Court Opinion

ID: 5497682
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:54:47.569023+00
Date Added: 2024-06-11T08:33:51.317643
License: Public Domain

Fish, J.,
(dissenting.) After a motion to vacate the attachment in this case had been heard upon the case-as made by plaintiffs’ affidavit, and denied, tile defendants renewed the motion upon affidavits and notice. It was heard and decided at special term, held before Mr. Justice Edwards, where an order was granted vacating the attachment. From that order this appeal is taken. The affidavit upon which the writ was granted sufficiently sets out a cause of action, either on contract for the purchase price of the goods or in fraud, either of which is sufficient for the purpose of this proceeding. The pleadings are not made part of the case, so that both the question of the cause of action as well as the alleged fraudulent proceedings of defendants rest upon the affidavits alone. Epon the case stated in the affidavits, the plaintiff may serve a complaint in an action on contract for the price of the goods sold, or in trover for converting them, or for damages resulting from the fraud of defendants in obtaining the goods. Either would be an action in which an attachment might be granted. See section 635, Code Civil Proc.; Bogart v. Bart, 25 Hun, 395. That plaintiff has brought another action in replevin, to recover a portion of the goods, has nothing to do with this case. That action will stand or fall upon the pleadings and proofs. The plaintiff may be beaten in that action, and yet be successful in this. He ought not to be bqaten in both actions, if he is right in either.
The special term did not consider or pass on the question as to whether a sufficient cause of action was stated in the plaintiffs’ affidavit. The point was .not raised there, nor is it presented by the defendants upon this appeal. The ■only ground upon which the order vacating the attachment was granted was that the facts stated in the affidavits upon which the writ was based were successfully controverted by the affidavits read by the defendants. The case ought to be heard and decided, upon this appeal, upon the same grounds taken at the special term. But on that question, if the plaintiffs, in their complaint, shall say nothing about any fraudulent representations in the purchase of the goods, but declare simply for the purchase price of the goods sold to the defendants, they may yet claim the benefit of the fraudulent conduct of the defendants in obtaining the goods as a circumstance in aid of the charge that in the transaction with Morrison they intended it as a cover to hinder and delay their other creditors. The salient points in the affidavit of Thompson, are— First, the charge of fraud by defendants in the purchase of the goods which constitutes the debt; and, second, that the defendants were at the time insolvent, and gave a chattel mortgage to Morrison with intent to hinder and delay and defraud their creditors. Plaintiffs’ affidavit states, in substance, that the last purchase of the goods by defendants was on the 28th day of January, 1889, to the amount of $786.02. It was on credit. That defendants were then and had been engaged in business at Troy, as manufacturers, and selling goods, apparently in healthy financial condition. They had, a few days before that, purchased goods of plaintiffs, on credit, to the amount of $694.45, and, about a month before that, another bill to the amount of $648.89,— all of which sums, in aggregate amounting to the sum of $2,129.36, remained unpaid. The plaintiffs’ affidavit states that at the time of those purchases the defendants represented to plaintiff that they were worth $10,000, had that capital in the business, had good backing at the national Bank of Troy, were *67solvent and in good financial condition, whereas they knew the fact to be otherwise; that they were at the time insolvent, and knew themselves to be so; that they drew checks to plaintiffs upon said bank for a part of said purchases, which checks were returned by said bank dishonored; that plaintiffs relied upon the representations of defendants in parting with their goods on credit; that the defendants still owe them for the whole of said sum, less the goods recovered in replevin, stated at $900. In corroboration of the charge that the defendants were perpetrating a fraud on plaintiffs, the affidavit shows—First. That the checks which defendants gave to pay for part of the goods came back protested, for want of funds at the bank. Second. That on the 30th of January, just two days after they had bought of plaintiffs, on credit, goods to the amount of $786.02, they executed to Morrison, their banker, a chattel mortgage upon everything they had, including the very goods so bought of plaintiffs, to secure the stated debt of $7,000, and caused the same to be made a public record; that said mortgage was given to hinder, delay, cheat, and defraud the creditors of defendants, and especially these plaintiffs. In corroboration of the charge of such fraudulent intent, the affidavit states that after the giving of the mortgage the defendants continued in possession of all the mortgaged property, managing, controlling, and selling the same, as they had done before the making of the mortgage, with the apparent assent of Morrison. The defendants and Morrison meet plaintiffs’ affidavit with affidavits, on their part, replete with denials of fraudulent intent, but do not deny the facts which constitute the basis of the charge of fraud. Morrison’s affidavit denies that he intended any fraud, and controverts a great many other items of minor importance, but does not deny that it was understood by and between him and defendants, at the time of the giving of the mortgage, that they were to remain in possession, and continue the business of managing, controlling, buying and selling, and trading with the goods, the same as they had done before, and that they did so continue in possession, in pursuance of said understanding, until after the issuing and levy of the, attachment in this case. On the contrary, he admits that up to the time of the issuing of the plaintiffs’ attachments the defendants were still continuing the business, and that up to that time he had made no move on his mortgage, and not until the attachments were levied did he make any attempt to use his mortgage, and then he did it because of the attachments.
