Warren v. Howe

Waterman, P. J. It is not contended that the County Court had not authority to make an order discontinuing the insolvency proceedings. What is insisted by counsel for appellees is, that the County Court had no warrant for that portion of its order Avkich directed that the assets of the insolvent estate be turned over to Warren and found Warren to be the OAArner thereof; that by the terms of the deed of assignment to Jacobs there was created an irrevocable trust for the use of the creditors for whose benefit the assignment Avas made, and that so soon as the insolvency proceedings Avere discontinued, a common law assignment may be said to have come into existence, it being then the duty of Jacobs to haAre gone on and administered the trust as though no assignment statute existed; and that he having refused so to do, a court of equity AAfill appoint a trustee to carry out the trust. In other Avords, it is contended that the only effect of the order of discontinuance entered by the County Court ivas to deprive that court of jurisdiction over the assignee and the estate. It is also urged that it Avas grossly improper for the assignee to have united in a petition for a discontinuance of the insolvency proceedings, or to have consented thereto. The first duty of the assignee is to the creditors; to them he OAves the utmost fidelity. The County Court is vested Avith a discretion as to whether it will, upon the petition of a majority in number and amount of the creditors, order a discontinuance. The court manifestly will do what, all things considered, it deems judicious and best. It would certainly be the duty of the assignee, if asked by the court to express *to it his opinion as to what the interests of the creditors required, as to a proposed discontinuance of the proceedings, to do so; and we see no reason why, acting in good faith, with an eye single to the interests committed to his charge, he may not voluntarily advise the court upon this matter. Clearly, whether the assignee advised or opiposed the granting of the petition can not affect the validity of the order, hfor is the order of discontinuance rendered invalid if it be the case that there was added thereto an order which the court had no power to make. We are therefore called upon to consider what the effect of a valid order of the County Court, discontinuing insolvency proceedings, is upon the estate and the parties interested. The statute seems to declare with clearness the effect of such an order; it provides that in such case all parties shall be remitted to the same rights and duties existing at the date of the assignment except so far as such estate shall have already been administered and disposed of. Appellees1 contention as to the meaning of this seemingly plain provision, is one that completely nullifies the statute. It is inconceivable that such language should have been used if the legislature had intended that the only change wrought by the order of discontinuance should be to divest the County Court of its jurisdiction over the administration of the estate. We have been referred to no case and we are not aware of any in which the construction assumed by appellees has been placed upon any similar provision of an insolvency statute. The Supreme Court of this State in Hanchett v. Waterbury, 115 Ill. 220, in substance say that a valid general assignment for the benefit of creditors can now be made only under the statute, and that to the County Court is committed the jurisdiction of administering the insolvent estate. Appellees in effect contend that under the statute there may be two kinds of insolvency proceedings; first, that over which the County Court exercises jurisdiction; second, that brought into existence by the discontinuance of the proceedings there had, over which secondary proceeding any court of chancery may exercise control. Such construction of the statute is in opposition to the uniform interpretation that has been placed upon it. From its enactment, it has, without exception, been held that all general assignments for the benefit of creditors are controlled by its provisions, and that to the County Court is committed an exclusive jurisdiction over the management and distribution of the assigned estate. Hanchett v. Waterbury, supra; Freydendall v. Baldwin, 105 Ill. 325-330; Farwell v. Cohen, 28 N. E. 35; Farwell v. Crandall, 120 Ill. 70; Boyden v. Frank, 20 Ill. App. 169; Wilson v. Aaron, 132 Ill. 238. It is urged that the deed of assignment executed by Kean to Jacobs, in terms conveys the assets irrevocably to the assignee. The language used in making the assignment can neither add to or take from its effect. All voluntary assignments for the benefit of creditors now stand upon the same footing. Farwell v. Cohen, supra; Hanchett v. Waterbury, supra; Farwell v. Crandall, supra; Hanford Oil Co. v. First National Bank, 126 Ill. 584. In the case of Frank v. Moses, 18 Legal Hews, 313, the Supreme Court had under consideration an order of the County Court discontinuing insolvency proceedings and turning over the assets to a third party. Such order was there approved; while the position of an irrevocable trust was not there assumed, yet it is impossible that the court would, as it did in that case, have affirmed an order directing the imprisonment of the assignee for failing to turn over the assets as ordered, except upon the understanding and interpretation of the statute, that by the order of discontinuance the title of the assignee was divested and the trust created by the assignment brought to an end. With great earnestness it is contended that the complainants in this cause have been shamefully defrauded by the action of the County Court; that a vile conspiracy was entered into and carried on by Jacobs, Kean and Warren, and that to deny to the complainants the relief they seek in this cause, which can only be had through the instrumentality of a receiver, will not only be a denial of justice, but make of the assignment law a potent instrument for the perpetration of fraud and injustice; and it is confidently asked how the County Court could confer title to these assets upon Warren when the conferring of such title was in no way necessarily incidental to the discontinuance of the insolvency proceedings. In the view we take of this matter it is of no consequence, so far as the judgment of this court upon these appeals is concerned, whether the County Court could or did by its order as against the complainants or other creditors of ICean,. establish title in Warren to the assets of this estate. The County Court could