74 N.Y.S. 692 | N.Y. App. Div. | 1902
This is an action to recover damages for the seizure and conversion of goods by- the sheriff under warrants of attachment issued against the property of the firm of J. Healy & Co. The surety company having indemnified .the sheriff, became substituted as defendant and took the appeal.
On the day following, the sheriff levied on the property by virtue of these warrants of attachment issued in actions brought by general creditors against the firm. After the recovery of judgments by the attaching creditors the sheriff sold the property under his levies and realized thereon more than the claim of the respondent to secure which the chattel mortgage was given.
The plaintiff claimed the right to possession of the property by virtue of its chattel mortgage. The defendant maintained that there was no consideration for the chattel mortgage, and that it was
The evidence tended to show an intent on the part of the failing debtors to hinder, delay and defraud their unsecured creditors, and the finding of the jury to that effect was justified.
We have stated the evidence as given by the bank officials and agents, relating to the transaction between the debtors and the respondent which resulted in the surrender by the latter of the time note and acceptance of the demand note and chattel mortgage and the proceedings thereunder, and the knowledge and information possessed by the .respondent as to the financial embarrassment of the. debtors, and. their motive in thus giving a preference to the bank. The debtor who- negotiated the transaction with the bank testified, in substance, that he informed the- vice-president of the. bank of their purpose to force a settlement with their other -creditors for considerably léss than their indebtedness, but this was flatly contradicted by the testimony of the vice-president.
The evidence required the submission of the case to the jury, and, therefore, the exceptions to the refusal of the court to dismiss the complaint were not well taken.
The court .directed the jury, in addition to rendering a general verdict, to make three special findings on the following questions, to wit: “ (-1) Did the firm of Healy & Co. deliver the'chattel mortgage in question for the purpose of hindering, delaying and defrauding their creditors? (2) Did the plaintiff bank receive-the chattel mortgage knowing that it was made and delivered for the purpose of hindering, delaying and defrauding the creditors ? (3) Did the plaintiff bank receive, the chattel mortgage with the intent of aiding or assisting in hindering, delaying and defrauding the creditors of Healy &.Co. ?” The .jury rendered a general verdict in favor of plaintiff and answered the first question in the affirmative and the third in-the negative, but were unablé to agree on the second. The court accepted.the verdict and relieved the jury from answering the second question, to which ruling appellant’s counsel excepted. This exception presents no error. It was discretionary with the court whether to require the jury to render a special verdict on any question in addition to the general verdict, and it ■ was equally discre
On account of the fraudulent intent of the debtors as found by the first special finding of the. jury, the chattel mortgage would become void by virtue of section 24 of the Personal Property Law (Laws of 1897, chap. 417) were it not for section 29 of said law which provides as follows : “ Bona fide purchasers.— This articlé does not affect or impair the title of a purchaser or incumbrancer for a valuable consideration, unless it appear that such purchaser or incumbrancer had previous notice of the fraudulent intent of his immediate vendor, or of the fraud rendering void the title of such vendor.”
The jury having found, both by the general verdict and specially, that the respondent, did not participate in the fraudulent scheme, purpose or intent of J. Healy & Co., it follows that the sole purpose and object of the bank was to secure payment of the note held by it.
There is no question of unlawful preference here. The property was merely transferred as security and no general assignment was contemplated or executed. Even if- the question were presented it probably would not avail the appellant in this action as it represents creditors who, themselves, have obtained a preference. (Maass v. Falk, 146 N. Y. 34; Abegg v. Bishop, 142 id. 286; Central National Bank v. Seligman, 138 id. 435.)
This case is to be distinguished from those where parties having prior equities are asserting them as by seeking to recover their own property or securities fraudulently appropriated or diverted, or are defending themselves against liability on their own obligations likewise appropriated or diverted, for here the attaching creditors had no prior equities. (Archer v. O'Brien, 7 Hun, 146, 149.) The $2,500 time note held by the respondent constituted a valid subsisting obligation. It was surrendered and extinguished, and a new note with security to insure the payment of an honest indebtedness was given and accepted. This constituted a valuable consideration within the intent and meaning of the statute quoted. (Youngs v. Lee, 12 N. Y. 551; Phœnix Ins. Co. v. Church, 81 id. 218; Archer v. O'Brien, supra; Treusch v. Ottenburg, 54 Fed. Rep. 868; Mayer v. Heidelbach, 123 N. Y. 342; Matter of Utica Nat. Brew
Thus the first provision of the statute last cited relating to consideration is satisfied, and it only remains to be seen whether the verdict establishes the fact that the respondent did hot have previous notice of the fraudulent intent of J. Healy & Co. within the fair intendment of the statute, and if so whether such finding is supported by the evidence.
By section 26 of the Personal Property Law the question of the existence of a fraudulent intent arising under the 2d article of that statute is expressly declared to be a question of fact and not of law. The express knowledge which the respondent concededly had that its debtors were embarrassed and unable to pay their debts and desired to secure the bank, did not necessarily. charge the respondent with knowledge of the fraudulent intent of the debtors, for those facts in and of themselves did not constitute fraud. (Commercial Bank v. Bolton, 20 App. Div. 70; affd., sub nom. Commercial Bank v. Sherwood, 162 N. Y. 310, 318.) In Maass v. Falk (supra) unsecured time notes were surrendered and secured demand notes substituted therefor, but this was not considered a suspicious circumstance and there was a finding of freedom from fraud on the part of both debtor and creditor. A failing debtor has a right, to protect certain of his creditors' in preference to others, and even though the debtor is actuated by an intent to hinder, delay and defraud other creditors, one creditor has the right to accept the payment of his claim in full, or security or a confession of judgment therefor, so long as this is done without knowledge on his part of the fraudulent intent of his debtor or participation therein. (Manning v. Beck, 129 N. Y. 1; Galle v. Tode, 148 id. 270; Starin v. Kelly, 88 id. 421.)
As against the claims of a party having no .prior equity a creditor is not necessarily put upon his inquiry concerning the motive of the debtor in giving him security. (Archer v. O'Brien, supra) All that took place between the failing debtors and the bank, according to the testimony presented by the- respondent, was consistent with good faith on the part of both parties. The good faith of the bank is, as has been seen, clearly established by the general verdict.
The views already expressed show that, there was no error in the refusal of the court to charge as matter of law that the fraudulent purpose of the debtors was imputable to the respondent on account of its having accepted the security voluntarily given. That was fairly a question for the jury.
The judgment and order should be affirmed, with costs.
Patterson, Ingraham and Hatch, JJ., concurred.
Jndgment and order, affirmed, with costs.