148 N.Y. 270 | NY | 1896
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *272 The plaintiffs are judgment creditors of the defendants Tode and Wulling, who were co-partners doing business under the name of "Tode Brothers," and engaged in the grocery business in the city of New York, and at Monroe, in the county of Orange. The plaintiffs bring this action to set aside certain judgments confessed by Tode and Wulling in favor of the other appellants, on the ground of fraud, or to postpone such judgments, with the executions issued thereon, to the lien of the plaintiffs' judgment and execution.
On or about the 7th day of March, 1891, the defendants Tode and Wulling became financially embarrassed, and convinced that they could not longer continue their business without obtaining from their creditors an extension of time for the payment of their debts; thereupon they, in company with the defendants, Levi and Materne, organized a corporation by the name of "Tode Brothers Company," and transferred thereto all of their property and stock in trade, without receiving therefor any consideration, money or stock in such corporation. They then called a meeting of their creditors for March 16th, 1891, for the purpose of procuring a compromise. At such meeting the defendants Tode and Wulling disclosed to their creditors the fact that their property had been transferred to the corporation, so that it could not be reached by them. They were then advised that such transfer was fraudulent and void in law, and the creditors appointed a committee *274 to formulate an arrangement by which the property could be applied pro rata upon the debts of the firm. On the 24th day of March a meeting of the committee was held, at which the defendants Wulling, Levi and Materne were present, and at which the committee formulated a plan for the adjustment of the affairs of the company. They then prepared and signed a notice to the creditors calling a meeting for the 26th of March, in order to present their plan for approval and acceptance. The notice was delivered to Wulling to be sent to the creditors, but instead of sending the same he withheld and suppressed it, and, in company with Levi and his counsel, went to the residence of the defendant Materne, and there Levi, as president, Materne, as treasurer, and Tode and Wulling, as directors, passed a resolution authorizing a re-transfer of the property of the corporation to the defendants Tode and Wulling, and then executed such a transfer. On the next day the defendants Tode and Wulling confessed judgments in favor of Levi for the sum of $3,058.09, and in favor of Materne for the sum of $5,543.09, which judgments were immediately docketed in the office of the clerk of the county of New York, and transcripts thereof filed in the office of the clerk of Orange county, upon which executions were issued to the sheriffs of the respective counties. The defendants Tode and Wulling thereafter, but on the same day, confessed judgments in favor of eight other creditors of their firm, but without such creditors' knowledge, and they caused these judgments to be entered, executions to be issued thereon to the sheriffs of the counties of New York and Orange, and levies to be made upon the property of Tode and Wulling. After the execution of such judgments, and the levy of the executions thereon upon the property of the defendants Tode and Wulling, the plaintiffs procured an attachment, to be issued in an action brought by them, to recover a judgment for the amount of their claim, which attachment was levied upon the property of the defendants Tode and Wulling, but after the levy of the executions issued upon the judgments previously confessed. Subsequently the property so levied upon in the *275 county of New York was sold and the same was purchased by the defendant Levi, under the assumed name of Levison, and shortly thereafter the same was transferred to the wives of the defendants Tode and Wulling, who formed a co-partnership and continued the business through their husbands at the same place and in the same manner that it had theretofore been conducted. At about the same time the property levied upon in Orange county was sold to the defendant Materne, who caused a corporation to be organized under the name of "The Monroe Cheese Company," that being the name under which the defendants Tode and Wulling had formerly conducted their business in that county, and such business was continued by the corporation with the defendant Tode as manager, and the defendant Wulling as secretary.
The referee has found as facts that the corporation first organized by the defendants Tode and Wulling, under the name of "Tode Brothers Company," was organized for the purpose of receiving the transfer of the property and estates of "Tode Brothers," so that such property and estates might be placed beyond the reach of their creditors, including the plaintiffs, and as part of a scheme contrived by them to obtain from their creditors an extension of time for the payment of their debts; that such transfer embraced all of the property, estates and effects of "Tode Brothers," and was made with a fraudulent intent to hinder, delay and defraud their creditors; that the re-transfer of the property of the corporation to Tode and Wulling, and the confessions of judgments by them in favor of the other defendants, and the issuing of executions thereupon, under which all of the property of the defendants Tode and Wulling was levied upon, were done and accomplished by the defendants Tode and Wulling, with the like fraudulent intent and purpose, and the intent and purpose of incumbering and covering up their property, so that their other creditors, including the plaintiffs, should not be able to reach the same, and for the purpose of hindering and delaying such creditors in the enforcement and collection of their claims against such defendants, and of compelling such creditors *276 to compromise or settle their claims upon unfavorable terms, and for less than the full amount thereof, and with a view of, in some manner, reserving to themselves an interest in the property, notwithstanding the sale thereof under the executions.
