Case ID: ad_21/html/0514-01.html
Source: Caselaw Access Project
Author: {"author": "Williams, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

In the Matter of the Petition of H. Herrmann Lumber Company, a Creditor of R. Rothschild’s Sons Company, to Compel the Assignee of Said Company to Allow its Books to be Examined. Benjamin F. Cahn, Assignee of R. Rothschild’s Sons Company, Appellant; H. Herrmann Lumber Company, Respondent.
    
      Creditor of an assignor for the benefit of creditors —he is entitled to examine the assignors books irrespective of whether the assignor has filed am inventory — inspec-' Mon ordered where the assignee failed to show his inability to permit it.
    
    Section 3 of chapter 466 of the Laws of 1877, relative to assignments for the benefit of creditors, as amended by chapter 318 of the Laws of 1878, directs that the debtor shall, within twenty days after the date of the assignment, file
    . an inventory, and provides that “.the books and papers- of such delinquent debtor shall at ..all times be subject to the inspection and examination of any creditor. The county judge is authorized by order to require such debtor or assignee to allow such inspection or examination.” Under this section a creditor is entitled to be permitted to inspect the assignor’s books irrespective of whether or not the debtor has been “ delinquent” in not filing an inventory within the period .fixed by the statute, notwithstanding the fact that the creditor falls to allege any reason why the inspection is necessary.
    The words “ debtor” .and “delinquent debtor” are used in■ this section as synonymous with the word “ assignor.”
    Where the affidavit used in support of a motion, by a creditor of an assignor for the benefit of creditors, to compel the assignee to permit him to examine the books and papers of the assignor, alleged that the assignee, upon being requested to permit the examination, said they, were not there, refusing to give any further information, and the assignee did not present any affidavits to the effect that he did not have the custody of the hooks and papers, or that there was any other reason why he would not he able to comply with the order if made, it was
    
      Held, that it would be presumed that the books and papers were where they should he, i. e., in the custody of the assignee, and that the order was properly granted.
    Appeal "by Benjamin F. Cakn, assignee of R. Rothschild’s Sons Company, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of r the county of New York on the 12th day of August, 1897, directing him, as assignee for the benefit of creditors of R. Rothschild’s Sons Company, to allow the H. Herrmann Lumber Company, a creditor of said assignor, to make an inspection and examination of the books and papers of the assignor.
    
      Emanuel S. Cahn, for the appellant.
    
      J. A. MacElhenny, for .the respondent.
   Williams, J.:

The order appealed from was made upon affidavits showing that the moving party, a New York corporation, was the creditor of the assignor, an Ohio corporation, to the amount of $706.30, for goods sold and delivered; that the assignment was made July 19, 1897, to and "accepted by the assignee, and filed and recorded in the clerk’s office of the city of New York; that the creditor desired its principal bookkeeper to inspect and examine the books and papers of the assignor, and instructed him to request the assignee to allow such inspection and examination to be made; that pursuant to such instructions on the 5th day of August, 1897, the bookkeeper requested the assignee to permit such inspection and examination,- and that the assignee replied that he could not allow the boobs to be examined and inspected as they were not there, and that they might ' be in Cincinnati; that he would not say where they were, and refused any further information. No affidavits were read in behalf of the. assignee, who had notice and appeared upon the hearing of the motion.

It is claimed on behalf of the assignee that there is no law, statutory or otherwise, which authorized the court to make the order merely because the • creditor desired to make the inspection and examination of the books and papers and the assignee refused it; that the order could only be made upon its appearing that such inspection and examination was necessary for some purpose disclosed in the papers upon which the order was made. It must be noticed that this Order was not made under section 21 of the Assignment Act (Laws of 1877, chap. 466), which provides for an examination of witnesses and the .production of the books and papers before a referee. The order was made under section 3 of the act, as amended by chapter 318 of the Laws of 1878, so far as there was any statutory power to make it. That section provides that' the debtor shall make an inventory or schedule within twenty days after the date of the assign- ■ ment, and that,'in case the debtor shall omit, neglect or refuse to make it within the twenty days, the assignee, within thirty - days after the date of the assignment, shall make the schedule or inventory; and for such purpose the county judge, upon the application, of the assignee, may by order compel' such deli/nqúemt debtor -and any other person to- appear and be examined, and the county judge may extend the assignee’s time for making the inventory or schedule-beyond the thirty days, and if the assignee fail to make it within the thirty days or the further time allowed, the county judge shall by order require the assignee to show cause why he should not be. removed, and any one interested in the trust may apply for such order, and then the provision in question here, follows in these words“ The books and papers of such delinquent debtor shall at all times be subject to the inspection and examination of any creditor. The county judge is authorized- by order to require such debtor or assignee to allow such inspection or examination. Dis- ■ obedience to such order is hereby declared to be a contempt, and obedience to such order may be enforced by attachment.” The section then closes with a provision for the filing of the inventory or schedule by the county judge in the office where the assignment is recorded. It is said that this provision is applicable only to a ■ debtor who fails to make the inventory or schedule as required in this section, and such delinquency not having been shown by' the moving papers here, the order was not authorized by this 'statute. We think this is too narrow a construction of this statute. The statute provides that the hooks and papers shall “ at all times ” be subject to inspection and examination, not merely after the debtor is so deli/iiquent. The statute was. treating in this section of the making of the inventory and schedule, and the assignor was therein designated as a debtor and a delinquent debtor,” but'we think the intention of the Legislature was to jirovide that a creditor might at any and all times inspect and examine the books and papers of the assignor, and the words debtor and delinquent debtor were in this section used as synonymous with the word assignor.

This construction is in harmony with our views of the rights of the creditors. The assignee is not appointed to protect or shield the debtor or to secrete his affairs from his creditors. The business of the assignor in the hands of his assignee should be thrown open to the examination of the creditors, in order that they may be able to examine and see whether there has been any dishonesty in making ■the assignment, whether any property has been improperly disposed of or withheld from the assignment, and whether the assignment is valid or invalid. Neither the assignor nor the. assignee should be permitted to refuse an inspection or examination of the books and papers of the assignor without any reason being alleged, and thus prevent the creditors from satisfying themselves as to the honesty of the assignment. In this case the assignee, at the time the request was made for an inspection and examination of the books and papers, said that they were not there, but he produced" no affidavits upon the hearing of the motion that he had not the custody of the books and papers, or that there was any other reason why he could not comply with the request or with the order if made. In the absence of such showing it was fairly to be presumed that the books and papers were where they .should be, in his custody or under his control.

We think the creditor was entitled of right to inspect the books and papers because he desired to do so, and that it was not necessary for him to show in support of the motion that there was some reason why it was necessary that he should do so. We may assume that he desired to make the inspection and examination to ascertain whether there was any dishonesty in the assignment, and that was a sufficient reason.

The fair • protection of creditors against fraud and dishonesty in assignments requires that there should be the fullest access by the creditors to the books and papers of the assignor.

Our conclusion is, that the order was properly granted under the provision in section 3 of the Assignment Act above quoted, and that it should1 be affirmed, with ten dollars costs and disbursements.

Yaw Brunt,' P. J., Patterson, O’Brien and Ingraham, JJ., concurred.

Order affirmed, with ten dollars costs and disbursements.