Third Nat. Bank v. Guerther — 34 N.Y. St. Rep. 478

Majority

p. 478

The Third Nat. Bank of Buffalo, Resp’t, v. Georgianna J. Guerther et al., App’lts.^[1]

(Court of Appeals,

Filed December 2, 1890.)

Headnote

1. Assignment fob creditors—Husband and wife—Preference of husband FOR SALARY AS AGENT.

Defendant, as residuary legatee of her father, continued his firm business for a time with her husband, who had been a partner only in the profits, but subsequently the husband assigned his interest to her, she assuming the debts and releasing him, and employed him to carry on the business, agreeing to pay him a yearly salary and to pay for the support of the family herself. Seven years later defendant made an assignment for benefit of creditors and preferred her husband as a creditor for $7,000 for unpaid salary. In an action to set aside the assignment the referee found that the assignment was void and the husband’s claim without consideration, on the ground that he had drawn some $10,000 to support the family, which, with his salary drawn, would extinguish his claim. Held, error.

2. Same.

A wife carrying on a separate business has a right to employ her husband as agent and compensate him, and though her agreement to support the family was illegal, and perhaps void, as she entered into it while solvent, she had a right to perform it, and having done so could not undo what had been done by recalling what she paid or requiring the husband to reimburse her for the outlay,

Appeal from judgment of the superior court of Buffalo, general term, affirming decision of referee in favor of plaintiff.

J. L. Bomer, for app’lts; Adelbert Moot, for resp’t.

This action was brought by the plaintiff, a judgment creditor of the defendant, Georgianna J. Guenther, to annul and set aside as- fraudulent and void a general assignment for the benefit of creditors with preferences made by said Georgianna to the defendant John L. Eomer on the 8th day of May, 1883, and also a mortgage for the sum of $5,545.58 covering real estate made by her on the same day to her husband John G. Guenther and John Dunbar as executors of the last will of her father, Henry F. Gillet, who died in the year 1874. The referee to whom the case was referred Sustained the mortgage, but held that the assignment was void because the assignor had included in it and directed the payment as a preferred claim of the sum of $7,000 to the husband of the assignor, which claim the referee held was without any consideration. It appears that after the assignment was made the plaintiff and other creditors of the assignor began .actions to procure judgments against her upon claims held by them, in which attachments were issued to the sheriff and levy made upon certain personal property embraced in the assignment and in the possession of the assignee which was subsequently sold by virtue of this levy. The assignee brought an action in the supreme court against the sheriff for a conversion of this property. The sheriff set up the same facts m his defense touching the validity of the assignment as are relied upon to invalidate it in this action. Both actions were referred to the same referee and they were tried together under a stipulation that the testimony, rulings and objections should

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apply to both cases. This action to set aside the assignment was brought in the superior court of Buffalo. The referee held in both cases that the assignment was void on account of the preference to John G. Guenther, the husband. The general term of the supreme court in the suit by the assignee against the sheriff reversed the judgment on the ground that the preference to the husband was supported by a sufficient consideration and might lawfully be provided for by the wife in making an assignment for the benefit of creditors. Romer v. Koch, 49 Hun, 483 ; 18 N. Y. State Rep., 909.

The general term of the superior court sustained the judgment in this case entered upon the referee’s report, holding that the assignment was invalid.

In order to get a clearer view of the question, in regard to which two very learned and able courts entertain opposite and conflicting opinions, a clear understanding of the facts which underlie it is necessary, and they are practically undisputed. The assignor is the daughter of Henry T. Gillet, who died November 23, 1874, leaving a will, in which his daughter, this defendant, then' married, was named as the residuary legatee and devisee. It is found by the referee that Gillet at the time of his death was possessed of a large estate, and was then, and for some years prior to that date, engaged in partnership with his son-in-law, John G. Guenther, in carrying on the wholesale and retail rectifying and liquor business in the city of Buffalo under the firm name of Henry T. Gillet & Son. That Henry T. Gillet owned all the property and assets of the firm, his son-in-law being interested only in the profits and being, under the arrangement, entitled to receive one-half of the same. After the death of Henry T. Gillet, the son-in-law, said John G. Guenther, as survivor, carried on the business in the same firm name until May 1, 1876, when, as such survivor and also as executor of the will of his father-in-law, he assigned and transferred to his wife, the residuary legatee, by written instrument “ all and singular the goods, chattels, property and effects of whatsoever name, kind or character, or wheresoever situate, of said firm of Henry T. Gillet & Son.” The wife assumed all the debts of the firm and released her husband from all claims on account of past transactions, and having thus- become possessed of the firm property and a considerable estate left by her father, she employed her husband, who had no property of his own, to take charge of, and carry on, the wholesale and retail rectifying and liquor business under the old firm name of Henry T. Gillet & Son; and she also further agreed with her husband that she would assume and pay all the expenses of supporting the family.

