Case ID: how-pr-ns_3/html/0079-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Vann, J.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SUPREME COURT.
    In the Matter of the General Assignment of David T. Davis et al. to Owen D. Perry.
    
      Assignment—By copartners which does not cover individual property nor provide for the payment of individual debts.
    
    Where an assignment was in substance'as follows : “We, D., J., B. & E., all of Utica, comprising the firm of D., J., B. & Co., doing business as manufacturers in Utica, for one dollar to us paid, hereby assign to P. all of our personal and real property not exempt from execution, in trust for our creditors. We direct said trustee to take possession of all our estate and convert the same into cash for our creditors. We direct him out of the first to pay expenses of administration ; and, whereas, divers persons have each indorsed notes and drafts for our use and benefit and for the benefit and accommodation of our firm, and we have given a mortgage on our stock and goods to P. the first indorser on most of said paper which has been used by us and is now held by parties to us unknown ; we, therefore, direct said trustee to pay all of said paper and bear said indorsers harmless from liability on account of indorsements for our said firm. We direct that said assignee next pay all of our debts in full, reserving to ourselves all moneys that remain in his hands after payment of all our debts :
    
      Held, that the assignment did not cover individual property nor provide for the payment of individual debts.
    
      Held, further, that a contestant not being a firm creditor, but only an individual creditor of two of the assignors, has no standing in court upon an accounting of the assignee.
    Where assignors assign jointly, or as copartners only, neither the assignee nor the courts can reach the individual property of any one of them in any proceeding under the assignment, or in any attempt to enforce it.
    
      Special Term, December, 1884.
    Motion on behalf of Edward A. Howell to modify and confirm, and on behalf of Owen D. Perry to set aside, the report of a referee, appointed by the county court of Oneida county to take and state the account of said Perry, as assignee, under a general assignment for the benefit of creditors. As both the county judge and special county judge of said county are incapable of acting in this proceeding, it has been removed into the supreme court.
    In July, 1875, David T. Davis, John I. Jones, Alpheus 0. Beckwith and Daniel W. Ehresman formed a copartnership under the firm name of Davis, Jones, Beckwith & Company, and as such carried on a wholesale and retail clothing business in the city of Utica until the 24th of June, 1876, when they made a general assignment to Owen D. Perry for the benefit of creditors, of which the following is a copy :
    
