Cunningham v. Freeborn

3 Paige Ch. 557 | New York Court of Chancery | 1831

The Chancellor.

As this cause was heard on bill and answer only, the denial of all fraud in the execution of the assignment is conclusive evidence of the fact in favor of the defendants, unless that allegation is inconsistent with or is contradicted by some other statement or admission in the answer. But the vice chancellor was correct in supposing that the general denial of fraud was not sufficient, if it appeared upon the face of the assignment that its legal effect would be to delay, hinder and defraud the complainant, or other creditors of the assignor. The revised statutes have not made the fraud itself a question of-fact; in all cases, neither indeed was it possible for the legislature to do so. For when a party has intentionally executed an assignment, or conveyance of his property, which must hinder and defraud his creditors of their just demands, the question whether the conveyance is fraudulent or not, necessarily becomes a question of law and not of fact. The object of the statute was to reach a particular class of cases, where the conveyance would not necessarily have the effect to defraud creditors or others of their lights; and where the question of fraud must of course depend upon the intent with which the conveyance was executed. In all such cases the question of fraudulent intent is declared to be a question of fact and not of law. But if a party admits he intended to do a particular act, the legal effect of which act the adverse party supposes to be to delay hinder or defraud' him as a creditor, and to be a violation of the statute, the .question whether the act complained of is such a fraud as the legislature intended to guard against, necessarily becomes a question of law; and must be decided as such by the court. In the case now under consideration, although the defendants have denied all fraud in the assignment, yet if the assignor has made an assignment in such a form as necessarily to produce the effect which the statute has declared to be a fraud upon his creditors, the court must declare that assignment fraudulent and void, notwithstanding this general denial in the answer. Upon an examination of this case, however, for the reasons given by the vice chancellor, I am satisfied that there is nothing upon the face of the assignment which shows it to be legally fraudulent. And the answer shows that, in fact, there was no intention to defraud.

The decree of the vice chancellor was also correct in dismissing the bill as against G. Freeborn, the assignee. The assignment being valid, and provision being made therein for the distribution of all the surplus proceeds of the assigned property among the remaining creditors rateably, after paying the debts of those who were preferred, such residuary cestui que trusts had an interest in the surplus, of which they could not be deprived without their consent- If the complainant wished to reach that surplus, he should have filed his bill in behalf of himself and all other creditors who might choose to come in under the decree. ^(a) In that way those creditors might have been compelled to elect whether to come in and take the benefit of the provision made for them in the assignment, or to let him take the whole, or so much thereof as was necessary to pay his debt and costs. But the present bill is not framed in such a manner as to enable the court to make a decree of that kind, even if there had been a prayer for general relief.

The decree of the vice chancellor must therefore be affirmed, with costs.

(a) See Egberts v. Wood, ante p. 517.