Hine v. Bowe — 23 N.Y. St. Rep. 891

Majority

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Charles S. Hine and Henry W. Plant, Resp’t, v. Peter Bowe, App’lt.^[1]

(Court of Appeals, Second Division,

Filed June 4, 1889.)

Headnote

1. Bill of sale—When instruments in form of,' not fraudulent as TO CREDITORS.

The plaintiff transferred hy a hill of sale, reading as follows: “ C. S. Hine bought of Epstein & Hine, stock, tobacco and cigars, fixtures, accounts considered good, notes considered good, accounts and notes considered doubtful. All as per annexed schedule, $16,204.43. ’ At the same time C. S. Hine executed an instrument in tne following f, rm: “New York, June 12, 1882. In consideration of the sale to me by Epstein & Hine, of the stock, etc., described in a bill of sale of this date, I agree to cancel their indebtedness to me for borrowed money, amounting, without interest, to §9,850, to pay the sum of §3,300 borrowed by them from Mrs. Moseman, for which I became responsible, and also the following sums which are entitled to preference, * * * and such other sum for wages, merchandise recently purchased, and other claims, as Epstein &Hine may direct to be paid, as entitled to preference, not exceeding §750. Charles S. Hine.” Upon an arrangement agreed upon, Charles S. Hine took the plaintiff Plant in the business with him, and they assumed the firm name -of C. S. Hine & Co., and by him the property was transferred to such firm. It appeared that Epstein & Hine owed the plaintiff the debt which he agreed to cancel. Held, that Hine was at liberty to purchase the property for the purpose of obtaining the payment of the debt due him, notwithstanding the firm was insolvent. That the sale being proved to be - made in good faith, the debtor could direct the payment of the surplus of the consideration by the purchaser upon his debts, or such debts as lie might direct. Potter and Vann, JJ., dissenting.

2. Same—Intent to defraud creditors must be shown.

As the nature of this transfer did not rest wholly upon the instrument executed by the firm, but partly, at least, in the intent of the plaintiff, he could not be prejudiced by the intent on the part of the firm to create a trust which the terms of the instrument did not import, unless he was in some manner chargeable with participation in the purpose to do so. Potter and Vañn, JJ., dissenting.

3. Same—Creditors of insolvent firm mat require property to be USED IN PAYMENT OF DEBTS OF SAID FIRM.

The creditors of an insolvent firm have the right to require that the partnership property be directed to the payment of the firm liabilities.

4. Same—Practice—What questions submitted to the jury.

As a rule the court is not required to submit a mere abstract proposition to the jury.

Appeal from judgment in general term in the ‘first department, affirming judgment entered on verdict, in favor of the plaintiffs. The action was brought to recover for the alleged conversion of personal property. The plaintiffs claim title derived from Epstein & Hine by transfer, evidenced by a bill of sale, as follows:

“New York, June 12, 1882.

“C. S. Hine bought of Epstein & Hine stock, tobacco and cigars, fixtures, accounts considered good, notes con

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sidered good, accounts and notes considered doubtful, all as per annexed schedule, $16,204.43.”

At the same time, O. S. Hine exectited an instrument in the following form:

“New York, June 12, 1882.

“In consideration of the sale to me by Epstein & Hine of the stock, etc., described iii a bill of sale of this date, I agree to cancel their indebtedness to me for borrowed money, amounting, without interest, to $9,850, to pay the sum of $3,300, borrowed by them from Mrs. Moseman, for which I became responsible, and also the following sums, which are entitled to preference, $280.43 to Jacob Henkel; $1,424 to L. 0. & J. Elsen; $300 to 0. A. Thaxton & Son; $300 to Mary J. Hine; and such other sums for wages, merchandise recently purchased, and other claims, as Epstein & Hine may direct to be paid, as entitled to preference, not exceeding $750. CHAS. S. HINE.”

Upon an arrangement agreed upon, Charles S. Hine took the plaintiff, Plant, in the business with him, and they assumed the firm name of C. S. Hine & Co., and by him the property was transferred to such firm.

The defendant, as sheriff, in behalf of creditors of the firm of Epstein & Hine, levied attachments, issued in actions against them, upon the property, and took it into his custody. This constitutes the alleged conversion. The defendant alleged by way of justification, those facts, and that the transfer of the property to C. S. Hine was fraudulent against the creditors of Epstein & Hine.

Michael H. Cardozo, for app’lt; Otto Howitz, for attaching creditors; Wm. H. Arnoux, for resp’ts.

The question presented at the trial was, whether the sale made to the plaintiff Hine was in fraud of the creditors of Epstein and Hine. The two instruments constituting the bill of sale, and stating the manner in which payment should be made, may be taken together, and for afi practical purposes, treated as parts of the same contract. Stow v. Tifft, 15 John., 458 ; Rogers v. Smith, 47 N. Y., 324 ; Knowles v. Toone, 96 id., 534.

It appears that the bill of sale embraced all the partnership property of the firm making it.

