Shuler v. Birdsall, Waite & Perry Manufacturing Co.

Majority

p. 725

(17 App. Div. 228.)

SHULER et al. v. BIRDSALL, WAITE & PERRY MANUF’G CO.

(Supreme Court, Appellate Division, Third Department.

May 25, 1897.)

Headnote

1. Attachment—Inference of Fraudulent Intent.

An inference that a corporation is about to assign, dispose of, and secrete its property cannot be drawn from the mere fact that the corporation, being insolvent, has instituted a proceeding to have a receiver appointed.

2. Same—Acts Consistent with Honesty.

The shipment by a manufacturer of goods from his factory, though in unusual quantities, is not alone evidence that he has assigned, disposed of, and secreted property with intent to defraud creditors, since it is in the di

p. 726

rect line of a manufacturing business, and is therefore as consistent witli an honest as with a dishonest intent.

3. Same—Affidavit—Personal Knowledge of Affiant.

The requirement that an affidavit must state circumstances from which it can be fairly inferred that affiant had personal knowledge, as averred in the affidavit, of matters therein recited, is not satisfied by an affidavit showing that affiant resided in a locality different from that in which such matters occurred.

4. Same—Acts of Corporate Officers.

A corporation is not chargeable with an intent to defraud its creditors because its president appropriated its funds to his own use.

Appeal from order of Broome county judge.

Action by Davis W. Shuler and another against the Birdsall, Waite & Perry Manufacturing Company on two promissory notes. An attachment was issued against the property of defendant, and Elmore G. Page, as temporary receiver, moved on the original papers to vacate the attachment, on the ground that the affidavit of William H. Son, on which the attachment was granted, was insufficient. The motion was denied, and said Elmore G. Page, as temporary receiver, appeals.

Reversed.

Argued before PARKER, P. J., and LANDON, HERRICK, PUTNAM, and MERWIN, JJ.

Elmore G. Page, for appellant.

T. B. & L. M. Merchant, for respondent.

The question on this appeal is whether the affidavit upon which the attachment is based is sufficient to authorize it. The affidavit and warrant are dated December 11, 1896. It appears that the plaintiffs are co-partners, doing business at Amsterdam, N. Y., and the defendant is a domestic corporation, having its place of business in the village of W'hitney Point, N. Y. The plaintiffs’ cause of action is based upon two promissory notes, executed and delivered by the defendant at Cortland, N. Y., payable to the order of plaintiffs, one month after date,—one for §95.50, dated November 3, 1896, and the other for $300.32, dated November 6, 1896. The execution and delivery of the notes, their nonpayment and protest, and the amount due thereon over and above all counterclaims, are set out in the affidavit. The ground of the attachment, as stated in the warrant, is that the defendant “had assigned, disposed of, and secreted, and was about to assign, dispose of, and secrete, its property, with intent to defraud its creditors.”

The main, if not only, fact stated upon which to base the allegation that defendant is about to assign, dispose of, and secrete its property, is that the defendant, being insolvent, is trying to have a receiver appointed, and a suit is pending for that purpose. This fact does not sustain the allegation of an intent to defraud creditors, but rather the contrary. By such an appointment all the creditors are afforded equal protection. In support of the allegation that the defendant had assigned, disposed of, and secreted its property with intent to defraud its creditors, it is positively stated in the affidavit that “about three weeks ago the defendant knew that it was insolvent, and unable to pay its debts, and the directors and officers had a

p. 727

consultation, and since that time they have been shipping away unusually large quantities of manufactured material, and that the president of defendant had been drawing out large sums of money for his personal use.” It is also stated by the affiant, from information derived from one Davy, foreman of the trimming shop, and Mr. Perry, one of the officers of the defendant,—but what one is not stated,— that within the past few days manufactured material in unusual quantities had been shipped to one Whitney, of Cortland, of the value of several thousand dollars and about 10 car loads. It is also stated by the affiant that, “with conversations that he had with John Dickinson, and from George Seymour and other parties around the village of Whitney Point,” he ascertained that defendant had been shipping most all of their manufactured material away within the last three weeks, and had depleted their stock so that there was very little desirable left; that he then went into the factory, and looked through it, and ascertained that there was not more than $2,000 in value of stock, and all they had left was this stock, plant, and a few book accounts,—all not to exceed in value $4,000 or $5,000. The affiant had previously stated that he was informed that the president had taken away the books of the defendant. The affiant also positively stated that the defendant was owing about $20,000.

