
    Smith Thomas, Assignee of George E. House, v. James M. Talmadge et al.
    1. A general assignment for the equal benefit of all the creditors, which is in due course of administration in the probate court, can not be invalidated in an action by the assignee for the recovery of property embraced in the assignment, on the ground that it was made and accepted with intent to defraud creditors.
    2. Nor where the property sought to be recovered in such action has been. seized in execution by part of the creditors, can a recovery be defeated on the ground that the assignor had fraudulently retained the possession of the property with the consent of the assignee. The remedy in such case of maladministration, is by proceedings in the probate court or by action, against the assignee.
    *Error to the district court of Morrow county.
    The original action was commenced by the plaintiff in error, who was the plaintiff below, against the coroner of Morrow county, for the recovery of specific personal projoerty, consisting principally of household goods, which had been levied upon and taken possession of by him, by virtue of executions against the assignor of the plaintiff, George E. House, and as the property of the latter.
    The defendants> in error, being the execution creditors, in the progress of the action were substituted as defendants.
    On the trial of the case in the court of common pleas, the plaintiff, to maintain the issue on his part, gave evidence tending to prove that the property in controversy was originally the property of George E. House, the execution debtor; that House had made a general assignment of his property for the benefit of his creditors, of which the following is a copy:
    “ Whereas, I, George E. House, of Mount Gilead, Morrow county, Ohio, having been engaged in the mercantile business in said town, and being unable to meet the payment of my claims as they fall due, and being desirous that all my creditors shall share-equally, in proportion to their several claims, in the proceeds of my property, do therefore hereby sell, convey, and assign to Smith Thomas, for the benefit of my creditors, the following real estate : (Here follows a description of the real estate conveyed.) To have and to hold and dispose of the same in the manner prescribed by the statutes regulating assignments for the benefit of creditors, subject to all incumbrances now on said premises, and reserving to-the said George E. House his right of homstead, under the statute, in said premises.
    “And I, the said George E. House, do also hereby sell and assign to the said Smith Thomas, for the benefit of my creditors as aforesaid, ail my personal property, notes and book accounts, excepting from this assignment such property as I may hold from execution lawfully.”
    This assignment was duly executed, attested, and acknowledged by said House on the 22d of March, 1861.
    *The plaintiff also introduced in evidence the records of the probate court, which showed that he had accepted the assignment and given the undertaking required by the statute, and had taken most of the property so assigned into his possession, and had accepted claims of creditors of House; but that he had not taken into his possession any of the property in controversy, the same having been left with the assignor until levied on by the defendants.
    It further appeared that the plaintiff had filed in the probate-court, on the 18th of April, 1861, and within the thirty days required by statute, an inventory, duly verified, of the property, moneys, rights, and credits of the assignor, which, as he alleged, had come to his possession or knowledge as such assignee, and that the property and assets comprised in the inventory had been duly appraised. This inventory did not include the.property in controversy.
    It also appeared that, on the 22d of January, 1862, he filed a second inventory in the probate court. This included the property in controversy, and was likewise verified; the jfiaintiff stating, in his affidavit, that at the time of making and returning his first inventory as assignee, the property mentioned had not come to his knowledge ; that he did not know of the same until within a few days; and that, as soon as he conveniently could, after he obtained knowledge of the same, he caused an appraisement and inventory thereof to be made.
    The defendants, the execution creditors, had caused the property to be levied upon, on the 15th of the same month, and on the 21st, the plaintiff commenced his action for the recovery thereof.
    The plaintiff having closed his testimony, it appears, from the bill of exceptions, “that the defendants then offered testimony to show that said assignment was fraudulent, and made to hinder and delay the creditors of said G-eorge E. House.” To the introduction of this testimony the plaintiff, by his attorneys, objected; but the court overruled the objection, and allowed the testimony to go to the jury.
    After the evidence was closed, the plaintiff’s attorney asked the ■court to charge the jury, “that if they found that the property in dispute in this case was included in the assignment *to said Thomas, that then the plaintiff was entitled to a verdict, notwithstanding the evidence might show-that the assignment was fraudulent, and made to delay and hinder the creditors of said House.”
    This instruction the court refused to give; but did charge the jury, “that if they found that the assignment made by said G-eorge E. House to the said Thomas, was made for the purpose and with the intent to cheat and defraud the creditors of said House, or to hinder and delay them in the collection of their debts, and that the assignee was a party to, and participated in said purpose and intent, that plaintiff could not recover; and that said property left in the .possession of said assignor, remained liable to levy and sale on the judgments of defendants against him.”
    
      To the ruling of the court, as to the charge asked and the charge given, the plaintiff excepted.
    The jury having returned a verdict for the defendants, the plaintiff filed a motion for a new trial, upon the grounds, among others, that the verdict was against the evidence; that the court erred in its charge to the jury, and in admitting evidence of fraud in the making of the assignment.
    This motion was overruled, and judgment entered on the verdict. The plaintiff' excepted.
    This judgment having been affirmed by the district court, on the-petition in error of the plaintiff, he now seeks, in this court, the reversel of both judgments.
    
      A. K. Dunn, for plaintiff in error:
    1. The assignment was not made with intent to hinder and delay or defraud creditors. The evidence in regard to fraud in the assignment, related to the conduct of the parties after the execution and delivery of the instrument, and does not show fraud. The assignment covers all the property not exempt from execution. S. & C. Stat. 712, sec. 83. The subsequent conduct of the assignor or assignee, can not change the character of an assignment made in-good faith. Dickson et al. v. Eawson et al., 5 Ohio St. 224.
    2. If the assignment was made with the intent to hinder and delay or defraud creditors, that does not invalidate it. *S. & C. Stat. 712, see. 85; Hull v. Jeffrey et al., 8 Ohio, 391; Bancroft & Caffee, assignees, etc. v. Blizzard, 13 Ohio, 30; Floyd & Co. v. Smith, 9 Ohio St. 553; 4 Kent’s Com. 311; Shepherd v. MeEvers, 4 Johns. Ch. 136; De Bevors v. Sanford, 1 Hoffman’s Ch. 192; Burrill on Assignments, 347; Hyde & Co. v. Olds et al., 12 Ohio St. 595.
    
