Case ID: ny-st-rep_55/html/0205-01.html
Source: Caselaw Access Project
Author: {"author": "Follett, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Engelbert Hardt et al., Resp’ts, v. Terese Schwab et al., Impl’d, App’lts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed October 13, 1893.)
    
    1. Assignment fob creditors—Fraudulent judgments.
    After confessing four judgments, upon which executions were immediately issued and levied, and on the same day, a firm executed an assignment for creditors. The firm property was bid in hy the creditors on the execution sale, hut not removed, and was taken possession of hy a new firm, composed of the brothers of the debtor, who placed the debtor in charge as manager. Held, that the facts supported a finding that the assignment was fraudulent and the judgments, execution and sale intended to defraud creditors of the firm.
    2. Same.
    A creditor having a just claim against a failing debtor must not use it for the purpose of placing the property beyond the reach of other creditors, and for the benefit of the failing debtor; if he does, he is liable to refund any sum that he has acquired by such attempt.
    Appeal by defendants, Terese Schwab and Joseph Lilienthal, from fin interlocutory judgment adjudging an assignment for creditors made by defendant, Emanuel Schwab, and certain judgments confessed by him to be void, and from final judgment determining the liabilities of the appellants.
    
      J.H. V. Arnold, for app’lt Schwab; Hays & Greenbaum, for App’lt Lilianthal; Blumenstiel & Hirsch, for resp’ts.
   Follett, J.

For some years prior to November 25, 1887, Emanuel Schwab and Jacob Schwab were partners in the city of New York, under the firm name of Schwab & Son. Before the ■date last mentioned Jacob Schwab died, leaving Emanuel Schwab the surviving partner of that firm. On the 25th day of November, 1887, Emanuel Schwab confessed four judgments—one in favor of Levi J. Gazan, for $2,021.47, which was entered and docketed at 11 o’clock A. M.; one in favor of Joseph Lilienthal, for $5,053.97, which was entered and docketed at 11 o’clock and 1 minute A. M.; one in favor of Terese Schwab, for $4,857.97, which was entered and docketed at 11 o’clock and 2 minutes A. M.; one in favor of Meyor Guggenheim, for $751.89, which was entered .and docketed at 11 o’clock and 3 minutes A. M." Executions were immediately issued upon said judgments, and, prior to the filing of the general assignment hereinafter mentioned, were levied upon All of the leviable assets of Emanuel Schwab. On the same day Emanuel Schwab, as surviving partner and individually, executed a general assignment to Herman Frohman for the alleged benefit of creditors, which was recorded in the office of the clerk of the city and county of Hew York at 11:80 A. M., immediately after the sheriff had taken possession of the assignor’s property under the aforesaid executions. On the 6th of December, 1887, the property was levied on by the sheriff, and was sold ubder said executions for $13,748.68. Of the property so sold—

Joseph Lilienthal purchased to the amount of....... $4,147 09

J. Frank “ “ “ “....... 6,358 87

J. Gazan “ “ “ “....... 764 72

J. Dreyfus “ “ “ “........ 622 87

Leopold Wallach was the attorney for the plaintiffs in these actions, and also for the assignor in the making of the assignment, and matters connected therewith. Hone of the property purchased by the above mentioned persons was removed from the premises where it was sold, being the place of business which Schwab & Son had occupied prior to the date of the assignment, but was left thereat, and taken possession of by a new firm, known as Schwab Bros., composed of two brothers of the assignor and judgment debtor. This firm employed the assignor and judgment debtor as general manager of the business of the new firm at a salary of $50' per week, and thereafter the business of Schwab Bros, was continued on the same premises occupied by the former firm of Schwab & Son, with the property purchased at the sale, no money being invested in the business by the new firm. The foregoing facts are not disputed, and from these and many other incriminating facts and circumstances the court found that the assignment was fraudulent and void, and that the judgments were recovered', the executions issued, and a sale made, with intent to delay, cheat and defraud the creditors of Emanuel Schwab. The appellants do not assert that any error was committed in the admission or exclusion of evidence on the trial, but insist, as their sole ground for a reversal, that the decision is contrary to the weight of evidence. This contention cannot be sustained. The evidence that these parties entered into a conspiracy to transfer the title to these goods to third parties to put them beyond the reach of creditors, and for the benefit of Emanuel Schwab, is overwhelming, and it. is quite useless to enter into a discussion of it. We think that the' judgment is not only supported by the weight of evidence, but that a decision in favor of these appellants would have been set aside as against the weight of evidence. A companion case, Abegg v. Schwab, 31 St. Rep., 139, has been before the court. That, was an action to set aside the assignment as fraudulent. In that, case, as in this, the defendants sought to reverse the judgment upon the ground that it was not sustained by the evidence. In discussing the question, the court said :

“ The debtor simply occupied the property under the weak device of a partnership between a couple of his clerks, who,. as we have seen, were his brothers, and agreed, nominally through these brothers, to pay the judgment creditors as he realized from the goods. There was a pretense that the judgment creditors bid at the sheriff’s sale to protect their judgments. But that was a very shallow pretense, for there was ample property to cover their judgments, and, besides, the biddings had no relation to the judgments. In fact, this pretense was worked out in a singularly inartistic and slovenly fashion,” reflecting but little credit upon the directing mind.”

This language is as applicable to this case as to the one then under consideration.

It is urged that it is established, beyond doubt, that the debts for which these judgments were recovered were just ones, due and owing from the judgment debtor to the judgment creditors. This may be true; but a creditor having a just claim against a failing debtor must not use it for the purpose of placing the property beyond the reach of other creditors, and for the benefit of the failing debtor. If he does, he is liable to refund any sum that he has acquired by such attempt, and, if it results in a loss of his claim, it is not too severe a punishment for the offense. The judgment should be affirmed, with costs.

O’Brien and Parker, JJ., concur.