Case ID: ad_14/html/0274-01.html
Source: Caselaw Access Project
Author: {"author": "Ingraham, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Charles T. Schulze, Respondent, v. Robert R. Sizer, Receiver of the L'Hommedieu Box and Lumber Company, Appellant, Impleaded with the Sims Lumber Company.
    
      Assets of one corporation fraudulently tmnsfewed to another.— remedy of a creditor of the former against a receiver of the latter — a new receiver is unnecessary — burden of proof as to the fraud.
    
    A judgment creditor of a lumber company,, whose assets'have been, as alleged, fraudulently transferred to another corporation, is not entitled to have all the property of the latter company taken out Of- the hands of a receiver, appointed in proceedings for its voluntary dissolution,, and to have such assets applied by a newly-appointed receiver to the payment of his judgment, where it appears that the latter corporation purchased some of its assets , of parties other than the first-mentioned company, and there is. nothing to show what assets are and what assets are not equitably applicable to the payment of the judgment.
    The burden of proof is upon a judgment creditor, who alleges that a transfer made by a corporation is fraudulent,, to establish the fact.
    
      Semble, that where property of á corporation is already in the hands of a receiver' it is’not necessary, in order to protect the rights of a judgment creditor, that a new receiver should be appointed. .
    Appeal by the defendant, Robert R. Sizer, receiver of the L’Hommedieu Box and Lumber Company, from a judgment of. the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Hew York on the -5th day of Hovember, 1896, upon the decision of the court rendered after a trial at the Hew. York Special Term. •
    
      John G. Tomlinson, for the appellant.
    
      James J. Allen, for the respondent.
   Ingraham, J.:

This action appears to be one in the nature of a creditor’s bill to set aside a transfer of property by the defendant, the Sims Lumber Company, to a corporation known as the L’Hommedieu Box and Lumber Company, to require the said box and lumber company, and the defendant Sizer, as receiver of such corporation, to-account to a receiver, to be'appointed in this action, for all the property and. the proceeds of all the property received. by either , of them from the- defendant, the Sims Lumber Company. After a trial at Special Term, a judgment was entered appointing a receiver of all the property in the hands of the defendant Sizer, as receiver of the L’Hommedieu Box and Lumber Company, and appointing a referee before' whom Sizer, as receiver, is to account to the receiver appointed in this action ; and out of the property that shall come into the hands of such receiver he is to pay to the plaintiff the amount of his judgment against the Sims Lumber Company. This judgment thus takes out of the hands of the defendant Sizer, as receiver of the L’LIommedieu Box and Lumber Company, all the property in his hands as such receiver, appoints another, receiver of. it, and requires the other receiver to apply this property to pay the plaintiff’s judgment against the Sims Lumber Company. This somewhat astonishing result is based upon the following facts: The Sims Lumber Company was. a foreign corporation, doing business in this State. On the 24th day of July, 1894, the Sims Lumber Company transferred its plant and factory to the L’Hommedieu Box and Lumber Cbmpany, the consideration of that transfer being the capital stock of the said L’Hommedieu Box and Lumber Company. Subsequently, on the 23d day of October, 1894, a proceeding was commenced for the voluntary dissolution of the said L’Hommedieu Box and Lumber Company, in which proceeding, on October 23, 1894, the defendant, Robert R. Sizer, was appointed. temporary receiver of the said L’Hommedieu Box and Lumber Company, and subsequently, on February 20, 1895, was appointed permanent receiver and has duly qualified as such receiver. Under such appointment as permanent receiver of this corporation, the said defendant is in possession of that portion of the property transferred by the Sims Lumber Company to the L’Hommedieu Box and Lumber Company, which was in possession of the latter-named company at the time of the appointment of the receiver. On the 24th day of December, 1894; in an action instituted by this plaintiff against the defendant, the Sims Lumber Company, a warrant of attachment was issued against the property of the said corporation, and subsequently, and on the 12th day of April, 1895, judgment was duly entered, an execution being issued upon such judgment, which was returned wholly unsatisfied. It does not appear when this indebtedness upon which the plaintiff’s judgment .was obtained against the Sims Lumber Company was incurred. It does, however, appear that the L’Hommedieu Box and Lumber Company, was incorporated on the 26,th day of May, lS9é, and proceeded to purchase certain property which had belonged to the Sims Lumber Company. The plant, including sheds, machinery, tools and office fixtures, was purchased, from one Walker for $18,000 in stock of the L’Hommedieu Company, and certain lumber was paid for by notes of the L’Hommedieu Box and Lumber Company, three of which notes for $1,000 each were paid. The amount of those notes was between $11,000 and $12,000, being for $1,000. each,, except the last note, and one note was payable monthly. After this transaction, it seems that the L’Hommedieu Box ,and Lumber Company continued in business, making purchases, incurring obligations to others and continuing to manufacture. This corporation during the time it was going purchased from the Empire Storage Lumber Company a great deal of lumber, and, at the time it went into the ■ hands of the receiver, it owed to the said Empire Storage Lumber Company a considerable amount for lumber furnished. Thus the L’TIonnnedieu Company did business for four months, manufacturing and selling merchandise, purchasing from others the material which it manufactured and incurring obligations upon the faith of its ownership of this property. Of this transfer the plaintiff had notice, and made no objection until after the voluntary dissolution of the L’Hommedieu. Company, and the appointment of a receiver, whose 'duty it was to distribute the assets among creditors. The judgment of 'the court makes no distinction between the property that the L’Hommedieu Company acquired from the Sims Company' and the property which it purchased from others or manufactured during the time that it did business, but it takes all of the property of the L’lTommedieu Company which has come into the hands of the receiver, and transfers it to a receiver appointed in this action for the purpose of paying the plaintiff’s judgment against the Sims Company. All the property of the L’Hommedieu Company, including any property which it had received by transfer from the Sims Company, being in the hands of the court for distribution among those entitled to it.,, it was entirely unnecessary in order to protect the plaintiff, or the creditors of the Sims Company, to appoint a new receiver. If the plaintiff is entitled to any relief, the judgment can direct the present receiver as to what disposition he is to make of the property in his hands.

