Case Name: John R. Young and George W. Newman, Appellants, v. Winfield S. Stone, as Sheriff of Broome County, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1901-05
Citations: 61 A.D. 364
Docket Number: 
Parties: John R. Young and George W. Newman, Appellants, v. Winfield S. Stone, as Sheriff of Broome County, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 61
Pages: 364–373

Head Matter:
John R. Young and George W. Newman, Appellants, v. Winfield S. Stone, as Sheriff of Broome County, Respondent.
General assignment — what constitutes — it is void if it does not conform to the statute — distinguished from a deed or hill of sale.
An instrument executed by an insolvent firm to two of its creditors in the following terms:
“ Know All Mm By These Presents :
“That I, Lyman Clark, one of the firm of Scott & Clark of the City of Binghamton, R. Y., do hereby bargain, sell and transfer and set over, and by these presents does bargain and sell to John R Young and Geo. W. Rewman, comprising the firm of Young & Rewman of Philadelphia, Penna., all the tobacco unmanufactured and in process of manufacturing, cigars, labels, boxes, fixtures for manufacturing cigars, and all the fixtures and goods of every kind and description belonging to said firm- of Scott & Clark, located at Ro. 164 Susquehanna Street in Binghamton, R. Y., together with all the personal property of every kind and name belonging to said firm of Scott & Clark. Said bill of sale is made by said firm in consideration of $1,337.00 and $73.00 costs of attachment, in all $1,300.00, due said Young & Rewman by said Scott & Clark for notes given to secure said goods above set forth, and to secure the other creditors that Scott & Clark are owing, and said goods are to be held and collected by said Young & Newman for their Own purpose and benefit, and to secure other creditors,” constitutes a general assignment for the benefit of creditors, and is void if not executed in the manner pointed out by the statute.
The distinction between a general assignment for the benefit of creditors and a deed or bill of sale, considered.
Appeal by the plaintiffs, John It. Young and another, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Broome on the 3d day of April, 1900, upon the dismissal of the complaint by direction of the court after a trial at the Broome Tidal Term, and also from an order entered in said clerk’s office on the 6th day of October, 1899, denying the plaintiffs’ motion for a new trial made upon the minutes.
Prior to the commencement of this action plaintiffs were copartners, doing business under the firm name of Young & Newman as tobacco merchants in the city of Philadelphia, Pa., and in the year 1889 the firm of Scott & Clark were cigar manufacturers in the city of Binghamton, N. Y. The plaintiffs sold Scott & Clark leaf tobacco, and in December, 1889, Scott & Clark were indebted to them on account thereof in the sum of $1,226.24, for which Scott & Clark had given them six promissory notes. On the 19th day of December, 1889, one of the said notes amounting to $214.18 having been protested for non-payment, Mr. Newman, one of the plaintiffs, went to the city of Binghamton to look after the interest of the plaintiffs with reference to their claim. The firm of Scott & Clark were at that time indebted to a large number of persons and they could not meet their liabilities. On the morning of the twentieth day of December the plaintiffs procured an attachment to be issued in an action against Scott & Clark, founded upon the note which had matured. The affidavits on which the attachment was issued were made by Mr. Newman and Mr. Hanlon, the plaintiff’s selling agent. In Mr. Newman’s affidavit he says : “ That the said defendants are about to dispose of their property with intent to defraud their creditors.” And he further says that his information was obtained from Mr. Hanlon. In Mr. Hanlon’s affidavit he details the information received by him including the following: “That defendants would execute a bill of sale to a certain party" in this city on the 20th day of December of their entire stock of goods and all of their effects and property, and this party to whom the bill of sale was to be given would then try to compromise with the creditors, otherwise they would not get anything.” He further states in his affidavit “ That numerous creditors have been pressing the defendants for the payment of their claims within the past four days and defendants have stated to deponent that they had a large number of debts outstanding and could not meet their liabilities.”
On the morning-of December twentieth Mr. Newman, together with his attorney and a deputy sheriff of the county with the warrant of .attachment in his possession, went to the place of business of Scott & Clark and very soon thereafter an instrument was executed by one of the partners and delivered to the plaintiffs of which the following is a copy:
“ Binghamton, N. Y., December 20th, 1889.
