13 N.Y.S. 688 | N.Y. Sup. Ct. | 1891
Lead Opinion
The plaintiff is a judgment creditor of the firm of Clarke, Radcliffe & Co., and brings this action against that firm, its general assignee for the benefit of creditors, and five of its judgment creditors by confession, to set aside said assignment and judgments as fraudulent and void, on the ground that all the defendants entered into a fraudulent combination among themselves to hinder, delay, and defraud the plaintiff and other creditors of said firm, and to evade the provisions of chapter 503 of the Laws of 1887, prohibiting preferences in assignments for the benefit of creditors exceeding one-third of the assets of assigning debtor. The case was before this court upon a former appeal, and, in the absence from the record of the requisite
The consideration of a judgment"in favor of one Eoye having been successfully impeached, and the general assignment itself having been set aside upon the ground of fraud, the learned trial judge refused to disturb the other judgments, and from such refusal this appeal is taken. These facts, beyond a reasonable doubt, show that the assignment and confessions of judgment together constituted a single transaction for the disposition of all the firm’s’ property, then upon the verge of insolvency. ' They were all drawn and prepared at the same time, and at the same place, by the samé parties, and were executed at substantially the same time. These acts were undoubtedly the result of a common scheme, by which it was sought to make a disposition of the debtor’s property, and therein to give a preference to those to whom the judgments were confessed. That instruments of this character, executed under those circumstances, are to be considered as one instrument, is we"; settled. White v. Cotzhausen, 129 U. S. 329. 9 Sup. Ct. Rep. 309; Sweetser v. Smith, 5 N. Y. Supp. 378; Kessell v. Drucker, 6 N. Y. Supp. 945. There is much force, therefore, in the suggestion that, as the assignment and judgments constituted a single transaction, parts of which the court held to be fraudulent, thereby the whole became tainted with fraud. In other words, it is claimed that the assignment and judgments, though contained in sepa
But there is another and distinct ground upon which these judgments must be set aside. The question we would now consider is not whether the judgments were made for the purpose of hindering, delaying, or defrauding creditors, but whether or not these judgments, being part of a scheme to give preferences, were not obnoxious to the statute, (chapter 503, Laws 1887,) and therefore void. The facts show that the judgments and assignments were parts of a plan for the disposition of all the debtor’s property, and an attempt and effort, as part of that scheme, to give preferences forbidden by law. Not only the circumstance of time, but the withholding of the assignment itself, although executed by the debtors until after levies were made under the judgments, is confirmatory of this view. In White v. Cotzhausen, supra, in commenting upon the case of Preston v. Spaulding, 120 Ill. 208, 10 N. E. Rep. 903, the opinion proceeds: “The supreme court of Illinois, considering the question whether the preferential judgments obtained in that case were within the prohibition of the act of 1887, said: ‘ The statute is silent as to the form of the instrument or instruments by which an insolvent debtor may effect an assignment. * * * It will be observed this act does not assume to interfere in the slightest degree with the action of a debtor while he retains the dominion of his property. Notwithstanding this act, he may now, as heretofore, in good faith, sell his property, mortgage or pledge it to secure a bona fide debt, or create a lien upon it by operation of law; as by confessing a judgment in favor of a bona fide creditor. But when he readies the point where he is ready, and determines to yield the dominion of his property, and makes an assignment for the benefit of his creditors under the statute, this act declares that the effect of such assignment shall be the surrender and conveyance of all his estate not exempt by law to his assignee, rendering void all preferences, and bringing about the distribution of his whole estate equally among his creditors; and we hold that it is within the spirit and intent of the statute, that, when the debtor has formed a determination to voluntarily dispose of his whole estate, and has entered upon that determination, it is immaterial into how many parts the performance or execution of his determination may be broken. The law will regard all his acts, having for their object and effect the disposition of his estate, as parts of a single transaction; and on the execution of the formal assignment it will, under the statute, draw to it, and the law will regard as embraced within its provisions, all prior acts of the debtor
It has been urged by the respondent that, as the assignment itself has been set aside and no longer exists, the upholding of the judgments would not contravene the statute, which can only be invoked where an undue preference is given in a general assignment for the benefit of creditors. The logical conclusion flowing from such an argument would be that, if the assignment was valid, the judments would be void, but that-the setting aside of the assignment for fraud would leave the judgments of binding force and effect. Thus we would reach a legal absurdity by holding that, where an illegal preference Is sought to be made, the court will hold the judgments void if the assignment is valid, and if the assignment is fraudulent the judgments will be upheld. It is unnecessary for us to determine what results may flow from this conclusion as to the judgment creditors’ liability to account to the plaintiff for the amounts received by them, respectively, under their judgments. Whether the plaintiff can compel the defendants to account for such sums received or not, cannot control the conclusion to be reached as to the invalidity of the ■judgments,, if otherwise warranted. Our conclusion, therefore, is that the judgment appealed from should be reversed, and a new trial ordered, with ■Costs to plaintiff to abide the event.
Concurrence Opinion
(concurring.) I concur in the result of this opinion, but I think there is an additional ground why the judgment should be reversed. It is apparent that the confession of these judgments was part of the fraudulent scheme of the judgment debtors, by which they, by means of another fraudulent judgment and a fraudulent assignment, sought to defraud their creditors. It is true that the judgment creditors w-ere not privy to this fraud, but that does not validate their judgment, because, if a judgment is suffered in pursuance of a fraudulent intent of the debtor, the judgment is void# irrespective of the intent of the creditor.
Daniels, J., concurs.