• Assuming, as the plaintiff claims, that the organization of the L’Hommedieu Company was simply a scheme to provide for the transfer of the property of the Sims Company, so as to prevent it from being subject to seizure to pay the debts of the Sims Company, there'is still no reason why a new receiver should be appointed, and all of the property of the L’Hommedieu Company, a portion of which is certainly liable for the debts of the company incurred since its organization, be applied to the payment of this plaintiff’s judgment. It may be that upon a new trial of this action the court will be able to distinguish between the property which has come into the hands of this receiver, which was the property of the Sims Company, and which, in equity, should be applicable to the payment of the debts of that company, and the property which was acquired by the L’Hommedieu Company from other sources, or from the Sims Company, which should be applied to the payment of the debts of the L’Hommedieu Company. There was, however, no evidence upon the trial to show just what property had come into the possession of the receiver which had been transferred to the L’Hommedieu Company by the Sims Company in pursuance of the fraudulent scheme alleged by the plaintiff. The burden of proof is upon the plaintiff to show fraud, and he must establish by a preponderance of evidence that the transfer to the L’Hommedieu Company was fraudulent, and that the particular property so transferred came into the hands of this defendant as receiver of the L’Hommedieu Company, and is still, either held by him or has been disposed of by him, and that the proceeds remain in his possession.

There was some evidence tending to show that a lease of certain premises in Flushing, and a plant which was valued at $5,000 in the schedule annexed to the petition for dissolution, were property derived from the Sims Lumber Company, but, except the evidence as to this lease and plant, there is not á particle of evidence to show that any of the other property which was transferred by the Sims ■company to the L’Hommedieu Company ever came "into tlm hands of the defendant receiver. As to the lumber purchased of the. Sims Company, it appeared that it was paid for by notes of the L’Hommedieu Company, and that those had been disposed of by the Sims Company. Three of the notes were paid, while the balance remained obligations of the L’TIommedieu Company held by third parties. Under these circumstances, it would seem that until the return of those notes, that transfer of lumber could not be set aside. Nor does it appear that any of that identical lumber alleged to have been sold by the Sims Company to. the L’Hommedieu Company ever came into the hands of the receiver.

It is not necessary at this time to express' an opinion as to just what right a judgment creditor of the Sims Company would have in this plant transferred to the L’Hommedieu Company. The question is as between the creditors of the L’Hommedieu Company and the creditors of the Sims Company; and that should be left to be disposed of by the trial court upon a new trial, when there can be clear evidence of just what property belonging to the Sims Company came into the hands of the receiver, and just what disposition he has made of it since.

The judgment is reversed, and a new trial ordered, with costs to the appellant to. abide the event.

Van Brunt, P. J., Barrett, Rumsby and O’Brien, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellant to abide event.