Morrison states that he was informed and believed that defendants were solvent and doing well; and yet, at a time when he believed them to be solvent and doing well, he exacts a chattel mortgage upon all their effects, and made it a public record. He states that he did not take any steps to enforce his mortgage until after the course of plaintiffs had nearly destroyed the business of defendants. That is to say, his chattel mortgage, for a sum nearly equal to the highest estimate of the aggregate value of their property, was a harmless thing, and was intended to be so. It did not have the effect to weaken the credit or injure the business of defendants, and would not have been enforced, but for the attachments of plaintiffs. That then means, if it means anything, that the mortgage was only intended to be a cover, to keep the other creditors off,—to rest easy, and let the defendants go on and do as they pleased with the property, so long as no other creditors sought relief,— and only to be used to protect defendants from their other creditors; not to be used as a sword, but as a shield, when an emergency arose. This is the shape in which the affidavit of Morrison leaves the ease. The affidavits of defendants do not deny that they purchased of plaintiff $786.02 in goods two days before they executed the chattel mortgage to Morrison. They do not deny that they gave checks to plaintiff, upon the bank of which Morrison was cashier, to apply-in part payment to plaintiff, when they had no balance to their credit; and that the checks were returned, dishonored. They deny that they were at the time insolvent; and yet they executed to Morrison, and put *68on record, a chattel mortgage for $7,000, when there was no need of it, and when the highest sum they estimated their entire assets is $10,000. The defendants admit the giving of the ciiattel mortgage. T hey do not deny&emdash;father, tacitly admit&emdash;that it was not to be enforce.!, except it became necessary to keep off other importunate creditors. They do not deny that they did actually remain in possession of the property, and, with the assent of Morrison, continued in the control and management, buying and selling, the same as they did before the mortgage was given. They allege that they were at the time perfectly solvent; and yet at such a time they committed the most destructive act of bankruptcy that a firm of business men could do. At a time when they were perfectly solvent, and able to pay all their debts; when Morrison so believed them, and when all their creditors were quiet; when it was not necessary to do so,&emdash;they gave this extraordinary mortgage to Morrison, which advertised them to every business man as being, on the face of things, utterly insolvent; and, with innocent assurance, these defendants continue to assert in their affidavit that they were able to pay, and would have paid, all their debts, including plaintiffs’ debts, had not their business been ruined by the attachment of plaintiffs. The mortgage did them no mischief. It is quite evident that it was not intended to interfere with their business. It was given and intended as a notice to quit, to ail other creditors; not to be used or enforced so long as other creditors kept quiet,&emdash;to enable the defendants to go on and market all their goods, and apply the avails in the future as they saw fit,&emdash;only to be given activity when it was necessary to defeat other creditors. It is not necessary to go beyond the affidavits of Morrison and the defendants to make a clear case against them, showing a mortgage given solely as a cover, intended to hinder and delay the creditors of defendants, and prevent them from realizing their debts out of defendants’ property. Other affidavits were read, on the motion in behalf of defendants; other, additional affidavits by plaintiffs, tending to strengthen the charges of fraud. Hone of them in any wise help defendants out of the difficulty arising from their own statement of the case.
The chattel mortgage was an extremely radical one, evidently intended to leave nothing for any other creditor. It, in terms, covered the entire stock of goods manufactured and unmanufactured, and in process of manufacture, and all supplies, including their electric motor, cutting-machines, button-hole machinery, all machines of every kind, cutting-boards, tables, shafting, patterns, boxes, stamps, and all other stock, machinery, tools, office furniture, and fixtures owned by them, and contained in their factory at Mount Olympus; and they were particular to add all their goods in laundry, not forgetting their trade-mark. Tims they made a clean sweep of everything owned by them. Morrison was at the time, and continued to be, cashier of a bank, and did not give the least attention to the business of manufacturing; leaving the defendants to go on and deal with the property the same as if he had no claim upon it. On the case made by the defendants, the chattel mortgage was clearly fraudulent, as against the creditors of defendants. The mere absence of a delivery and change of possession of the mortgaged goods, of itself, is sufficient to render the mortgage presumptively fraudulent and void, as against creditors, and conclusively so, unless good faith, and the absence of any intent to defraud, is made to appear. Proof that defendants'were indebted to Morrison for the amount named in the mortgage, is not, of itself, sufficient to satisfy this requirement; much less so if, at the time of the giving of the mortgage, it was intended not only that defendants should remain in possession, but were to have the unrestrained management and control of the property, changing its character, and selling and marketing the same, at their pleasure, and for their own benefit. ■ Such a mortgage is fraudulent in fact, even though the debt secured be valid. One creditor has no right thus to lend himself to be used as a breakwater against other creditors, who may be press*69ing for payment. The statute has denounced such a transaction; and it is held to be fraudulent and void, as against other creditors. Griswold v. Sheldon, 4 N. Y. 580-584; Russell v. Winne, 37 N. Y. 591; May v. Walter, 56 N. Y. 8; Southard v. Benner, 72 N. Y. 424; Potts v. Hart, 99 N. Y. 168, 1 N. E. Rep. 605. The attachments, then, were sufficiently justified, and they should be maintained. The order of the special term should be reversed, and the attachments reinstated; the order of the county judge of Rensselaer county reversed, and the attachment reinstated; and the order of Justice Ingalls, denying the motion to vacate, should be affirmed.