
    Samuel Jamison, assignee, etc., v. John McNally et al.
    
    1 The act of February 12, 1863, amending section 17 of the “ act regulating tbs mode of administering assignments in trust for the benefit of creditors,” applies to conveyances constructively as well as those actually fraudulent as against creditors.
    2. The only change effected by the amendatory section is to give to those instituting the suit, and such other creditors as become parties, a preference over other creditors. But, before such preference can be obtained, the opportunity must be presented to all the creditors of becoming parties, by giving them the required notice of the pendency and object of the suit.
    3. The rights of the parties become fixed by the decree which finally determines the fraudulent character of the conveyance; and it is too late, after the suit has been prosecuted to a successful result, for a party to gain the statutory preference over other creditors by publishing the notice.
    4. But where such notice has not been given, the court, before ordering the funds to be paid over to the assignee appointed under the act, will provide for the payment of the costs and expenses of the creditor in prosecuting the suit by which the fund was obtained.
    Eerok to the district court of Eoss county.
    On the 20th of October, 1865, a petition was filed in the court of common pleas of Eoss county, by Isaac Stookey — -a judgment creditor, who sued for himself and John McNally, and other named judgment creditors of Jacob Bush — against Jacob Bush, William Bush, Strawder James, and Allen Bush, to set aside a conveyance, made January 31st, 1861, by Jacob Bush, of certain tracts of land described, to William Bush and Strawder James, for the alleged colorable consideration of ten thousand dollars. The wife of Jacob Bush did not join him in the execution of the deed, but retained her contingent right of dower in the land. The alleged ground for setting aside the conveyance was, that it was made and received with the intent to defraud Jacob Bush’s creditors, and for a grossly inadequate consideration. The petition further states that, before suit brought, William Bush conveyed his half of the farm to Allen Bush, a son of Jacob Bush, for a like colorable consideration, or for a grossly inadequate consideration, if any, and for the purpose of defrauding the creditors of Jacob Bush ; and that Allen Bush had full knowledge of the circumstances. The further prayer of the petition was, that the lands might be soldi and the proceeds applied to pay the judgment creditors for whom the action was brought.
    Pending the suit in the common pleas, Isaac Stookey died, and John McNally, one of the judgment creditors named in the petition as such, was substituted as plaintiff in his place.
    The answer of the defendants avers, in substance, that the intention of the sale and conveyance by Jacob Bush to William Bush and Strawder James was to secure them as his creditors and sureties to the extent of ten thousand dollars, and that the sale and conveyance by William Bush of his half of the lands to Allen Bush was in good faith, for a valuable consideration, and not to defraud any one.
    The cause was appealed to the district court, and there tried at the September term, 1867, and resulted in a judgment and decree for the plaintiffs. The court found that the conveyance made by Jacob Bush to William Bush and Strawder James “was not made with the actual intent, and for the purpose of delaying, hindering and defrauding the said plaintiff, and other creditors of the said Jacob Bush ; nor was said consideration in said conveyance expressed entirely colorable, as in said petition charged, but that said conveyance is constructively fraudulent in this, to wit: the consideration in said conveyau.ce set forth and proved was inadequate and insufficient,” and much less than the lands were worth at the date of the conveyance ; that the lands were then worth fifteen thousand dollars, and that the contingent right of dower of Eva Bush, wife of Jacob Bush, both living, was valued at four thousand dollars, and deducted at that value from the value of the lands, but that the real value of the right of dower was not more than one thousand dollars, which, added to the ten thousand dollars, left four thousand dollars of the fifteen thousand the lands were really worth. This four thousand dollars, with interest from January 31st, 1861, was adjudged to be paid by the purchasers of the lands, or, in default, that the lands be sold, &c.; and the money was ordered to be paid into the hands of the clerk, to be distributed according to law, under the order of the court of common pleas, to which court the cause was remanded to carry the judgment and order into execution.
