Cohen v. Irion

Upon the evidence the referee was warranted in finding that the firm of Beltz & Reusswig was insolvent at the time it was dissolved, March 1, 1880, and that the firm of Beltz & Reusswig owed from $4,000 to $5,000 more than its assets. Pol. 88 and fols. 137 and 139. Upon the dissolution of that firm, Beltz took the assets, and “ the whole business and agreed to pay the firm debts. Pol. 82. When Henry Beltz purchased an interest of his father in the property he held a note given by the old firm of Beltz & Reusswig for $1,350, which he surrendered to his father as part of the purchase-price for an undivided half interest in the firm assets. Pol. 83. The verbal arrangement was made between the father and son for the partnership to exist between them, and after they entered into business. They paid in the course of the business a large number of the debts of the old firm of Beltz & Reusswig. It is quite evident that when the son sold to the father, the 10th of June, 1884, his interest in the firm existing up to that time, the firm was in a state of insolvency, and that fact was known to the father and the son.

Bishop on Insolvent Debtors says in section 282, page 215, viz.: “An assignment by an insolvent debtor which undertakes to provide for the payment of debts not owing by the assignor, or for amounts in excess of sums justly due by him, is fraudulent and void, for the manifest reason that the provision for such fictitious debts must have the effect either to defraud the Iona fide creditors of the assignor, or to delay and embarrass them in the collection of their debts.” And he cites numerous authorities upholding the proposition. See, also, Mead v. Phillips, 1 Sandf. Chan., 83; Webb v. Daggett, 2 Barb., 9 ; Bank v. Webb, 36 id., 291. Whether the assignment was fraudulent in fact or not was a question of fact for the referee. In Jacobs v. Remsen, 36 N. Y., 668 it was said, “ whether an assignment made by an insolvent debtor, in trust for the benefit of his creditors, is fraudulent in fact, the finding of a referee or of a jury, upon conflicting evidence, that it is not fraudulent, cannot be legally disturbed by the supreme court.” To the same effect is Ball v. Loomis, 29 N. Y., 412 .

Upon the question of whether the assignment was fraudulent in fact or not, the acts of the assignor prior to, and in contemplation of, making the assignment bear upon the question of intent. Peck v. Crouse, 46 Barb., 151 . And when such an inquiry is opened the law permits great latitude. Hubbard v. Briggs, 31 N. Y., 538 .

It is insisted, in behalf of the appellant, that an error was committed upon the trial in allowing the complaint to be amended so as to allege large purchases by the assignor of the plaintiffs with the preconceived design not to pay for the same; and that an error was committed by the referee in receiving evidence under such an amended complaint of the facts tending to show that the assignor purchased between the 10th of June, 1884, and the 21st of February, 1885, when he assigned, a large quantity of goods, amounting to $10,500, for which purchases the plaintiffs brought their actions and recovered judgments, and in finding such facts in regard thereto as are stated in the sixth finding by the referee. While the plaintiffs were not in a situation to rely upon such fraud for the purpose of avoiding the assignment, Kennedy v.

Upon the whole evidence before the referee he has found, as a matter of fact, that the general assignment executed by George Beltz February 21, 1885, was “ a part of a plan to hinder, delay and defraud creditors of George Beltz, including the plaintiffs in this action, and to hinder, delay and defraud themand thereafter he found, as a conclusion of law, that the assignment, “referred to in the complaint herein was and is fraudulent and void against these plaintiffs, and should be set aside.” We think the referee was authorized by the evidence before him to find, as a matter of fact, that the assignment was made with intent to hinder and delay creditors, and was fraudulent and void We think this conclusion of law upon the facts found is correct

Judgment affirmed, with costs.

Merwin, J., concurs.

(dissenting) — This action was in the nature of a creditor’s bill, brought to set aside a general assignment for the benefit of creditors made by the defendant, George Beltz, to the defendant, Elias Irion. The action was based on the ground that such assignment was fraudulent as to creditors.

The plaintiffs’ allegations of fraud were, that by such assignment certain fictitious debts were preferred; that the defendant, Beltz, secretly withdrew large portions of his assets, diverted them from the payment of his just debts, placed them beyond the reach of his creditors without any valid consideration, and transferred a large portion of his assets to his son and relatives for his own use and benefit; and that he purchased large quantities of goods with an intent to cheat and defraud his creditors, with a view of including them in his assignment for the purpose of paying fraudulent creditors and making fraudulent preferences under such assignment.

The learned referee found that the assignment was fraudulent, and should be set aside.

