70 N.Y.S. 558 | N.Y. App. Div. | 1901
This action grows out of a struggle between two creditors of an insolvent firm in an effort to obtain priority in the payment .of their claims out'of the assets of the insolvents. The claimed indebtedness to the creditors, respectively, is just and honest. " An insolvent dibtor has the right to sell and transfer the whole or any portion of his property to one or more of his creditors in payment of, or to secure, his debts when that is his honest purpose, although the effect of the sale or transfer will be to place his property beyond the reach of other of his creditors and render their debts uncollectible. That right existed at common law as an incident to the right of property. It was as complete and perfect as the right to acquire and enjoy it; ■ (Tompkins v. Hunter, 149 N. Y. 117.)
If, however, a transfer is made by debtors upon the trust that the grantee shall convert the property into money, and from the proceeds pay the indebtedness of the grantors, it is a general assignment und must be executed in conformity with the statutes relating to assignments for the benefit of creditors. ’ (Britton v. Lorenz, 45 N. Y. 51.) Scott & Clark did not own any real estate. The writing purports to sell “ all the fixtures and goods of every kind and description belonging to said firm, * * * together with all the personal property of every kind and name belonging to said firm.” Another paper was executed after the levy by the defendant' purporting to transfer the accounts of said firm to the plaintiffs. It does not appear why the subsequent transfer of the accounts was made as the first writing would seem to include the accounts. (18 Am. & Eng. Ency. of Law, 408.) That it was the intention of the parties to include the accounts is shown by the fact that the plaintiffs took the books of account into their possession on December twentieth and removed them from the factory. The writing does not purport to be a mortgage, and the plaintiffs do not now claim that it was given as a collateral security. It purports to be a sale. That it was intended as a transfer of the title appears from the fact that there was a coniplete surrender by Scott & Clark of all the property to the plaintiffs. One of the plaintiffs immediately after the delivery of the writing told the foreman of the factory that he had purchased the place and that he would stop work for the time being. In the morning when the levy was made by the defendant one of the plain
The determination of this case depends upon the legal effect of the writing so given to the plaintiffs. Sales are transfers in the ordinary course of business; assignments commonly grow out of -the embarrassments or suspension of business. A sale is usually for a. consideration actually paid or agreed to be paid and created or passing simultaneously; an assignment is in most cases for a consideration already executed as for a precedent or subsisting debt. An important distinction between the two modes of transfer arises •out of the character of a trust which belongs to an assignment. A sale is, on delivery of the thing sold and receipt of the consideration a complete transaction, passing absolutely and irrevocably all the seller’s interest in the subject of it without reversion or return under -any .circumstances. An assignment is likewise an absolute conveyance by which both the legal and equitable estate is divested out of the grantor, but the title vested in the assignee is subject to the uses and trusts in favor of the creditors.. (Burrill Assign. § 4.) It is not essential, however, that a trustee should be named as such in the instrument. And when the creditor undertakes under an agreement with the assignor to sell the property and apply the proceeds to the payment of his own and other debts of the assignor, and refund the surplus, he becomes a trustee, and the transaction amounts to a voluntary assignment. (Burrill Assign. § 3.) A sale-has been generally distinguished from an assignment by the absence
In Hine v. Bowe (114 N. Y. 350) a firm executed to the plaintiff a bill of sale of the firm property at an agreed price, and the plaintiff executed an instrument in return by which he agreed to cancel his indebtedness against the defendant and pay other debts of the firm not exceeding the sum named. Held not to be a general assignment.
In Manning v. Beck (129 N. Y. 1) an insolvent debtor gave to his son a bill of sale in payment of a debt due the son and his assumption of certain indebtedness of the father which he agreed to'pay and also the payment of a small amount in cash to the father. The consideration of the bill of sale was ample, and the son was solvent. The following day the father made a general assignment. The son had no knowledge of the contemplated assignment or of any fraudulent intent. The bill of sale was upheld.
In Maass v. Falk (146 N. Y. 34) insolvent debtors transferred to three banks all the goods, wares and merchandise, stock in trade and fixtures of Falk Brothers & Co., in their store, “ To have and to hold to the said banks as security for the said indebtedness to them respectively, with authority to the said banks to hold and sell the same at public or private sale * * * and after payment of the expenses of such sales, and the said indebtedness to said banks with interest in full or ratably * * * to render the overplus to said firm or its assigns/’ Held, that this was a valid transfer not
.. In Tompkins v. Hunter (149 N. Y. 117) an insolvent debtor transferred to a creditor all of his property, real and personal, of an agreed value of $21,790.70 in payment of indebtedness to the creditor to the extent of the amount of the agreed value of the property transferred. The transfer was upheld.
In Hodge v. McKechnie (156 N. Y. 514) an insolvent debtor transferred to a banking firm arid to his wife all his stock of goods in a Specified place by an instrument which purported to convey an absolute title. and directed that from the proceeds the banking firm be first paid, and that his wife have the balance then remaining. It was not shown that there was more than sufficient property to. pay -the honest debts of the grantors in the bill of sale, and the transaction was upheld. _
In Delaney v. Valentine (154 N. Y. 692) a debtor executed' a chattel mortgage to a creditor to secure her debt and also the indebtedness of certain other -specified creditors, and empowered her, in default of payment, to sell the mortgaged property and out of the proceeds of the sale to pay -the debts-mentioned and interest, and the expenses of the sale, rendering the overplus, if any, to the .mortgagor. On the same day he transferred to another person, being one of those named as a creditor in the chattel mortgage, certain account's or choses in action as^ collateral security for the paym’eht of a portion of the debts secured by the said chattel mortgage and also, to secure the debts of certain other named creditors. All of the debts-mentioned were honest debts of the mortgagor, and the-mortgagor was then insolvent. The chattel mortgage rand transfer was upheld.
It will be seen that these- transfers are upheld either by reason of their being intended as collateral security or, in cases where they -were not intended as collateral security, a price was fixed for the goods sold and a definite agreement made as to how -the.same should .be paid. In this case we have an absolute transfer- of property that the plaintiffs admit was worth much more than their claim. It was not made as a.-collateral security but for their' own benefit ■ and the benefit of the other creditors. No price was agreed upon for the property, and it was hot made for the purpose of paying specified
The judgment is affirmed, with costs.
Judgment and order unanimously affirmed, .with costs.