Loucheim v. Casperson

48 A. 1107, 61 N.J. Eq. 529, 16 Dickinson 529, 1901 N.J. Ch. LEXIS 115

• Court: New Jersey Court of Chancery
• Decided: April 19, 1901
• Status: Published

Opinion

G-rey, Y. C.

The pleadings in this cause have been stated with fullness because of the endeavor to bring into the cause matters not properly within the issues joined.

The first point which should be determined is the challenge of the complainants’ right to file a bill to enforce the assignment until they shall first have recovered- a judgment at law. The question has been settled in this state after some variance of judicial opinion, by the cases of Pillsbury v. Kingon, 6 Stew. Eq. 287, and Kalmus v. Ballin, 7 Dick. Ch. Rep. 296. In the latter case it was determined by the court of appeals that an assignee for benefit of creditors has the right, as a trustee to whom all the property of the assignor has been transferred, to bring a suit in this court to set aside a fraudulent disposition of the assignor’s estate, in avoidance of the assignment, to the extent that the property thus disposed of is needed to satisfy the demand of creditors who have proven their claims. The assignee owes to the proving creditors a duty to recover property thus fraudulently diverted, and upon request that he proceed, and failure to do so, the creditor acquires a status to act in his stead. Ibid. 297. The requirement that the assignee should be requested to proceed is, of course, based upon the assumption that he is living, and that he is not himself a party to the fraudulent disposition of property which is attacked. If the assignee be a participant in the fraud-doing, the creditors who have proved their claims, and have thus become entitled to have the trust performed, may themselves ask the aid of this court to set aside the fraud and secure so much of the property conveyed in avoidance of the assignment as may be necessary to satisfy their claims. They may assert their rights in this way without first obtaining judgment. Terhune v. Sibbald, 10 Dick. Ch. Rep. 237. If the assignee be dead when the fraud is discovered, as in this case, to deny the creditor’s right to sue would be to deny him any remedy.

Several creditors who have not proved their claims under the assignment have obtained themselves to be admitted as complainants, and it is insisted that they have a slatus to have their claims determined and enforced in this suit. It is insisted that they may come in as complainants because the bill is an open one to all creditors of Joseph L. Casperson, &c., and secondly, because this suit is sought to be enforced, not only against the property which passed to the assignee under the assignment, but also against subsequently acquired property of Joseph L. Casperson, against which property (Joseph L. Casperson being dead) the non-proving creditors contend they have a stafois to sue, under the ruling in Haston v. Castner, 4 Stew. Eq. 697. As to the first suggestion, that the non-proving claimants under the assignment may join as complainants, it cannot be-admitted that the original complainant, who has proved his claim to the assignee, and therefore has a status to enforce the assignment, has power, by mere invitation, to enable other creditors not within the trust to join in its enforcement and thereby receive its benefits. As to the other point, this bill is distinctly in its premises and prayer a suit to enforce the assignment, its remedies can go no further than the securing the restoration to the cestuis que brusieni under that trust, of the property of which they have been deprived by the fraud of the trustee. Obviously those not within the terms of the trust cannot share in its benefits, either of procedure or of recovery. This was distinctly declared in Kalmus v. Ballin, 7 Dick. Ch. Rep. 297. The case of Jones v. Davenport, 17 Stew. Eq. 34, in which three suits against the estate of a deceased debtor were heard together, cited to sustain the claim of the non-proving creditors, is not in point. In that case, though heard together, the suits were not consolidated, nor were they settled,' as is contended, by one decree. A careful reading of the last paragraph of the report of the case (at p. 52) will show that the vice-chancellor declared the several parties to be entitled to several decrees, variant in their character, each according to the merits of his separate bill.

The ease of Haston v. Castner, ubi supra, cannot aid the contention of the non-proving creditors, that a creditor-at-large may, without judgment, file a bill to set aside the fraudulent conveyance of the personal property of his deceased debtor. That case is expressly declared to be based on the statute which makes such claims against decedents, when they have been admitted by the executor, to be liens on the lands of the deceased debtor. The statute does not extend to make such claims liens on the personal property of the deceased debtor, and in the present case the deceased debtor, Joseph L. Casperson, does not appear to have owned any lands.

The complainants’ counsel has .also sought to extend the reach of the bill, to make the defendant Robert Casperson liable for damages to the assigned estate, occasioned by the assignee’s misbehavior in so conducting the sales of the assigned goods that ■ their price was greatly depreciated. Whether such a claim could be here entertained at all need not be looked into, for there is no evidence which charges the defendant Eobert Casperson with any liability for a participation in the assignee’s misconduct in conducting the sales. The only basis of claim against Eobert Casperson in this suit is that he became the voluntary recipient of values, which, at the time of the assignment, belonged to that trust, and which were then fraudulently kept back from those entitled to have them, namely, the creditors who proved under the assignment. This phase of the case is hereinafter discussed.