She, also, on the 1st day of May, 1876, executed, acknowledged and procured to be recorded in the office of the clerk of the county a certificate, pursuant to the statute, permitting the continued use of partnership names, stating that she was the person “ now and hereafter ” dealing under the firm name of Henry T. Gillet & Son; that her residence or place of abode was in Buffalo, and that her husband, John G. Guenther, was her agent for carrying on said business. The business was conducted by the husband under this

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power and in this manner until May 9, 1883, the day after the date of the assignment which is the subject of this controversy. During all this time the management and conduct of the business was wholly entrusted to the husband. The wife was without business experience and had no knowledge of the details of the business or the methods by which it was carried on or whether profitable or not; she agreed to pay her husband $1,600 per year for his services, and the referee finds that this was a reasonable compensation. It is also found that during the time the husband had charge of the business the expenses of supporting the family, consisting of the husband, wife and one child, in a proper and reasonable .manner, not including the expense of maintaining the dwelling house and repairing and insuring the same, amounted to between two thousand and two thousand five hundred dollars per year, which were paid by the husband out of the proceeds of the business. The amount drawn by the husband during this time from the business to pay the family expenses amounted to upwards of $10,000, and to apply upon his salary $2,031.38. When the assignment in question was made the assignor was indebted to divers parties in the sum of $70,000 and upwards, which she was unable to pay. The assignee, acting in good faith, and. as is found, without any fraudulent intent, took possession of the property embraced in the assignment, having duly qualified, and he claims the property as such assignee for the purposes of the trust. Numerous other facts were found relating to the origin, history and validity of the mortgage which the referee held to be valid, and as all parties seem to have acquiesced in that part of the decision, we are not concerned with them on this appeal. The referee held that the promise and agreement of the wife to support the family was void, and that as the husband had drawn from the business in all over $12,000, there was nothing due to him for salary from the wife, and “ that by reason of such preference and the directions to said assignee, so contained in said assignment, to pay to said John G\ Guenther, out of' said assigned property and estate, said sum of $7,000, said assignment is void.”

It thus appears that the conclusion that the assignment was void, and the preferred claim of the husband without consideration, was reached by the referee by applying the $10,000 and upwards which the husband drew from the business to pay the family expenses, under a void agreement, upon his salary, thus extinguishing any claim against the wife for the same. We think that the judgment proceeds upon an erroneous view of the transaction. The assignor upon the death of her father became possessed of a separate estate, and entered upon the conduct of a separate business, which she could manage or carry on either personally or through such agencies as she might select, and for that purpose it was competent for her to appoint her husband. Abbey v. Deyo, 44 N. Y., 343 ; Buckley v. Wells, 33 id., 518; Knapp v. Smith, 27 id., 278; Merchant v. Bunnell, 3 Keyes, 539 ; Foster v. Persch, 68 N. Y., 400 ; Kingman v. Frank, 33 Hun, 471 .

The right to employ an agent implies the right to compensate him for his services, and even if it be assumed that the husband

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would be unable to maintain an action against the wife to recover the agreed compensation, it would still remain a moral obligation which the wife could voluntarily pay or provide for without furnishing any legal or just ground for complaint on the part of her other creditors, providing the transaction was free from actual fraud. So, too, her agreement to support the family in this case yras, no doubt illegal, and perhaps void in the sense that so long as it remained executory it could not be enforced against her; but as she entered into the agreement when she was perfectly solvent, and without any fraudulent intent, she had the right to perform it, and, having done so, could not undo what had been done by recalling what she paid or requiring the husband to reimburse her for the outlay. This was the situation in which the assignor was placed before making the assignment. She had performed her agreement to support the family by permitting the husband to pay these expenses out of her funds, but she had not paid the yearly salary which she had stipulated to pay, and it was not a fraud upon her other creditors to provide for its payment in the assignment. We do not consider it necessary to state at greater length the reasons, or refer more particularly to the authorities that uphold this proposition.

That has been done by the supreme court in Romer v. Koch, supra, in a learned and able opinion which commands our approval. There is nothing in this view of the case that conflicts with Coleman v. Burr, 93 N. Y., 17 . In that case the husband agreed to pay his wife a specified sum per week for taking care of his aged mother, whom he was bound to support; and this agreement, honestly made, was the sole consideration for the transfer by the husband to his wife of certain real estate. It was held that this conveyance was void as against the existing creditors of the husband. This result was reached by the application of the common law doctrine that the marital duty of the wife required her to perform such duties when necessary in the household of her husband, and a contract on the part of the husband to pay her for the performance of such duty was without consideration. That principle has no application here, as it has not yet been held and is not claimed that a husband 'owes any legal duty to his wife to render sevice for her, in her separate business, without compensation.

The judgment should be reversed and a new trial granted, costs to abide the event.

All concur.