Cohen v. Moorhouse — 21 N.Y. St. Rep. 436

Majority

p. 436

Herman Cohen, App’lt, v. Asa Moorhouse et al., Resp’ts.

(Supreme Court, General Term, Second Department,

Filed December 10, 1888.)

Headnote

Assignment fob benefit of creditors—Preferences to children of assignor—When assignment not fraudulent.

Where in an assignment for the benefit of creditors the assignor preferred certain of his children to the amount of certain trust funds belonging to them, which came into his hands as their guardian, and which he used in his business and lost, Held, that the assignment was not fraudulent because of such preferences.

Appeal from a judgment entered in favor of defendants upon a trial before the court, without a jury at an Orange county special term.

George Putnam Smith and D. D. McKoon, for app’lt; G. M. Bush, for resp’ts.

This action was brought to set aside a general assignment made by the defendant, Asa Moorhouse,. for the benefit of his creditors on the ground of fraud. The, action was tried before a judge without a jury, and he found that the assignment was made in good faith and

p. 437

without an intent to cheat, defraud, hinder or delay the creditors of Moorhouse.

It was the claim of the plaintiff that the assignment upon which the attack was made was fraudulent in law, because it made preferences to certain relatives of the assignee, to an amount which exhausted the estate, and that those preferences were of such a nature as to render the assignment void. The principal attack was made upon the preference of Fannie Moorhouse and Nellie Moorhouse, two daughters ■of the assignee, of $1,000, with interest from May 14, 1886, for moneys belonging to them which the assignee held as their guardian and used in his business.

But it appeared from the testimony of the assignee himself, who is the only witness examined upon the trial, that he was the guardian of his two daughters; that the sum of $500 belonging to each of them came into his hands as such guardian, and that he used the same in speculations which turned out disastrously, and that the money was substantially squandered, so that he was honestly indebted to them in the sum of $1,000, for which he preferred them in the assignment. Similar satisfactory explanations were made by the assignee upon his examination of all the debts which he preferred in his assignment.

There was also special objections to the preferences of two other daughters of the assignee for whom he had also been appointed guardian, but a similar investment had "been made of the trust funds which belonged to these two ■daughters, and the same result had ensued, so that he was also indebted to them for trust funds belonging to them which he had also squandered.

The investment of the trust funds by the assignor which belonged to his four daughters was not such an investment as would relieve him from liability. He had no right or authority to make such an investment of the trust funds, and it was really in violation not only of the rules of law, but was entirely unjustifiable in any point of view, and on any accounting by him for such trust funds he would be held personally responsible for the whole amount.

In making the preferences for his four children as he did in the assignment, the assignor was doubtless actuated by the honest belief that he was justly indebted to them for an amount of the trust funds which he had received as their guardian; so there was no fraudulent intent in making those preferences.

A full examination of the case leads us to the conclusion that there is no fraud established, either in fact or in law in the execution of the assignment in question, and the findings of the trial judge are correct, and that the judgment should be affirmed, with costs.

All concur.