Court Opinion

ID: 5497859
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:55:01.938657+00
Date Added: 2024-06-11T08:33:51.577306
License: Public Domain

Daniels, J.,
(dissenting.) The attachment states the grounds upon which it was issued to be that the action was for damages for fraudulently obtaining and converting merchandise, and for the disposition by the defendant of his property with intent to cheat and defraud his creditors. In support of these facts, it was stated in the affidavit made by one of the plaintiffs that they had a good cause of action against the defendant for damages for a fraud, and for fraudulently obtaining and converting the goods, wares, and merchandise of the plaintiffs. The affidavit then proceeded to state that the defendant applied to the plaintiffs for the purchase of a quantity of tobacco. He had previously been a purchaser from the Arm, but at this time desired to increase his purchase to so large a5 extent that a statement was required of him of his financial condition. Such a statement was made by the defendant; and in the statement made he is sworn to have represented to the plaintiffs “that he was perfectly solvent; that the plaintiffs herein were his largest creditors; that, outside of the moneys due and owing them, he owed only to the amount of one or two thousand dollars, and solely for merchandise; and that they might well trust him, since his business was prosperous and increasing so that he needed those goods for sale.” The affidavit then proceeded to state that the plaintiff relied upon this statement, and sold and delivered to the defendant goods, wares, and merchandise of the value and at the price of $2,828.27, upon a credit ranging from five to nine months. This sale took place in the month of May, 1889, and no payment upon the purchase price *509of the goods was made by the defendant. The affidavit then proceeded to state that the defendant received the goods, and disposed of them, with the intent to cheat and defraud the plaintiffs, and that when he received them he did not intend to pay for them. It is then added that the statements made by him concerning his financial condition were false and untrue, in the, fact that he was not at the time solvent, and that the plaintiffs were not his largest creditors, but that at the time when he made the statements he had made and delivered to his son a promissory note for the sum of $6,430, payable in four months from its date, which was the 8th of April, 1889, and that the defendant knew at the time when his representations were made that his statements were false and untrue, and designed to cheat and defraud the plaintiffs. This was sufficient to establish a cause of action upon which an attachment, under the provisions of the Code, might be issued against his property; for it is provided by subdivisions 2 and 3 of section 635 that an attachment may be issued when the action has been brought for damages for the wrongful conversion of personal property, or for any other injury to such property, in consequence of negligence, fraud, or other wrongful act. And obtaining property, in the form of a sale and purchase by one person from another, by means of fraudulent representations, has been held to be such an injury to personal property as will present a case within the language of these subdivisions. Bogart v. Dart, 25 Hun, 395; Whitney v. Hirsch, 39 Hun, 325; Paper Co. v. Searing, 47 Hun, 237. And the case of Fleitman v. Sickle, 13 N. Y St. Rep. 399, is not in the slightest respect in conflict with this construction of these subdivisions- of the section; for there the attachment was issued to recover an indebtedness for goods sold and delivered, and upon the sole other ground that the defendant had assigned, disposed of, or secreted his property with intent to defraud his creditors. The same observation is also applicable to Kibbe v. Herman, 3 N. Y. Supp. 852; for this last case in no manner brought into controversy these provisions of the Code, neither was anything stated or decided in the case which would prevent an attachment issuing for the cause of action mentioned and set forth in the affidavit in this action. What it established was that the defendant, by means of false and fraudulent representations, had, in the form of a purchase, obtained the property of the plaintiff for the price, and amounting to the value, mentioned in the affidavit, and that the representations inducing the sale of the property to him in this manner were at the time and must have been known to him to have been false when he made them. The cause of action was therefore sufficiently set forth to answer all the requirements prescribed by the law to entitle the plaintiffs to an attachment.
The only other or further requirement is that contained in section 636 of the Code of Civil Procedure; and that has provided, to entitle the party to an attachment in addition to the cause of action, that it shall be made to appear, either that the defendant is not a resident of the state, or that he has departed from the state with intent to defraud his creditors, or to avoid the service of a summons, or keeps himself concealed in the state with the like intent, or that he had removed, or is about to remove, from the state with intent to defraud his creditors, or has assigned, disposed of, or secreted, or is about to assign, dispose of, or secrete, his property with the like intent. And, to bring this case within this provision of the Code, and establish the fact that the defendant had assigned or disposed of his property with intent to defraud his creditors, it was further shown by the affidavit that an action had been commenced and judgment recovered against him, by his son, upon the note which has been mentioned.