It is contended chat the transfer appears upon the face of the instruments to have been fraudulent as against the creditors of Epstein & Hine. This contention is founded upon the fact that the right is reserved to them, to direct what claims shall have the preference for the purpose of the payment of $750. That would render it void as against such creditors, if the transaction, as thus represented, was an

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assignment in trust for the benefit of the creditors of the parties who made such transfer. Sheldon v. Dodge, 4 Denio, 217 . But the contract, as evidenced by the terms of those two instruments, does not necessarily require the construction that any such trust was created. The question upon this proposition is not one of intent of the parties otherwise than as the interpretation of the language there used may require. They may be construed to import an absolute sale at a stipulated price to be paid in the manner therein provided. And in that view, the sum to be applied in satisfaction of the debt due the purchaser, and to be paid to other creditors of the firm, would constitute the consideration of the sale, rather than an application of the proceeds of the property to their payment. The $750, payable for the benefit of the firm as it should direct, was a part of the measure of consideration, and if it had been payable directly to the firm, the effect would have been no different. Dunham v. Whitehead, 21 N. Y., 131 ; Brown v. Guthrie, 110 id., 435; 18 N. Y. State Rep., 311. It appears that Epstein & Hine owed the plaintiff the debt, which he agreed to cancel. He was at liberty to purchase the property for the purpose of obtaining the payment of the debt due him, notwithstanding the firm was insolvent. This, the law permits a creditor to do. Dudley v. Danforth, 61 N. Y., 626 ; Auburn Exchange Bank v. Fitch, 48 Barb., 344 . And when the sale is absolutely; and in good faith, made to him, no reason appears why the debtor, may not as well direct payment of the surplus of the * consideration by the purchaser upon his debts, or such debts as he may direct, as to take the money and pay it on them himself. Royer Wheel Co. v. Fielding, 101 N. Y., 504 . But appearances do not always represent the intent of parties to transactions relating to the disposition of property, when the rights of creditors of the parties making the transfer are involved. An assignment may be intended to create a trust, although it may not necessarily so appear by its terms. And in such cáse, as to creditors, it will, in its legal effect and consequences, be treated accordingly. Britton v. Lorenz, 45 N. Y., 51 ; aff’g 3 Daly, 23 . Whether that was the nature of the transaction of transfer between Epstein & Hine, and such plaintiff in this instance, was dependent upon the intent of the parties to it, which, upon the evidence, was properly a question of fact for the jury.

With a view to that question, the defendant’s counsel requested the court to charge the jury, that if the firm was at the time insolvent, and by the bill of sale intended to make an assignment for the benefit of creditors, it was void, etc. The exception to the refusal was not well taken, because theTequestidid not embrace within its terms, any suggestion that .the plaintiff, Hine, was in any sense in privitymifh Epstein and. Hiñ.e. in. respect „to_such Jntent.

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This was essential, as the nature of the transfer did not rest wholly upon the instrument executed by the firm, but partly, at least, in that made by such plaintiff, and he •could not be prejudiced by an intent "on their part to create a trust which the terms of the instrument did not import, unless he was in some manner chargeable with participation in the purpose to do so. Following that, was another request, to charge the jury that “no particular form is requisite to constitute an assignment for the benefit of creditors, and if the jury find that the instruments in question were intended as a general assignment for the benefit of creditors, the jury must believe that they were intended to pass the entire property of an insolvent firm.” This was refused, and exception taken. When the rights of creditors of the assignor are involved, the court will inquire into the intent of the parties to the transaction, for the purpose of characterizing the transfer and its effect. But the court was in this instance required to submit to the jury a mere abstract proposition, unconnected with any suggestion giving it application to the case, or to any question of fact requiring the consideration of the jury. As a rule, the court is not required to submit a mere abstract proposition to the jury. Moody v. Osgood, 54 N. Y., 488 .

The question for them was not, whether or not, any particular form was essential to such an assignment. The application of the proposition was dependent upon the finding that the instruments were intended as an assignment in trust for the benefit of creditors. The proper instruction to which the defendant would have been entitled, if requested, was substantially that the form of those instruments was not in the way of such construction and effect, if they so found the fact, and in that event they •should so treat them, and find for the defendant.

The further request to charge that if the jury found that the firm did not part with the property absolutely, or if Epstein and Hine, or, either of them, was to receive any substantial advantage or employment in consideration of the transfer, the defendant should have a verdict, requires no consideration, because it had been substantially charged by the court, and the repetition of the charge in that respect could not be required. The court had charged the jury that their verdict should be for the defendant, if they found that Epstein and C. F. Hine, or either of them, had any interest in the property attempted to be transferred by them after the execution of the instruments ; and that if the transaction contained any device to cover up property for their benefit, or to secure to them, directly or indirectly, any benefit, the transaction was fraudulent, and the verdict

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should be for the defendant. This seems to cover the subject of the last mentioned request.

The defendant’s counsel contends, that the conclusion was warranted that one or more of the debts which the purchaser undertook to pay, were the individual debts of one member of the firm, and that such question should have been submitted to the jury, and as the consequence of their so finding, the transfer of the property would have been void as against the defendant. It is true that the creditors of an insolvent firm had the right to require that the partnership property be directed to the payment of the firm liabilities. Wilson v. Robertson, 21 N. Y., 587 ; Menagh v. Whitwell, 52 id., 146. The evidence does not fairly justify the inference that any portion of the consideration of the purchase was, by the agreement, appropriated to the payment of any individual debt of one of the members of the firm of Epstein & Hine. So much of the debt due the plaintiff Hine, as was originally that of Charles F. Hine, became the liability of the firm by virtue of the articles of partnership, when the firm of Epstein & Hine was formed, and the reference in the plaintiffs’ agreement to a debt, as one to be paid to Messrs. Elsen, was descriptive of a debt for which Epstein alone was primarily liable, as it was produced by a loan furnished to him, but the firm was liable as indorser to the holder of the paper which represented it; and while the firm was not liable to the Elsens, as between it and the holder, the debt may have been treated as that of the firm, and it seems to have been paid by the plaintiff Hine at the bank where the paper so indorsed was discounted. The manner in which the debt was described did not qualify the relation of the firm as indorser to it; and the provision for its payment may be deemed as made to relieve the firm from its liability, which such relation permitted it to do.

In the view taken, no other question seems to require consideration.

The judgment should be affirmed.

All concur, except Potter and Vann, JJ., dissenting.