Strauss v. Rose

Robinson, J., delivered the opinion of the Court. Eachel Groldschmitt being embarrassed and in failing-circumstances, on the 29th of April, 18*79, conveyed to the appellee her stock of goods and fixtures, in trust, to sell the same and apply the proceeds, first to the payment of' the expenses of the trust, then to the payment of certain preferred creditors, then to the payment of all other creditors without preference, and the balance, if any, to herself. On May 1st following, an attachment was issued upon the affidavit of the appellants’ creditors of the assignor, alleging that she had conveyed or was about to convey her property for the purpose of defrauding her creditors, (Act 1864, ch. 306,) and under this attachment the stock of goods and fixtures conveyed by Eachel Groldschmitt to the appellee were taken by the sheriff. At the trial below the Court rejected the. several prayers offered by the appellants, and instructed the jury if they should find that the deed of April 29th was regularly executed and recorded, their verdict must he for the claimant. In other words, the deed being upon its face a. valid assignment, the appellants had offered no evidence from which a jury could reasonably find that it was fraudulent in fact. A debtor, it is admitted, may make an assignment of his property, and provide for the payment of one class of creditors in preference to another. Abstractly considered, it may he more equitable to provide for the payment of all alike, hut as the debtor may, by actual payment of money, prefer one creditor to another, for the same reason he may assign his property, so long as it remains unaffected by liens, in trust, to sell the same and apply the proceeds to the payment of certain debts in preference [531] to others. All the law requires is that the conveyance shall he made in good faith and upon a valid consideration. As regards the conveyance now before us, it is upon its face unquestionably a valid assignment in law. It contains no provision exacting releases of creditors, nor is there a provision or reservation of any kind expressly or impliedly enuring to the benefit of the assignor. On the contrary, it is upon its face an unconditional conveyance of property in trust for the payment of creditors. But though fair and valid on its face, it may, in fact it is said, to be a mere device or contrivance to defraud creditors. This is true. It may be made for the purpose of concealing or covering up the .debtor’s property, or to force creditors to accept a compromise, or in pursuance of an agreement or understanding with the assignee or the preferred creditors, by which the assignor is to derive some advantage or benefit inconsistent with the legal rights and remedies of creditors. If so, it is as much within the condemnation of the statute as if the fraud had been written on its face. The burden of proof, however, in such cases is upon the creditor assailing the assignment, and he must offer evidence from which a jury may reasonably find that though valid on its face, it is fraudulent in fact. This case then comes down to this, was there any. such evidence offered by the appellants ? We think not. There is no proof that the assignment in question was made for the purpose of concealing the property of the assignor, nor any proof of a secret trust or understanding with the trustee or any one else that she was to derive any benefit from its execution as against the rights of creditors. The trustee is not even a creditor, and the proof shows that he accepted the trust at the request of Mrs. G-oldschmitt, and after both Mr. Walter and Rohr had declined. He gave bond as required by law, took possession of the -property [532] and at once had it appraised. Now a great deal was said about the removal of part of the goods from the store on the morning after the conveyance was made; hut whatever suspicion may arise from this fact, his reasons for the removal are fully explained in his testimony. The goods thus removed were sold by him, and whether he acted discreetly or indiscreetly in this respect, he acted on his own responsibility and without consulting the assignor or the preferred creditors. So we find nothing either surrounding the execution of the conveyance, or in the subsequent conduct of the trustee, from which fraud could be inferred. Besides this the proof shows the assignment was made upon a valid consideration, with the exception of Miss Laucheimer’s claim of $350. No attempt is made to impeach the debts preferred by the deed; and we see no good reason to question the genuineness of her claim. She proves she loaned the money, and Mrs. G-oldschmitt admits she borrowed it, and her bank-book shows she had the money in bank. Whether it was a few dollars more or less than $350 is not material. If there be any question as to the precise amount, this can be determined in the audit and distribution of the fund. The extent to which the evidence offered by the appellants goes is to prove the insolvency of Mrs. Qoldschjnitt, and that she continued business and continued to buy goods, after she knew or ought to have known, that she was unable to pay for the same. But even in this aspect it is but just to say that her purchases during the twelve months prior to the assignment were far less than the preceding twelve months; and further than this, the record shows that in the four months preceding the assignment, she bought of the appellants goods to the amount of $29L 60 and during the same time paid to them $260, leaving balance due of only $31.60. But this is a matter not material to this case. The fact that she was insolvent did not [533] prevent her from making an assignment of her property for the benefit of creditors. And even if she had fraudulently contracted debts within the meaning of the Act of 1864, this would not affect the assignment unless there was some connection between the debts thus contracted and the assignment itself. And of this there is not a particle of proof. On the contrary, she continued to buy and to pay as usual up to the very day, when the pressure of creditors forced her to make the conveyance. If she had fraudulently contracted debts with the appellants, they had a right to the writ of attachment under the Act of 1864, but they had no right under the writ, to take property which she, prior to the issuing of the writ, had conveyed in trust for the benefit of creditors. Horwitz, garnishee, vs. Ellinger, 31 Md., 492. (Decided 8th March, 1883.) The case of Main & McKillip, Garnishee vs. Lynch, 54 Md., 658, so much relied on by the appellants, stands on a different ground from this case. In dealing with the plaintiff’s prayers in that case, the Court say; there was evidence that the assignor, Wagoner, had been disposing of and concealing his property to defraud his creditors, and that Main, one of the assignees had aided and abetted him in furtherance of his fraudulent purpose. The question whether the assignment was fraudulent in fact, was submitted to the jury. But in this case there is no evidence from which a jury could reasonably find a fraudulent purpose on the part of Mrs. Groldschmitt, and the assignment being valid on its face, the Court properly rejected the plaintiffs’ prayers and granted the instruction offered by the claimant. Eor these reasons the judgment below will be affirmed. Judgment affirmed.