“ Know All Men By These Presents:
“ That I, Lyman Clark, one of the firm of Scott & Clark of the City of Binghamton, N. Y., do hereby bargain, sell and transfer and-set over, and by these presents does bargain and sell to John R. Young and Geo. W. Newman, comprising the firm of Young & Newman of Philadelphia, Penna., all the tobacco unmanufactured and in process of manufacturing, cigars, labels, boxes, fixtures for manufacturing cigars, and all the fixtures and goods of every kind aiid description belonging to said firm of Scott & Clark, located at No. 164 Susquehanna Street in Binghamton, N. Y., together with all the personal property of every kind and name belonging to. said firm of Scott & Clark. Said bill.of sale is made by said firm in consideration of $1,227.00 and $73.00 costs of attachment, in all $1,300.00, due said Young & Newman by said Scott & Clark for notes given to secure said goods above set forth, and to secure the other creditors that Scott & Clark are owing, and said goods are to be held and collected by said Young & Newman for their own purpose and benefit, and to secure other creditors.
“ Dated Binghamton, N. Y., December 20th, 1889.
“SCOTT & CLARK.
“ Per Lyman Clash.”
The notes owing by Scott & Clark to the plaintiffs were surrendered to Mr. Clark at the time of the execution and delivery of the writing. The keys of the factory were delivered to Mr. Newman and he made an inventory of the stock and property in the factory, after which he locked up the building and left for the night.
Among the other creditors of Scott & Clark was one Frank Keyes, to whom they were indebted in a sum exceeding $1,500. Mr. Keyes obtained a judgment against Scott & Clark December 20, 1889, and an execution was issued thereon and placed in the hands of ¿the defendant. When Mr. Newman returned to the factory on the morning of December twenty-first, he found it unlocked and the defendant in charge, who told him that he had levied on the property of Scott & Clark by virtue of the execution in favor of Keyes. The defendant refused to turn over the property to the plaintiffs and subsequently sold it under said execution.
This action was brought by the plaintiffs against the defendant for conversion of the goods so levied upon by the defendant, and an answer was interposed by the defendant. The action was first tried in February, 1891, and resulted in a verdict of a jury in favor of the defendant. After the trial a motion was made on a case and exceptions for a new trial which was granted. The defendant appealed from such order to the General Term of the Supreme Court where the order granting a new trial was affirmed. (77 Hun, 395.) The action was again tried in May, 1895, and resulted in a verdict of a jury in favor of the plaintiffs. A motion for a new trial upon a case and exceptions was made and denied, and an appeal was taken from such judgment and order and the same were reversed by the Appellate Division of this court and a new trial ordered. (33 App. Div. 261.) The action was again tried in September, 1899, and at the close of the plaintiff’s case the court, on the defendant’s motion, granted a nonsuit and the complaint of the plaintiff was dismissed. A motion was made for a new trial, which was denied, and this appeal is from the judgment and order so entered in favor of the defendant.
T. JB. Merchant, for the appellants.
Harvey D. Hi/nman, for. the respondent.

Opinion:
Chase, J.:
This action grows out of a struggle between two creditors of an insolvent firm in an effort to obtain priority in the payment .of their claims out'of the assets of the insolvents. The claimed indebtedness to the creditors, respectively, is just and honest. " An insolvent dibtor has the right to sell and transfer the whole or any portion of his property to one or more of his creditors in payment of, or to secure, his debts when that is his honest purpose, although the effect of the sale or transfer will be to place his property beyond the reach of other of his creditors and render their debts uncollectible. That right existed at common law as an incident to the right of property. It was as complete and perfect as the right to acquire and enjoy it; (Tompkins v. Hunter, 149 N. Y. 117.)
