Case ID: ny-st-rep_14/html/0754-01.html
Source: Caselaw Access Project
Author: {"author": "Sedgwick, C. J. Ingraham, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Thomas J. Smith, Resp’t, v. H. Edgar Hartwell, impl’d, App’lt.
    
      (New York Superior Court, General Term,
    
    
      Filed March 1, 1888.)
    
    Assignment fob the benefit of creditors—Failure to prefer wages of employees—Effect of.
    An assignment made for the benefit of creditors that directed the assignee to pay certain persons named the amount due to them for salaries or wages, and after paying such amount to pay certain other preferred creditors, is void where it appears that certain persons other than those mentioned were creditors of the assignor for wages or salaries owing to them as employees of the assignor. .Laws 1884, chap. 328. Contra,, see ■ Soberts v. Tobias, 9 ÍT. T. State Rep.. 59.
    Appeal by defendant from order continuing order of injunction.
    
      Stabler & Hipple, for app’lt; James B. Dill, for resp’t.
   Sedgwick, C. J.

I agree with the learned judge at special term.

The sole power of the assignee is to devote the whole of the assigned estate to the purposes described in the assignment. He has no power to pay out of the estate any debt of the assignor in preference to others that are not described by the assignment. If he should pay the plaintiff as a creditor preferred by the statute he would violate his duty. No other person than he has power to make this payment. Therefore the object of the statute would be defeated, while the assignment stands, and therefore it must be set aside.

Perhaps the plaintiff loses the preference intended for him. Yet if this be so, it is inevitable, and he must have in the stead the position of a diligent creditor.

Order affirmed, with ten dollars costs to abide event.

The following is the special term opinion:

Ingraham, J.

The only question on this motion is, whether or not an assignment made for the benefit of creditors that directs the assignee to pay certain persons named, the amounts due to them for salaries or wages, and after paying such amounts, to pay certain other preferred creditors is void, where it appears that certain persons, other than those mentioned, were creditors of the assignor for wages or salaries owing to them as employees of the assignor.

By section 328 of the Laws of 1884, the act in relation to assignments for the benefit of creditors was amended, so that “In all assignments made in pursuance of this act, the wages or salaries actually owing to the employees of the assignor or assignors, at the time of the execution of the assignment, shall be preferred before any other debt.”

It would appear from f'e language of the statute that it was the intention of the legislature that the assignment itself should provide for such preferences.

The act does not say that such preferences shall exist independent of the assignment, but that “ In all assignments made, the wages or salaries, etc., shall be preferred before any other debt.”

In this case the assignors have directed that the wages due certain employees shall be preferred, and have then disposed of the balance of the estate without' providing that the amounts due the plaintiff shall be preferred.

This, I think, is clearly in violation of the statute, and as the assignee derives all his powers from, the assignment, it is clear that he would not he authorized to pay any debts to employees not mentioned in the schedule.

In the case of Richardson v. Herron (39 Hun, 537), a majority of the court. held that where no attempt was made to prefer any of the debts due to the employes, the assignment was not void, but that decision would not apply, where the assignors had directed that certain of their employees should be preferred, without providing for other of their employees to whom there was an actual indebtedness for wages or salaries, and the contrary view appears to have been taken in Harriot v. Masterton (38 Hun, 643, mem) decided by the general term, of the second department, and in the case of Roberts v. Tobias, decided by Justice Van Brunt, at special term.*

I think, therefore, that this assignment is void. Motion for injunction must therefore he granted, with ten dollars costs to plaintiff to abide the event of the action.

*[See Roberts v. Tobias (9 N. Y, State Rep., 59) which reverses special term.—