161 N.Y. 587 | NY | 1900
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *590
The plaintiffs are judgment creditors of Lesser Brothers, a firm engaged in the clothing business in New York, and which failed on October 2, 1896. The purpose of the action was to set aside certain transfers of real and personal property and certain judgments by confession given by the firm to various parties claiming to be creditors, on the ground that the transfers and judgments were fraudulent. The facts which disclose the various transactions present the usual complications found in all schemes to defraud creditors. They have been fully detailed in the opinion of the learned trial judge and in that of the learned court below on appeal. A very brief reference to these facts will be quite sufficient now, since it was found at the trial and by the learned court below upon review that the purpose of the transfers and confessions of judgments, on the part of the firm, at least, was to hinder, delay and defraud creditors. These findings are not questioned here, and so we are able to enter upon a review of the judgment with one important fact settled. The plaintiffs *594
and all the numerous defendants, except two, have, by permission, appealed to this court. The main contention on the part of the defendants, who are favored creditors, through the transfers and judgments referred to, is that while the debtors intended to perpetrate a fraud, yet their creditors were wholly innocent and did not participate in any such purpose, but were simply seeking to obtain security for their honest debts, as they might within the recent case of Galle v. Tode (
(1) The appeals of Tobias Lesser, Bernhard Moses and Mrs. Marcus present the same questions. The trial court found that the judgments confessed to each of these parties and the transfers to them were made by the debtor firm for a fraudulent purpose and that they participated in the fraudulent intent. The court below on appeal unanimously affirmed this part of the judgment and the only ground upon which it is questioned here by the learned counsel for these particular creditors is that the finding that they participated in this fraud is without any evidence to sustain it. There are two conclusive answers to this contention. In the first place the unanimous decision below applies to the finding of fraud on the part of the creditors as well as the debtors, and, hence, is conclusive in this court on the question. But even if this were otherwise the doctrine of Galle v. Tode would have no application. The court referred in that case to creditors pressing their claims and procuring judgments in the usual way, either by regular suit or confession. But here the creditors took no affirmative or independent action to collect their claims. They simply accepted the advantage which the fraudulent debtor voluntarily gave them for his own purposes and as part of the fraudulent scheme. They put themselves under his protection and into his hands. They allowed the fraudulent debtor to represent *595 them in procuring the judgments and his fraudulent purpose was properly imputed to them.
(2) With respect to the appeal of the receivers appointed in the action brought by one of the fraudulent debtors against the other two, after the fraudulent preferences were made to dissolve the partnership and distribute the assets, the courts below are agreed that the suit or the receivership was not in good faith, but part of the fraudulent scheme to obstruct, hinder, delay or defraud creditors, that the receivers were appointed upon false and fraudulent statements made to the court and the material facts bearing on the application were suppressed. That the court below had the power to modify the judgment as to them in the manner that it did, cannot very well be questioned. The refusal of the court below to recognize receivers, who are the product of such a fraudulent contrivance, as officers of the court and trustees for creditors, was not a legal error. Though they may have been personally innocent of any participation in the fraud, yet their authority was tainted with the vice that pervades the whole transaction. The judgment appointing them having been virtually set aside for fraud, they have no legal right to demand that they be permitted to survive the destruction of the authority creating them.
(3) The learned trial court found that the transfers to Adler and Lilianthal were fraudulent, but as to these two defendants the judgment has been reversed. The order does not state that the reversal was upon the facts, and, hence, we must presume that it was for some error of law committed at the trial. In the form in which the record comes here we think that this part of the judgment of the learned court below cannot be sustained. The findings of fact to the effect that both of these defendants participated in the fraud have not been disturbed and they sustain the legal conclusions. In order to sustain the reversal in such cases in this court the respondent must show that some error of law is involved in the judgment of the trial court. (Parker v. Day,
The same considerations, we think, apply with equal force to the defendant Lilianthal. The trial court found that he also participated in the fraud, and no error of law can arise upon the finding, unless it can be shown that there was no evidence whatever to sustain it. The fraudulent intent of the grantor in the conveyances to this defendant being admitted, the circumstances were such that knowledge of this purpose on the part of the grantee could have been inferred as a reasonable conclusion. Lilianthal, like all the other parties referred to, simply followed the directions which the failing debtor gave to him. He did not take any independent action. He did not even ask for the conveyance, but merely accepted what was offered to him by the debtor. He knew that the latter was about to fail and that he had many creditors. It is difficult to believe that a business man who has been tendered and receives a conveyance of the property of the failing debtor under such circumstances can be entirely innocent of the intent and purpose behind the transaction. All we mean to say, however, is that when the trial court after hearing all the parties and having the benefit of their presence and appearance, and after weighing all the circumstances, refuses to adopt such a theory and in fact reaches a contrary conclusion, this court cannot say that such a finding is without any evidence to sustain it. The various steps, by means of which the whole transaction was consummated, were of such an unusual character that the learned trial judge was warranted in finding that none of the parties benefited by it could have been entirely ignorant of its real scope and purpose. Therefore, since we are bound to assume that the learned court below upon the appeal considered only questions of law arising upon the facts found, we think that the record does not disclose any legal error that warranted a reversal of any part of the judgment of the Special Term. *598
The judgment should be affirmed, except as to the defendants Adler and Lilianthal, and as to them it should be reversed and that of the Special Term affirmed, with costs.
PARKER, Ch. J., GRAY, BARTLETT and HAIGHT, JJ., concur; MARTIN and VANN, JJ., concur as to the affirmance and dissent as to the reversal.
Judgment accordingly.