      “ Know all men by these presents, that we, David T. Davis, John I. Jones, Alpheus C. Beckwith and Daniel W. Ehresman, all of Utica, composing the firm of Davis, Jones, Beck-with & Company, doing business as wholesale and retail dealers and manufacturers of men’s, youths’ and boys’ clothing, in the city of Utica, U. Y., for and in consideration of the sum of one dollar to us in hand paid by Owen D. Perry, of Utica, H., Y., the receipt whereof is hereby acknowledged,, and of the stipulations and promises herein contained, we do hereby sell, assign, transfer and set over to the said Owen D. Perry all of our personal and real property, choses in action, and all property of every kind and description whatsoever or wheresoever situate, which is not by law exempt from levy and sale on execution, to have and to hold the same to himself, his successors or assigns, in trust nevertheless for the benefit of our creditors as hereinafter stated. We direct that the said Owen D. Perry as trustee take immediate possession of all our estate, both real and personal, and to convert the same and the whole thereof into cash as speedily as may be for the benefit of our creditors, and to dispose of the proceeds as follows: First. We direct that the trustee or assignee, Owen D. Perry; first pay out of the said estate by him held in trust all just and legal charges and expenses of administering this trust: Second. Whereas, Owen D. Perry, G. J. Griffiths, James A. Beecher, John E. Ehresman, Henry Ehresman, T. G. Beckwith, have each indorsed sundry promissory notes and drafts at different times to a large amount for our use and benefit and for the benefit and accommodation of our firm, as accommodation indorsers, some of said notes are indorsed by two or more of said parties as accommodation indorsers; and whereas we have executed a chattel mortgage on our stock and goods to Owen D. Perry, who is the first indorser on most if not all of said accommodation paper, which paper has been used and negotiated by us to sundry parties and is now outstanding and held by parties to us unknown, we therefore direct that the trustee, Owen D. Perry, pay and discharge all the outstanding paper indorsed, by either of said parties by whomsoever held or owned, and to pay and discharge the same in full and to in all things bear said parties and each of them harmless from any and all liability on account of indorsements for our firm, by paying and discharging all such indebtedness in full: “Third. We direct that the assignee next pay and discharge all of our debts in full, reserving to ourselves all moneys that may remain in the assignee’s hands after the payment of all our debts.
    “ Witness our hand and seal this 25th day of June, A. D. 1876.
    DAVID T. DAVIS. [L. s.] JOHN I. JONES. [L. 8.] ALPHEUS C. BECKWITH. [L. S.] DANIEL W. EHRESMAN.” [L. S.] X X *
    “ I, Owen D. Perry, trustee named in the within assignment, do hereby acknowledge the acceptance of the within trust, and agree to faithfully perform the duties therein imposed.
    “Witness my hand and seal this 26th day of June, 1876.
    “ OWEN D. PERRY.” [l. s.]
    Said business had been carried on by said Davis & Jones, as copartners; from 1859 to January 1', 1874, by said Davis, Jones, Beckwith and one Horn; from the latter date to July 9, 1875, when Horn retired and Davis, Jones and Beckwith continued until July 25, 1875, when the firm, composed of said assignors, was formed as aforesaid. At the date of the general assignment each of said firms had some assets and owed some debts, except the firm of Davis, .1 ones, Horn & Beckwith, which had no assets, and owed no debts. Some of the assignors were owing individual as well as firm debts. While the firm owned no real estate, some of the members did, as individuals, but it was of no value above the' incumbrances thereon.
    On the 25th of September, 1877, there was a final accounting in the usual form and a decree made by the county court' distributing all the assets reported and discharging the assignee and his sureties. The dividends paid the preferred claims and a small per centage upon the unpreferred. On the 10th of December, 1877, upon the application of Edward N. Rowell, who held the joint and several note of said David T. Davis and John I. Jones for $1,776, dated January 20, 1876, an order of reference was made by the county court “ to inquire and report what, if any, property passed to said assignee under said assignment, applicable to the payment of the debts of Davis and Jones, two of said assignors, or the debts of either of them.” Upon the coming in of the report of the referee, and on the 6th- of May, 1879, an order was made “ opening said decree and accounting so far as said Rowell was concerned ” and permitting him to file his proof of claim nunojpro twno and to contest the accounting of the assignee, who was required to account “ for his proceedings as assignee forthwith before ” a referee appointed for the purpose. On the 7th of February, 1883, this referee filed his report, whereby he found that assets of great value passed to said assignee under said assignment that he had not accounted for, and requiring him to account for a balance of $13,865.63. He held, in effect, that the assignment covered individual property as well as the copartnership property remaining of each of said firms, and that the assets should be so marshaled according to the rule in equity as to apply the assets of each firm to the payment of its own debts and to apply the surplus according to the respective interests of the partners to the payment of their individual debts; that as the decree was opened only as to said Rowell, no claim but his against either firm or any member thereof individually could be proved on this accounting.
    He recommended that from the balance of $13,865.63, unaccounted for, there should be deducted $4,200 for counsel and referee’s fees; that as the remainder, when apportioned among the partners according to their mutual rights, showed the sum of $1,547.89 due to Davis and $1,927.90 due to Jones, the claim of said Rowell upon his joint and several note against David T. Davis and John I. Jones, should be next paid in full. But he made no recommendation as to what should be done with any part of the surplus still remaining in the hands of the assignee. The report proceeds upon the assumption that the claims of all creditors were barred by the decree of September 25, 1877 ; that the order of May 6, 1879, opened said decree as to said Rowell only, and hence, that he was entitled to so much of the newly discovered or fraudulently suppressed assets as would satisfy his claim on his joint and several note against Davis and Jones, after payment of the expenses of this accounting. The referee also found, in substance, that Perry, the assignee, and Powell, the contestant, were both active and effective conspirators with the assignors in efforts to defraud creditors; and that this was the object of the assignment.
    
      Wm. B. Button, for contestant.
    
      B. Q. Stoddard, for assignee.
   Vann, J.

— The object of the assignors in making the general assignment, and of the assignee in accepting it, was to hinder, delay and defraud creditors. The contestant not only knew this at the time, but actively helped the fraudulent scheme along. Creditors, however, have the right to waive the fraud, accept the assignment and come in under it. (Papal/) e agt. Stewart, 27 JV. Y., 310; Mills agt. Argali, 6 Paige, 577). They all seem to have done so in this ease and hence it is the duty of the court to enforce the trust upon the application of any one having a valid debt against the assignors. ISTo party to this controversy makes any claim hostile to the assignment, but all claim under and in confirmation of it.

The first question to be decided is whether the assignment covered both the firm and individual property of the assignors, or firm property only. As the contestant is not a firm creditor, he has no standing in court upon this accounting if the assignment covered only firm property, and was for the sole benefit of firm creditors. While, as an individual creditor of two of the assignors, it would be for his interest that any surplus going to them should be as large as possible, he could only reach that surplus by perfecting judgment against his debtors and acquiring a lien upon it as a judgment creditor. Otherwise he would have no interest in it that could be protected upon this proceeding, unless the assignors assigned individually as well as copartners.

The practical construction given to the assignment by the assignors and the assignee is of slight importance, as it does not appear from their conduct in creating or administering the trust that they were controlled either by judgment or principle. The powers of the assignee in administering the trust and of the courts in controlling such administration are confined to the express terms of the assignment (In the Matter of Lewis, 81 N. Y., 421; Chapin agt. Thompson, 89 N. Y., 270, 279). The instrument creating the trust is both the foundation and the boundary of those powers.

If the assignors assigned jointly, or as copartners only, neither the assignee nor the courts can reach the individual property of any one of them in any proceeding under the assignment, or in any attempt to enforce it.

