as to the amount of indebtedness and the value of their property, and were false, and fraudulently designed to procure the goods of these creditors without paying for Them; and the assignees are charged with complicity in — 320 — this matter; and thus no title passed. These facts, if true„ bring the case within the ruling in Cohen vs. Meyers, Cohen & Company, 42 Ga., 46, and subsequent cases. Indeed, in respect to some of the goods delivered, jewelry, etc., it is alleged that the goods were not sold, but. delivered for inspection and selection by the assignors, of such as they would buy, and these goods are set out in the-bill appended; so that they can be identified, if a correct account of sales and what is sold be kept by the receiver.. We think that, under an assignment of everything, these-partners possess; all their stock on hand, made on the 4th. of December, less than a month after the delivery of some-of the goods of complainants; these specifications of the-character of goods sold are sufficient, as charged, to identify them, if the assignors and assignees have managed their business properly and kept such books as they should have kept. It is true that in the case in 56 Ga., 144, this court held that, where goods were so sold, there was no lien; but in that-case the title was not attacked, but the lien only insisted on. Here the title is attacked because of a purchase by fraud,, which vitiated and annulled the title, as we understand the facts, and in some instances all semblance of sale is-explicitly denied, and it is declared and sworn to, that .the-goods were merely delivered for inspection with a view to future purchase. And though no rescission of the sale be asked for in the first class of debts, that is, sale void for fraud,, yet that is the necessary result of the bill, its allegations and prayers for such relief as equity can administer; and in theecond class,where no sale at all was made, but the goods sent for inspection merely, with a view to future purchase, of course no title passed, and those goods are the property of the complainants still, and the right to them, or their proceeds, if sold, would seem to be clearly in complainants; and to account for them, if on hand, or those proceeds, if' sold by the assignees, this proceeding is more complete: — 321 — and perfect a remedy, under the facts brought out in the evidence, than any remedy at law. So in 56 Ga., 427, there was no allegation or proof of title of any sort in the complainants before the chancellor (see p. 429 of opinion); and thus in that case, while the opinion shows equity in the bill, p. 430, the injunction was denied. Therefore, we are led to the conclusion, after much deliberation, that this case comes within the spirit of the adjudications of this court in 42 Ga., supra, and 57 Ib., 247; and 58 Ib., 50. We are aware that there are some adjudications in other states to the effect that creditors cannot attack an assignment as fraudulent and void, and at the same time claim under it and call on the assignees to account to them; and perhaps, on the final hearing of this case, it may be necessary to confine complainants to the one or the other of the two aspects of the bill and depositions, either to a square attack on the deed of assignment, or to the equitable rights of the creditors for a strict accounting under it. On the question before as, however, the injunction and receiver and the cautious and prudent order of the chancellor thereon, — the affirmance or reversal of that order alone,— which is the sole question for adjudication now, it is unnecessary to enter upon this double asi>ect of the bill; and we express no opinion thereon. The chancellor, on that final hearing, will doubtless give such direction to the investigation as the rights of the parties, when all the facts are fully developed, shall require, according to the principles of equity and the practice in courts of chancery. See further on the general subject, Burrell on Assignments, §§92, 93, 159, 165, 469; 3 Wis., 367; 30 Mo., 561; 20 Ark., 325; Perry on Trusts, §§817, 818; 9 N. Y. 176; High on Rec., 406, 407, 408, 409, 459, 460; 11 Md., 370; 1 Paige. 298; 8 Ga., 511; 10 Ib., 273. Judgment affirmed.