#### William Loeschigk *et al.,*plaintiffs and appellants, *vs.*Richard Baldwin *et al.,*defendants and respondents.

Neither a transfer by a firm of their stock in trade and other assets, to a creditor, at a fair valuation, upon an agreement by him to dispose of them and repay upon a definite credit any surplus of their proceeds • after satisfying his claim, nor a subsequent general assignment by such firm for the benefit of creditors, of their property, including four promissory notes, given by such creditor on such specified credit, after taking possession of such property under such original transfer, for the full value of it, leaving his claim unsecured, which assignment preferred his claim, are rendered fraudulent and void at law against creditors of such firm, by their terms, or the circumstances of their execution.

(Before Bosworth, Ch. J., White and Monell, JJ.)

Heard November 11,1863;"

decided November 28, 1863.

This was an appeal from a judgment dismissing the complaint with costs.

This action was brought by the plaintiffs Wessendouck, Kutter and Luckemeyer against the defendants R. L. Baldwin, Yanderhoof, Southworth and Miles, to set aside a sale made by the defendants R. L. Baldwin,- Yanderhoof and South-worth, (comprising the firm of “ Baldwin *& Go,”)*to the defendant Miles, and, also, to set aside a subsequent assignment for the benefit of creditors, made by Baldwin & Company to the defendant C. S. Baldwin, who was not a member of the firm.

The cause was tried before Mr. Justice Monell without a jury, in January, 1862.

The plaintiffs called as witnesses the defendants R. L. Baldwin and Miles, and after their testimony was taken, rested their case, and the court dismissed the complaint.

The court found the facts as follows:

1st. That on the 6th of November, 1861, the firm of “ Baldwin & Co.” being indebted to the defendant Miles between $5000 and $6000, executed and delivered to him a bill of sale, dated on that day, for the consideration of $8000, of all the *378goods and merchandise belonging to them in the premises 339 Broadway. i

2d. And at the same time, also transferred to him their books of account and bills receivable.

3d. Simultaneously with the execution of such bill of sale, he executed and delivered to them an agreement to account to them for any surplus proceeds of the property sold to him, after payment of his debt.

4th. There was an actual delivery of the articles transferred to him, and change of possession.

5th. Subsequently, Miles gave “Baldwin & Co.” his four promissory notes for $8000, (the consideration of the bill of sale,) payable in six, nine, twelve and fifteen months.'

6th. On the 13th of November, 1861, “ Baldwin & Co.” made a general assignment to the defendant C. S. Baldwin, including such notes and the agreement as to any surplus.

7th. The plaintiffs were judgment creditors of “ Baldwin & Co.” for a debt contracted before the sale to Miles, and their execution has been returned unsatisfied.

8th. The defendants are not, and have not been, under any injunction, nor has any receiver been appointed, and Miles has proceeded to sell and dispose of the effects conveyed to him, and paid his notes. And the assignee has proceeded to execute the assignment.

9th. Miles was a *bona fide*creditor of Baldwin &"Co. to the amount of their alleged debts to him. The conveyance by them to him was for an adequate consideration, and was received by him without any knowledge of -any fraudulent intent on the part of “ Baldwin & Co.”' if any existed.

10th. There was no intent on the part of “ Baldwin & Co.” to hinder, delay or defraud creditors, either in the making of the sale or conveyance to Miles, or in the making the assignment to C. S. Baldwin.

As matter of law the court found :

1st. That Miles having no notice or knowledge of any fraudulent intent on the part of Baldwin & Co., and being a *bona fide*purchaser for a valuable consideration, without notice of *379any such intent, is protected, even if there had been any such intent on their part.

2d. That the sale and conveyance by Baldwin *&*Co. to Miles were legal and valid.

3d. That the assignment by Baldwin *&*Co. to C. S. Baldwin was legal and valid.

4th, That there is no ground for the relief demanded in the complaint.

Judgment dismissing the complaint having been entered," the plaintiff appealed.

*W.*Hutchins, for the plaintiffs, appellants.

I. The insolvency of Baldwin & Co. being known to Miles as well as themselves, Miles’ agreement, on the 6th November, to take their property, and after paying his own debt to return them the surplus, was a sale that operated to hinder and delay, and defraud creditors, because it withdrew the debtor’s property *pro tanto*from the creditors’ suits and executions. This transaction, standing by itself, is void as against creditors.

II. But the contract of November 6th was merged in that of November 13th. By the former, Miles’ debt of $5,000 was to be paid, and he to account with Baldwin & Co.' for the surplus. By the latter, Miles was still to be a creditor, and to give his notes for the goods on a long credit, and be preferred as a creditor in the assignment. This latter contract and the assignment were one transaction, and come within the rule which forbids an assignor to empower an assignee to sell on credit.

If an assignor can not empower an assignee to sell on credit, he can not himself sell his property on credit, with a view of assigning the notes given in payment, and then make such assignment.

An assignment which empowers the assignee to sell on credit is void. *(Porter*v. *Williams,*5 *Seld.*142. *Brigham*v. *Tillinghast,*3 *Kernan,*215. *Nicholson*v. *Leavitt, 2 Seld.*510.) The law will not suffer a debtor to do indirectly what it forbids directly.

