Clark v. Stanton

• Decision Date: 25 October 1877
• Citation: 24 Minn. 232
• Court: Minnesota Supreme Court
• Parties: E. H. CLARK <I>vs.</I> JUDSON A. STANTON.

24 Minn. 232

E. H. CLARK vs. JUDSON A. STANTON.

Supreme Court of Minnesota.

October 25, 1877.

On February 3, 1875, Edwin Clark and William H. Clark, copartners as E. & W. H. Clark, made a general assignment,

for the benefit of creditors, to Judson A. Stanton. Subsequently the said Edwin Clark petitioned the district court for Stearns county, under the provisions of chapter 44, of the General Laws of Minnesota for 1876, that the said Stanton be required to make and file his report as required by the aforesaid act, and that the proceedings of said assignee be investigated by said court, and that his said trust be closed, and for other relief. In accordance with an order of the court made thereon, the said assignee filed his report, June 13, 1876, and annexed thereto a certain schedule of notes and accounts against the estate, held by one J. W. Johnson, and upon which it was stated eighty per cent. of the original indebtedness had been paid. Upon the objection of Edwin Clark to the said schedule, the assignee further reported that the claims therein contained were purchased by the assignee, out of his own private funds, for sixty per cent. of the amount then due thereon, at the special instance and request of the assignors, for the purpose of preventing the said estate from being thrown into bankruptcy, and upon the express agreement with the said assignors that if he would purchase such claims for such purpose, the same should be paid in his hands, or to whom he might transfer the same, in the same manner as if they had not been assigned by the original owners thereof. W. H. Clark, one of the assignors, also filed an affidavit, in which he substantially corroborated the facts set forth in the assignee's report, and stated that it was his earnest desire that the said assignee should be still allowed to transact the business of the estate, and close up the same without any interference from the said Edwin Clark or any other person whatsoever; and that unless such assignee was permitted to close up such business, great and irreparable damage would be done to the estate and the said deponent.

Edwin Clark, and several of the creditors who had assigned the claims thus reported as held by J. W. Johnson, filed replies to the said report, in which it was practically alleged that the assignment of the claims was made at a large discount for the supposed benefit of the estate, and upon the strength of representations made by the assignee as to its insolvent condition; that the said creditors instituted the proceedings in bankruptcy solely for the purpose of getting rid of the said trustee, whom they greatly distrusted, and to thereby secure a faithful administration of the trust; that the consent of said Clark to the agreement made between the assignee and the assignors was procured by threats and intimidations, and that it was the desire of the aforesaid Clark and the said creditors that the assignee be removed, the transfer of the claims set aside, and the aforesaid agreement declared null and void.

By order of the court certain issues were thereupon framed and under a stipulation the same were submitted to be tried by the court at chambers; the testimony to be taken as prescribed in civil actions in the district courts of this state, as said court shall deem best.

Upon the trial of these issues the assignee produced in evidence, among other things, the following contract, in writing, to-wit:

"The claims and accounts of the following persons and firms against the estate of E. & W. H. Clark, having been purchased by Judson A. Stanton, the assignee of said estate, at the rate of sixty per cent. on a dollar, which claims and accounts, and each and every of them, were so purchased at the express request and solicitation of us and each of us, made by us and each of us to said Stanton prior to and about the time of such purchases, we, and each of us, hereby ratify and approve the act of said assignee in making said purchases, and each of them, and hereby agree, for a valuable consideration, that such claims and accounts, and each of them, may and shall be paid out of the proceeds of said estate to said Stanton, or the person or persons owning and holding the same, to the extent of the original amounts and face of said claims, and each of them, and interest thereon; and said Stanton, or such person holding such claim or claims, may and shall share and be paid pro rata with all the other creditors of said estate, and be entitled to receive dividends upon the original amount of said claims to the same extent, and be entitled to all and the same benefits that the original assignor or assignors of such claim or claims would have been entitled to receive, had he or they not made any assignment thereof. [Here follows a list of the persons who had assigned their claims and accounts, as stated in the contract.]

                                                     "EDWIN CLARK
                                                     "WILLIAM H. CLARK."
                

Upon the other hand, the court admitted in evidence, under objection and exception, and as part of the testimony for the plaintiff, Edwin Clark, certain depositions of the aforesaid creditors tending to impeach the validity of the transfer of their claims to the assignee, and to establish the facts set out in their replies to the report. The court also permitted several of the said creditors to file a petition after a portion of the evidence had been received, in which they asked, upon the facts and testimony made to appear in the said proceeding, in respect to the conduct of said estate by said assignee, that the amount of their claims might be paid from the funds of the estate, the assignee removed, and such other relief granted as the court might consider necessary for the protection of their rights.

Upon the issues submitted, the court found, among other things, that the estate had never been insolvent except in so far as the mere act of making said assignment might constitute such insolvency; that on February 15, 1876, the said assignee had sufficient cash funds to pay all the outstanding indebtedness of the estate, with costs and expenses; that four dividends, of twenty per cent. each, had been declared in favor of the creditors of the estate; that the assignee purchased some of the claims against the estate at a large discount, and through unfair means, using both his own funds and those of the estate for that purpose; that nothing had been paid upon said claims since their purchase, the assignee having retained all subsequent dividends declared upon the same, although payment of the said dividends had been duly indorsed on the said claims; that said claims were afterwards assigned to J. W. Johnson, and their payment in full guaranteed by the said assignee; that said assignee had not acted in good faith in the execution of his trust, or for the best interests of the estate, or the creditors thereof; that Edwin Clark requested the assignee to purchase the said claims, and that part of the same were so purchased to prevent proceedings in bankruptcy; that said proceedings were commenced by a part of the holders of the said claims, because of their dissatisfaction with the said assignee and his administration of the estate; that said assignee gave the said creditors just and reasonable grounds to suppose that unless they sold their claims at a discount, they would otherwise be a long time obtaining a settlement of the same; that none of the said claims were purchased for the benefit of the estate; that the agreement between the assignors and assignee in relation to the purchase of the claims was not freely and voluntarily entered into by said Edwin Clark, but was signed by him from a just ground of fear that the said assignee would otherwise injure the said estate.

Upon the evidence introduced into the case the court further found, among other things, that the amount of the claims purchased by the assignee was $10,163.28, and that he paid therefor $6,160.79; that in April, 1875, he made a general offer of sixty per cent. to all the creditors for the claims against the estate, which offer was refused by a large number, and that the claims of such as refused were subsequently paid in full; that all the claims purchased by the assignee were so purchased without the consent of any of the other creditors, and that some creditors were induced to sell their claims at sixty per cent., by means of representations that others had sold at the same figure;...