The important question in this case is, whether the evidence was sufficient to sustain the finding of the referee upon that question. The evidence shows that in 1866 the defendant, George Beltz, and one Reusswig formed a co-partnership for the purpose of carrying on the business of merchant tailors, at the city of Utica; that this business was continued by them until 1880, when that firm was dissolved, and the defendant, Beltz, purchased the interest of his partner in the business, and agreed to pay the debts of the firm. The debts of that firm were in excess of its assets. The defendant, Beltz, assumed the debts of the firm, as he testified, to preserve his good name and because he wanted to continue the business and keep his credit good. Fol. 137. Upon making this purchase he at once commenced

The business was continued by George and Henry G. Beltz, under the firm name of George Beltz & Son., until January 10, 1884, when a disagreement arose between them as to the amount drawn out by the father, and as to employing a book-keeper, when for that reason the firm was dissolved. Folio 113. The father purchased the interest of his son for $2,500, and gave his notes therefor, which were preferred in his assignment. At that-time Henry's interest in the firm exceeded the amount of such notes. Folio 278, n. The business was then continued by the defendant; Beltz, alone until February 21, 1885. During this time the defendant Beltz employed ]fis son, who was a cutter, and who did the cutting for his father, and traveled some from place to place, taking measurements and orders for clothes. During the latter part of the time the business was carried on by George Beltz & Son, and after the son had sold his interest in the business to his father, they purchased more goods for the business than they had previously. This was explained as being necessary to carry into execution their purpose to extend the business by taking orders in towns outside of the city where they were doing business. Folios 120, 186. This explanation was in no way contradicted. On February 21, 1885, the defendant Beltz made a general assignment to the other defendant, and among other claims preferred the $2,500 in notes given his son for his interest in the business of George Beltz & Son. Upon making such assignment the defendant Beltz delivered to his assignee all the property in his possession, even to his watch. The assignee took possession of the same, and has since then duly proceeded with the administration of his trust.

Upon these facts it is difficult for me to discover any ground upon which this judgment can be upheld. I have been unable to find any evidence which would sustain the claim that the defendant Beltz has preferred any fictitious debt. The only pretense that this allegation in the complaint has been proved, is based on the claim that the debt of Henry Beltz was fictitious because the firm of Beltz & Eeusswig were insolvent, and that when he purchased of his father a half interest in the stock, fixtures, accounts and business which had formerly belonged to that firm, that he acquired nothing by such purchase, and consequently had noth

Assuming, then, that the son was the owner of a one-half interest in the business and assets, and as the proof shows that the firm of G. Beltz & Son was not insolvent, fol. 273, h, but that his interest at the time he sold it to his father was greater than the amount he received, fol. 278, n, it is impossible for me to see how it can be properly claimed that this debt to the son was fictitious. I do not think the judgment can be upheld on that ground.

I have found no evidence that would justify a finding that the defendant Beltz at any time secretly withdrew any portion of his assets and placed them beyond the reach of his creditors without valid consideration. Indeed, there seems to be no claim at this time that the allegation in the complaint has been established,, unless as to the debt of the son, which has already been considered.

Nor do I think the evidence sufficient to sustain the judgment on the ground that the defendant Beltz fraudulently purchased goods with the intent of including them in his assignment to pay debts fraudulently preferred. The purpose of making the increased purchase was fully explained both by the defendant Beltz and his son, and there are no circumstances that I can recall which tend to show that such explanation is not a true one. It is not claimed that he purchased any goods that were not strictly in the line of his business, nor that he purchased an amount greater than was necessary to properly conduct it when extended,, as he proposed to do, by canvassing the surrounding towns for orders for clothes. Moreover, it is doubtful, to say the least, if the plaintiffs could in any way avail themselves of any fraud in making purchases, if it existed. Where a vendor, from whom goods have been obtained by fraud, instead of disaffirming the contract of sale, affirms it by bringing suit thereon and prosecuting it to judgment, neither he nor a receiver, appointed in supplementary proceedings instituted upon such judgment, can set up the fraud in the sale, for the purpose of defeating an assignment of the property made by the vendor for the benefit-of creditors, although the assignment was made in furtherance of the fraud, with full notice thereof upon the part of the assignee. Kennedy v. Thorp, 51 N. Y., 174 .

A careful «study of the evidence in this case has led me to the

In Morris v. Talcott, 96 N. Y., 107 , Ruger, Ch. J., states the rule as -to proof of fraud as follows: “ A party, therefore, relying upon the establishment of a cause of action, or a right to a remedy against another, based upon the alleged commission of fraud by such person, must show affirmatively facts and circumstances necessarily tending to establish a probability of guilt, in order to maintain his claim. When the evidence is capable of an interpretation which makes it equally as consistent with the innocence of the accused party as with that of his guilt, the meaning must be ascribed to it which accords with his innocence rather than that which imputes to him a criminal intent. It is well settled in this state that an intent to defraud cannot be imputed to a party who contracts a debt knowing that he is insolvent, merely from the fact of his insolvency and his omission upon a. purchase of property upon credit to disclose such condition to his vendor. Nichols v. Pinner, 18 N. Y., 295 ; 23 id., 264; Wright v. Brown, 67 id., 9; People's Bank v. Bogart, 81 id., 108. A condition of known insolvency on the part of an intending purchaser of property, accompanied with an intention to acquire the property of his vendor without paying for it, constitutes such a fraud as will make the vendee liable to arrest in an action for the debt; but the intention not to pay can no more be inferred from the mere fact of insolvency, than the fact of insolvency can be inferred from the existence of an intention not to pay. In either case it is essential that the necessary facts be made out by competent evidence.” In the case at bar it does not seem to me that the facts proved naturally or logically indicate the existence of fraud. They are at least as consistent with innocence and an honest purpose as with fraud. The evidence may possibly arouse a suspicion, but it does not establish fraud.

Following the principle of the authorities cited, I am of the opinion that the evidence in this case was insufficient to sustain the findings of the referee, and that the judgment should be reversed.