If, however, a transfer is made by debtors upon the trust that the grantee shall convert the property into money, and from the proceeds pay the indebtedness of the grantors, it is a general assignment und must be executed in conformity with the statutes relating to assignments for the benefit of creditors. ' (Britton v. Lorenz, 45 N. Y. 51.) Scott & Clark did not own any real estate. The writing purports to sell " all the fixtures and goods of every kind and description belonging to said firm, together with all the personal property of every kind and name belonging to said firm." Another paper was executed after the levy by the defendant' purporting to transfer the accounts of said firm to the plaintiffs. It does not appear why the subsequent transfer of the accounts was made as the first writing would seem to include the accounts. (18 Am. & Eng. Ency. of Law, 408.) That it was the intention of the parties to include the accounts is shown by the fact that the plaintiffs took the books of account into their possession on December twentieth and removed them from the factory. The writing does not purport to be a mortgage, and the plaintiffs do not now claim that it was given as a collateral security. It purports to be a sale. That it was intended as a transfer of the title appears from the fact that there was a coniplete surrender by Scott & Clark of all the property to the plaintiffs. One of the plaintiffs immediately after the delivery of the writing told the foreman of the factory that he had purchased the place and that he would stop work for the time being. In the morning when the levy was made by the defendant one of the plain tiffs said to the defendant, "You have no right to this place; this belongs to me. Scott & Clark have no interest in it." At the sale by the defendant the attorney for the plaintiffs forbade the sale npon the ground that the property belonged to Young & Newman. When this action was commenced the plaintiffs alleged in the complaint, under oath, that they were the owners of the property therein .specifically described, being the property in dispute. The plaintiffs have only received $58 from the book accounts. The total amount of the property of Scott & Clark, exclusive of the book accounts, was inventoried by the plaintiffs at $2,140.74., One of the plaintiffs -on this trial testified: " The inventory taken by me there at that time is the fair market value of the property. The property inventoried there was worth at that time the values that were placed on it to a cent."
The determination of this case depends upon the legal effect of the writing so given to the plaintiffs. Sales are transfers in the ordinary course of business; assignments commonly grow out of -the embarrassments or suspension of business. A sale is usually for a. consideration actually paid or agreed to be paid and created or passing simultaneously; an assignment is in most cases for a consideration already executed as for a precedent or subsisting debt. An important distinction between the two modes of transfer arises •out of the character of a trust which belongs to an assignment. A sale is, on delivery of the thing sold and receipt of the consideration a complete transaction, passing absolutely and irrevocably all the seller's interest in the subject of it without reversion or return under -any .circumstances. An assignment is likewise an absolute conveyance by which both the legal and equitable estate is divested out of the grantor, but the title vested in the assignee is subject to the uses and trusts in favor of the creditors.. (Burrill Assign. § 4.) It is not essential, however, that a trustee should be named as such in the instrument. And when the creditor undertakes under an agreement with the assignor to sell the property and apply the proceeds to the payment of his own and other debts of the assignor, and refund the surplus, he becomes a trustee, and the transaction amounts to a voluntary assignment. (Burrill Assign. § 3.) A sale-has been generally distinguished from an assignment by the absence from it of the trust element which is essential to assignments. . In a sale of property there is a fixed price, but. no trust ; while in an assignment there is a trust and no fixed value given to the property. (3 Am. & Eng. Ency. of Law" [2d ed.], 13.) There, is a broad arid well-defined distinction between a génerril.assignmerit for the benefit of creditors and a deed or bill of sale. The former is a transfer by a debtor of his property ;to another in trust to sell arid convert, into money and distribute the proceeds among his creditors and it implies a trust and contemplates the intervention of a trustee. The others import an absolute sale and transfer of. the title to be held and "enjoyed by the purchaser without any attending trust. (Tompkins v. Hunter, 149 N. Y. 117.) A general assignment in its .ordinary legal significance means an assignment by a debtor transferring all his property in general terms to an assignee in trust for all his creditors. (People v. Mercantile Credit Co., 55 App. Div, 594.) A reference to some of the authorities belied upon by the plaintiffs as sustaining the writing here in controversy is necessary for the purpose of showing that they were each decided by reason of the existence of facts differing radically from the.facts shown in this case. ' In Kelly v. Babcock (49 N. Y. 318) there was a transfer, of" property for a fixed price, part of which was applied to pay an. indebtedness due to the grantees, and it was provided in the instrument that the balance might be paid to "and among the "creditors of the firm, and the surplus if any to the firm. It was held by the court that the sale was an absolute one, and that the balance remaining unpaid of the purchase-money could be reached by creditors, .and that the sale was valid and legal. . In Brown v. Guthrie (110 N. Y. 435) a debtor and the defendant, a creditor, entered into.an agreement in and .by which it was recited that the debtor owed the defendant $980.79, and that the debtor was also- indebted to other persons in a' large amount, and that he owned personal property worth $2,500, unincumbered;-and. .that he desired-, an additional loan of $1,200, and it was therein agreed that the debtor would execute to the defendant notes to the amount ,of $2,400, and secure, them by a chattel mortgage on all the goods and chattels owned by him. The .creditor' was to cancel .the old notes of $980.79, and. to furnish to the debtor an additional -loan of $600 within twenty days, and. assume payment of, and thereafter pay, such notes and accounts then owing by the debtor to other parties as the debtor should direct, to the amount of $619.21. The notes and chattel mortgage were executed, the old notes were canceled, and defendant advanced the $600, and a statement was made by the debtor to the defendant of the persons to whom he was indebted, and whom he desired should be paid said amount of $619.21, and the defendant paid thereon $401.28. The court held that this was not a general assignment; that it was in form an absolute sale upon a chattel mortgage given for a fixed and agreed consideration ; that the material and essential characteristic of a general assignment is the presence of a trust; the assignee is merely a trustee, and not absolute owner; he buys nothing, and pays nothing, but takes title for the performance of trust duties; that there was no such element in the transaction between these parties.