The referee also, in substance, found that the attorneys who advised and represented the defendants Tode and Wulling in the transactions pertaining to the confessions of judgments and the issuing of the executions, were the attorneys of the defendants Levi and Materne, and the same attorneys who, in the matter of the confessions of judgments, acted or assumed to act in behalf of the creditors or plaintiffs in the judgments so confessed, as well as in behalf of the defendants who confessed them; that the confessions wee prepared, judgments entered and executions issued thereon by such attorneys; that they had knowledge of the said corporation and of the transfer thereby of all the property and estates of "Tode Brothers," and advised Tode and Wulling that such transfer was fraudulent, and that the property should be re-transferred to them by the corporation, and they assisted in making such re-transfer; they also had knowledge of the meeting of the creditors of "Tode Brothers" and the appointment by the creditors of the committee and of the proceedings had between such committee and the debtors with reference to the adjusting of their matters, and they advised that the confessions of judgments should be executed. At the time of such confessions such attorneys were not acquainted with any of the parties in whose favor judgments were confessed, except the defendants Levi and Materne; that the confessions were prepared and judgments entered thereon at the request of the defendants Tode and Wulling and upon the suggestions and advice of such attorneys.
It is quite apparent that the defendants Tode and Wulling were anxious to find some means by which they could avoid payment of their creditors' demands in full and still retain their goods and continue their business. Their first attempt to dispose of their goods to a corporation and then force a *277 compromise or extension of time of payment from their creditors appears to have failed, and then, whilst their creditors were engaged in devising a plan to dispose of the property and apply the proceeds ratably upon the indebtedness of the firm, Tode and Wulling procured a re-transfer of the property from the corporation and then executed the confessions of judgments in question, evidently hoping thereby to derive an advantage from the favored creditors and also to force the other creditors to submit to a compromise.
It is contended on behalf of the respondents that the defendants Levi and Materne were parties and privies to the fraudulent intent of Tode and Wulling. There is, however, no direct finding to that effect. A finding was requested that the defendants Levi and Materne had no knowledge of the intent of Tode and Wulling to defraud their creditors and the request was refused. But the refusal to find a fact is not tantamount to a finding against a fact, unless the intention of the court to be so understood is clearly apparent. The refusal to find may rest upon other considerations; the evidence may not be regarded as satisfactory either for or against, or the fact may not be regarded as material in the determination of the controversy. We do not understand the case of The Standard Oil Co. v. TheTriumph Ins. Co. (
These facts are significant and leave no escape from the conviction that Levi and Materne not only knew of the fraudulent intent and purpose of Tode and Wulling, but actually participated and aided in bringing about the disposition of the property intended by them. We consequently have no difficulty in reaching the conclusion that as to Levi and Materne the determination of the referee is correct.
As to the other judgment creditors a different question is presented. Confessedly they were innocent and had no knowledge of any fraudulent intent on the part of the judgment debtors. The referee and the General Term appear to have reached a conclusion that their judgments were fraudulent owing to the purpose and intent of the judgment debtors, notwithstanding the innocence of the judgment debtors, (Following Simons v. Goldbach, 9 N Y Supp. 359, 360; Illinois Watch Company v. Payne, 11 N Y Supp. 408, 410.) We do not feel at liberty to follow the General Term to the extent indicated in its opinion. Such a rule would practically render useless the statute providing for the confession of judgments and make it dangerous for a diligent creditor to accept from his debtor a confession of judgment. We are aware that under the first clause of the Statute of Frauds providing that every conveyance or assignment of an estate with the intent to hinder, delay or defraud creditors *279
shall be void, it has been held sufficient to show in the first instance fraudulent intent of the assignor. (Starin v. Kelly,
Whilst we are unable to concur in the reasons given below, we are still inclined to the opinion that this judgment should be sustained as to these judgment creditors. It is true they were innocent of any fraud or of any knowledge of the purpose or intent of the judgment debtors, and that the confessions of judgment were made to them without their knowledge, and that such confessions were for the amounts actually due and owing to them. We may, therefore, to this extent treat the judgments as free from fraud. The defendants Tode and Wulling having confessed the judgments, had no further power or control over them. The executions issued thereon were the processes of the court in which the judgments were entered, and could only be issued by an officer thereof duly authorized by law. The judgment debtors Tode and Wulling thereupon in furtherance of their scheme directed their attorneys, who had prepared the confessions of judgments and caused them to be entered, and who were entire strangers to the judgment creditors, to issue executions upon such judgments and cause them to be delivered to the sheriffs of New York and Orange counties to be levied upon their property. The processes of the court were thus procured to be issued by attorneys, who had no authority from the owners of the judgments. The executions would, therefore, be void, as well as the levies made thereunder, unless such acts of the attorneys were ratified by the judgment creditors. (Remington Paper Co. v. O'Dougherty,
Evidence was submitted upon the trial under the exception *281 of the defendants, which was competent only as against the judgment debtors. In our consideration of the case we have not given it any force and effect except as against the judgment debtors, and it is apparent from the findings of the referee that he did not otherwise consider it.
The other exceptions appearing in the case were properly disposed of by the General Term.
The judgment should be affirmed, with costs.
All concur (BARTLETT, J., agrees with the conclusion that the confessed judgments to Levi and Materne are void, but is of opinion that the other confessed judgments, as part of a fraudulent scheme and entered up without knowledge of the plaintiffs therein, are also void).
Judgment affirmed.