*380III. Such a sale on credit, and an assignment of the price, are void. *(Browning*v. *Hart,*6 *Barb.*91. *Litchfield*v. *Pelton, Id.*189. *Vance*v. *Phillips,*6 *Hill,*433. *Cooke*v. *Smith,*3 *Sandf. Ch.*333.)

IV. The contract for the sale of the hills receivable by Baldwin & Co. to Miles, being in trust for the assignor, is void by the 1st section of the 2d title, part 2, chap. 7 of the Revised1 Statutes. (6 *Hill,*434.)

V. A finding of fact that a transaction which the law pronounces fraudulent is not so, will be set aside, even in those cases where by statute fraud is a question to he submitted to the jury. (*Wilds*v. *Hudson River Railroad Company,*24 *N. Y. Rep.*433. *Dunham*v. *Waterman,*17 *id.*9.)

VI. Miles knew of the proposed arrangement, and assented to it, and is not, therefore, a *bona fide*purchaser without notice; and, under the original agreement, he is not a *bona fide*purchaser, .because he. gave no value, hut the sale was made to secure an antecedent debt.

VII. Findings of fact need no exception. *(Magie*v. *Baker,*4 *Kern.*438.)

VIII. The commencement of a suit (whether the defendants. are enjoined or not) is such notice to an assignee or fraudulent grantee that any subsequent transfer by him is at his peril.

*Edwards Pierrepont,*for the defendants, respondents.

By the Court, Bosworth, Ch. J.

It is found as facts, that the sale and conveyance to Miles, and the assignment to Charles S. Baldwin were not made with intent to hinder, delay or defraud the creditors of Baldwin & Co.; and that each of them was made without any such intent.

If these facts are correctly found upon the evidence, the complaint was properly dismissed.

That Baldwin *&*Co. were indebted to Miles on the 6th of Uovember, 1861, between the sums of $5000 and $6000, is undisputed. That at the time of the transfer by the former to the latter, of the goods, at the nominal or actual price of *381$8000, Baldwin *&*Oo. did not contemplate making an assignment, is sworn to positively, and not contradicted. That the goods were worth over $8000, no witness ventures to affirm. That it was then agreed that Miles should have a credit of six, nine and twelve months for the difference between the amount due him and the sum he was to pay for, or might realize from, the goods, is expressly sworn to and not contradicted; and it does not appear that he was to be paid any thing for his services in selling the goods.

If the original transaction can be regarded as a transfer of the goods to Miles as security for the payment of his claim, with power to sell the goods and apply the proceeds first to pay the sum due to him and account for the surplus, if any, then the transaction was in substance a mortgage with a power to sell presently, and was not void if there was no actual-intent to hinder, delay or defraud. *(Leitch*v. Hollister, 4 *Comst.*211.) It was not an assignment *in trust*for any part of the creditors of Baldwin *&*Oo., nor was it in any sense any more a transfer *in trust*than every mortgage to secure a debt is. Every mortgagee must account for the surplus, if any, and an express promise to account for it is but-co-extensive with the legal liability created by the relation of mortgagor and mortgagee.

Assignments of personal property by a debtor/ though in insolvent circumstances, to a creditor to secure him for existing claims and engagements, if made *bona*fide,-will be deemed valid, *(Hendricks*v. Robinson, 2 *John. Ch.*283, 306,312. *S. C.*17 *John.*438.)

Before the 13th of November, 1861, Miles had sold this stock of goods, and the arrangement then was that Miles should give his notes for the agreed price of the goods, $8000, and stand as a creditor for the sum due tó him, The goods he had sold before this, and the purchaser of them is not a party to this suit. That the goods were worth more than the sum for which Miles gave his notes is not pretended, and that the disposition which" he made of them is invalid, or unauthor*382ized, or was made with, a fraudulent intent, I am not able to perceive.

The assignment to Baldwin can not be held void, merely by force of any vice inherent in the transfer or transaction of the 17th of November. That was executed before the notes were given, to the extent and in the sense that the property transferred by the bill of sale to Miles had been sold by him to a purchaser, the *bona fides*of whose purchase is not called in question.

Baldwin *& Co.*and Miles, on the 13th of November, adjusted the matters between them growing out of the transfers to Miles, and it is not disputed that the notes he gave for the property which he had received and sold, were for an aggregate sum equal to their full value.

Preferring Miles as creditor for the sum due to him, did not place him in any more favorable position in respect to the proceeds of the goods sold, than he occupied under the agreement of November 7th.

And on the evidence, it can not be concluded that the transfer of the goods on the 7th was made with intent by Baldwin *&*Co. to make ah assignment of the obligation of Miles to account for the surplus.

There is no evidence tending to show the assignment fraudulent, regarding it as a transaction separate in intent and fact, from the transfer of the 7th of November. And that transfer being made with an actual honest intent, and there being nothing in its terms or undisputed circumstances upon which the law can pronounce the intent to be fraudulent, the plaintiff’s complaint was properly dismissed.

A dismissal was the proper judgment on the facts found. Those facts are warranted by the evidence.; and no different or further facts could "be found on the evidence, varying the legal conclusions consequent upon them.

The judgment should be affirmed.