M. & P. Hutchins v. Sayles Hawley & William N. Peck, Trustees of J. & M. Greenough, 9 Vt. 295

The opinion of the court was delivered by Williams, Ch. J. It appears that Hawley executed' a note to the Greenoughs, which is unpaid. That, before the commencement of this suit, Peck bad purchased the note of the Greenoughs, paid them the value thereof, and notified Hawley of the purchase. The plaintiff endeavors, in this suit, to holdHawley as trustee of the Greenoughs, on the ground that the purchase,- by Peck, of the note,, was fraudulent and done with.ah intent to enable the Greenoughs to defraud their creditors.

If it is practicable to effect, this object in this action,, it will follow, that questions in relation to a fraudulent conveyance may be decided by the court, without the intervention of a jury. Nothing is disclosed shewing that Peck is in any way indebted to theGreenoughs. He has paid the value of the note, aud the only object of making him a party is to obtain from him a disclosure,, which may be evidence of a-fraudulent transaction-between-him and the Greenoughs,. and in order that the decision in this case may be conclusive upon his right hereafter to collect the note of Hawley.

In Massachusetts it- has been considered that this course may be taken. The impropriety, however, of thus passing upon the right of the assignee, without the intervention of a jury, led the court in that State to suggest that a legislative provision for a trial, by jury,, of the question,.whether trustee or not, would be highly expedient.

The greater impropriety, however, of compelling a trustee to be examined on oath, in relation to fraud’ in- a conveyance, or assignment, to which he was a party, when, by his answer to the interrogatories, he might subject himself to the penalty,, provided in the statute against fraudulent conveyances,, would lead us to hesitate, before we should say that any such proceedings ought to be sanctioned.

The design of the statute was to subject property, in action, to be taken by the creditors of an absconding or concealed debtori as property in possession is subject to be taken by the credievery debtor; and the statute evidently was not designed to try a question of fraud in the dealings between a debtor and his assignees. The creditor is placed in the situation of the absconding or concealed debtor, so far as to enable him to collect the money, goods, chattels, rights or credits of such debtor in the hands of his debtor.

It was said by the very able and learned judge, who delivered the opinion of the court, in the case of Sargeant v. Leland, 2 Vt. Rep. 280, “ that by money, “ rights or credits, is meant cash in the hands of the trustee, or “ debts due from him, belonging to the principal debtor ;” and it is very obvious, that there must be some trust, or indebtedness, as between the debtor and the trustees, before such trustees can be made liable by the process contemplated in this act.

Whether the trust must be such as could be enforced, or whether, in the case of a fraudulent trust, which should appear from proper testimony, and which could not be enforced between the parties, because they were both in pari delicto, the creditors could avail themselves of the provisions of this statute, is not a question arising in this case. In the case before us, there was neither trust nor indebtedness. Neither Peck nor Hawley had any property in trust for, nor were they indebted to the Greenoughs. The note of Hawley was transferred to Peck, and notice regularly given.

Hawley ceased, after such notice, to be the debtor of the Greenoughs, Peck purchased the note, paid the full value, and held it for his own benefit, and not in trust for the absconding debtor. If the purchase was made mala fide, the remedy of the creditors must be sought in some other action, and not in this. At the time the note was received, by no process could the creditors of the Greenoughs have appropriated the avails of it in satisfaction of their debts. In the view which the plaintiff takes of the transaction, it was only a consequence of the purchase that the Greenoughs were enabled to abscond.

We are very clear that the plaintiff cannot, from the disclosures made by the persons summoned as trustees, hold them accountable as such for the amount of the note in question. The judgment of the county court is therefore affirmed.