Rosenstein v. Coleman

• Decision Date: 04 August 1896
• Parties: ROSENSTEIN v. COLEMAN et al.
• Court: Montana Supreme Court

45 P. 1081

18 Mont. 459

ROSENSTEIN v. COLEMAN et al.

Supreme Court of Montana

August 4, 1896

Appeal from district court, Silver Bow county; John J. McHatton Judge.

Action by Anna Rosenstein, as assignee of Isadore Rosenstein against C. M. Coleman and another, for the value of property alleged to have been wrongfully taken by defendants from plaintiff's possession. From a judgment for plaintiff and from an order overruling a motion for new trial defendants appeal. Reversed.

The plaintiff, Anna Rosenstein, brought this action as the assignee for the benefit of the creditors of Isadore Rosenstein. She sued the defendants, who were, respectively, a justice of the peace and a constable of Silver Bow county. Her complaint alleged that Isadore Rosenstein assigned his stock in trade, consisting of merchandise, to her, for the benefit of his creditors; that she accepted the trust, and took possession, but that after the assignment, and after her possession, the said constable, McNichols, levied upon and attached all of the property described in the assignment, and ousted her of possession. She demanded judgment for $2,680, the value of the articles alleged to have been wrongfully taken from her possession as assignee. The deed of assignment is attached to the complaint, and, among other things, contains the following: "But in trust and confidence, however, to sell and dispose of the said property, real and personal, and to collect the said choses in action, using a reasonable discretion as to the times and modes of selling and disposing of said property as the said second party may deem best, either for cash or on time, or for credit, or at public auction or private sale, and to collect the said choses in action and accounts, with the right to compound for the same, but to use all due diligence and haste in so disposing of and collecting the said property and effects, to the end that the said creditors of the said first party may not be hindered or delayed in the receipt of their several claims and demands against the said first party; and to dispose of the sums of money so realized and collected as follows." A general demurrer was interposed by the defendants, but was overruled. Defendants answered, admitting the execution of the assignment, but denying that by said instrument any title or interest vested in the plaintiff as assignee for the benefit of the creditors of Isadore Rosenstein, or otherwise; denying possession of plaintiff as alleged; denying that the instrument constituted an assignment for the benefit of creditors; and denying that defendants wrongfully withheld possession. The defendants then averred that, in certain actions by creditors of Isadore Rosenstein, judgments were duly rendered against said Isadore Rosenstein, and that on September 9, 1893, under the authority of certain executions duly issued by the justice of the peace, the property included in the said pretended assignment was levied upon and duly sold, and the proceeds of the sale applied to the payment of the judgments of the first and second attaching creditors. It was further alleged that the said pretended assignment was made by Isadore Rosenstein with intent to hinder, delay, and defraud his creditors, and was and is absolutely void, and that plaintiff never had, as assignee for the benefit of the creditors of said Isadore Rosenstein, any right, title, or interest to the property mentioned. The plaintiff, by replication, denied that the property was at the time of the levy the subject of attachment or sale, but averred that it was in possession of the plaintiff as assignee; denied that the assignment was made with intent to hinder, delay, or defraud the creditors of the said Isadore Rosenstein; and denied all other averments of defendants' answer. There was a trial before a jury, and a verdict rendered in behalf of plaintiff, assessing her damages at $1,500, the value of the property at the time of the levy of attachments by the defendants. A motion for a new trial was overruled. The defendants appeal from the judgment, and from the order overruling their motion for a new trial.

C. R. Leonard, for appellants.

W. I. Lippencott and W. W. Dixon, for respondent.

HUNT J. (after stating the facts).

The important question in this case is whether an assignment which empowers the assignee to sell and dispose of the assigned property as he may deem best, either for cash or on time, or for credit, is fraudulent and void as to creditors. The district court held it was not, and submitted the question of fraud to a jury. But, after careful consideration, we understand the law to be that such an instrument is fraudulent. It is a well-established principle that a debtor making an assignment can authorize no delay whatever, except such as is necessarily incident to the creation of the trust. This principle is thus stated by Gardiner, J., in Nicholson v. Leavitt, 6 N. Y. 510 "It has always been understood that, where an individual has incurred an obligation to pay money, the time of payment was an essential part of the contract; that when it arrived the law demanded an immediate appropriation by the debtor of his property in discharge of his liability, and, if he failed, would itself, by its own process, compel a performance of the duty. The debtor, by the creation of a trust, may direct the application of his property, and may devolve the duty of making the appropriation upon a trustee. This the law permits, and such delay as may be necessary for that purpose. But the debtor cannot in this way avoid the obligation of immediate payment, or extend the period of credit, without the consent of the creditor. The attempt to do this, however plausible may be the pretense, is, in conscience and in law, a fraud, and nothing else." This language was approved of by the New York court of appeals in Dunham v. Waterman, 17 N.Y. 9. The argument is advanced that this discretionary power vested in the assignee may result advantageously to the creditors, by avoiding a sacrifice of the goods included in the assignment. This is likewise answered by the rule that the debtor cannot, by an assignment, avoid the obligation of immediate payment when the debt is due. He cannot, without his creditors' consent, extend the period of credit. Provisions, therefore, in an assignment, "by which it appears that the debtor, at the time of its execution, intended to prevent the immediate application of his property to the payment of his debts, will make the instrument void as to such creditors as are hindered and delayed." McCleery v. Allen, 7 Neb. 21. It has been further laid down that, if an assignment containing a clause authorizing a sale on credit is valid, it follows that the debtor has a right to confer the power. But if the owner of the property has vested the discretion in his assignee, unless it is fraudulently exercised, "equity cannot interpolate a provision that the fund shall be disposed of, and the money realized according to the discretion of the chancellor." Nicholson v....