The assignment, when reduced to an outline or framework, is in substance, as follows: “We, D., J., B. & E., all of Utica, comprising the firm of D., J., B. & Co., doing business as manufacturers in Utica, for one dollar to us paid, hereby assign to P., all of our personal and real property not exempt from execution, in trust for our creditors. We direct said trustee to take possession of all our estate and convert the same into cash for our creditors. We direct him, out of the proceeds, to first pay expenses of administration; and, whereas divers persons have each indorsed notes and drafts for our use and benefit and for the benefit and accommodation of our firm, and we have given a mortgage on our stock and goods to P., the first indorser on most of said paper which has been used by us and is now held by parties to us unknown, we therefore direct said trustee to pay all of said paper and bear said indorsers harmless from liability on account of indorsements for our said firm. We direct that said assignee next pay all of our debts in full, reserving to ourselves all moneys that may remain in his hands after payment of all our debts. Witness our hands and seals.”

Thus from the beginning to the end of this instrument it seems to be Wholly and exclusively a joint or firm contract. It in effect says: “ We, composing a firm, assign our property to pay our debts, reserving any surplus to ourselves.” The subject of the assignment was “ our property,” which includes all and only such as the assignors owned jointly or .as partners. The object of the assignment, at least when it is gathered from the instrument itself, was to pay “our debts,” or indorsements for “ our said firm,” which necessarily excludes any but joint or firm debts.

The deed of trust is silent as to individual assets and individual debts. Whether either existed cannot be told from reading it. The description of the assignors, their property and indebtedness, the form of the granting clause, the recitals, the naming of creditors, the directions to the assignee, and the reservation of the surplus, all indicate a joint undertaking. Ho words of severance appear in the instrument. The joint form of expression is used exclusively. Words with a plural meaning, such as “ we,” “ us ” and “ our,” are constantly used, but no word of separation, with a singular or several meaning. The word “ our ” does not have a joint and several meaning. That would be expressed by “our and each of our.” The assignment must be construed to cover individual property and to provide for the payment of individual debts, before it can be held that the claim of the contestant should, be paid. This cannot be done without holding that the word “ our” and the expression “ our and each of our ” are convertible terms.

The intention of the parties, throwing out of view the fraud which all intended to perpetrate upon creditors, and which is a constant embarrassment in any attempt to construe the writing as an honest business undertaking, whether ascertained from the words used, or from the circumstances surrounding the contracting parties, or both, is the same. It appears from the evidence that the firm owned a large and valuable stock of goods, with accounts and other personal property, but no real estate. Two of the assignors owned no individul property, and the other two owned none except some real estate of no appreciable value above incumbrances. The firm was largely indebted and probably insolvent. Two of the assignors owed nothing individually, but each of the others owed more than his individual property was worth. It is therefore to be presumed that the object of the assignment was to transfer firm property to pay firm debts. Whatever its form, it could have no other practical effect, as there were no individual assets worth mentioning for it to operate upon. Ho reason can be found in the circumstances surrounding the assignors when they assigned, for giving a more extended meaning to any term used by them than its ordinary and natural signification.

Moreover the creditors in the first class were to be paid in full from the proceeds of all the property assigned. Did the assignors intend to execute an instrument void upon its face by providing for the application of individual property to the payment of copartnership debts ?

I think that the assignment does not cover individual property, nor provide for the payment of individual debts. This construction is supported by the following authorities: Morrison agt. Atwell (9 Bosw., 503); Turner agt. Jaycox (40 Barb., 164, 172; affirmed on appeal, 40 N. Y., 470, 472); Collumb agt. Collumb (16 N. Y., 484); The Berkshire Woolen Co. agt. Juillard (75 N. Y., 535); Perry on Trusts (secs. 345, 579 and 641); 1 Parsons on Contracts (6th ed., p. 2, and note).

The exemption clause of the assignment and that granting real property are relied upon as supporting the theory that individual property was transferred. This position is not without force, but, as those clauses may have been used from more abundant caution or adopted from the usual form, I think it must yield to the points already suggested which impress me as of greater force.

But even if the construction placed upon the assignment by the learned referee is correct, the position of the contestant that he should be paid' in full to the exclusion of the firm creditors cannot be allowed to prevail. After so aiding the assignors in their efforts to defraud creditors that un preferred claims received substantially no dividend, he slept upon his own' rights until the claims of all creditors had been barred, including his own, when he procured a dispensation in his favor that would enable him to obtain his pay in full out of assets equitably belonging to others. Under any construction ,of the assignment this would not be allowed, at least until all creditors had been notified of the changed condition of affairs and had been permitted to move to open the decree and come in upon the second or supplementary accounting. The honest and diligent creditor is favored by the law, but if the result sought for by the contestant in this proceeding is effected, the dishonest and negligent creditor would be favored. He would in effect be allowed to take advantage of his own wrong.

The motion to confirm the report of the referee is denied, with costs, and this proceeding is dismissed but without prejudice to the right of any firm creditor to make such application as he may deem proper for the protection of his rights.