Case ID: nys_33/html/0518-01.html
Source: Caselaw Access Project
Author: {"author": "\n      MARTIN, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(86 Hun, 415.)
    McNANEY v. HALL et al.
    (Supreme Court, General Term, Fourth. Department.
    May 4, 1895.)
    1. Fraudulent Conveyances—Action to Set Aside—Who May Sue.
    Creditors cannot sue to set aside a deed executed by their debtor shortly before he made an assignment for benefit of creditors, but the action can he maintained only by the assignee.
    3. Same—Proof of Fraud.
    The fact that a debtor exhibited .an incorrect list of his assets to his creditors, with false representations as to the value, and told the creditors that if they would not take the property at such valuations in satisfaction of their debts they would not get anything, is not conclusive evidence that an assignment for benefit of creditors subsequently made by him was made with fraudulent intent, but may be considered as bearing on that question.
    3. Assignment for Benefit of Creditors—Schedules by Assignee.
    Where the assignor neglected to make the schedules, and the assignee made them, but omitted some small items of property, the assignment is not thereby invalidated.
    4. Appeal—Review—Weight of Evidence.
    Findings of the trial court will not be disturbed on appeal unless they are against the weight of evidence, or the proofs so clearly preponderate in favor of a contrary result that it can be said with reasonable certainty the trial court erred.
    6. Judgment—Res Judicata.
    A judgment in an action to set aside a general assignment as in fraud of creditors is not conclusive in a subsequent action by another creditor, suing in behalf of himself and all creditors similarly situated, to set aside the assignment.
    Appeal from special term, Chemung county.
    Action by John McNaney, in behalf of himself and all other judgment creditors of Francis G-. Hall similarly situated who shall hereafter join in this action, against Francis G-. Hall, William S. Carr, and Timothy S. Pratt, as executors of Samuel S. Hamlin, deceased, and Samuel C. Taber, as assignee for the benefit of creditors of Francis Gr. Hall, to set aside a general assignment, to set aside certain deeds, etc. The complaint was dismissed on the merits, with costs, and plaintiff appeals.
    Affirmed.
    Argued before HARDIN, P. J., and MARTIN and MERWIN, JJ.
    Baldwin & Baldwin and Alex. Gumming, for appellant.
    Charles J. Bissell, for respondent Francis Gr. Hall.
    Reynolds, Stanchfield & Collin, for respondents William S. Carr and others, executors, etc., a.nd Samuel 0. Taber, as assignee, etc.
   MARTIN, J.

The purpose of this action was twofold: (1) To set aside a general assignment for the benefit of creditors made by the defendant Francis G. Hall to the defendant Taber; and (2) to set aside certain deeds, assignments, bills of sale, and other transfers and conveyances made by the defendant Francis G. Hall to the defendant Samuel S. Hamlin. The ground upon which the plaintiff sought to set aside the general assignment and the other conveyances mentioned was that they were made with an intent to hinder, delay, and defraud the creditors of the defendant Hall.

