Voorhees v. Carpenter

• Decision Date: 26 February 1891
• Docket Number: 14,649
• Citation: 26 N.E. 838,127 Ind. 300
• Parties: Voorhees et al. v. Carpenter
• Court: Indiana Supreme Court

26 N.E. 838

127 Ind. 300

Voorhees et al. v. Carpenter

No. 14,649

Supreme Court of Indiana

February 26, 1891

From the Fountain Circuit Court.

Judgment affirmed.

T. F Davidson, for appellants.

H. H Dochterman, for appellee.

OPINION

Elliott, J.

The course pursued in argument narrows this controversy to a single controlling question, which may be stated thus: Can a creditor maintain a suit to set aside a fraudulent conveyance made by a debtor who afterwards executes a voluntary assignment for the benefit of creditors in a case where the trust is accepted and fully administered, but where neither the assignee nor the creditor has any knowledge of the fraudulent conveyance until after the final settlement of the trust and the discharge of the assignee?

The initial proposition is free from difficulty, for it is established law that an assignment, under the statute, for the benefit of creditors, vests in the assignee the right to set aside fraudulent conveyances executed by the assignor. Cooper v. Perdue, 114 Ind. 207, 16 N.E 140; Seibert v. Milligan, 110 Ind. 106, 10 N.E. 929; Simpson v. Warren, 55 Me. 18; Pillsbury v. Kingon, 33 N.J. Eq. 287 (36 Am. R. 556); Klapp's v. Shirk, 13 Pa. 589; Thomas v. Talmadge, 16 Ohio St. 433.

A corollary of this initial proposition is that property fraudulently conveyed vests in the assignee, and he--not the creditors--can maintain a suit to set aside the conveyance. Seibert v. Milligan, supra; Hasseld v. Seyfort, 105 Ind. 534, 5 N.E. 675; Lord v. Fisher, 19 Ind. 7; Hallowell v. Bayliss, 10 Ohio St. 536.

The effect of these settled principles is that the assignee must, as a general rule, bring the suit to set aside the fraudulent conveyance, and this general rule must govern here unless there are peculiar elements taking this case out of that rule. The only fact that can give plausibility to the contention that the case is not within the general rule is the fact that there was no discovery of the fraudulent conveyance until after the trust had been closed and the assignee discharged.

It can not be doubted that the final order adjudging that the trust had been settled and directing a discharge of the assignee put an end to his authority. Morrill v. Dunn, 39 Me. 281. But it does not follow that the termination of the assignee's authority revested or revived the right of a creditor to subject property, which ought to have been included in the trust, to sale for the payment of his own debt. The point which requires elucidation is not one concerning the right of a creditor to bring suit to reopen the trust or to secure the appointment of a new trustee, but it is one involving the right of a creditor to secure for his own benefit property which ought to have gone into the trust, and which would have gone there had not the wrong of the debtor in concealing the fraudulent conveyance kept it from the hands of the assignee. The case before us is, it is very evident, entirely different from one in which a creditor seeks to uncover a fraudulent conveyance and make the property available for the benefit of all creditors. That end could doubtless be attained by a proper application to a court of equity, but we have here no question as to the right to appoint a new trustee or reinstate the old one; the question we have here is a radically different one.

The decisions to which we have referred declare that a voluntary assignment must be so administered as to put creditors upon an equality. It is the duty of the assignee to use all lawful means to secure the property of the debtor and apply it to the payment of creditors. The theory of the law regulating voluntary assignments for the benefit of creditors is, that all of the debtor's property shall go into the trust and pass into the hands of his assignee. After the assignment takes effect the right of creditors to seize the property of the debtor is, as a general rule, at an end, for the assignee becomes their representative for the purpose of securing assets and collecting claims. The debtor does not, in any sense, constitute the assignee his agent; on the contrary, the deed of assignment creates an irrevocable trust for the benefit of creditors, and the trust becomes one to be administered under the supervision and control of a court of equity. Moses v. Mugatroyd, 1 Johns. Ch. 119; Shepherd v. McEvers, 4 Johns. Ch. 136; Ward v. Lewis, 4 Pick. 518; Pingree v. Comstock, 18 Pick. 46; Read v. Robinson, 6 Watts & Serg. 329; Ingram v. Kirkpatrick, 6 Iredell Eq. 463; Stimpson v. Fries, 55 N.C. 156, 2 Jones Eq. 156. As the assignee is, in the true sense, a trustee, it is entirely consistent with principle to hold that he is the representative of the beneficiaries and not of the creator of the trust. So it is held by many courts. Ware v. Gardner, L. R. 7 Eq. 317; Doe v. Ball, 11 M. & W. 531; Holmes v. Penney, 3 Kay & J. 90; Root v. Potter, 59 Mich. 498, 26 N.W. 682; Heineman v. Hart, 55 Mich. 64, 20 N.W. 792; Robinson v. Bliss, 121 Mass. 428.

It has been held, in well-reasoned opinions, by the Supreme Court of Massachusetts, that an assignee may elect to confirm or to repudiate a fraudulent conveyance. Freeland v Freeland, 102 Mass. 475; Harvey v. Varney, 98 Mass. 118; Snow v. Lang, 2 Allen, 18; Butler v. Hildreth, 5 Met. 49. If this be the law, then it would seem clear that a creditor has no right to proceed against property fraudulently conveyed, since that right passes from the creditor and lodges in the assignee. But, aside from this consideration, the conclusion must be, that the trustee is alone invested with the right to set aside a fraudulent conveyance after the trust has once become effective, for the reason that when the trust is once established it fastens upon all property subject to the claims of creditors. Once trust property it must remain trust property. As trust property it is property in which all the beneficiaries have an interest, and which no one creditor can appropriate to his exclusive benefit. He may have it brought into the trust, but he can not secure it and exclude other beneficiaries whose rights and equities are equal. Creditors are not remediless where the trust has been closed, although no one of them may be entitled to sue for his individual benefit, for equity, acting upon the maxim that a trust will not be allowed to fail for want of a trustee, will, on a proper application, appoint a trustee to execute the unexecuted trust. But, it is hardly necessary to suggest, it is one thing to appoint a trustee to execute a trust by securing property fraudulently conveyed by the debtor, and...