Court Opinion

ID: 6126757
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:33:44.45347+00
Date Added: 2024-06-11T08:34:52.237399
License: Public Domain

Ready, J.:
This action was brought to recover damages against the defendant for having, as a sheriff of the county of New York, taken and sold the plaintiff’s goods to satisfy a judgment against George ~W. Carpenter, who was the plaintiff’s vendor. The defendant set up a plea of justification alleging the title of the goods to be in Cai’penter, notwithstanding the claim asserted by the respondent.
IJpon the trial, and at the conclusion of the jiidge’s charge, the court was requested to instruct the jury that a purchaser for full value was not protected on buying goods sold to hinder, delay or ■defraud creditors if the purchaser had notice of the intent on the part of the seller ; which the court refused to do as solicited, and modified it by introducing the words “ and participated in such intent.”
The statute provides that every conveyance or assignment of goods or < choses in action made with intent to hinder, delay or defraud creditors as against the persons so hindered, delayed or defrauded, shall be void. (3 R. S. [6th ed.], p. 145.) This is a broad and sweeping provision, and if it stood alone the result might be that the fraudulent intent of the grantor or assignor would render every such transfer void, no matter how innocent the purchaser might be; ;and hence, by a subsequent section of the statute, it was declared that the previous chapter should not be construed in any manner to affect or impair the title of a purchaser in good faith for a valuable consideration, unless it should appear .that such purchaser had previous notice of the fraudulent intent of his immediate grantor, or of the fraud rendering void the title of such purchaser. (3 R. S. {6th ed.], p. 146, § 5.)
The effect of these two provisions seems to be that if a purchase ibe made by a person having notice of the fraudulent intent of the vendor, he is not entitled to absolute protection, and his title may, therefore, be affected or impaired, even although he may have bought in good faith and for a valuable' consideration. This view has been sustained by the authorities. (Pringle v. Phillips, 5 Sand., 157; Danforth v. Dart, 4 Duer, 101; Baker v. Bliss, 39 N. Y., 70.)
If a rule declaratory of this effect had been expressed upon the trial it may be that the jury would, nevertheless, have found for the plaintiff, but that does not affect the right of the defendant to ¡have it charged if it be the law. The court, however, refused *557to recognize it and instructed the jury that a purchaser for full value was not protected in buying goods sold to hinder, delay or defraud creditors, if he had notice of the intent on the part of the seller and participated in. such intent; and this theory of participation was expressed in the instructions given the jury throughout the observations of the learned judge. The defendant duly excepted to the refusal to grant the request made and to the charge as given.
TTis interpretation of the effect of the statute, to which reference has been given, seems to be predicated of the recent case of Dudley v. Danforth (61 N. Y., 626). In that case the referee found in substance upon conflicting evidence that the purchase and sale were made in good faith for the purpose of paying to plaintiffs an honest debt owed them by the judgment debtor. The defendant asked the referee to find among other things that the alleged sale and transfer were made with intent on the part of the judgment debtor to hinder and delay his creditors, and that the plaintiffs had previous notice of such intent on the part of the judgment debtor. This the referee refused to find, and it was held, that assuming the evidence would have justified such a finding it would not have invalidated the purchase without the further finding that the plaintiffs participated in such intent. The case is not reported in full although it involves a very important principle, and the precise facts are not stated. But the finding of the referee was, however, that the sale was made for the purpose of paying plaintiffs an honest debt. In the syllabus of the case the rule declared is stated to be that where the vendee purchases property for the purpose solely of receiving payment of an honest debt, the fact that the vendor sold with intent to hinder and delay his creditors does not make the sale void as to such creditors; and this although the vendee had knowledge of such intent. It must be made to appear that the vendee participated in the fraudulent intent; and this was doubtless in conformity to the opinion expressed, but which is not published.
It may very well be that the court proceeded in that case upon the theory that the creditor might accept payment of his debt by way of purchase for a fair consideration, even though he knew of a general design on the part of his debtor to dispose of his property to defraud his creditors. This would not be such a purchasé as is contemplated by the statute. It would be the acceptance of some*558thing by way of barter in discharge of the indebtedness. Of course, if the debtor treated all of his creditors in the same way his general design would fail because he would be disposing of the property at fair prices and for legal purposes.
It cannot justly be regarded as hypercritical to assert that when a purchase is made by a creditor with knowledge, of the vendor’s fraudulent purpose of hindering, delaying or defrauding his creditors, of more than enough to pay the debt due, he necessarily participates in the fraud by thus assisting in its accomplishment. He aids in the fraudulent intent and the sale for a fraudulent purjiose because he buys the property, which is a part of the scheme. In the case referred to it seems, however, from the report and the referee so found, that the sale was made in good faith and for the purpose of paying an honest debt, and for the sole purpose of paying the debt. In this case, as already stated, there was a sale of more property than was sufficient to pay the plaintiff’s debts, and it happens, therefore, that the purchase was not made solely to accomplish such payment, but to continue the business in which the judgment debtor had been engaged, which was done, and the judgment debtor himself employed in the business by the plaintiff. The cases are, therefore, dissimilar, and this case is not controlled by the adjudication to which reference has been made. The sale here was not made solely for the purpose of paying the plaintiff’s debts.
The doctrine of the case of Dudley v. Danforth (supra), as it seems- to be in conflict with the statute itself on the subject of fraudulent transfer should be restricted to cases precisely similar, and not extended beyond them.
For these reasons the judgment should be reversed and a new trial ordered, with costs to abide the event.
Davis, P. J., concurred.
Present — Davis, P. J., Brady and Daniels, JJ.
Judgment reversed, new trial granted, costs to abide event.