and did discontinue the proceedings; that order left all parties where they stood at the date of the assignment; that is, left Kean the owner of these assets, subject to whatever liens, by way of judgment or otherwise, existed thereon. Subject to 'such liens, if any, Kean was at liberty to make such transfer of his assets to Warren or anybody else as he saw fit. Such transfer would, like any other transfer by a debtor of all or a portion of his property, be subject to investigation, and might be held fraudulent as to creditors. If no order of transfer to Warren had been made, but Kean, by deeds by him executed, had made conveyance to Warren, any judgment creditor of Kean, execution having been returned nulla Iona, might have filed a bill making Warren a party defendant thereto and had the transfer set aside if found to be fraudulent as regards creditors; but without having obtained judgment, a creditor could not have proceeded. The position of appellees is that while the order of the County Court transferring the assets to Warren is void, yet it does away with the necessity that they should exhaust their remedy at law ere they appeal to a court of equity. In considering what is said by appellees as to the great value of the estate transferred to Warren, and the fact that they have not- been paid anything upon their claim, it must be borne in mind that appellees were parties to the proceeding and order under which the transfer was made; that they had due notice thereof (Field v. Ridgley, 116 Ill. 424-432; Andrews v. Bernhardt, 87 Ill. 367); that they were at liberty by evidence or argument to show to the County Court that such order ought not to be made, and when made that they might have excepted thereto, sued out a writ of error? or appealed therefrom; but they neither objected to its entry, nor have they taken any appeal from the action of that court. In the bills filed in this cause appellees have failed to adduce any reason for their manifest neglect to insist upon their right in the County Court to object and to appeal. What would have been said of appellant Warren, if instead of answering the bills filed in this cause, he had suffered them to be taken as confessed, and had failed to object or except to a decree taking these assets from his hands and distributing them among the creditors of Kean í Would he have been heard if he had then gone into the Circuit Court alleging that he gave full value for the property and that his purchase was Iona fide? We do not mean to be understood as now passing upon the question of whether complainants are, as to the title of Warren, concluded by the order of the Circuit Court; when complainants shall, as attaching or judgment creditors, have in a proper proceeding necessarily presented such question, it will then be considered. Appellees charge that Kean, Jacobs and Warren wrongfully combined and confederated to procure the transfer of the assets to Warren, but what the wrongful acts were, is not shown. It is not wrongful to combine to bring about a discontinuance of insolvency proceedings; the statute contemplates such combination; they are necessarily the result of combination. Nor can it be said to be wrongful to combine to have such an order of transfer entered as was made in this case. The Supreme Court in the case of Frank v. Moses, 18 Legal News 313, says that the true construction is not that the County Court has. authority only to dismiss the proceeding's and to order the unadministered assets to be returned to the debtor; and further that to turn the goods, at the request of the assignor, over to a third party, is the same practically as turning them over to the debtor. It is wrongful to combine to cheat or defraud any one, but it does not therefore follow that any kind of suit can be maintained by any one cheated or defrauded; nor is a simple charge of combination to cheat and defraud a sufficient charge of fraud. The particular acts constituting the fraud must be set forth. Story, Eq. Pleadings, Sec. 251-252; Hovey v. Holcomb, 11 Ill. 660. Ho excuse or reason is given by appellees for not having availed themselves of their right to object to or appeal from the order of the County Court, nor does it appear that any of the wrongful combination of which they now complain was then unknown to them. True it is, that a decree may be attacked and set aside as having been ob- ■ tained by fraud; but in such case the fraudulent acts must be set forth and the bill must have for its object the setting aside of the decree because thereof. In the present case, the bills are not to set aside the order of the County Court but to disregard it; to obtain the assets of the estate in • spite of it. We do not understand, as is insisted by counsel, that it is gravely or otherwise urged that under the amendment of 1870, the assignment law has put it in the power of the assignor and a majority of the creditors to rob the remainder ; we do understand that unjust orders, decrees and judgments may be rendered in any proceeding if the parties thereto do not object; and we further understand that as to all injustice the methods of attack pointed out by the law must be followed. It is quite true that equity never allows a trust to fail for the Avant of a trustee, and that it is one of the provinces of a court of equity to provide for and to enforce the execution of trusts. There is in the present case no more of a trust than there is in the instance of any debtor Avho is alleged to have conveyed his assets in fraud of his creditors. In such case the circumstances may be such as to justify the taking out of an attachment, or it may be necessary to first obtain judgment, issue execution and proceed under it, or if it be returned nulla Iona, by creditors’ bill. A inere contract creditor is not entitled upon the bare showing of a fraudulent transfer to maintain a suit in equity and to have a receiver appointed. Appellees are simply contract creditors making a collateral attack upon an order of court rendered in a proceeding to which they were parties, and of which they had notice. They have not exhausted their remedy at law nor have they endeavored by appeal or writ of error to set aside the order of which they complain. In this proceeding they have shown no more cause for the appointment of a receiver than has every creditor whose debtor, it is alleged, has made a transfer of his property fraudulent as to creditors. The order appointing a receiver will be reversed and the cause remanded with directions to revoke the whole order appointing the receiver, and discharge him. Reversed and remanded.