    On the return of the cause to the common pleas, Samuel Jamison, as assignee of Jacob Bush, and as administrator of Merett Jamison, deceased, was, on his own motion, made a party to the suit, and filed his answer, in the nature of a cross-petition, in which he states that, after the judgment in the district court, and the remanding of the cause to the common pleas, he was appointed assignee of Jacob Bush, by the probate court of Boss county, on the application of one of a number of Jacob Bush’s creditors, whose claims, though notin judgment, existed prior to and ever since January 31, 1861, one of such claims being due to him as administrator ; and averring Jacob Bush’s insolvency, and claiming that the amount recovered in the action should be distributed to all his creditors pro rata, whether judgment or non-judgment creditors, and not alone to the judgment creditors for whose benefit the suit was brought; and insisting that they acquired no lien by the filing of the petition to set-aside the conveyance, having given no notice to creditors, as required by the statute of 1863 ; and, as assignee, asks the direction of the court as to whether such creditors shall present and establish their claims, according to the general law governing ordinary assignments in trust for the benefit of creditors, or according to the act of 1863.
    The plaintiff replied to Jamison’s answer, denying that he had been duly appointed assignee, and insisting that creditors whose claims were not reduced to judgment prior to the filing of the original petition, have no right to. or lien upon, the fund recovered or to be distributed in the case ; that the suit was prosecuted for the exclusive benefit of such creditors as had reduced their claims to judgment prior to the commencement of the action; that by reason of the action, and the judgment therein, the plaintiff and the other judgment creditors acquired, in equity, a priority over the other creditors, and that Jamison, by his answer, shows no right to question that priority, and no right to the fund to be distributed.
    Upon the issues thus raised the cause was tried in the common pleas, and appealed to the district court, and therein again tried at the September term, 1868, as between Jami-son and the plaintiff.
    On this trial the court found that after the rendition of the judgment in the original case in the district court, on the application of a creditor of Jacob Bush, who was such creditor prior to the execution of the’conveyance mentioned in the original petition, the probate judge of Ross county appointed Jamison as assignee of Jacob Bush, under the act of February 12, 1863, to amend section seventeen of the act of April 6, 1859, “to regulate assignments in trust for the benefit of creditors ; ” that Jamison was duly qualified, and was, when he filed his answer, and still is, acting as such assignee; that no notice of the pendency and object of the suit to set aside the conveyance was ever published, or attempted to be published, under said act of 1863 ; but that the facts stated in Jamison’s answer do not entitle him, as assignee, or as an individual creditor of Jacob Bush, or as administrator, to any relief in the premises, and that, under the final decree of the district court, the act of 1863 has no application ; and that Jamison could not be appointed assignee for want of power in the probate judge. Therefore the court dismissed Jamison’s answer and cross-petition, at his costs, and held that the judgment creditors, by and for whom the original action was prosecuted, were entitled to the fund to be distributed, to the exclusion of Jamison, according to their respective rights. Judgment was entered accordingly, and Jamison excepted, and filed the present petition in error.
    
