State Nat. Bank of Maysville v. Ellison

(after stating the facts as above). Upon full consideration of this cause the court has reached the following conclusions:

1. That the probate court of Adams county, Ohio, had jurisdiction to raise the assignment and order the assigned property to be restored to the assignor. This proposition is established by Garver v. Tisinger, 46 Ohio St. 66, 18 N. E. 491. The court in that case recognized the necessity of the consent of all creditors, manifestly for the reason that by the assignment, the equitable title is vested in ■he creditors for whose benefit the assignee holds the legal title in trust. The probate court found in its order raising the assignment that all the creditors of Ellison assented thereto. That finding, so far as the validity of the raising of the assignment is concerned, is conclusive except upon direct attack. It cannot he collaterally impeached. Wehrle v. Wehrle, 39 Ohio St. 365.

The rule of the federal courts that the jurisdiction of the court can be inquired into collaterally applies to the initial proceedings whereby the court obtains jurisdiction of the parties or subject-matter. JThe order here in question was made in a pending proceeding wherein jurisdiction had previously been acquired. The distinction is clearly drawn in Noble v. Railway Co., 147 U. S. 173, 174, 13 Sup. Ct. 271.

2. The complainant is barred by its own laches. It was notified in the first week of November, 1889, that the assignment had been raised, and the property restored to the custody and management of Ellison. New debts were about to be incurred by him in conducting his individual business, and the entire situation was changed *356upon the assumption that the raising of the assignment was assented to by all the creditors. The complainant was at the time furnished with a copy of the order, and invited to continue, and did continue, to do business with Ellison thereafter. The complainant also obtained from Ellison & Shelton an assignment of all the assets held by that firm from which it collected a considerable portion of its claim. It appears from the record that it was then supposed by all concerned that those assets were ample to pay the complainant’s entire claim. Two years elapsed before complainant brought this suit. It was too late then for the complainant to object to the validity of the order raising the assignment.

Precisely this point was raised in the court of common pleas of Hamilton county in the case of St. Louis Nat. Bank v. Standard Wagon Co., on appeal from the probate court. There, before the first assignment of the Standard Wagon Company was raised, its president applied personally to the president of the St. Louis Bank for the consent of the bank to the raising of the assignment. The president of the bank declined to give a written consent, for the alleged reason that he might thereby impair certain security which the bank held; but he indicated that he would not object, stating that.the bank would look to the Standard Wagon Company, instead of the assignor, for its claim; and afterwards suit v'as brought by the bank against the Standard Wagon Company for the amount due. The assignment was raised in August. It was not until December following that the bank gave notice to any one that it intended to contest the validity of the order raising the assignment. It was held that, having led the bank company to believe that it was willing the assignment should be raised, and that it would look to the corporation for its money, and the company having acted on that belief, the bank was estopped from contesting the validity of the order by which the assignment wms raised. So here, the complainant having tacitly acquiesced in the raising of the assignment, and having waited two years before making any objection thereto, the creditors of Ellison meantime proceeding upon the assumption that the raising of the assignment was valid, the complainant ought not to be allowed to now question it.

It is not necessary to consider other points which are presented for the defense. The result is that the sale by Ellison to Sinton of the real estate referred to in the bill and in Sinton’s answer on November 19, 1891, for full consideration, is not open to attack, and the case must be dismissed as to Sinton.

3. As to the other defendants the case is quite different. On the 28th of October, 1889, Ellison executed a mortgage to the defendants, Blair, Pownell, and T. J. Shelton, in trust for the benefit of such of his creditors as had signed or should sign a composition agreement for an extension as set forth in the mortgage, which included several tracts of real estate, embracing the bulk of Ellison’s property. The complainant did not sign the agreement. Under section 6343 of the Revised Statutes of Ohio that mortgage inured to the equal benefit of all creditors in proportion to the amount of their respective claims. Every creditor, therefore, whether a creditor at *357large or a judgment creditor, was beneficially interested in the trust created by that mortgage, and entitled to proceed in equity for its enforcement in Ms behalf. The complainant has been excluded from all participation therein. It is entitled to a decree placing it upon an equality with those who signed the composition agreement, and requiring the mortgagees to recognize its claim, and pay dividends npon the full amount thereof. The validity of the composition agreement is not questioned. It is binding upon those who signed, but the trust mortgage, having been made in contemplation of insolvency, with intent to prefer the creditors who entered into the composition agreement, inures to the equal benefit of all creditors in proportion to the amount of their respective claims. The rule that individual property shall he applied first to the payment of individual creditors, and the surplus, if any, divided among partnership creditors, and that partnership property will be applied first to the payment of partnership debts, and, second, if there be any surplus, to the payment of individual debts, which is the rule recognized alike in the federal courts and in the courts of Ohio, will be applied in this case. What is said above with reference to dividends in favor of the complainant an ill be understood to be subject to this rule. Decree for complain.nt accordingly, with costs.