Charles Roesch & Sons Co. v. Mumford

• Decision Date: 28 February 1916
• Docket Number: 1993.
• Court: U.S. Court of Appeals — Third Circuit
• Parties: CHARLES ROESCH & SONS CO. et al. v. MUMFORD.

230 F. 56

CHARLES ROESCH & SONS CO. et al. v. MUMFORD.

No. 1993.

United States Court of Appeals, Third Circuit.

February 28, 1916

Bourgeois & Coulomb, of Atlantic City, N.J., for appellants.

S Cameron Hinkle, of Atlantic City, N.J., for appellee.

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit Judges.

WOOLLEY Circuit Judge.

The questions on this appeal relate to the validity of a deed of trust in the nature of an assignment for the benefit of creditors, and to the validity of a judgment recovered by one of the creditors after assenting to the assignment.

Clifton C. Shinn, while insolvent, conveyed to Isaac Bacharach, by bill of sale and deed bearing date June 23, 1906, all of his personal and real property, 'in trust * * * to sell convey or otherwise dispose of the same in such manner as the creditors of the said party of the first part, Clifton C Shinn, may elect. ' By separate deed, the wife of Shinn conveyed to Bacharach, upon the same trust, her inchoate right of dower in the real property conveyed by her husband.

It is conceded that Shinn was hopelessly insolvent, and that in the assignment for the benefit of his creditors, there was neither fraud nor preference.

Upon delivering the deed, Shinn addressed letters to all of his creditors informing them of his insolvency and of the assignment of his property for their benefit. These were followed by letters from Bacharach, calling a creditors' meeting. At that meeting, the creditors appointed a committee to cooperate with Bacharach in administering the trust, one of the members of which was Charles Roesch, Jr. vice-president and the sole representative at its Atlantic City branch of Charles Roesch & Sons Company, a corporation engaged in selling meats and provisions, with its principal office in the City of Philadelphia. The Roesch Company was a substantial creditor of Shinn. Acting with the committee of creditors, Bacharach proceeded to sell the real estate. His action was arrested, however, by a question raised by a title guaranty company as to his power to dispose of the property under the limitations of the trust, without the concurrence of all of Shinn's creditors. This question very naturally arose out of the character of the conveyances of Shinn and his wife to Bacharach, which, though conveying title to Bacharach, conferred upon him no power of sale. Thereupon Bacharach endeavored to procure from all of Shinn's creditors power to sell the property, by obtaining their signatures to an instrument which is termed a power of attorney. This instrument bears date July 13, 1906, and purports to be signed by all of the creditors, though in fact three or four did not sign it. Among the signatures to this instrument is that of Charles Roesch and Sons Company, affixed by Charles Roesch, Jr., its vice-president.

After the Roesch Company had signed the power of attorney and while the signatures of other creditors were being procured, the Roesch Company endeavored to repudiate its signature and to withdraw its representative from the creditors' committee.

Seven months after signing the power of attorney, the Roesch Company instituted an action against Shinn by foreign attachment, attached as property of Shinn all the property he had conveyed to Bacharach, and ultimately recovered judgment for $3,629.06. This judgment was sold by the trustee of the Roesch Company, which in the meantime had gone into bankruptcy, and was purchased by George Roesch, its president. Upon execution the property attached was sold to Carl Roesch, a nephew of George Roesch, for the sum of $350, delivery of the deed being stayed by this proceeding.

Throughout the attachment proceedings, Bacharach, the trustee, found himself hindered in the disposition of the property by lack of power to sell under the deed and incomplete power to sell under the power of attorney, as well as by the menace of the attachment proceedings of the Roesch Company. Shinn, having become a resident of Pennsylvania, endeavored to extricate his trustee and the property from this predicament by filing a voluntary petition in bankruptcy in the District Court of the United States for the Middle District of Pennsylvania, considerably more than four months after the attachment was laid, conceiving that by this procedure the title to the property would vest in his trustee in bankruptcy and that the property could be sold by him. But this was not so simple as it seemed, because of Bacharach's antecedent title under the deed and the intervening attachment proceedings by the Roesch Company. Thereupon Elwin C. Mumford, trustee in bankruptcy for Shinn, appealed to the court below for help, by filing the bill in this case, wherein he attacked the attachment proceedings and the sale thereunder, and prayed that the attachment be annulled and the judgment vacated; and that Bacharach, Shinn's trustee under the deed, be decreed to transfer and convey to him, Shinn's trustee in bankruptcy, the property, real and personal, remaining in his hands. To this bill certain of the defendants made answer, that the assignment was void because it did not conform with the general assignment act of the State of New Jersey; that the assignment purported to be for the benefit of all creditors, and that all creditors had not conferred upon Bacharach the power to sell which the deed contemplated should be conferred by them; that the signature of the Roesch Company to the power of attorney was not binding upon it for the two reasons, that it was unauthorized and was affixed to a void instrument, and, therefore, it was free to pursue the remedy for the collection of its debt that it afterwards adopted.

The District Court entered a decree holding the attachment void and restraining the defendants from further proceedings thereunder, and ordering Bacharach, trustee under the deed, to convey to Mumford, trustee in bankruptcy, such of the property conveyed to him for the benefit of Shinn's creditors 'as remains in his hands after executing the trust imposed under the deed to him as trustee. ' This is an appeal from that decree.

The questions involved are so related that it is difficult to present and discuss them separately. The underlying question is whether the property attached belonged to Shinn or Bacharach, trustee, at the time of the attachment. This question is controlled by another, which relates to the conduct of the Roesch Company, the plaintiff in the attachment proceeding, in accepting the benefit of the assignment and waiving its right to an action at law. And finally, the relief to be granted depends upon which of the two trustees holds the superior title. In view of this situation, it appears to us, the first question calling for decision relates to the validity and legal effect of the conveyance by Shinn to Bacharach.

This conveyance grew out of Shinn's insolvency and was suggested by his anxiety to conserve his property for the benefit of all his creditors. For some reason he did not choose to pursue the course provided by the Federal Bankruptcy Act or the one open to him under the General Assignment Act of the State of New Jersey (1 Comp.St. 1910, p. 114). If he had adopted either of these courses, the rights of all creditors would have been fixed by law. As he pursued another, its acceptance by his creditors in substitution for the remedies they already had, of course, had to be obtained. This was contemplated even by the instrument itself. Until the creditors accepted the assignment, each was free to pursue his own remedy with respect to the collection of the debt due him. If the assignment by Shinn constituted an act of bankruptcy, the requisite creditors in number and amount could have instituted proceedings against him in bankruptcy or each could have pursued his own remedy by an action at law. For a period of time these remedies were open to the Roesch Company, not because the course pursued by Shinn was void in that it did not conform to procedures prescribed by federal and state statutes, but because it was voidable so far as it affected an individual creditor who had not given his assent to it.

While this was the state of the case, the Roesch Company did not avail itself of its rights and proceed against Shinn or his property for the recovery of the debt in any of the ways open to it. But this situation was changed, at least in so far as it concerned the Roesch Company, by the conduct of that company. The conduct of the Roesch Company was held to amount to an acquiescence in and an acceptance of the trust created by Shinn in part for its benefit. The legal effect of that conduct was the principal matter controverted in the court below and was the thing that controlled the decision of the court. It is quite unnecessary to review the testimony upon which the court based its decision that the Roesch Company by its signature and by its acts, accepted the trust under the assignment and waived its rights to proceed at law for the collection of its debt. With this decision we are in entire...