Case Name: Frederick H. Hazard, as Trustee in Bankruptcy of Utica Crockery Company, Appellant, v. Rosell E. Wight, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1910-05-04
Citations: 138 A.D. 441
Docket Number: 
Parties: Frederick H. Hazard, as Trustee in Bankruptcy of Utica Crockery Company, Appellant, v. Rosell E. Wight, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 138
Pages: 441–446

Head Matter:
Frederick H. Hazard, as Trustee in Bankruptcy of Utica Crockery Company, Appellant, v. Rosell E. Wight, Respondent.
Fourth Department,
May 4, 1910.
Bankruptcy — action to recover sums paid by bankrupt corporation to creditor — facts not justifying recovery.
On the bankruptcy of a member of a partnership persons interested in the business induced the defendant, to whom two of the members of the firm, including the bankrupt, were indebted, to purchase the assets of the business, which lie did on condition that be should be paid the amount owed to him and $1,000 in addition. The defendant paid $5,250 for the assets of the firm and a corporation having a capital of $10,000 was organized, to which he turned over the goods purchased in consideration of an agreement by the corporation to pay .him the sum due, the payment being secured by the transfer to him of a large majority of the stock. Thereafter the defendant surrendered his claim for the $1,000, thereby reducing the indebtedness, which was subsequently paid partly from the assets of the corporation and partly from outside resources.
Thereupon the defendant transferred the stock held as collateral and his interest in the corporation ceased. In an action by the trustee in bankruptcy of such - corporation to recover the sum paid by it to the defendant,
Held, that as the defendant had received no moneys not owing to him, and there was no concealment, or pretense that any creditor of the corporation became such relying upon concealed facts, a judgment dismissing the complaint upon the merits was proper.
Spuing and Eobson,'JJ., dissented, with'opinion.
Appeal by the plaintiff, Frederick H. Hazard, as trustee, etc., from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of'Oneida on the 26th day of July, 1909, upon the report of a referee, dismissing the complaint upon the merits.
The action was commenced on the 27th day of March, 1908, to recover the sum of $4,296.96, with interest, alleged to have been received by the defendant, but'which belonged to the Utica Crockery ■Company, of which the plaintiff is trustee in bankruptcy.
Edmund J. Wager, for the appellant.
Vaseo P. Abbott, for the respondent.

Opinion:
McLennan, P. J.:
One Madoc, prior to June 21, 1906, was conducting a crockery business in the city of Utica, N. Y., and went into bankruptcy owing the defendant $350, and one Pike, who had formerly been associated with Madoc in such business, owed defendant $400. One Wilcox had been employed by Madoc as bookkeeper. Prior t-o J une 21,1906, the bankrupt stock of Madoc had been appraised at upwards of $17,000. Pike and Wilcox applied to the defendant to induce him to purchase said stock and turn it over to them so that they might continue the business of Madoc. The defendant agreed to make such purchase upon condition that he should be paid the amount owed him by Madoc and Pike and $1,000 in addition to such amount as he might pay for the stock of goods, and he subsequently bid and paid for such stock of goods and fixtures the sum .of $5,250. .Soon thereafter the plaintiff corporation was" organized at a capital stock of $10,000,.and the goods purchased by the defendant, being the bankrupt stock of Madoc, was turned o.ver to it. It was agreed at the time of the incorporation of the plaintiff company that the payments should be made to the defendant until he was fully paid, and as a part of such agreement or transaction ninety-eight shares, of stock of the plaintiff corporation were transferred to the defendant as collateral for the payment of his said indebtedness,, upon the payment of which indebtedness said stock was to be transferred at' the direction of Wilcox. The defendant thereafter surrendered his claim for $.1,000 for services and expenses, thus reducing the indebtedness to $5,750. Such indebtedness was paid from sources outside of the assets of the company and also from the assets of the company. When the full amount of such indebtedness to the defendant was paid he transferred his ninety-eight shares of stock which he had as collateral, .and his interest in the corporation ceased. There is no suggestion in the evidence that the defendant had at any time received any money from said corporation which it did not actually owe him for the goods which he had actually transferred to it and the finding of the referee is to that effect. There was no concealment of the transaction. There is no pretense that any creditor of the plaintiff corporation became such relying upon .any facts which were concealed or undisclosed by the defendant so far as his transactions with the corporation were concerned. .
The statement in appellant's brief that the defendant sold the aforesaid merchandise and .fixtures to the corporation for $10,000 and took in exchange for them ninety-eight shares of the capital stock is not borne out by the evidence. Such ninety-eight shares of stock were transferred to him as collateral to the indebtedness which the corporation owed him for goods actually paid for by him and delivered to it. He did not make a cent out of the transactions and no one was deceived by any transaction which he had with it.
' It seems to me that the judgment is right and should be affirmed, with costs.
All concurred, except Spring and Bobson, JJ.., who dissented in a memorandum by Spring, J.