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Baillargeon v. Dumoulin

165 A.D. 730 Court Third Department, Decision date 1915-01-06 English

Delivered by Woodward, J.:

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p. 730
Oliver E. Baillargeon, Appellant, v. Edward C. Dumoulin, Respondent.
Third Department,
January 6, 1915.

Headnote

Fraud — debtor and creditor—fraudulent chattel mortgage — power of assignee for benefit of creditors — agreement to sell goods covered by mortgage for benefit of mortgagee.
Plaintiff in payment of a transfer of his interest in a business to his partner took a chattel mortgage upon the stock of merchandise which remained in the possession of the mortgagor and who to the knowledge of the mortgagee continued the business, disposing of and replenishing the stock for the period of about eight months, when he made a general assignment for the benefit of creditors.
Held, that the mortgage was fraudulent and void as against creditors as a matter of law.
On the day following the assignment plaintiff made a demand upon the assignee for the goods claimed to be covered by the chattel mortgage, which he threatened to foreclose in case the goods were not delivered. In an action for conversion of the goods .the assignee, who was sued personally, contended that the goods claimed by the plaintiff were marked for the purpose of preserving a record so that the question of ownership might be disposed of thereafter, while plaintiff claimed that defendant took the goods under the terms of an agreement set forth in the complaint. The court permitted the case to go to the jury on the plaintiff’s theory. Held, that the court properly disposed of the case by setting aside a verdict in plaintiff’s favor and dismissing the complaint.
There was no consideration for an alleged delivery of the goods to plaintiff, and if there was such a delivery it was the duty of the defendant as assignee to reclaim the goods upon discovery of the facts in relation to the mortgage.
The plaintiff, who could get no title from the defendant as assignee for the benefit of creditors except upon payment of a valuable consideration without notice, gained nothing by his mortgage, and defendant properly disposed of the goods for the benefit of creditors.
An agreement by defendant to sell the goods for the benefit of the plaintiff, if made, was without consideration, and he had the right to recede from such a position.
Appeal by the plaintiff, Oliver E. Baillargeon, from a judgment of the Supreme Court in favor' of the defendant, entered in the office of the clerk of the county of Clinton on the 13th day of April, 1914, upon a dismissal of the complaint by direction of the court at the close of the plaintiff’s case. Decision
p. 731
on the motion to dismiss was reserved until the end of the whole case and the verdict of the jury was taken which was in favor of the plaintiff. Defendant thereupon moved that said verdict be set aside and his motion for a dismissal of the complaint made at the close of plaintiff’s case be granted, and the court thereupon set aside the verdict of the jury and dismissed the complaint.
Fred M. La Duke and Francis X. Hennessy, for the appellant.
Sidney E. Maders and H. W. Thomas, for the respondent.

The complaint alleges that on or about the 16th day of November, 1911, at Keeseville, N. Y., plaintiff delivered to the defendant certain goods, wares and merchandise, and certain store fixtures, of the value of $900; that these chattels were delivered to the defendant upon the express agreement that defendant would sell the same with reasonable promptness and dispatch and from the avails thereof pay the plaintiff the sum of $776, with interest, less a commission of five per cent; that the defendant sold the goods for the sum of $875, the sale being completed on the 4th day of December, 1911; that the defendant paid to the plaintiff the sum of $400.74 in two payments, and has failed and neglected and refused to pay the plaintiff the balance of said $775, although the same has been demanded; that defendant has converted to his own use the sum of $657.18 of the avails of said sale.

It developed from the defendant’s answer, and the matters appearing upon the trial, that prior to January 5, 1911, plaintiff and his brother were copartners in business, which was conducted by them in the village of Keeseville. The partnership was dissolved on that day, the plaintiff selling his interest to the brother, taking a chattel mortgage for $900 on the merchandise in payment of his interest. The merchandise remained in the possession of the mortgagor, who continued in business until the twenty-fifth day of September, disposing of the stock of goods, replacing stock, and carrying on the trade with the knowledge of the mortgagee. On the date

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mentioned the mortgagor in possession made a general assignment for the benefit of creditors, the defendant becoming the assignee. By the terms of the chattel mortgage $25 was to become due every three months, and $125 had been paid on the same at the time of the assignment. On the day following the assignment the plaintiff made a demand upon the defendant, as assignee, for the goods claimed to be covered by the chattel mortgage, threatening at the same time to foreclose his mortgage if the goods were not delivered. It appears that both parties at or about that time posted notices of sale, and that on or about the 11th day of November, 1911, they met at the store in Keesevillé, with their attorneys, and the plaintiff pointed out and caused to be marked the goods which he claimed to be covered by the chattel mortgage, and it is claimed that the defendant, as assignee, thereupon recognized the goods as belonging to the plaintiff, and that he then entered into the contract alleged in the complaint.

There is very little conflict in the evidence as to the material points, except that the defendant, who is sued personally for conversion of the goods, contends that the goods were marked for the purpose of preserving a record so that tho question might be subsequently disposed of, while the plaintiff claims that the defendant took the goods under the terms of the agreement set forth in the complaint. The learned trial court permitted the case to go to the jury upon the plaintiff’s theory, and upon the jury finding a verdict in favor of the plaintiff, on motion set aside the verdict and dismissed the complaint We are of the opinion that the case was properly disposed of by the court.

There can be no question that the chattel mortgage, under the circumstances, was fraudulent and void as against creditors, as a matter of law. (Zartman v. First Nat. Bank, 189 N. Y. 267 , 273, and authorities there cited.) The defendant was in possession in the capacity of a trustee for the protection of the rights of the creditors. He bought nothing and paid nothing, but took title for the performance of trust duties. (Brown v. Guthrie, 110 N. Y. 435 , 441.) His relation to the property was known to the plaintiff; the demand upon him was made in his capacity of assignee on the day following the assignment, and

p. 733
it requires no citation of authority for the proposition that one cannot take trust property from a trustee without rendering an equivalent — he cannot be permitted to deal with trust property to the detriment of the trust estate. The chattel mortgage being fraudulent and void as to the persons represented by the defendant it was "the same as though it had no physical existence, for a void thing is no thing, and there was, therefore, no consideration whatever for the alleged delivery of the goods to the plaintiff, and if the latter’s version is true and the defendant, as assignee, actually delivered the goods to him, it was the duty of the defendant as such assignee to reclaim the goods upon discovering the true facts in relation to the chattel mortgage. (Zimmer v. Hays, 8 App. Div. 34 , 37, 39, and authority there cited; Wetmore v. Porter, 92 N. Y. 76 , 83, 84.) The plaintiff, who could get no title from the defendant in his capacity of assignee for the benefit of creditors, except upon the payment of a valuable consideration without notice (Wetmore v. Porter, supra, 84 ), gained no right by reason of his fraudulent chattel mortgage, and the defendant properly disposed of the goods for the benefit of the creditors. The fact that he has paid to the plaintiff more than his ratable share of the proceeds of such sale as a creditor of the assignee does not change the situation so far as this action is concerned. The plaintiff, not owning the goods which the defendant concededly sold, has no standing in this court in this action; the agreement of the defendant to sell the goods for the benefit of the plaintiff, if it was made, was without consideration and in disregard of his duties as assignee, and he had a right at any time to recede from such a position. (Wetmore v. Porter, supra, 85 .)

The judgment appealed from should be affirmed, with costs.

Judgment unanimously affirmed, with costs.

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