52 Ark. 389 | Ark. | 1889
In April, 1886, J. J. Cook & Bro., grocers and merchants in the Town of Augusta, became insolvent. Several of their creditors brought suits and sued out orders of attachment against them. The claims sued on amounted to about $22,000. The property of Co,ok & Bro. was seized under these orders of attachment. This brought about a general conference and concert of action upon the part of their creditors. Many of them had an informal meeting in Augusta, and afterwards, on April 30, 1886, held a meeting in the City -of Memphis, when a contract or agreement was entered into by Cook & Bro., and their creditors, including all the creditors who had sued out orders of attachment and all others, except one or two to whom onl}- small amounts were due. This contract was reduced to writing and signed by the parties. By it Cook & Bro. transferred, assigned and conveyed all their property of every kind and description to Branch Martin and Thomas E. Erwin, in trust for’the benefit of all their creditors. It was thereby agreed that Martin and Erwin, upon giving bond, were to take charge of all their property, including real •estate, merchandise, notes, mortgages, book accounts, etc., that the attachments should be dismissed, and that payments should be made as follows, to wit: First, the expenses of the trust. Second, to Friedman Bros. Third, to Dillard & Coffin, .$7000. Fourth, to Eckerly, Stone &. Co., $1305. Fifth, the balance to all other creditors, including balance due to Dillard ■& Coffin, and Eckerly, Stone & Co., fro rata, and the balance, if any, to Cook & Bro. Friedman Bros, were preferred creditors to the full extent of their claim. Dillard & Coffin, and Eckerly, Stone & Co. were preferred only as to a part of their debts. These creditors were preferred because they were the first attaching creditors, and because, if they had enforced their attachments, all the assets of Cook & Bro. would have been exhausted, and nothing would have been left to pay other ■creditors. By this agreement a committee, consisting of John W. Dillard, L. C. Tyler and F. T. Ryan, creditors of Cook & Bro., were appointed. It was empowered to superintend and direct the execution of the trust, to regulate and direct the purchases and expenditures in connection with the same, and to fill vacancies in the trusteeship, if any occurred. Its action was to be subject to the approval or rejection of the creditors as a body, and consistent with the object and purposes of the trust. The trustees were empowered to continue the business of Cook & Bro.; and the subscribing creditors agreed to furnish them, through the committee, supplies to the amount of .$2500, or such other sums as they might find necessary to advance to the customers- of Cook & Bro., to enable them to ■make their crops, and thereby to pay what they owed, as well as for the supplies furnished. If the trust was not closed by tbe first of March, 1887, the trustees were directed to sell the .assets remaining on hand, or enough thereof to satisfy the trust, at private or public sale, as they should think best. This contract was signed by W. F. Taylor & Co., the attaching creditors, and by other creditors to the number of about thirty, and was delivered to the trustees. The attaching creditors then discharged the property from the attachments, and delivered it to-Martin and Erwin. Afterwards W. F. Taylor & Co., the appellees, caused their signatures to be erased from the agreement, brought suit on their demand, and on the 19th day off August, 1886, obtained a judgment against Cook & Bro. for $645.12. They caused an execution to b.e issued on this judgment, and levied on one and a half lots and some corn, a part of the property of Cook & Bro., transferred and conveyed to-Martin and Erwin, and caused the Sheriff to advertise the same to be sold to satisfy their judgment. • Before the day off sale Martin and Erwin, claiming the property, in order to suspend the sale, executed with J. H. Campbell, as surety, a bond to the plaintiffs in the execution, to the effect that, if it shoulcL be adjudged that the property levied on, or any part of it, was. subject to the execution, they would pay to the plaintiffs the value of the property so subject, and 10 per cent, thereon, not exceeding the amount due on the execution, and 10 per cent-thereon, and it was approved. Thereupon Taylor & Co-brought this action. They alleged in their complaint that the conveyance to Martin and Erwin and contract signed by Cook-Si: Bro. and their creditors was and is illegal, fraudulent and. void as to them; first, because it does not specify any time within which creditors are to accept its provisions ; second, because the same provides that property therein conveyed is to-be administered and closed up under the supervision of the creditors through a committee; third, because it provides that, the business is to be carried on beyond the time allowed by the statute; fourth, because the same provides for the disposition of the assets at private sale; and fifth, because it provides that the surplus, if any, shall be paid to Cook & Bro.;. and asked that the transfer and conveyance made by Cook &. Bro. in the agreement with their creditors be set aside, and for judgment against Martin, Erwin, and Campbell on their bond,. for the full amount due on their jndgment. ■ And defendants', answered, and alleged substantially, the facts stated : that the-erasure of plaintiffs’ names was made without authority; that the contract between Cook & Bro. and their creditors was-made in good faith; and that plaintiffs are estopped from disputing its validity. On a hearing, the court, sitting as a jury,, found the facts as follows : “ The plaintiffs declined to participate in the meeting of the creditors and debtors at which the agreement was entered into, and refused to sign it. Subsequently, however, they were induced by the so-called managing or supervising