Albion Malleable Iron Co. v. First National Bank

Grant, C. J. (after stating the facts). The court based its conclusion upon the finding that the mortgages or trust deeds were merely securities, and could not be construed as common-law assignments. 1. The court was in error in dismissing the complainants’ bill. The cause was at issue, and ready for the introduction of proofs. The sole question for determination was whether a receiver should be appointed and a temporary injunction granted. If the instruments are held to be assignments, the complainants are not seeking to set them aside, but to have the trust enforced with the preferences declared void, so that all the creditors may share equally. This is the proper and equitable course to pursue in case of assignments with preferences. If the instruments are held to be securities, and valid, the complainants are entitled to be heard upon pleadings and proofs as to the [226] alleged violation of the trust by the assignee, Mr. Dearing. .By the express terms of the mortgages — if held to be such • — -the complainants are interested, and entitled to call the trustee to an account. He filed a bill, which is claimed to be collusive, and did not make these complainants parties. Under either aspect of the case the court should not have dismissed the bill until after a hearing upon the proofs. It is proper to add that the answers deny all the material allegations of the bill. 2. The conveyances are between the Elms Buggy Company and Mr. Dearing as trustee. They state that they are made for the purpose ‘ ‘ of securing the payment of all its [the buggy company’s] debts to all its creditors.” They cover all the property of the company, and say that said company “does sell, assign, transfer, set over, and mortgage unto said second party as such trustee,” etc. They then prefer certain creditors, and, after they are paid, the avails of the residue are to be divided among the other creditors. It is not stated therein when the debts are due, but they contain the usual provisions for taking possession upon default in payments. The instrument ■called the “ chattel mortgage ” closes with these provisions : '“It is believed by said first party that it is for the benefit and advantage of the creditors for it to continue the business of manufacturing until such time as it shall have used up all its stock now on hand for the purpose of transforming the raw material into manufactured stock, and, in case some certain lines should be exhausted, that it should buy sufficient new material of any kind not on hand necessary to complete the working up of any other available for that purpose. For this reason said first party contemplates the continuance of its said business, and of selling said product for the benefit of those secured. And it is expressly understood that said first party shall keep a true and accurate and detailed account of all the expenses of so operating the business, and of all receipts, and shall render such account and statement to the said trustee, who shall have the right to examine into the said business and said work; and if, at any time, he shall believe that the continuance of said business is not for the in [227] terest of the creditors secured hereby, he shall have, full power and authority to stop the operation of said factory, and take possession of the said property, if he deems it necessary, and at maturity of this mortgage dispose of the said property in accordance with the terms of this mortgage. And said party of the second part, as such trustee, is also authorized and empowered, by himself or his agent, to receive into his custody all proceeds of sale, and all remittances, and all orders for manufactured goods at all times; and for that purpose he shall have access to all correspondence and letter books of said first party to such extent as, in his judgment, is necessary for the full and complete discharge of his duties hereunder.” The bill alleges that the trustee immediately took possession, and conducted the business until he filed the bill above referred to, and that the parties by their acts construed the conveyance to be a general assignment for the benefit of creditors. It is unnecessary to now determine the character of these instruments upon their face. Fraud is charged, and we are not prepared to say that they may not be shown by proofs to in fact constitute an assignment. Upon this we express no opinion, but prefer to leave it to the final determination of the case. We can only dispose of the question now as if it were before us on demurrer. 3. Counsel for complainants strenuously urge that this court should appoint a receiver, or direct the court below to appoint one. All allegations of fraud are denied by the answers. The property is already in the hands of a receiver, who presumably has given a good and sufficient bond. Upon ascertaining the view of this court upon the law of the case, the court below will, of course, take such action as it shall deem advisable to preserve the property for the benefit of those who shall eventually be entitled to it. We think that this question should be left to the determination of that court. The decision is reversed, with the costs of this court, and the case remanded for further proceedings. The other Justices concurred.