This action was commenced on or about the 11th of October, 1889; and on the!4th of the month an offer was made to allow the plaintiff in the action to take judgment against the defendant for the sum of $6,000, with costs. This offer was on the same day accepted by the plaintiff in that action; and judg*510ment was thereupon, and on the same day, entered against the defendant, as that was mentioned in the offer which was served. An execution is stated in the affidavit to have been at once issued upon this judgment, and a levy under the execution was made on the same day “upon the whole of the stock in trade and fixtures of the defendant” which were still held for the purpose of satisfying the judgment. This levy is stated to have been made upon the property with the intention to dispose of'it, and with intent to cheat and defraud the other creditors, and especially the plaintiffs. And it is then added that, by reason of the levy, substantially all the property of the defendant, including part of the merchandise from the plaintiffs, had come into the possession of the sheriff, for the purpose of being applied upon the judgment. These proceedings indicate a decided probability that the plaintiff who made the affidavit upon which the attachment has been issued was right in his conclusion that the intention actuating the proceedings in the action in favor of the defendant’s son was really to seize and appropriate his property, and prevent other creditors from resorting to it for the satisfaction of debts owing by the defendant to them. It is to be inferred from the affidavit that substantially all the property which the defendant had was .seized and appropriated by the execution in this manner. And such a seizure in favor of one of the creditors of the insolvent debtor, brought about with his assent, is opposed to the policy created by chapter 503 of the Laws of 1887; for by that act the right of an insolvent debtor to prefer one creditor or class of creditors to others to whom he may be indebted has been restricted to one-tliird of his estate. The provision then made was enacted to prevent abuses of this description, which had so frequently arisen in the disposition of estates of insolvent debtors; and it was deemed necessary by the legislature to check and restrain it to such an extent that after the enactment of this statute no more than one-third of the property of the debtor should be disposed of by way of preference in favor of any of his creditors, after payment of the amounts that may be due from him for wages and salaries to persons in his employment. Thepolicy of the act is entirely clear; and that is to take away from the insolvent debtor the power, previously possessed by him, of appropriating all liis property to the payment of favored creditors, and allowing the others no means whatever for the payment of any part of the debts owing to them. It is true that the defendant has not made an assignment, within the language of this act; but the policy of the act is to prevent him from making a preference in favor of his creditors beyond the one-third mentioned therein. And that the debtor will not be allowed to evade or avoid this policy by the confession of judgments, or the allowance of judgments to be taken against him in this manner, has been held already in a case heard and decided by this general term, but not yet reported.1 This principle, under a statute still broader in its language and effect, came before the supreme court of the United States, for the consideration and construction of that tribunal, in White v. Cotzhausen, 129 U. S. 329, 9 Sup. Ct. Rep. 309. An attempt had there been made to evade the restraints of the statute by voluntary transfers of property by the insolvent debtor for the benefit of particularly specified and favored creditors. And they were held by the court to be illegal, and in contravention of the Spirit and policy of the act of the state of Illinois; and the principle was sanctioned that, no matter by what name the end is sought to be effected, it is in violation of the statute. “You may call it a mortgage, or you may make a confession of judgment, or use any other contrivance, by whatever name known, if the purpose is to dispose of an insolvent debtor’s estate, whereby a preference is to be effected, it is in violation of the statute.” 129 U. S. 344, 9 Sup. Ct. Rep. 313. And to dispose of the property pursuant to an intention to evade the language and effect of an act of this description is a fraud *511upon the other creditors of the insolvent debtor. He cannot, either direclly or indirectly, deprive them of the rights intended to be secured by this statute for the satisfaction, or partial satisfaction, of the debts owing to them; and to attempt to do so, whatever may be the form of the proceeding by which the object is to be accomplished or effected, is an evasion and fraud upon the law, and presents such a disposition of the debtor’s property as is forbidden by this section of the Code. That has prohibited him from assigning or disposing of his property with the intent to defraud his creditors. It was' a fraud upon the other creditors to permit his son, by his own participation and consent, to obtain judgment upon this note in the manner in which that was done, and to seize and appropriate substantially all the property of the defendant for the purpose of paying that judgment; and, if that should be permitted, or allowed to succeed, it would be a device by which the entire effect and policy of this statute could be evaded and defeated by a fraudulent and dishonest debtor. The law will permit the success of no such artifice, but will require the policy upon which the enactment of this statute has proceeded to be observed and maintained byinsolventdebtors. Theaffidavit upon which the attachment was issued was sufficient to sustain it, and the order denying the motion was right, and should be affirmed, with costs.

See Spellman v. Freedman, 7 N. Y. Supp. 698.