      Alfred Yaple for plaintiff in error :
    The conveyance, though found to be not actually but only constructively fraudulent, as against creditors, is, nevertheless, a conveyance “ made with intent to hinder, delay or defraud creditors,” within the meaning of section 17 of the act relating to assignments and insolvent debtors, (S. & C. 713 714 ; S. & S. 397, 398,) and the general prior non-judgment or lien creditors of the grantor come in, pro rata, for their distributive share of the fund, with the plaintiff below and other judgment creditors. Avery v. Street, 6 Watts, 247 ; Hoffman v. Mackall et al. 5 Ohio St. 121-124, 132, 133, 138 ; Stanton et al. v. Keys et al. 14 Ohio St. 443 ; Swasey v. Blackman, 8 Ohio, 5, 20 ; Ash v. Ash, 9 Ohio St. 383-387 ; 11 Ohio St. 1-13 ; 12 Ohio St. 139 -144 ; Crumbaugh v. Kugler, 2 Ohio St. 373.
    The district court, in effect, held the conveyance to be bad, under the 2d section of the statute of frauds. Boyd v. Dunlap, 1 Johns. Ch. 478 ; 1 Am. Lead. Cas. (4th ed.) 26, 35, 42, 49; Code, sec. 458; Sexton v. Wheaton, 8 Wheat. 229-252; Ridgway v. Underwood, 4 Wash. C. C. 129, 137 ; Salmon v. Bennett, 1 Conn. 525-558 ; Gholson & Oakey’s Dig. Fraud Con. (12) ; Brice v. Myers, 5 Ohio, 132, 3, note ; Creed v. Lancaster Bank, 1 Ohio St. 1; 1 Story’s Eq. Jur., secs. 353, 355, 359-425 ; Reade v. Livingston, 3 Johns. Ch. 481-500; 2 Kent’s Com. 440, 442; 1 Am. Lead. Cas. (n.) 63, (n.) 71; James’ Bankrupt Law, pp. 236, 257, 153-183 ; Parish v. Murphree, 13 How. 92; Vance v. Phillips, 6 Hill, 433 ; 1 Bla. Com. 88.
    But if the conveyance was not void, but good to the extent of the actual consideration, but “ voluntary ” and “ constructively fraudulent” (as the court found) as to the $4,000 worth of the land defendants received under the deed, and if they should pay that, or have the land sold to pay it, equity requires that this $4,000, recovered under the statute, should be distributed according to the method provided by the statute in such cases, its design being to establish equality of distribution of the effects of insolvents. See Laws of 1859, p. 235, sec. 17, and Stanton et al. v. Keys et al. 14 Ohio St. 443; 1 Am. Lead. Cas. (4th ed.) 42, note; 3 Johns. Ch. 499; 1 McCord’s Ch. 518, 522; Strobhart, 200 ; 12 Serg. & Rawle, 448, 455, 456.
    No notice of the pendency and object of the suit by the plaintiffs having been given to creditors, as required by the act of Feb. 12, 1863, amending the 17th section, the plaintiffs should not be allowed to gain an advantage by their violation of the requirements of the statute, but these creditors should now be let in to assert their pro rata rights in this fund with the plaintiffs.
    Whether the court will permit the plaintiffs now to publish the notice, or whether it will allow such time for presenting claims as the assignment law provides, is left to its determination. The assignee asks its direction in the premises.
    In case the assignee takes the whole fund and administers it under the assignment law, the costs would first be paid, and the plaintiff’s counsel fees be provided for out of the fund, and the residue would be distributed pro rata to all the creditors, under the authority of the probate court. Conrad v. Pancost, 11 Ohio St. 685.
    