The remaining questions involve points of law and of fact. The bill alleges that J oseph L. Casperson, at the time of making his assignment to his brother, William E. Casperson, fraudulently retained and concealed a considerable part of his assets from his creditors, with the assent of his brother, the assignee; that, at the auction sale of the larger portion of the goods, William E. Casperson, the assignee, procured Wood to purchase the goods, Avithout consideration, who immediately conveyed them to William, without consideration; that William accounted for the purchase-price in his assignee’s account, out of the funds which Joseph retained, and thereafter the store was conducted in William’s name, but all the business was done by Joseph, for his own profit.

The assignment was made on February 20th, 1884. By operation .of laAv it passed all of the property of Joseph D. Casperson to his assignee, William E. Casperson, whether that property was actuality delivered or not. All moneys belonging to J oseph, Avhich he had in William’s hands at that time, passed, by the assignment, for the benefit of the creditors who might thereafter prove their claims. The piano which belonged ■ to Joseph’s Avife, and which, on his death, came to her surviving husband jure mariti, belonged to Joseph at the time of the assignment, and was part of the assigned estate. When Eobert received the $100 for it from the assignee, William E. Casperson, he had no right to the money—it belonged to the assigned estate.

The bill seeks ail accounting only from the defendant Robert Casperson. The prayer does not ask any accounting against the defendants, the executors of William R. Casperson.

The evidence consists of a large number of exhibits, checkbook stubs and other memoranda, as well as parol testimony. The proofs show that for a long time before the assignment J oseph L. Casperson had been accumulating a considerable sum of money in the hands of William R. Casperson. There is also evidence indicating a disposition, on Joseph’s part, immediately before the assignment, to turn his goods into cash. At the time of the assignment this considerable sum of money which J oseph had in William’s hands was neither mentioned in the schedule annexed to the assignment, nor was it subsequently accounted for by the assignee. At the auction sale Wood, at William’s request, bought in a large- quantity of the stock of the store, for which he paid nothing. Wood never, in any way, took possession of the goods, but William, the assignee (who was Joseph’s brother), at once took the goods, opened the store and nominally carried on the business. In fact, Joseph was not only in actual charge, but was recognized by William as the actual owner of the business to the same extent as before the assignment. This mode of conducting the business' continued until September, 1893, when Williain died, and on March 13th, 1893, his executors voluntarily transferred the stock and store business to Robert, the son of J oseph.

Both sides agree that, under this assignment from the executors of William, Robert Casperson took title to the stock in the store, &c. There is no claim or pretence that B. Frank Wood paid anything for his purchase, or received anything for his bill of sale. It is both proven and admitted to have been a mere pretence. Nor is there any claim that Robert paid anything for the assignment of the stock to him. It was a voluntary transfer, without any consideration whatever, and gave -to Robert Casperson the values which his father had in William’s hands, concealed from his creditors, at the time of the assignment, and which were used by William in the purchasing and re-stocking of the goods of the store. The bill of sale from Wood to William R. Casperson, dated March 33d, 1884, is producecl, and the transfer from William’s executor to Robert on-March 13th, 1893, is endorsed on the bill of sale. William R. Casperson, the assignee, did account for the price bid by Wood at the auction sale, but he had Joseph’s money in hand with which to pay it, and it is explicitly proven by Wood himself that he paid nothing for his purchase.

The defendant Robert Casperson, claims that he cannot be called upon to respond for money earned by his father in carrying on the business after the assignment. If this were the whole case, the contention would be good. The proof shows, however, that when, immediately after tlie assignment, the store was re-opened in William R. Casperson’s name, but, in fact, by Joseph, under that cover, Joseph’s money, which had been previously hidden in William’s hands, was invested in the purchase of new stock and other expenditures in carrying on the business.

This money belonged to Joseph’s creditors who proved under the assignment. It remained in the business, and came to the defendant Robert Casperson, in 1893, by the transfer of the business from William’s executors. Robert probably had notice of the fraudulent concealment of assets from the creditors, and of their subsequent use in the business. He was certainly afware of the fact that the store was pretended to be carried on in William’s name, and of the fact that it was really owned by Joseph. He recognized entries on William’s check stubs, as a showing of the moneys that came in from the store, entered on William’s book, and the expenditures therefrom for Joseph’s benefit in carrying on the business. Whether Robert had notice or not of the fraud at the time it was worked is, however, of little significance, for the proof is entirely clear that he was not a purchaser of the stock for value; on the contrary, he was, both from his father and from the executors of William, a mere donee, who paid nothing. It is therefore entirely equitable that Robert Casperson should account for the values which, at the time of the assignment, belonged to Joseph, but which were kept away from his creditors by the fraudulent collusion of Joseph and William, the assignee, and which have since, by voluntary gift, come to him (Robert Casperson).