On August 21, 1884, the plaintiff’s assignor recovered a judgment against the defendant Hall for $1,050.21. An execution was issued thereon, which was returned wholly unsatisfied. Subsequently, and in March, 1889, the judgment, which was the basis of this action, was duly assigned to the plaintiff. For several years prior to July 21, 1884, the defendant Hall was engaged in business as a private banker at the city of Elmira. On that day he suspended payment at his bank, and closed the doors, claiming that he was unable to continue business and meet his obligations. At that time he was the owner of a large amount of valuable real and personal property, and was indebted to a large number of persons in an amount which exceeded the value of such property. After his suspension, the depositors and other creditors of the defendant Hall called upon him for a settlement of their claims. He made a list of his property, and placed an estimate of value opposite each piece, which he showed his creditors as a true list and a correct statement of their value. The list did not specify all his property, and the values were exaggerated. In his negotiations with his creditors, he offered them the property mentioned in the list at the prices designated, in payment of their claims, and to some of them stated that he had no other property, and could pay in no other way, and that if they would not take the property at_ the prices they would get nothing, and would get nothing if they sued. Between the 21st of July and the 1st of August he compromised with some of his creditors by transferring to them a portion of his property at excessive prices, and thus paid and extinguished about $85,000 of his indebtedness. These transfers were made and received in good faith, without any intent to hinder, delay, of defraud his creditors. Among the creditors of the defendant Hall were Samuel S. Hamlin and Betsy P. Hall. The latter transferred to the former all her claims against the defendant Hall on July 24, 1884. Between the 21st of July and the 1st of August the defendant Hall transferred to the defendant Hamlin the real estate and property mentioned in the complaint. These transfers were in form absolute, but were made and accepted upon the agreement between the defendants Hall and Hamlin that the latter should accept them as collateral security for the indebtedness of Hall to him, and that he should be responsible only for what he received out of the property so transferred. The defendant Hall was indebted to Hamlin at that time in a sum exceeding $60,000. After these transfers were made, and on the 1st of August, 1884, the defendant Hall made a general assignment to the defendant Taber of all his property, not exempt by law, for the benefit of his creditors. The assignment contained no preferences except as to the wages and salaries of his employés. The defendant Taber accepted the trust under such assignment, qualified as such assignee, took possession of the estate, and entered upon the discharge of his duties, and continued to act as such assignee until the commencement of this action. The defendant Hall having omitted to make and file any inventory or schedule of the assigned estate, one was made and filed by the assignee. By inadvertence or mistake on the part of the assignee, and without fraud or fraudulent intent, the inventory or schedules were defective in omitting therefrom the property transferred by the defendant Hall to Hamlin and others as collateral security. The foregoing, briefly stated, are the facts found by the referee. He also found that the general assignment for the benefit of creditors and the transfers and conveyances made to the defendant Hamlin were made and accepted in good faith, and without any intent to hinder, delay, or defraud the creditors of the defendant Hall, and held that the defendants were entitled to a judgment dismissing the plaintiff's complaint with costs, and directed judgment accordingly.

The important issues in this case were whether the general assignment made by Hall, and the transfers and conveyances made to Hamlin as collateral security for the debts held by him against Hall, were made with an intent to hinder, delay, or defraud his creditors. We deem it unnecessary to state in detail all the various acts, circumstances, and transactions which are relied upon by the appellant as evidence that the assignment and transfers in question were made with a fraudulent intent. The evidence disclosed a variety of circumstances and many transactions from which, if unexplained, an inference of fraud might perhaps have been drawn. The defendants have, however, introduced evidence which has explained the circumstances and transactions thus relied upon in a manner which, if believed, would show that the purpose of the transfers in question was an honest one, and that they were made in good faith. While the evidence shows that Hall transferred to Hamlin a large amount of real and personal property, yet it also discloses that he was largely indebted to Hamlin. These transfers were as security only, so that, if the property transferred exceeded in value the amount of Hamlin’s debt, the creditors of Hall would have the benefit of any surplus there might be. It was at least natural that Hall should have secured his indebtedness to Hamlin, who was a relative, and had been his friend from his youth up, and advanced to him these large sums of money. If his purpose in making these transfers was an honest one, and it was intended thereby to secure the debts owing Hamlin, and that was its only purpose, he had a right to thus secure him, and the transaction was valid. Bank v. Williams, 128 N. Y. 77, 28 N. E. 33; Williams v. Whedon, 109 N. Y. 333, 337, 16 N. E. 365; Paper Co. v. O’Dougherty, 36 Hun, 79, affirmed 99 N. Y. 673; Knapp v. McGowen, 96 N. Y. 75, 86; Dorr v. Beck, 76 Hun, 540, 28 N. Y. Supp. 206; Sumner v. Skinner, 80 Hun, 201, 30 N. Y. Supp. 4; Murphy v. Briggs, 89 N. Y. 446, 452. The fact that Hall agreed to take charge of the property and to manage it for Hamlin was perhaps a circumstance to be considered by the referee in determining the question of fraudulent intent. But when it is remembered that Hamlin was an old man, who was infirm, unable to assume the care and labor incident to looking after this large property, and that Hall had previously acted for him in the transaction of his business, it seems but natural that it should have been agreed between them that Hall should look after it for him. With this explanation the potency of that circumstance as an evidence of fraudulent intent is very much diminished, if not substantially overcome.

