Stafford v. Merrill

This action was brought by a judgment creditor of Edgar H. Stafford, to set aside confessions of judgment, chattel mortgages and a general assignment, which was made to defendant Merrill, on the ground that these were part of a general scheme to illegally prefer creditors in contravention of the statute.

The complaint sets forth the recovery of judgment and issue and return of execution by plaintiffs and the making of a general assignment by the judgment debtor to Merrill, January 6, 1890, filed January 7, 1890.

It alleges that prior to the assignment, while the debtor was insolvent and in contemplation of the assignment, with the purpose of preferring the Fifth National Bank of Port Henry, and in violation of the statute limiting the amount of preference in a general assignment, said creditor made a chattel mortgage to the cashier of said bank to secure certain notes owing by the debtor to said bank.

It further alleges that the judgment debtor and said bank, conspiring to cheat his creditors and to mislead them into giving credit to him, agreed that he should execute certain chattel mortgages to said cashier which should not be recorded until such act became necessary for the protection of said bank, and that he did therefore execute three chattel mortgages in October, November and December, 1889, which were not recorded until January, 1890.

It further alleges that said debtor and said bank, conspiring to give him a fictitious credit, agreed that he should execute (and he did execute) three confessions of judgment in August, 1889, and October, 1888, which were not filed until January, 1890.

It further alleges that said debtor after making the general assignment gave a confession of judgment to said bank, January 6, 1890, which was not filed until January 7, 1890.

It alleges that the judgments are fraudulent "and fictitious in

The complaint further alleges a confession of judgment by the debtor to one Palmer in August, 1889, filed January 7, 1890, which it avers is part of the debt secured by judgments to the bank and was within the terms of the conspiracy aforesaid.

The complaint further alleges the execution of a chattel mortgage by the debtor to Blanche Le Huray January 6,1890, after the execution of the general assignment and filed January 7, 1890. And further that this was intended to secure accommodation notes endorsed by her for Stafford held by said bank and which were included in the indebtedness of Stafford to said bank of $20,000.

It further alleges that one Boss is preferred in the assignment for $50 and that Stafford was not indebted to him in any sum; and that this amount was to be paid him for managing the estate after the assignment.

There is a further allegation that said Stafford with intent to prefer plaintiff, executed a bond and mortgage to her of $3,000 on real estate and a chattel mortgage. And that plaintiff repudiates the same and surrenders the same as the court may direct.

It is not alleged that any of these acts were done with intent to hinder, delay or defraud creditors.

On the opening of the case it was conceded by plaintiff that none of the parties intended any fraud.

Thereupon the defendants on this concession and on the complaint objected to any evidence and moved to dismiss on the ground that no fraud was charged. The motion was granted and the plaintiff appeals.

The counsel for the plaintiff admits in his brief the necessity of allegations and proving fraud. But he contends that fraud is alleged by the charge of the intentional violation of a statute, of mortgages and judgments given and confessed as the result of a conspiracy to create fictitious debts.

The mode of disposing of a case adopted here is unsatisfactory. In a complaint embracing so many allegations it is difficult to say whether there may not be in some unobserved clause an allegation, on proof of which there might be a recovery. A demurrer (and this dismissal is similar), can only be sustained when admitting all the facts alleged it presents no cause of action whatever. Marie v. Garrison, 83 N. Y., 14 ; Sanders v. Soutter, 126 id., 196; 37 St. Rep., 1 .

There is an allegation in the complaint that one Boss is preferred creditor in the assignment; that the assignor was not indebted to said Boss in any sum whatever; that the sum was named in the assignment under a secret understanding and agreement between the assignor and Boss and the bank that he was thus to be preferred in consideration of services to be rendered by Boss after the assignment, in the interest of the bank.

Hothing was said by defendant’s counsel on the argument as to this allegation. But we cannot properly overlook it in considering the question before us. We cannot treat it as the allegation of accidental preference of one not a creditor, because there is the

The defendant, however, urges that the failure to allege fraud makes the complaint so defective that no recovery could have been had, especially as the plaintiff’s counsel concedes that there was no intentional fraud. But there are cases where the necessary effect of the assignment is to hinder, delay or defraud and, therefore, the assignor is assumed to have intended what he directed the assignee to do. Wilson v. Robertson, 21 N. Y., 587 ; Nat. Bank of Granville v. Cohn, 42 Hun, 381 ; 6 St. Rep., 318 ; Edgell v. Hart, 9 N. Y., 213 .

In the last case the court considered the provision of the Revised Statutes that fraudulent intent is a question of fact and held as matter of law that the mortgage, on its face, was fraudulent. It seems to us, therefore, that the omission to charge a fraudulent intent was not fatal to the complaint if there was an allegation therein which showed, if true, that the assignment was fraudulent in law.

We have not discussed what seems to be the principal part of the plaintiff’s complaint, viz., the attempt to give preferences beyond. the statutory limit. Very probably, if the trial had proceeded, that would have been found to be the sole ground of plaintiff’s action and the allegation which we have considered would have been in some way eliminated. But by the course pursued we are shut off from the consideration whether there could possibly have been given any proof under this complaint which would have entitled plaintiff to any relief. And we meet the allegations which we have considered and which appears to show a fraudulent assignment.

Judgment reversed, new trial granted, costs to abide event.

Landon and Mayham, JJ., concur.