& Doolittle v. Southworth. principle is to be overruled, it must be done by the court of appeals. This is the ground on which the motion for a nonsuit was granted at the circuit, and it is the principle on which we deny the application for a new trial. New trial denied. SAME TERM. Before the same Justices. DOOLITTLE vs. SOUTHWORTH and others. Where an assignment, made by insolvent debtors, of their property, for the benefit of their creditors, contained a clause directing the assignee to pay, in the first class of debts, every sum of money owing by the assignors, whether then due or to become due and payable thereafter, for which D. & F. were endorsers or sureties, &c. Held, that under this provision of the assignment, persons who had accepted and paid drafts drawn upon them by the assignors, on the credit of property consigned to the drawees to be sold on commission, and which drafts had been endorsed by D. & F., were not entitled to be paid the amount of such drafts, out of the assigned funds, as preferred creditors of the assignors. Held also, that the acceptors of the drafts were to be considered the principal debtors, and the drawers only the sureties; and that consequently the assignors were not debtors and did not owe the sums of money secured by the drafts, within the meaning of the provision in the assignment. IN EQUITY. This was an appeal from a decree of the late vice chancellor of the fifth circuit. On the 4th of January, 1845, Charles Kathern and Harvey Doolittle, copartners in the mercantile business at Herkimer, under the firm of Kathern & Doolittle, being indebted to various persons and in various amounts, beyond their ability to pay, made an assignment of all their property, real and personal, to the complainant, in trust for the payment of the debts owing by the said firm, in the order and manner therein particularly mentioned. The complainant having accepted the trust, filed his bill in this cause against the defendants, creditors of Kathern & Harvey, and interested in the assignment, and in the property and effects Doolittle v. Southworth. thereby conveyed, and claiming to come within the preferred classes of creditors, alleging that by reason of the large amount and complex nature of several of the accounts and claims made and held by them against Kathern & Doolittle, and the intricacy of the various transactions set forth, and the various and conflicting claims that might be made against the complainant as such assignee, in respect to the trust property, the safety of the complainant and the interest of the said creditors required that the accounts should be taken and settled, and the proceeds of the trust property be paid over, by the direction and under the authority of the court of chancery. The bill then prayed for an order of reference for taking a statement or settlement of the accounts, and all disputed claims against the trust; that the assignment might be confirmed, and the debts provided for in the first and second classes thereof might be determined by the decree of the court; that the complainant's compensation as trustee or assignee might be adjusted and settled; and that the trust property might be disposed of and converted into money, under the authority and direction of the court; that the court would make such orders and decrees for the disposition of the proceeds thereof, and the order of the payment of the creditors, as might be proper; and that the complainant might be discharged from his trust, &c. The bill was taken as confessed as to the defendants Paul Custer, Luther Hall and Henry G. Harter. The other defendants appeared and put in answers; and the cause was heard, as to them, upon pleadings and proofs. The vice chancellor made a decree determining as to the rights of the several creditors of Kathern & Doolittle, under the assignment, and directing the order and manner in which their debts should be paid; and directing a reference to a master to take and state the accounts between the complainant as trustee, and the trust estate. By this decree it was determined that the defendants Southworth and Beach held no debt or demand against the assignors, provided for in the first four classes mentioned in the assignment; and the complainant was directed to pay to them no part of the funds realized by Doolittle v. Southworth. him under the assignment, until he should have first paid all the debts and demands provided for in the first four classes mentioned therein. The defendants Southworth and Beach appealed from that decree. W. & C. Tracy, for the appellants. C. H. Doolittle, respondent, in person. After hearing counsel for the respective parties, upon the appeal, THE COURT unanimously affirmed the decree appealed from, for the reasons stated by the vice chancellor in the opinion delivered by him on deciding the cause; which opinion they adopted as their own. It is as follows: P. GRIDLEY, V. C. The bill was filed by the complainant in this cause, to determine the conflicting claims of several of the parties interested in the provisions of the assignment mentioned in the pleadings and proofs; to obtain the directions of the court in relation to the disposition of the trust funds among the several claimants; and to close the trust as to all the parties to this suit, so as to bar their right hereafter to question the manner in which the proceeds of the assignment shall be