Again, it is contended that the amount of the property transferred was large. This is true, but the debts it was given to secure were also large. The property transferred was not so greatly in excess of the debts to be secured as to constitute a circumstance of much weight bearing’ upon the question of fraud. Indeed, the referee has found that the Value of the property transferred was in fact less than the amount of the debts owing by Hall to Hamlin. Moreover, if the general assignment was valid, this action, under the allegations of the complaint, could not be maintained by the plaintiff to set aside the transfers and conveyances made to Hamlin. Under such circumstances, the action could only be maintained by the assignee, as the right to assail those conveyances on the ground of fraud was vested in him alone. Spring v. Short, 90 N. Y. 538; Crouse v. Frothingham, 97 N. Y. 105, 113; Loos v. Wilkinson, 110 N. Y. 195, 209, 18 N. E. 99; Prentiss v. Bowden, 145 N. Y. 342, 40 N. E. 13.

"When we consider the question of the validity of the general assignment, we find that the evidence renders it quite clear that at the time of his suspension the defendant Hall did not intend to make a general assignment for the benefit of his creditors, but believed that he could adjust his debts by distributing among his creditors all the property owned by him at excessive prices, and that he could borrow sufficient money to pay the remainder after his property had been so distributed. This course was industriously and effectively pursued by him until his creditors, by attachments, issued and threatened, rendered an assignment practically necessary.

But it is said that when the inventory was filed the property transferred to Hamlin as collateral security, and property transferred to some of his other creditors as collateral, and some other small items of property, were omitted from the schedule, and hence the referee should have found that the general assignment was made with an intent to hinder, delay, and defraud his creditors. The evidence discloses that the schedules were made by the assignee, and not by the assignor. It is true, however, that he was consulted in regard to making them. We do not think the act of the assignee in making the schedules in any way reflects upon the act of the defendant Hall in making the assignment. Denton v. Merrill, 43 Hun, 224, 232. The question here was as to the intent of the defendant Hall at the time the assignment was made. If his purpose was honest, the instrument was valid. Hardmann v. Bowen, 39 N. Y. 200. But the subsequent acts of the assignor were admissible to reflect upon the original intent. Shultz v. Hoagland, 85 N. Y. 464. The most, therefore, that can be said in this case, is that the omission of the assignor to correct the schedules made by the assignee, by inserting therein the property omitted, was a circumstance to be taken into consideration by the referee in determining the intent with which the assignment was made. If, as the referee found, the omission was not an intentional one, but was the result of forgetfulness or oversight on the part of the assignor, or if he supposed it unnecessary, then little weight was to be given to such omission, especially as all the facts relating to that property were known to the public, and had been testified to by Hall when examined under the assignment act, so that the actual situation must have been known to his creditors. As was said by Finch, J., in the Shultz Case:

“It would be hard to find any schedules absolutely perfect, or any debtor who could inventory every item of his property with strict accuracy. Room must be allowed for honest mistake, and, possibly, even for careless and thoughtless error.”

See, also, Peyser v. Meyers, 135 N. Y. 599, 32 N. E. 699, and Ellis H. Eoberts & Co. v. Buckley, 145 N. Y. 215, 39 N. E. 966.

It is also said that the transfers of property to pay a portion of his creditors, and of other portions of his property to secure other of his creditors, including the defendant Hamlin, his wife, his brother, the Chemung Canal Bank, and Charles J. Langdon, were evidence-that the assignment was made with an intent to defraud his creditors. Each of these transfers was a circumstance to be considered by the referee in determining this question of intent, and yet, when it is. found that in each of those cases the defendant Hall was in fact indebted to the creditors secured, and that the property transferred as collateral for such debt was not greatly disproportionate to the debt sought to be secured, the referee might well have been led to the conclusion that those circumstances were entitled to but little weight in determining the question of tire intent with which such general assignment was made.

