Concord Const. Co. v. Plante

Action by a subcontractor to foreclose a mechanic’s lien upon a fund due the general contractor from the city of New York. The general contractor was the firm of H. M. Weed & Co., which was a partnership composed of H. M. Weed and one Barrett. On the 2d of October, 1907, Weed executed, in the name of the firm, four assignments, the aggregate amount of which covered substantially the entire fund in question. The plaintiff filed its notice of 'lien on October 3d, and similar notices were filed by the other respondents on the same day, or shortly thereafter. The firm was subsequently adjudicated a bankrupt, and the appellant Plante appointed trustee. The trial court found that the assignments were without consideration, fraudulent and void as against the lienors, and directed payment of the fund to the plaintiff and the other respondents, and the balance remaining, if any, to the trustee. Judgment was entered to this effect, from which the assignees and the trustee, who claims the exclusive right to attack the assignments, appeal.

The evidence adduced at the trial fully established that the assignments, with the exception of that to the appellant Bolton, were given in satisfaction of the individual obligations of H. M. Weed, incurred prior to the time the partnership was formed. It did not appear—at least evidence was not offered which would have justified a finding —that these obligations or any of them were ever assumed by the firm, and the trial court, therefore, was correct in finding that the assignments were without consideration and void as against the lienors. That being so, the lienors, in preference to the trustee, were entitled to payment from the fund. Crane Co. v. Pneumatic Signal Co., 94 App. Div. 53 , 87 N. Y. Supp. 917 , affirmed sub nom. Crane Co. v. Smythe, 182 N. Y. 545 , 75 N. E. 1128 . Whether the assignments were void or voidable under the bankruptcy act, if indeed that question were properly before the court, was immaterial.

The assignment to Bolton was given under different circumstances. In August, 1907, Mrs. H. M. Weed made an accommodation note for $2,000, payable October 1st, following, to the order of H. M. Weed & Co. The firm- indorsed this note and had it discounted by a bank. Bolton, by a separate instrument, guaranteed to the bank the payment of the note or any renewals thereof. When the note became due, a

The assignment was an absolute one, and as against the lienors, who were creditors of the firm, it seems to me it was clearly without consideration and void. Craft v. Schlag, 61 N. J. Eq. 567 , 49 Atl. 431 . When the note fell due on October 15th, Bolton voluntarily paid it, without even a demand for payment having been made upon him or the maker. No evidence was offered that Mrs. Weed was unable to pay the note. On the contrary, the court found that she was able to pay it when it fell due, and Bolton knew it when he paid the note. Under such circumstances, a voluntary payment on his part could not operate to validate the assignment, otherwise void in its inception. Wood v. Hunt, 38 Barb. 302 . Not only this, but the only conclusion which I am able to draw from the undisputed facts is that the assignment was given and accepted with the intent of hindering and defrauding the lienors, and the trial court so found. It was, therefore, void as to them, even if his voluntarily paying the note constituted a consideration (Greenwald v. Wales, 174 N. Y. 140 , 66 N. E. 665 ; Starin v. Kelly, 88 N. Y. 418 ), and for that reason the same was properly set aside (N. Y. L. Co. v. Seventy-Third Street Bldg. Co., 5 App. Div. 87 , 38 N. Y. Supp. 869 ; Gross v. Daly, 5 Daly, 540 ; Linneman v. Bieber, 85 Hun, 477 , 33 N. Y. Supp. 129 ; Tisdale v. Moore, 8 Hun, 19 ).

If the foregoing views be correct, then it follows the judgment appealed from should be affirmed, with costs to each respondent appearing separately and presenting briefs.

EAUGHEIN and DOWEING, JJ., concur.

I am unwilling to assent to the proposition that the contingent liability of a surety or guarantor is not sufficient consideration to support an assignment as security by the principal debtor, or that a surety cannot take such an assignment from the

The cases cited in the prevailing opinion do not support the conclusion reached. Craft v. Schlag, 61 N. J. Eq. 567 , 49 Atl. 431 , is an authority for, not against, the appellant Bolton. In that case, a surety took an absolute assignment of substantially all of his principal’s property, but did not satisfy the debt, nor in any way change his position to the liability. The court held that a contingent liability was not sufficient consideration to support an absolute conveyance of all of the principal’s property; but it was careful to point out that the conveyance would have been good if taken only as security. In this case, the undisputed evidence is, and the court found, that the assignment was taken as security. Paying or securing an honest debt does not tend to “hinder, delay, or defraud creditors” within the meaning of those terms as applied to fraudulent conveyances. Wood v. Hunt, 38 Barb. 302 , decided, what is undoubted law, that an assignment, void as to creditors in its inception, was not made valid by the subsequent voluntary payment by the assignee of the debts of the assignor. If the assignment to Bolton had not been given as security for a liability, contingent or otherwise, but had been wholly voluntary, the case cited would be in point. Greenwald v. Wales, 174 N. Y. 140 , 66 N. E. 665 , decided that, even though an assignment was supported by a sufficient consideration, it was void as to creditors if made with intent to hinder, delay, or defraud them, of which the assignee had notice. There was no evidence to show, and the court did not find, that the defendant Bolton participated in, or had notice of, any fraudulent intention of his assignor. The nearest to a finding on that head is the twenty-ninth finding of fact, to the effect that the defendants James, Martha R. Weed, and Bolton had reasonable cause to believe that the assignments in question were given with the intention to prefer them over other creditors. But we are all agreed that the question of unlawful preference under the federal bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 544 [U. S- Comp. St. 1901, p. 3418]) is not involved in this case. The evidence plainly shows that the defendant Bolton acted in entire good faith in accepting security, and his testimony bears the stamp of honesty. He did testify that the guaranty was not the consideration, and indeed that there was no consideration, for the assignment; but what he meant is plain. He was referring to “consideration” in the popular, not legal, sense. He testified :

“H. M. Wood & Co. made an assignment to me to cover me in order that the loan should be paid.”

It is plain that the trial court decided the case upon the ground that the assignments were without consideration, and therefore constructively fraudulent, and the judgment must be supported upon that ground, if at all.

The case, in a nutshell, is this: Bolton guaranteed the payment of a note, made by Mrs. H. M. Weed for the accommodation of H. M. Weed & Co., indorsed by H. M. Weed & Co., and discounted by a bank. Thereafter, without his having asked for it, the principal debtors sent him the assignment in question to secure him upon his guar

I vote to reverse the judgment in so far as it adjudges the assignment to the defendant Bolton void.

INGRAHAM, P. J., concurs.