committee, upon certain conditions, to sign, and did sign the paper. They consented to do so upon the direct condition and representation that one Estes, at a salary of $75 a month, should be substituted in place of Martin, who was objectionable to plaintiffs, and was to get a salary of $200 a month. This condition was not complied' with, and the chairman of said managers, on the part of the assenting creditors, on demand of plaintiffs, and without objection, immediately caused plaintiffs’ signature to the agreement to be erased therefrom. Plaintiffs had no other connection with the parties to this agreement, were never called on to contribute any part of the money the creditors were to advance to carry out its provisions, and their withdrawal from it seems to have been acquiesced in, particularly by the defendants. The erasure was made when the instrument was in the hands of the defendants, Martin and Erwin, and they in possession of the property, but before they had proceeded to dispose of it, and before the instrument had been filed for record. Neither Martin nor Erwin offered any objection to erasing the signature when it was done, or at any time thereafter ; neither did Cook & Bro., who were on the ground; nor the creditors,, who had knowledge of it. With a knowledge of these facts, the defendants, Martin and Erwin, proceeded to dispose of the assets of Cook & Bro., according to the terms of the instrument;” and among other things declared the law ta Be as follows: “The instrument of writing by which defendants set up a claim to the property on which the plaintiffs’ execution was levied is absolutely void as a deed of assign■ment for the benefit of creditors, nor is it valid as a deed •of trust or mortgage security. If the instrument has any ■validity in law it is merely as an agreement in writing between •debtor and creditors, by which the assets of the debtor were placed in the hands of a third party, to be disposed of under the supervision and direction of the creditors for their benefit. .It did not affect the rights of any creditor who was not a party to the agreement,” and “ conferred upon the assignees, in this •case, no right or title to the possession of the property and that “plaintiffs were not estopped from prosecuting their claim against Cook & Bro. to judgment, and levying executions on property in the possession of Martin and Erwin;” and that •“ parol evidence was admissible to explain the erasure;” and •rendered judgment in favor of the plaintiffs against the defendants for the full amount of the execution, and the defendants appealed to this court.
The instrument in question is a conveyance by Cook 8c 'Bro. of their property to trustees for the benefit of creditors, .and is also a contract between the subscribing parties thereto. "Martin and Erwin were the trustees. It provides that the ‘committee selected to supervise shall have the authority to fill -any vacancy which might occur in the places of the trustees. When it was first presented to the appellees they refused to ■sign it. Finally, at the instance of one or two members of the •committee, they signed it, with the understanding that T. H. Estes should be made trustee in the place of Martin. No change, however, was made in the instrument on account of their signature. Martin and Erwin still remained, as before, the trustees in the deed. The said members of the committee immediately, ascertained that one of the creditors would not ■consent to the removal of Martin, and so informed appellees. They at once demanded the erasure of their names, and the members of the committee, at whose instance they signed, without delay caused it to be done. They now insist that they are in no manner affected by the instrument, and that the property in controversy was liable to be seized to satisfy their execution.
In this case debtors and creditors were, doubtless, of the ■opinion that the instrument in question would be invalid as to non-assenting creditors. Not until all the creditors, except one or two to whom the debts owing were very small, had signed, were the instrument and the property delivered. After the ■execution of the instrument the attaching creditors, believing -.that they were as well secured thereby as by their attachments, ■discharged the property from seizure and caused it to be delivered to the trustees. Nothing remained for Cook & Bro. and their subscribing creditors to do to complete the transfer and conveyance of the property when the erasure was made. 'The result was the property vested in Martin and Erwin in trust according to the terms of the instrument. Did the erasure impair their title ? It is said that the court found that it “was made when the instrument was in the hands of Martin and Erwin, and they in possession of the property, but before they had proceeded to dispose of it, and before the instrument had ■been filed for record;” and that neither Martin, Erwin, Cook & Bro., nor any of the creditors, who had knowledge of it, made any objection to the erasure when it was made, or at any time thereafter. This may be true, but it is also true that Cook & Bro., the trustees, and the subscribing creditors, except appellees, never consented to surrender the property conveyed by the instrument, or any part of it, or to release any hold upon it, on account of the erasure. On the contrary Martin and Erwin still claimed and held it in trust ánd proceeded to ■dispose of it according to the terms of the instrument. The consequence is, the title to it was not divested by the erasure •as to any of the parties who had signed. Surely appellees could not, so far as they were concerned, divest the trustees ■of title, or impair the same, by a stroke of the pen, against the will of the other parties. That is not a mode of transfer recognized by the law.
For the errors indicated the judgment of the Circuit Court is reversed, and this cause is remanded for a new trial.