      James Olds, for a defendant in error:
    The simple question in this case is: Can a failing creditor combine and collude with his friend and accomplice in fraud, and by calling the transaction an assignment for the benefit of creditors, succeed in cheating and defrauding the creditors ? I do not understand that to be the law. Creditors are not in court asking for a disposition of this fund. They all agree that the transaction is a> fraud upon them.
    
      Bertrand Andrews, also for defendants in error.
   White, J.

In relation to assignments for the benefit of creditors, and transfers and assignments of property with intent to defraud ■creditors, the common law and the statute of frauds have been modified in this state by the act regulating the mode of administering assignments in trust for the benefit of creditors. S. & C. Stat. 709.

Under this act, assignments in trust may be divided into three classes:

1. 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.

2. Such as are made in contemplation of insolvency, with intent to prefer one or more creditors.

3. 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, are in accordance with the equitable policy upon which it is founded, and, if carried out in good faith, will necessarily effect a pro rata distribution of the assets among all the creditors.

*In the second class, section 14 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, section 17, 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. After the fraudulent character of the conveyance or transfer has been declared in a proper proceeding, the probate judge, on application of any creditor, is authorized to appoint an assignee. Such assignee is clothed with authority, by the statute, to represent the creditors, and is required 'to recover the property and administer it, as in other cases of assignments to trustees for the benefit of creditors.

The fraudulent grantee, standing on the fraudulent sale or conveyance alone, can derive no right under section 17 as against the ■creditors. That section is designed for their benefit, and as to them he stands in an atLtude of hostility. His title, being founded in fraud, can not be set up against those it was designed to injure.

All assignments in trust for the benefit of creditors, whether created by the voluntary act of the parties or by the statute operating upon their acts, are alike to be administered for the benefit of all the creditors.

The assignment in the present case belongs to the first class. It purports to convey and assign all the property of the assignor (except such as he may lawfully hold exempt from execution), to be held and disposed of by the trustee in the manner prescribed by the statutes regulating assignments for the benefit of creditors. It was accepted by the plaintiff, and, as he was bound to do by the •statute, he appeared and filed the same in the probate court, and gave, to the approval of the court, the security required by law for the faithful performance of his duties. If he had failed to do this within ten days after his acceptance of the trust, on application of the assignor, or any creditor, it would have been the duty of *the court to have removed him, and to have appointed another in his stead. The appointee of the court would have been required to take possession of all the property and administer the .same according to the statute.

By the acceptance of the trust by the plaintiff, the filing of the - assignment, and the giving of the required security, the probate court acquired jurisdiction over the trust and over the conduct of the plaintiff as assignee; and it became the duty of that court to see that the trust was faithfully administered for the benefit of all the creditors, in proportion to the amounts of their respective claims.

The assignment, if faithfully administered, could not work a fraud on any of the creditors. If fraud against them exists, it must arise from the withholding of assets by the assignor, or the misapplication of them by the assignee. This would be a fraud on the assignment, rather than in it.

Eor maladministration, the assignee is subject -to removal, and if he colludes with the assignor against the creditors, he certainly should be removed. He is also liable upon his undertaking for dereliction of duty.

The assignment itself being proper, and such as the statute contemplates, and having been put in due course of administration for the benefit of all the creditors, in accordance with the statute, the motives that may have been entertained by the parties to it, at the time it was made, should not invalidate it; and upon the trial .of the issue in this case, an inquiry into their character was immaterial. If the motives were fraudulent, the acts were lawful and proper; and were such as constituted the plaintiff the statutory trustee of the creditors, whose bona fides is not questioned) and who are the only beneficiaries in the trust.

But it is said that the assignor retained the possession of the-property in controversy, and that this was done with the connivance of the assignee. This, it is claimed, withdrew it from the-operation of the assignment.

The assignment does not rest alone upon the acts of the parties-It is aided by the statute, which defines the duties of the assignee,, the rights of creditors, and makes provision for subjecting the-property to the purposes of the trust.

*The fraudulent withholding of the property in controversy by the assignor did not impair the right of the general creditors to have it applied in execution of the trust, or of the assignee.to recover it from the defendants as execution creditors. They stand in the same position as the execution debtor. If he could not hold the property, neither can they. The consent of the assignee to the fraud would not alter the case. In attempting-to recover the property he was in the performance of a legal duty, and neither the assignor nor the defendants who stood in his shoes, could set up the prior delinquency to defeat the recovery. If the plaintiff had been removed for the alleged misconduct, his successor could have recoerved the property; and, while he remains charged with the execution of the trust, we perceive no reason why his powers should be less ample than would be those of his successor. The remedy, in such case of maladministration, is by proceedings in the probate court or by action against the assignee.

The following authorities bear upon the questions decided im this case: Klapp’s Assignees v. Shirk, 13 Penn. St. 592 ; Bancroft and Caffee, Assignees v. Blizzard, 13 Ohio, 30; Floyd & Co. v. Smith, 9 Ohio St. 547; Conrad & Bro. et al. v. Pancost & Co. et al., 11 Ohio St. 685; Hyde & Co. v. Olds et al., 12 Ohio St. 591.

Judgment of the district court and of the court of common pleas-reversed, and cause remanded to the court last named for further proceedings.

Scott, C. J., and Day, Welch, and Brinkerhoee, JJ., concurred.  