First National Bank of Champlain v. Wood — 10 N.Y. St. Rep. 87

Majority

p. 87

First National Bank of Champlain, Resp't, v. Orville K. Wood, et al., App'lts.

(Supreme Court, General Term, Third Department,

Filed July, 1887.)

Headnote

1. Appeal—Presumption that evidence supported the judgment of THE LOWER COURT.

Where the evidence in a case is not brought before an appellate court on the- record, and it does not affirmatively appear that no evidence was given which would support the legal conclusion made by the court below, it will be presumed in support of the judgment that such evidence was given.

2. Findings oe pact in support op conclusions op law—The omission op BY REFEREE IS NOT ERROR.

The omission of a referee to find all the facts needed to support his conclusion of law is not necessarily error.

•3. General assignment—Preferences—What are illegal.

Where a general assignment was made by a firm and preferences were given to members of the families of two of the firm to the extent of notes given them by the firm members Held, that the parties to whom the notes were given not being bona fide purchasers for value stood in the same position as the partners in whose favor the indebtedness evidenced by the notes actually existed, and that the preferences were illegal.

•4. Partnership assets—First liable for firm debts—Accounting.

Held, that granting that the notes operated to transfer the claim to the payees, still the nature of the claims remained the same, viz.: Money owing by a partnership to one of its members, and was first subject to the payment of the debts of the firm, and to an adjustment by accounting between the partners.

This appeal brings before us the judgment-roll including the referee’s report. But no case is made, and we have not the evidence before us.

In Kellogg v. Thompson ( 66 N. Y., 88 ) it was said that, in such a case, the court must assume that the facts proved

p. 88

were sufficient to sustain the findings and also any additional findings necessary to sustain the conclusion of law not in conflict with the affirmative facts found.

In Carman v. Pultz ( 21 N. Y., 551 ) it is said the referee’s-reports are not construed with the strictness which was-applied at common law to special verdicts. The court will presume nothing in favor of the party alleging the error, but, if compelled, through the imperfection of the statement of facts to resort to presumption at all, will adopt, such only as will sustain the judgment.

This doctrine is more fully stated in Murray v. Marshall ( 94 N. Y., 617 ). “When the evidence in a case is not brought before us on the record, and it does not affirmatively appear that no evidence was given which would support the legal conclusion made by the court below, we are-bound to presume in support of the judgment that such evidence was given.

The referee has found that the assignments of O. K. Wood & Co., and of Orville E. Wood and of Victor A. Wood, individually, were fraudulent and void on account of the illegal preference stated in his report.

At the time when the notes of 0. K. Wood & Co. were-given to the wife of V. A. Wood and to the wife and children of 0, E. Wood, if the firm of 0. K. Wood & Co. had been insolvent, then the preference of these notes would have been fraudulent, as the referee found it to be. So too if at. that time O. E. Wood and V. A. Wood had been themselves, severally insolvent, they would have had no right to give to their respective relatives the alleged indebtedness to-themselves of the firm of 0. E. Wood & Co.

These facts would not have been in conflict with the affirmative facts found, but fully consistent therewith. As-is said in the cases above cited the appellate court should, if necessary, presume in support of the judgment. That such evidence as is suggested and which would support the-legal conclusion was in fact given.

For it is the duty of the appellant to show that the referee erred. And the omission of the referee to find all the facts needed to support his conclusion of law, is not necessarily error. If the appellants claim that the evidence in this case does not show that the assignments are void for fraudulent preferences, they should show what the evidence was.

Aside from this, however, we think the conclusion of the. referee was right.

The case of Cole v. Reynolds ( 18 N. Y., 74 ), held that one-firm might sue another, although a certain person was a member of each. It may be doubted whether that decision!'

p. 89

would permit one member, or two members, of a firm to recover a claim against the firm without an accounting.

If 0. Eh Wood & Co. did owe Orville K. and Victor A., either jointly or severally, the firm may have owed Albert G-. EL Wood more. And it would not be just that either one partner, or two partners, should thus get a preference over the third without having an accounting.

But, however that may be, the notes which were given were merely evidences of the alleged debt which the partnership owed to two of its members. Making these notes payable to the wives and children of these partners did not change the character of the debt. The payees were not bona fide purchasers for value without notice. Assume that the notes operated to transfer the claim to the payees, still the nature of the claim remained the same, viz.: money owing by a partnership to one of its members. It was like the money put into the partnership by each. It was so much standing to the credit of those members of the firm. It was subject to an adjustment by accounting between the partners. And it was first of all subject to the payment of the debts of the firm; debts which Victor A. ancl Orville K. owed as members thereof.

Suppose that Orville 3L and Victor A. had made a transfer to' their respective wives of their respective interests or capital in the firm. Could the firm on becoming insolvent prefer these wives to the extent of the interest of Orville K. or Victor A. when they made such transfer ? We think clearly not. The present transaction is substantially the same.

We think, therefore, that for both the reasons given the judgment should be affirmed, with costs.

When 0. K„ Wood & Co., consisting of three members, gave their notes at the request of two members, to members of their families, in consideration of the indebtedness of the firm to each of the two members, we may assume an account stated, and that as between the firm and the two members the transaction was valid.

We may assume the firm was then solvent. Ho property by this transaction was withdrawn from the firm. The notes are not paid. After a time the firm becomes insolvent and makes an assignment. Its duty is to assign its firm property to pay its firm creditors, other than its own members. But it gives preference to these notes, and thus proposes to withdraw from the firm property enough of it to pay these notes. Thus the holders of these notes, who obtained them by gift from the members of the firm, propose to take firm property, at the expense of firm creditors, sufficient to make these gifts good. They were not

p. 90

gifts of property, but gifts of promises, and they should be rated at their legal value as gifts of promises. The present holders say to the other creditors of the firm, your valid claims against the firm must in law and equity wait for such scanty dividend as may or may not be declared from the firm assets after the firm’s promises to pay two of its own members, so all have first been fully paid to us, although these promises cost us nothing. The case is the same as if the two members of the firm still held the notes.The holders of the notes stand in their' shoes. And as the law would not permit the firm at the expense of its creditors to prefer two of its own members, it will not permit the preference to those who stand in their shoes.

The judgment should be affirmed.