distributed. The creditors who are interested in the fifth provision in the assignment, have not been made parties to the bill, for the reason, as mentioned in it, that they are very numerous, and that after satisfying the parties preferred in the preceding classes, there can in no event be a surplus in which they will have a right to participate. No decree therefore to be made in the cause, will conclude or in any manner affect their rights. It is suggested that Luther Hall, who is made a party, and who has suffered the bill to be taken as confessed, has obtained a verdict against Farmer & Doolittle, as sureties or guarantors of a debt of the assignors, Kathern & Doolittle; and therefore that although Farmer & Doolittle insist that they are not sureties, and intend to take the opinion of the supreme court VOL. III. 11 Doolittle v. Southworth. thereon, they ought to be protected under the provision for the first class of creditors in the said assignment, in the event that the court shall adjudge them to be liable. To effect that purpose, the decree may allow a sufficient amount of the trust funds to be retained to meet the contingency of this claim, being held to be one which belongs to the first class of debts to be paid. The defendant, Lathrop P. Stafford, has put in an answer, and claims to be preferred; but the proof has sustained the averment of the bill, that he was not only not a preferred creditor, but not a creditor of the assignors at all; and of course not entitled to any part of the proceeds of the assignment. The most important question in the case, however, arises upon a claim set up by the defendants, Southworth & Beach, to have a demand which they insist they have established against Kathern & Doolittle, paid out of the assigned funds, under the provision in favor of the class of creditors first preferred in the assignment. Kathern & Doolittle were country merchants and dealers in produce, residing and doing business in Herkimer county. The defendants were commission merchants and dealers in produce, in New-York. During the season of 1844, the firm of Kathern & Doolittle transmitted to the defendants, from time to time, large quantities of cheese, to be sold on commission, and by an agreement between the respective parties, drew upon them, and the drafts so drawn were accepted on the credit of the property thus placed in their hands. The defendants claim a balance, upon a just statement of the account, of about $1900 to exist in their favor, by reason of the acceptance and payment of drafts for the firm of Kathern & Doolittle, exceeding by that amount the net proceeds of their sales. This sum, I think, should be diminished by deducting one draft for $400, which was accepted on the individual account of one of the members of the firm, without the consent of the other member of the firm, and with the knowledge that it was in fact a transaction for the benefit of the individual who presented it, and which was not charged in the account of the firm, at the time. I also think the loss sustained on the lot of cheese sold in Philadelphia should be borne Doolittle v. Southworth. by the defendants. The defendants' place of business was in New-York, and the cheese was designed for the New-York market, and it must be implied as a part of the agreement of the parties, that the cheese was to be sold there. I think this is a necessary conclusion, in the absence of any assent of the owners, and of any proof of a general usage of the trade to send to other markets goods thus received to be sold on commission. And the witness, Carter, comes far short of proving any such usage. The difference, therefore, between the sum realized in Philadelphia and the market price of such an article as this in New-York, at the time, should be deducted from the balance claimed by the defendants. It appears, also, that the drafts accepted and paid by the defendants, which they insist are embraced in the class of debts first preferred, were respectively for $200, $900 and $1000, drawn by Kathern & Doolittle on Southworth & Beach, under the agreement aforesaid, endorsed by Farmer & Doolittle, discounted at the Oneida Bank, immediately transmitted to the defendants, and by them accepted and returned to the bank. It also appears, that when the first two of the said drafts were drawn and accepted and paid, the defendants had in their hands sufficient funds to pay all their existing liabilities for Kathern & Doolittle. The same fact is true of the $1000 draft, except as to a sum of less than one half of its amount. There can be no pretence, therefore, that these defendants were, as to their drafts thus accepted and paid, (with the exception above mentioned of the $1000 draft,) in any sense accommodation acceptors for Kathern & Doolittle. The discount and acceptance of these bills, transferred to the bank by intendment of law the funds in the hands of the defendants, on the credit of which they were accepted. But even notwithstanding an actual over-draft and an actual balance ultimately found against the drawers of a bill, under circumstances precisely similar to the facts in this case, it has been solemnly adjudged in the case of Bagnall v. Andrews, (7 Bing. 217,) that the acceptor could not be regarded as an accommodation acceptor, so as to render the drawer an incompetent witness, on the ground that he was the principal debtor. It also ap |