The appellant also contends that the exhibition by Hall of an incorrect list of his assets, his representations concerning it, and his' threats to creditors, were evidence of an intent to defraud his creditors by the assignment which was subsequently made. It may be assumed, we think, that this was a circumstance which the learned referee was authorized to consider in determining that question, but it was neither controlling nor conclusive evidence of fraud.

Upon all the evidence in the case, the referee has found that the general assignment made by the defendant Hall and the transfers by him to the defendant Hamlin were made in good faith, for a valuable consideration, and without any intent to hinder, delay, or defraud the creditors of the defendant Hall. A patient and careful examination of the great volume of evidence contained in the appeal books in this case has led us to the conclusion that these findings of the referee are sustained by the evidence. The evidence in the case was conflicting, and it is quite possible that different inferences might have been drawn, and different conclusions reached, from the testimony of the witnesses and the transactions and circumstances developed by the evidence. This was clearly a case where the ■ questions at issue were of fact for the referee, and the findings were not so plainly against the weight of evidence, nor did the proof so clearly preponderate in favor of a contrary result, that it can be said with reasonable certainty that the referee erred in his conclusion. Where a review of the facts by an appellate tribunal is proper, it is under no obligation to arbitrarily adopt the conclusions of the trial court; yet great consideration will be accorded to its opinions, especially where there is evidence on both sides, and the mind of the court has been called upon to weigh conflicting statements and inferences, and to decide upon the credibility of opposing witnesses. In reviewing the determination of a trial court in such a case, the appellate court is not warranted in reversing upon the sole ground that in its opinion the trial court should have reached a different conclusion. To justify such a course, it should appear that the findings of the trial court were against the weight of evidence, or the proof so clearly preponderated in favor of a contrary result that it can be said with reasonable certainty that the trial court erred in its conclusion. Westerlo v. De Witt, 36 N. Y. 340; Crane v. Baudouine, 55 N. Y. 256; Sherwood v. Hauser, 94 N. Y. 626; Baird v. Mayor, etc., of City of New York, 96 N. Y. 567; Lowery v. Erskine, 113 N. Y. 52, 20 N. E. 588; Devlin v. Bank, 125 N. Y. 756, 26 N. E. 744; Barnard v. Gantz, 140 N. Y. 249, 35 N. E. 430. We are of the opinion that, under the doctrine of the authorities cited, the findings of the referee should be upheld.

The appellant, however, contends that a former judgment, in an action in which John R. Purtell and another were plaintiffs, and Francis G. Hall and Samuel G. Taber were defendants, was a bar or conclusive evidence against the defendants Hall and Taber. That action was brought by the plaintiffs therein against the defendants for the sole purpose of setting aside the general assignment of Hall to the defendant Taber. The judgment adjudged the assignment to be fraudulent and void, and set it aside only as against the plaintiffs in that action. That action was by the plaintiffs therein alone, and not in behalf of other creditors. The plaintiff in this action was not a party to that action, nor a privy of the plaintiff therein, and hence was in no way bound by the judgment. Indeed, he was not a creditor of Hall until March, 1889, when he purchased the judgment upon which he bases his right to maintain this action. We think the judgment in that action was not an estoppel or conclusive evidence against either of the defendants in this action, and the referee properly so held. Shipman v. Rollins, 98 N. Y. 311, 330; Moore v. City of Albany, Id. 396, 409; Masten v. Olcott, 101 N. Y. 152, 160, 4 N. E. 274; Quinby v. Carhart, 133 N. Y. 579, 30 N. E. 972.

While an examination of the requests to find proffered by the plaintiff and those proffered by the defendants shows that in some instances the learned referee has made findings upon such requests that are perhaps somewhat inconsistent, still we find nothing in those findings which materially affects the questions at issue in the case, and therefore they furnish no reason to disturb the judgment. We have examined the various rulings to which our attention has been called by the appellant, but have discovered no error in them that would justify a reversal. Nor do we deem it necessary to discuss them further than to say that each of the rulings has been carefully examined and considered by us. We are of the opinion that the findings of the referee in this case are fully sustained by the evidence, that no exceptions were taken which would justify a reversal, and that the judgment herein should be afiirmed. Judgment affirmed, ■with costs. All concur.