In Hine v. Bowe (114 N. Y. 350) a firm executed to the plaintiff a bill of sale of the firm property at an agreed price, and the plaintiff executed an instrument in return by which he agreed to cancel his indebtedness against the defendant and pay other debts of the firm not exceeding the sum named. Held not to be a general assignment.
In Manning v. Beck (129 N. Y. 1) an insolvent debtor gave to his son a bill of sale in payment of a debt due the son and his assumption of certain indebtedness of the father which he agreed to'pay and also the payment of a small amount in cash to the father. The consideration of the bill of sale was ample, and the son was solvent. The following day the father made a general assignment. The son had no knowledge of the contemplated assignment or of any fraudulent intent. The bill of sale was upheld.
In Maass v. Falk (146 N. Y. 34) insolvent debtors transferred to three banks all the goods, wares and merchandise, stock in trade and fixtures of Falk Brothers & Co., in their store, " To have and to hold to the said banks as security for the said indebtedness to them respectively, with authority to the said banks to hold and sell the same at public or private sale and after payment of the expenses of such sales, and the said indebtedness to said banks with interest in full or ratably to render the overplus to said firm or its assigns/' Held, that this was a valid transfer not withstanding that siibsequent transfers were made inclnding.all the property of debtors.
. In Tompkins v. Hunter (149 N. Y. 117) an insolvent debtor transferred to a creditor all of his property, real and personal, of an agreed value of $21,790.70 in payment of indebtedness to the creditor to the extent of the amount of the agreed value of the property transferred. The transfer was upheld.
In Hodge v. McKechnie (156 N. Y. 514) an insolvent debtor transferred to a banking firm arid to his wife all his stock of goods in a Specified place by an instrument which purported to convey an absolute title. and directed that from the proceeds the banking firm be first paid, and that his wife have the balance then remaining. It was not shown that there was more than sufficient property to. pay -the honest debts of the grantors in the bill of sale, and the transaction was upheld. _
In Delaney v. Valentine (154 N. Y. 692) a debtor executed' a chattel mortgage to a creditor to secure her debt and also the indebtedness of certain other -specified creditors, and empowered her, in default of payment, to sell the mortgaged property and out of the proceeds of the sale to pay -the debts-mentioned and interest, and the expenses of the sale, rendering the overplus, if any, to the .mortgagor. On the same day he transferred to another person, being one of those named as a creditor in the chattel mortgage, certain account's or choses in action as^ collateral security for the paym'eht of a portion of the debts secured by the said chattel mortgage and also, to secure the debts of certain other named creditors. All of the debts-mentioned were honest debts of the mortgagor, and the-mortgagor was then insolvent. The chattel mortgage rand transfer was upheld.
It will be seen that these- transfers are upheld either by reason of their being intended as collateral security or, in cases where they -were not intended as collateral security, a price was fixed for the goods sold and a definite agreement made as to how -the.same should .be paid. In this case we have an absolute transfer- of property that the plaintiffs admit was worth much more than their claim. It was not made as a.-collateral security but for their' own benefit and the benefit of the other creditors. No price was agreed upon for the property, and it was hot made for the purpose of paying specified claims. It was a transfer of all the firm assets for the benefit of all the firm creditors, and it seems to us to be exactly such a transaction as the General Assignment Law (Laws of 1877, chap. 466) was intended to reach and make impossible except in the way pointed out by such statute.
The judgment is affirmed, with costs.
Judgment and order unanimously affirmed, .with costs.