      S. L. Wallace also for plaintiff in error :
    The court found that the deed was constructively fraudulent to the extent of $4,000. Under the act of Feb. 12, 1863, (60 O. L. 8,) that fund should pass into the hands of the assignee for the benefit of all the creditors. This act embraces all classes of fraudulent conveyances. This conveyance was fraudulent within the meaning of the statute of frauds. The court found it so, to the extent of the $4,000, the fund in question. The fact that the fraud was found to bo constructive can make no difference.
    No notice having been given to the yther creditors, they had no day in court, and the proviso contained in sec. 17, act of 1863, has no application whatever, and the assignee is entitled to the fund.
    
      W. H. Safford for McNally :
    After the decree in the case, Jamison was, on the application of one of the creditors not embraced in the petition, appointed assignee, and now claims the fund by virtue of the statute. S. & C. 713, sec. 17.
    
      To this we answer, that the statute only provides for cases where the conveyances are absolutely void, as against creditors, by reason of the conveyances having been declared by a court of competent jurisdiction to have been made with intent to hinder, delay or defraud creditors. No such declaration has been made by the court in this case; on the contrary, the court declare that the conveyance ivas not made with such intent, but was constructively fraudulent by reason of the inadequacy of consideration. The conveyance-was not, therefore, void, but was permitted to stand, on payment of the value of the land as found by the court.
    A distinction is to be observed between actual and com structive fraud. The statute contemplates cases of actual, fraud, and those only.
    A deed fraudulent in fact is absolutely void, and is not permitted to stand as security for any purpose of reimbursement or indemnity; aliter, where it is constructively fraudulent. Boyd v. Dunlap, 1 J. C. 478.
    Where a deed is sought to be set aside as voluntary and fraudulent as against creditors, and there is no sufficient evidence of fraud to induce the court to avoid it absolutely,, but there are suspicious circumstances as to the adequacy of the consideration and fairness of the transaction, the-court will not set aside the conveyance altogether, but will, permit it to stand as security for the sum actually paid. Ibid.
    
    If actual fraud be not proved, the court will not set aside the title, but will either make it subservient to the equity of the case, or leave the party complaining to his remedy at law. Ibid.
    
    This case is not embraced by the statute aforesaid ; and McNally, having first commenced proceedings, obtained priority, and is entitled to the fund as against Jamison, theassignee.
   White, J.

The first question in this case is, whether a conveyance made by a debtor, which is constructively fraudulent as to creditors, comes within the provisions- of the act of February -L2, 1863, amending section 17 of the act of April 6, 1859, entitled, “an act regulating the mode of administering assignments in trust for the benefit of creditors.”

The original section provided that all transfers, conveyances or assignments made with intent to hinder, delay or defraud creditors, should inure to the equal benefit of all creditors, in proportion to the amounts of their respective claims, and required the probate judge, after such transfer, conveyance, or assignment should have been declared by a court of competent jurisdiction to have been made with the intent aforesaid, on application of a creditor, to appoint an assignee, according to the provisions of the act, who, upon being duly qualified, was required to proceed, by due course of law, to recover possession of all property so transferred, conveyed or assigned, and to administer the same as in other cases of assignments to trustees for the benefit of creditors. S. & C. Stat. 713.

In Thomas v. Talmadge, (16 Ohio St. 437,) referring to the act regulating the mode of administering assignments, it was said :

“Under this act assignments in trust may be divided into three classes : First: Such as profess to be for the equal benefit of all the creditors, and where the terms of the assignment are such as to effect this object. Second : Such as are made in contemplation of insolvency, with intent to prefer one or more creditors. Third: All transfers and conveyances made with intent to defraud creditors, though no trust for the benefit of creditors may be designed or declared in making the transfer or conveyance.
“Those of the first class harmonize with the provisions of the statute, and, if carried out in good faith, will necessarily effect a pro rata distribution of thé assets among all the creditors. In the second class, the sixteenth section of the act defeats the preference sought to be created, and gives to the assignment the same legal operation as if its terms had been made in conformity with the first class. In cases falling within the third class, the seventeenth section, without respect to the intention of the parties, fastens a trust upon the property, and provides that the transfer or conveyance shall inure, not to the fraudulent grantee or assignee, but to the equal benefit of all creditors, in proportion to their respective claims.”

The amendatory section is as follows: “ All transfers, conveyances, or assignments made with intent to hinder, delay or defraud creditors, shall be declared void at the suit of any creditor; and the probate judge of the proper county, after any such transfer, conveyance or assignment shall have been declared by a court of competent jurisdiction to have been made with the intent aforesaid, shall, on the application of any creditor, appoint an assignee, according to the provisions of this act, who, upon being duly qualified, shall proceed, by due course of law, to recover possession of all property so transferred, conveyed or assigned, and to administer the same as in other cases of assignment to trustees for the benefit of creditors; provided, however, that any creditor instituting a suit for the purpose aforesaid, shall cause notice of the pendency and object thereof to be published for at least four consecutive weeks in some newspaper printed, or of general circulation, in the county in which said suit shall be pending ; and all creditors who shall, within fifteen days next after the expiration of said notice, file an answer in said action, in the nature of a cross-petition, praying to be made parties thereto, and setting forth the nature and amount of their respective claims, and shall secure the payment of their pro rata share of the costs and expenses of such action, including reasonable counsel fees, in proportion to the amount of their said claims, either by a deposit of money, or by an undertaking given to the plaintiff in such sum and with such security as the court or clerk thereof shall require and approve, shall be first entitled, with the plaintiff, to the benefits of such transfer, conveyance or assignment, in proportion to the amounts of their respective claims; and after the costs and expenses aforesaid, and the claims of the aforesaid creditors shall have been paid by such assignee, the residue in his hands, if any, shall inure to the equal benefit of the remaining creditors, in proportion to the amount of their claims.”