There is evidence that considerable sums of money were paid to Robert by Joseph and by William, at Joseph’s request, since the assignment, and the complainant contends, that as these were voluntary advances from Joseph from the earnings of the store, in which the assigned estate moneys were invested, Robert should also account to the creditors under the assignment for these advances. The store was not stocked and run solely with moneys concealed from the creditors. It is quite evident that other money, from other sources, must have been put in for the re-stocking of the store. The cash advances to Robert were made from the general profits of the business. Robert’s counsel insists that the assigmnent creditors have no right to call upon Robert for moneys advanced to him by Joseph from the earnings of his business, after his assignment. It is, of course, true that the assignment creditors have no right to the subsequent earnings of the assignor. But the evidence shows that Joseph mixed the concealed assets, which belonged to his assignment creditors, with other moneys, probably borrowed from William, and with his own earnings. The confusion was occasioned by Joseph’s wrongful and fraudulent act. Neither he nor Robert, his voluntary beneficiary, can profit thereby. The creditors, as costáis que irusteni, may, in such cases, either have a return of their principal moneys, fraudulently concealed, with interest, or, if clear proof be made of profits derived from the use of trust funds, they may require an accounting for all profits made by their use. In this case the evidence is not sufficiently specific to define what the profits of the business were. The mere fact that some trust funds were put in the business does not entitle the cesLuis que Irusleni to all the profits of the business.

The creditors will receive their equitable rights as nearly as the evidence warrants, by restoring to them from the intermingled property the' amount shown to have been kept from them, at the time of the assignment, with interest from the date of the assignment.

The defendant Robert Casperson strenuously denies that, at the time of the assignment, Joseph had any money’s in William R. Casperson’s hands which were kept from the assignment creditors. One witness who testified to this was Charles Casperson, another brother of Joseph. Charles appears to have been employed as a clerk in the store. But Charles also testifies that William R. Casperson, the assignee, covertly purchased the assigned goods at his own sale by procuring Wood to bid them in. He admits that the goods so purchased were to be held for Joseph, and that the latter always afterwards conducted the business. When this witness was asked who paid for those goods, he said he could not answer the question. Robert Casperson himself testifies that, though the goods were bought under the name of William R. Casperson, they were, in fact, from the time of the auction sale, Joseph’s goods. Robert also admits that, when he finally sold out the business, he received, in all, about $2,200, accruing from different sales of the goods, &c.

The denials of these witnesses that William was, at the time of the assignment, the holder of large sums of Joseph’s money, are of little weight against the contemporaneous memoranda produced, kept by William R. Casperson himself, and admitted by Robert Casperson to state the cash account between his father (Joseph) and his uncle William. These show that, before and at the time of the assignment, William had been acting as Joseph’s banker, and that he then had in his hands a considerable sum of Joseph’s cash which was, by law, part of the assigned estate. As above stated, these moneys were not accounted for to the assignment, but were kept back from the creditors and afterwards used for Joseph’s benefit in carrying on the business. The defendant contends that these moneys were loans by William to Joseph. There may have been loans made by William to Joseph, but there is no sufficient proof of the fact. There is, however, an explicit showing that William had a considerable amount of Joseph’s money for which he did not account. A cash account kept by William on his checkbook covers, and other written memoranda made about the time of the assignment, show that the amount of Joseph’s money in William’s hands was increased shortly before the assignment. These moneys in William’s hands were just as much assets of Joseph’s, which should have been applied for the benefit of the creditors under the assignment, as the stock in the store or other visible property. The title to the moneys of Joseph in William’s hands at the time of the assignment became part of the assigned estate by operation of law. When these moneys were subsequently used to carry on the business, to re-stock the store, which was given to the defendant Robert Casperson, without any consideration paid, he received, to the extent of these values, a part of the assigned estate, which he is bound to return to that trust. The amount which William R. Casperson’s memoranda cash account shows he had in his hands belonging to Joseph at the entry next before the date of the assignment is $1,274.94. Robert, as voluntary transferee of the business, should account for this sum, with interest from the date of the assignment. He has received by the transfer of the business and the payments made, therefrom to him much more than this sum. This, however, with the price of the piano, is, under the pleadings and proofs in this cause, the extent to which the defendant Robert Casperson should respond. If a less sum will suffice to satisfy the claims of the complainant and other creditors which have been proven under the assignment, Robert will, of course, be called upon to pay only so much as may satisfy the balance due on those claims. What the residue owing upon the proven claims is, can be readily ascertained from the statement of the dividend of the assigned estate. The creditors are entitled to so much as will restore to them the amount they have lost by the diversion of the assets of the assigned estate into Robert Casperson’s hands. A receiver will be appointed, if it be necessary, in order to carry into effect the unperformed trusts of the assignment deed.

The evidence does not warrant any decree that the house in Camden was bought by Robert with assets kept from the assignment. Nor is there any evidence which justifies the allowance of an injunction, at the instance of the assignment creditors, restraining Robert Casperson from further prosecuting his suit against the executors of William R. Casperson in the New Jersey supreme court. The complainants do not themselves ask for any accounting to them in that matter. The evidence neither shows that the balance in William R. Casperson’s hands, at the time of his death in 1892,' was part of the original assigned estate, hidden away in February, 1894, nor is it proven, with sufficient particularity, that it was derived from the profits on the hidden moneys.

A decree will be advised according to the views above expressed.