Sutherland v. Bradner — 26 N.Y. St. Rep. 854

Majority

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John L. Sutherland and Frances Sutherland Major, as Executors, Resp’ts, v. Alonzo Bradner and Andrew J. Holden, App’lts.^[1]

(Court of Appeals, Second Division,

Filed October 29, 1889.)

Headnote

Assignment fob benefit of cbeditoes — Void assignment not validated BY SÜPPLEMENTABY ASSIGNMENT MADE AFTEB BECÓVEBY OF JUDGMENT.

On June 4, 1884, Bradner made an assignment, with, preferences, hut did not include plaintiffs, who had an action pending against him, and directed that the surplus after paying preferred creditors he returned to him. On June 16th plaintiffs recovered judgment, and June 28th Bradner. executed a supplementary assignment, directing that said surplus he divided between all his creditors. Held, that the first assignment being void as against plaintiffs’ judgment, the supplementary assignment did not validate it, and the judgment became a legal lien on all of the assignor’s real estate situate in the county where it was docketed.

Appeal from a judgment of the fifth department, affirming a judgment setting aside a general assignment for the benefit of

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creditors as fraudulent on its face, which, was entered on the decision of a special term.

On the 4th day of June, 1884, Alonzo Bradner executed, acknowledged and delivered a preferential general assignment for the benefit of his creditors to Andrew J. Holden as assignee, who on the same day executed and acknowledged an acceptance thereof and delivered the completed instrument to the clerk of the county of Livingston by whom it was duly recorded on that day. The assignor by his assignment preferred part of his creditors, dividing those preferred into four classes and directing the payment in full of each class in its order, but provided that in case the assigned estate should be insufficient to pay some one of the classes in full then the creditors named in such class were to be paid pro rata. The assignor after making provision for the payment of the preferred creditors, provided: “ Lastly, the said party of the second part shall return the surplus of said net proceeds and avails after the payment of the said debts, demands and liabilities as herein provided, if any there shall be, to the said party of the first part, his executors, administrators or assigns.”

The plaintiffs were not preferred in the assignment, and when it was made an action was at issue and pending in the supreme court between them as plaintiffs, and Alonzo Bradner and David McNair as defendants, in which the plaintiffs recovered June 16, 1884, a judgment, on contract, against Bradner and McNair for $17,698.87 damages and costs, a transcript of which was on the next day duly filed, and the judgment duly docketed in the office of the clerk of the county of Livingston, in which county Bradner and McNair then resided. June 17, 1884, an execution was issued to the sheriff of the county of Livingston, who had not returned it at the time of the trial of this action, being unable to collect it, or any part of it, by reason of said assignment.

June 28, 1884, the assignor executed and acknowledged an instrument, which is called a supplementary assignment, to his said assignee, referring to the original assignment, and reciting and directing as follows: “Whereas, it was intended by the party of the first part, the assignor, to provide for the payment of all of his creditors out of the avails of the property so transferred and conveyed, in whole or in part, as provided in said deed of assignment ; and, whereas, in copying the draft of said deed, the party of ' the first part, by mistake and unintentionally, omitted to insert in the deed executed by him a clause authorizing the party of the second part, the assignee therein, to pay all creditors of the party of the first part, not specified in said deed as entitled to preference, out of any property or proceeds thereof remaining in his hands, Now, for the consideration mentioned in said deed, and fully to carry out the intention and purpose of the parties thereto, and to> supply the omission, the party of the first part does hereby authorize and direct the said party of the second part, in case any property so conveyed and transferred to him, or the avails thereof, shall remain in his hands after paying and discharging the debts due to the creditors specifically named in said deed, and before

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any surplus shall be returned to the party of the first part, as in said deed of assignment provided, to pay all other debts of the party of the first part in full, if the said property or avails thereof be sufficient for that purpose; and, if not, to pay the same pro rata in proportion to the amounts of such debts.”

June 30th this instrument was delivered to the assignee, who, on that day, executed and acknowledged an acceptance thereof and delivered the completed instrument to the clerk of the county of Livingston, by whom it was duly recorded on that date. On the 14th day of July, 1884, this action was begun to have the assignment declared fraudulent and void as against the plaintiffs’ judgment, which the plaintiffs asked to have declared a lien on the assignor’s real estate, which was adjudged by the special term, and its judgment was affirmed by the general term.

Charles J. Bissell, for pl’ffs, resp’ts; James Wood, for assignee, app’lt; John A. Van Derlip, for assignor, app’lt.

A preferential assignment by an insolvent of all of his estate in trust for the payment of but part of his creditors which provides that, after paying the creditors named, the remainder of the assigned estate shall be restored to the assignor, hinders and delays the unpreferred creditors, and it is void as against them. Goodrich v. Downs, 6 Hill, 438 ; Barney v. Griffin, 2 N. Y., 365 ; Collomb v. Caldwell, 16 id., 484 .

The appellants concede that, as against the plaintiffs’ judgment, the assignment in so far as it affects the real estate, is invalid, but urge that it was validated by the so-called supplementary assignment; but if not, that it should have been reformed upon proof that the illegal clause was inserted through the mistake and inadvertence of the assignor .and assignee without fraudulent intent. The instrument recorded June 30th and called a supplementary assignment, did not validate the original assignment as against the plaintiffs’ judgment, which was recovered and docketed between the dates of the two instruments, and became a legal lien on all of the assignor’s real estate situated in the county wherein it was docketed. Porter v. Williams, 5 How. Pr., 441 ; affirmed, 9 N. Y., 142 ; Gates v. Andrews, 37 id., 657; Schwartz v. Soutter, 41 Hun, 323 ; 2 N. Y. State Rep., 633; affirmed, 103 N. Y., 683 ; 4 N. Y. State Rep., 288; Averill v. Loucks, 6 Barb., 470 ; Metcalf v. Van Brunt, 37 id., 621; Smith v. Howard, 1 Sheld., 5; S. C., 20 How. Pr., 121 .

The defendants alleged in their answers and offered to prove that the assignor intended by his assignment to devote all of his property to the payment of his debts, and that the provision for the restoration to the assignor of the remainder after the payment of the preferred creditors was inadvertently inserted by mistake, and without intent to defraud the creditors of the assignor, which evidence was rejected on the ground that it would afford no ground for a reformation of the assignment as 'against the lien of the plaintiffs’ judgment. It is clear on principle and authority that an assignment void on its face cannot be reformed by an action so as to cut off a lien of a judgment recovered after the exe

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cution of the illegal assignment, and before its reformation. Whitaker v. Gavit, 18 Conn., 522 ; Whitaker v. Williams, 20 id., 98; Farrow v. Hayes, 51 Md., 504 . This assignment, by its terms, hindered and delayed the creditors of the assignor, and it was not competent to show, for the purpose of cutting off the lien of the judgment, that no fraud was intended by the assignor and assignee.

The judgment should be affirmed, with costs.

All concur, except Bradley and Haight, JJ., not sitting.