The original and amended sections were enacted in puisuance of the same general policy. By the original section the conveyance was made to inure to the equal benefit of all creditors. The only change effected by the amendatory section is to give to those instituting the suit, and such other creditors as become parties, a preference over the other creditors. But before such preference can be obtained, the-opportunity must be presented to all the creditors, of becoming parties, by giving them the required notice of the pendency aud object of the suit. It is true, the language of the proviso requiring the notice to be given seems to be imperative; but the obvious meaning is, that the notice is to be given in order to obtain the preference for which the-act provides, and that the only effect of not giving the notice is to leave the fund that may be recovered, to be administered as in other cases of assignments in trust for the-benefit of creditors.

The section, in terms, applies to all conveyances made with intent to hinder, delay or defraud creditors. The question raised by the record is, whether, in order to bring' a case within the operation of the section, the conveyance-must have been made with an actual intent to defraud.

The operation of the section is, in our opinion, as comprehensive as the power of the court to set aside conveyances, on the ground of their being made in fraud of the rights of creditors.

Parties are presumed to intend the natural consequences' of their own acts; and to the extent that a conveyance is found to work a fraud, to that extent is fraud presumed to-have been intended. If the intent exists, it is immaterial, under the statute, whether its existence is proved by evidence directly, or is to be inferred, as a matter of law, from the nature of the transaction.

The original decree in this case was rendered upon the principle recognized in equity, that when a conveyance is set aside as only constructively fraudulent, it is upheld in favor of one not guilty of any actual fraud, to the extent of the actual consideration, and is vacated only as to the excess. In the application of this principle the grantee may be decreed to be, as to such excess, a trustee for creditors. 1 Am. Lead. Cases, 49.

The object of the statute is to make all property con veyed in fraud of creditors subject to the payment of their just demands, upon the principle of equality, provided they take upon themselves, in the mode prescribed, equality of burden for its recovery.

The remaining question is, whether the right to a preference, for which the statute provides, in the distribution of the funds realized by the suit, has been lost by the failure to give the notice which the statute requires, of the pendency and object of the suit. We think a fair construction of the statute requires this question to be answered in the affirmative. The rights of the parties become fixed by the decree which finally determines the fraudulent character of the conveyance. Where an assignee has been appointed, as was done in this case, he, as the representative of the creditors, becomes entitled to the fund, and it is made his duty “ to administer the same as in other cases of assignments to trustees for the benefit of creditors.” If no assignee should be appointed, it would be competent for the court having jurisdiction of the funds and of the parties to direct the execution of the trust, and order distribution, as was held under the original section. Oonrad v. Pancost, 11 Ohio St. 685. But after the suit has been prosecuted to a successful result, it seems to us it is too late for a party to gain the statutory preference over other creditors by publishing the notice.

But where such notice has not been given, the court, before ordering the funds to be paid over to the assignee appointed under the act, will provide for the payment of the costs and expenses of the creditor in prosecuting the suit by which the fund was obtained.

The order of the district court distributing the fund and dismissing the cross-petition of the assignee, is reversed, and the cause remanded.

Welch, C. J., and Day, McIlvaine and West, JJ., concurred.  