Case ID: abb-pr-ns_6/html/0178-01.html
Source: Caselaw Access Project
Author: {"author": "Daly, F. J. Barrett, J. (Dissenting). Brady, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PLACE against MILLER.
    
      New York Common Pleas ; General Term,
    
    
      June, 1869.
    Attachment.—Morions and Okdebs.—Affidavit.
    On a motion to set aside an attachment, which turns on the question whether the bond of an assignee for the benefit of creditors had been filed when the attachment was issued, a mere denial in the affidavit of the moving party that the security was then filed, without evidence by the certificate of the county clerk, or otherwise, on the pointj is insufficient to overcome the positive statement of the assignee that it was filed as required by law.
    An assignment for the benfit of creditors is not to be deemed void, as a conclusion of law, merely from the fact that the assignors did not disclose their intent to make it, when called upon by the creditor for payment.
    The omission to do any of the acts required by the statute to render valid an assignment for the benefit of creditors, or the omission of a partner to join in making such an assignment, is not available, upon motion, to sustain an attachment as against the assignment, except so far as such circumstances bear upon the question of fraudulent intent..
    Appeal from an order.
    This action was brought by Isaac V. Place against Richard H. Miller and others. The plaintiff alleged that he had been induced to sell goods to the defendants by false and fraudulent representations made by them as to their capital and solvency, and as to" the persons who composed their firm.
    The defendants made an assignment for the benefit of creditors, in disregard of which the plaintiff levied an attachment which they had caused to be issued, on the assets in the possession of the assignee. The details of the circumstances relied on as showing a fraudulent intent appear in the opinion of the court sufficiently for an understanding of the points determined. On motion at special term the attachment was set aside, and the plaintiff now appealed.
    
      
      Levi 8. Chatfield, for the appellant.
    
      George R. Thompson, for the respondents.
   Daly, F. J.

I entertain no doubt, after reading the affidavits, that the defendant Miller made the representations sworn to by Chapman, and that they were false, and were made for the purpose of inducing the plaintiff to send the defendants the large amount of goods which they had ordered. And I think also that Miller’s statement that the firm was solvent and able to pay their debts when this order was given, in July, 1866, and that their insolvency had been occasioned by circumstances which had occurred afterward, without stating what circumstances, or giving any other explanation, is not very satisfactory. But the difficulty which I experience, and which seems to have been felt by the judge below, is in assuming as a conclusion of law that the assignment was made by them solely for the purpose of defrauding their creditors. The assignment is regular upon its face. They have assigned $46,000 worth of goods, and the assignee has given security as required by law for the faithful fulfillment of his trust, in more than the value of the goods, and this has been approved in the manner which the law requires. The security is to be approved, and the bond filed at the time of the filing of the assignment, and if it had not been filed when the attachment was issued, it would be an easy matter for the plaintiff to show it. The certificate of the county clerk would show the day when it was filed. The plaintiff does not aver that he has made any inquiry as to the first, but simply denies in his affidavit that it was filed when the attachment was granted, which is insufficient to overcome the positive statement of the assignee that he filed the bond and schedules as required by law.

It does not follow, because Miller did not disclose to the plaintiff that they had, or were about to make, an assignment, upon the day when the plaintiff called upon him respecting the payment of their note, that the assignment was made with a fraudulent object (Dickenson v. Ben-ham, 20 How. Pr., 343). If it had been shown that they had dishonestly disposed of property, before making the assignment, or had concealed any, there might be some ground for assuming that the assignment was a sham. But it has been shown that $46,000 worth of goods was seized under the plaintiff’s attachment, which had passed to the assignee under the assignment, and was in his possession when the attachment was granted. Whatever may have been the circumstances under which the defendants induced the plaintiff to give them credit, it was six months afterward when they made the assignment, and if they assigned all the property then in their possession for the benefit of their creditors,—and.there is nothing to show that they had previously made any dishonest use of any of it —there would be, as there is, no pretense for assuming that an assignment which is valid upon its face, and for the faithful administration of which security has been given, was made with intent to defraud their creditors; and unless this can be arrived at, as a conclusion of law, from the facts before the court, the attachment cannot be sustained. ' ,

The omission to do any of the acts required under the statute to render the assignment valid, or the alleged fact that A. R. Miller was one of the partners, and has not united in it, or anything establishing the invalidity of the assignment, are not available upon this motion, except so far as it bears upon the question of a fraudulent intent in making the assignment. If it is wanting in any essential requisite to its validity as a legal instrument, it will give the assignee no title to the property, which may then be levied upon by judgment creditors, or other remedies may be taken to prevent the assignee from carrying the trust into effect. But the property cannot be seized in the first instance, nor an attachment sustained, unless the assignment was made with a fraudulent intent, that is, as a cover, the real object being to dispose of the property by the co-operation of the fraudulent assignee, so as to prevent its being applied to the payment of the debts of the firm; and the judge below would not have been warranted, in such a conclusion, by the facts before him.

The order should be affirmed.

Barrett, J. (Dissenting).

The views entertained by the learned judge at special term have since been substantially overruled in Kennedy v. Thorp (3 Abb. Pr. N. S., 131), Judge Brady himself delivering the opinion of the court. The fact, so abundantly established in the case at bar, that the assignors had, by false representations of solvency, purchased large quantities of goods shortly prior to the making of the assignment, was there held to warrant the conclusion that the assignment itself, though valid upon its face, and apparently regular, formed but a part of the general scheme to defraud the sellers. That case, too, presented certain explanatory features which are absent here, while its collateral circumstances were slight, when compared with the numerous and bald indicia of a continuous design, disclosed in these motion papers.

