Case ID: ad_148/html/0031-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Morris Littmann, Appellant, v. Frances A. Harris, Respondent, Impleaded with Francizca, a Corporation, Defendant.
    First Department,
    December 1, 1911.
    Debtor and creditor—fraud — creditor’s suit to set aside fraudulent conveyance — corporation transfer to former president — facts sufficient to establish prima facie case.
    Where in a judgment creditor’s suit to set aside as fraudulent a transfer of the property of a corporation to one H., who was a trustee and its former president, plaintiff shows that the transfer was made during the pendency of an action by him against the corporation to recover a considerable sum; that the corporation had apparently no defense to the action in which it permitted judgment to be taken against it by default; that the transfer stripped the corporation of all its assets and rendered it insolvent; that the transfer was made by relatives of the defendant H., to whom all the corporation’s stock had been transferred and who had undoubtedly been elected officers and trustees for the purpose of carrying through the transfer; that the only consideration alleged was past advances by H., which' were not clearly proved and the amount of which was vague and uncertain and that all these circumstances were known to H., the transferee, a prima facie case of a fraudulent transfer is made out.
    The proof of these facts cast upon the transferee the burden of showing that the transfer was bona fide and that the consideration passing to the corporation was adequate.
    
      Appeal by the plaintiff, Morris Littmann, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 24th day of January, 1911, upon the decision of the court, rendered after a trial of the New York Special Term, dismissing the complaint upon the merits.
    
      Wales F. Severance, for the appellant.
    
      Ignace I. Apfel, for the respondent.
   Scott, J.:

Plaintiff appeals from a judgment dismissing the complaint upon the merits.

The action is- by a judgment creditor of a corporation named “ Francizca,” and Frances A. Harris, formerly its president and one of its trustees. Plaintiff sued the corporation for wages on April 28, 1908. A defense was interposed and the action came on for trial on June 16, 1909, when the' defendant corporation defaulted and the plaintiff had a judgment. In March, 1909, while the aforementioned action (of which the defendant Harris had knowledge) was pending, the composition and management of the corporation was completely changed. Certain gentlemen who had theretofore been stockholders and trustees sold their stock to one Dann, a' brother-in-law of the defendant Harris, and resigned as trustees. The defendant Plarris also resigned as president, and Dann, her brother-in-law, was. elected president in her place. He was then engaged in business in Brooklyn and afterwards embarked in business in Philadelphia. It does not appear that he ever took any part in conducting the affairs of “ Francizca ” except to transfer all of its assets to the defendant Harris. At the same time that Dann was elected president the father and sister of defendant Harris were elected trustees, so that the board of trustees was thereafter composed entirely of Mrs. Harris' and members-of her family. All the assets of the corporation were thereupon transferred to the defendant Harris, as she expresses it, by “arrangement” with her brother-in-law Dann. The fixtures were sold to her for the expressed consideration of $1,350, the stock on hand for an expressed consideration of $2,000, and the outstanding accounts for no definite consideration so far as appears. It does not even appear what their amount was or how much was collected upon them, although defendant Harris thinks that she collected about $300. There is no evidence as to the value of the fixtures or as to the value of the stock except that defendant Harris after-wards sold the goods at an advance of $300. The sole consideration, so far as appears, for these transfers to Mrs. Harris was an alleged indebtedness to her from the corporation of which no evidence was given except her declaration that the corporation was indebted to her. Even the amount of this alleged indebtedness is not made clear, for she puts it on the trial at $3,400, while, when examined in supplementary proceedings, she had fixed it at $2,000.

In our opinion the evidence established prima facie a fraudulent transfer to defendant Harris. There were presented all the facts which are generally considered indicia if a fraudulent conveyance. First. The transfer was made while a suit for a considerable amount was pending against the corporation to which it apparently had no available defense since it permitted judgment against it to go by default. Second. The transaction stripped the corporation of all of its assets available to meet the demand of the creditor who was suing it. Third. The transfer rendered the corporation insolvent. Fourth. The whole transaction was had with relatives of the defendant Harris, who had undoubtedly been elected officers and trustees to carry this very transaction through. Fifth. The consideration for the transfer to defendant Harris is sought to be found in past advances, not clearly proven, and the amount of which is left vague and uncertain. Sixth. All the circumstances were well known to the transferee. (Lawrence Brothers, Inc., v. Heylman, 111 App. Div. 848; affd., 189 N. Y. 573; Riker v. Gwynne, 129 App. Div. 112.) These facts are certainly, sufficient to cast upon the defendant Harris the burden of proving that the transaction was bona fide and that the consideration passing to the corporation was adequate. If the transfers were made in fraud of plaintiff’s rights, the transferee in the present case was certainly cognizant of the intent.

It follows that the judgment appealed from-must be reversed and a new trial granted, with costs to appellant to abide the event.

Ingraham, P. J., Clarke, Miller and Dowling, JJ., concurred.

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