The question arises as to how much weight should be- given to the positive statements of the affiant. It does not appear where he resides. He states, at the commencement of his affidavit, that he is the general manager and agent for the plaintiffs, is fully acquainted with all the plaintiffs’ business, and has full knowledge of all the facts and transactions thereinafter set forth. If, as may be inferred, he resides at Amsterdam, where the business of the plaintiffs is located, his personal knowledge of what occurred at Whitney Point, in Broome county, prior to his arrival there, as he says, on December 9,1896, is not apparent. In Hoormann v. Cycle Co., 9 App. Div. 579 , 41 N. Y. Supp. 710 , the rule is laid down that the mere averment of facts as upon personal knowledge, in an affidavit made to procure an attachment, is not sufficient, unless circumstances are stated from which the inference can be fairly drawn that the affiant has personal knowledge of the facts.which he avers. This is a reasonable rule, and, applying it here, the positive statements of the affiant that the directors of the defendant after a consultation shipped away unusually large quantities of manufactured material, that the president of defendant had been drawing out large sums of money for his personal use, that the defendant was owing about $20,000, and there were but few book accounts, are entitled to but little weight.

It may be assumed that within a short time manufactured material in unusual quantities had been shipped to Whitney, of Cortland. If so, it remained at a known place within the jurisdiction of the court, and where the notes to plaintiff were given, and where one of them was payable. It does not appear what the goods were, or what kind of goods the defendant manufactured, or where they were usually sold or marketed, or what the position of Whitney was with reference to defendant. Shipment from the factory would ordinarily be in the direct line of a manufacturing business, and the

p. 728

fact alone that the amounts were unusual would not be sufficient to sustain the allegation of fraud. From the affidavit, taken altogether, we cannot assume that shipments were made to any other place than to Cortland, or that the shipments were made for any other purpose than for sale- or market. Assuming that the president of defendant drew out large sums of money for his personal use, it would not follow, from that fact alone, that the corporation would be chargeable with fraud. An act in fraud of the corporation would hardly show fraud on the part of the corporation. See Bank v. Wallace, 4 App. Div. 382 , 38 N. Y. Supp. 851 .

The shipments of goods and the acts of the president are the main circumstances bearing on the alleged fraudulent transfer or seere•tion of defendant’s property. Significance is claimed for the information, imparted to the affiant by one Knickerbocker, engineer, that the president of the company had gone away with a satchel containing the books of the defendant. If, as the affiant was also informed, the president was engaged in consultation with his attorneys with a view of having a receiver appointed, and a suit was pending for a receiver, it is not strange that the president should have the books of the company, and a dishonest intent would not be inferable. The engineer also told the affiant that he was instructed to lock the plant up and keep the keys until called for by the receiver.

To authorize an attachment upon the ground alleged there must be actual or intended fraud. Casola v. Vasquez, 147 N. Y. 258 , 41 N. E. 517 . If the facts stated are as consistent with an honest intent as they are with a fraudulent one, fraud may not be inferred from them. Bank v. Wallace, supra. The affidavit is, we think, not sufficient to authorize the conclusion that the corporation had assigned or disposed of or secreted any of its property, or was about to do so, with intent to defraud its creditors. It follows that the order appealed from should be reversed.

Order reversed, with $10 costs and disbursements, and motion to vacate attachment granted, with $10 costs. All concur.

Cases cited

Hoormann v. Climax Cycle Co. 9 App. Div. 579 N.Y. App. Div. 1896-11-06 p. 727
Casola v. Vasquez 147 N. Y. 258 N.Y. 1895-10-15 p. 728