Were the question an open one in this court, I should, perhaps, venture to express an opinion in favor of narrowing the doctrine of Kennedy v. Thorp to cases where the insolvent’s recent purchases, effected by means of false statements, are connected with some direct evidence, however slight, of fraud in the act of assigning, or where they are coupled with other facts and circumstances pointing convincingly to the instrument itself, as the fraudulently concocted culmination of a continuous scheme. But if so confined, all the required elements are found in the case at bar, and even the few facts referred to by the learned first judge, each undoubtedly insufficient of itself, and as a separate piece of evidence, present, when grouped together, and considered with reference to them mutual dependence, an almost irresistible array. Not only were the goods obtained by fraud-' ulent representations as to capital and solvency, but as to the very composition of the firm. A. R. Miller, who now swears that he had no connection whatever with R. H. Miller & Co., was repeatedly declared to be a member of the firm, and to have put in $15,000, and he was actually held out as such upon the bill-heads and upon the printed captions of the letters sent to the plaintiff. Even after the execution of the assignment this branch of the fraud was not frankly admitted, but the truth was evaded by the pretense that he had drawn out the greater part of his capital. Further falsehood and duplicity were resorted to in order to conceal the making of the assignment, and.to lull the plaintiff’s fears until it had been fully consummated. It was executed early on January 8, 1867, and was recorded before twelve o’ clock, noon. On that very morning the plaintiff called upon R. H. Miller, and inquired whether the notes due on the following day would be paid, to which Miller replied, “Yes, he thought so,” but requested Place to call at twelve o’clock of that day. Returning as requested, Place was at once introduced by Miller to the assignee, and upon his expressing great surprise, and inquiring what had become of the $45,000 of cash capital, Miller replied that his brother, the same who now swears that he was not a member of the firm at all, had drawn out his capital, or the greater part of it, and that Steel, who had promised to put in $15,000, but had not done so, was then traveling in the west, and that he, Miller, had not ■ seen or heard from him in the last six weeks. This latter statement was also untrue, for this was on January 0,- and Steel ratified the assignment in New York on the tenth, and it appears by Steel’s own recital, as well as that of Miller and the assignee, that he had been “ heard from” so far as to express his consent prior to the execution of the assignment. Miller’s conscience, too, seems to have been awake to the fallibility of the instrument, which he must have assumed in begging Place not to “ break itand, in this connection, he deliberately stated that he had made it to “keep off his Jew creditors ’ ’ whose debts were about to mature, and that if he, Place, would 11 keep still, he would get his pay.” All this is corroborated by Flanders, who says that at this point the more cautious assignee came in and called Miller aside, the result of which was that in a few minutes the latter rejoined Place and Flanders, and expressed his regret at having conversed with them at all, naively adding that he “had not said anything.”

These declarations, although made after the execution of the assignment, and perhaps not admissible as against the assignee, were clearly evidence as against the assignors. The assignee is neither party nor privy to this action, and his title is not affected by the sustaining or vacating of the present attachment. His right to the property claimed to have passed under the assignment is a matter to be determined quite independently of the result of this suit or proceeding. Any declarations made by the defendants herein at any time are, therefore, evidence against them of a fraudulent intent in the assignment or other disposition of their property. The declarations being admitted, I cannot think they come within the principle or reasoning of those cases referred to by the learned judge at special term, where it was held that a fraudulent intent can never be inferred from merely threatening to do a lawful act. On the contrary, the admission here was that an act lawful in itself had been effected for the unlawful purpose of hindering and delaying a certain class of creditors, and that it had been managed in such a manner that if Place would only “keep still, and not break it up, he would get every dollar of his money.” Again, the assignment itself was strongly preferential, and, although a debtor has a perfect legal right to prefer, yet this fact cannot be entirely overlooked when we consider the unexplained evidence of fraud in the dealings of the firm, the surroundings of the instrument itself, and all the other facts and circumstances which point to it with so much suspicion.

Another bad feature of the case was the giving up of a large quantity of goods to effect a discharge of the Stilwell warrant issued against Miller by a justice of the superior court. These goods, it is claimed, were merely consigned by Place to Miller & Co., and, therefore, did not pass under the assignment. This is denied by Place and Chapman, and no letters in support of the statement or bills of consignment, or such other documentary evidence as would naturally be in Miller’s possession, are produced or referred to. Besides, if given up as being Race’s property, it is not likely that the assignee would have billed them to him as upon a sale, nor that, as a consideration therefor, over §5,000 of the firm’s indebtedness would have been canceled. The farther explanation that it was done after consultation with ‘1 the creditors,” is equally unsatisfactory. Such consultation was unnecessary upon the previous theory. Place says, however, and it is not denied, that the proposition'was made in court immediately upon the return of the warrant. When, then, the consultation took place, and whether and 1 ow the assignee, in such a brief interval, was enabled to confer with every one of the numerous creditors of the firm, resident and non-resident, is not stated. This certainly was essential to validate so serious an act as that of practically preferring Place for a large part of his debt, and that, too, over even those preferred in the assignment, and in derogation of its provisions. Something more specific was required in that connection than the mere general statement that he had consulted with the creditors of the firm,” who approved or assented ; and I cannot but look upon that transaction as indicating an understanding between the assignors and the assignee, and an ability upon the part of the former, with the latter’ s consent, to manipulate the firm property according to the exigencies of their position, and with very little regard for the provisions of their formal trust.

I find nothing frank or honest in the course of the defendants, either prior to or at the time of the making of the assignment, or subsequently; and, in my judgment, the order vacating the attachment should be reversed, and the attachment reinstated.

Brady, J.

I deem it necessary to say that the case of Kennedy y. Thorp, referred to by Judge Barrett, is 'entirely different from, this case. The facts disclosed there established the design to accumulate property immediately prior to the assignment, and by fraudulent representations. Such is not the case here.

Order affirmed.