Ellis H. Roberts & Co. v. Buckley

This action was brought by the plaintiff, a domestic corporation, as a judgment creditor in behalf of itself and all other creditors of the firm of Buckley & Co. who might desire to join in the action, to set aside as fraudulent a general assignment for the benefit of creditors, made by the members of the firm of Buckley & Co. as such, and as individuals, to Patrick F. Bulger; and also to set aside as fraudulent certain judgments entered in favor of Thomas Wheeler, Daniel Gr. Major and Chloe Spencer against Buckley & Co.

The firm of Buckley & Co., and the members thereof, were insolvent. The assignment was executed and delivered on the 17th day of March, 1886. In it the assignee is described as the party of the second part.

It provides that: “ Fifth. After the payment in full of all of the co-partnership debts designated in schedules A and B as above directed, the said party of the second part shall pay all and singular the co-partnership debts set forth and enumerated in the schedule hereto annexed marked C in full with interest.”

“ Sixth. After the payment in full of the co-partnership debts set forth in schedules A, B and C as above directed, the said party of the second part shall pay all and singular the co-partnership debts set forth in a schedule hereto annexed marked D, with interest.”

Schedule C referred to and forming a part of the attached assignment contains a statement of the names of the creditors, third named, as preferred in the assignment, the general nature of such indebtedness and the amount thereof. In it appears the following:

“Name of creditor..:.....Daniel Gr. Major;

Besidence..............Washington,. D. C.;

Consideration......i. .. .Money loaned;

Form of debt...........Accounts and notes which assign-

ors are unable to describe;

Amount about.......... $12,000,00;

Date for interest......... 1,000.00 Jan. 12, 1883,

“ “ 1,500.00 Aug. 8, 1883,

“ “ 500.00 Oct. 4, 1883,

“ “ .„....... 1,000.00 Feb. 4, 1884,

“ ' “ ......... 3,000.00 Feb. 10, 1884,

“ “ ......... 5,000.00 May 23, 1884,

as near as assignors are able to state.”

On the 7th day of April, 1886, John Buckley and William E. Shirley, as such assignors, filed their inventory and schedules, duly verified as required by law, and amongst the firm debts set out by them in the schedule so filed is an indebtedness to Daniel ■Gr. Major, which is described as follows:

“ Daniel Gr. Major, Washington, D. C.............. $12,000 00

Accounts and Motes.

Jan. 12, 1883...................... $1,000 00

Aug. 8, 1883...................... 1,500 00

Oct. 4, 1883....................... 500 00 money loaned.

Feb. 1,1884....................... 1,000 00

Feb. 10,1884...................... 3,000 00

May 23,1884...................... 5,000 00 ”

Major was a brother-in-law of the assignor John Buckley, and the amount of his claim so preferred, with interest, was the sum of $13,501.70.

The referee has found the following facts:

“Fifteenth. That at the date of the making, execution and delivery of said assignment the item of $1,500, August 8, 1883, so preferred in said assignment and set out in said schedules had been paid off and discharged, the same having been paid by Buckley & Co. to Daniel Gr. Major by check of Buckley & Co. on the Oneida County Bank to the order of Daniel Gr. Major, dated December 11, 1883, for $1,530.75, which check was duly paid Daniel Gr. Major by said Oneida County Bank, and said check being given for $1,500 as the principal, and 30.75 as the interest due on said loan of August 8, 1888.”

“ Sixteenth. That at the time of the making, executing and delivery of said assignment the following items so preferred therein on behalf of Daniel Gr. Major, viz.: $1,000, January 12, 1883; $5,000, May 23, 1884, formed no part of the items of indebtedness then due or owing by Buckley & Co. to Daniel Gr. Major, nor do the said items, or either of them, appear upon the books of Buckley & Co. as amounts due by their firm to Daniel Gr. Major.”

The referee further found as facts that “ The indebtedness of Buckley & Co. to Daniel Gr. Major on the 17th day of March, 1886, including interest, to be as follows:

Mote date Feb. 26, 1883, on demand, with interest,

for....................................... 00

Interest on same.............................. 183 50

Note dated June 1, 1883, on demand, with interest,

for...-.................................... 1,000 00

Interest on same.............................. 167 67

Note dated Oct. 4, 1883, on demand, with interest,

for....................................... 500 00'

Interest on same.............................. 73 58

Note dated January 31, 1884, on demand, with interest, for................................. 1,000 00

Interest on same............................. 127 67

Note dated February 12, 1884, in one year, with

interest, for................................ 3,000 00

Interest on same............................. 377 50

Note dated May 6, 1884, on demand, with interest,

for....................................... 3,000 00

Interest on same............................. 335 50

Cash advanced by check, May 6, 1884 .......... 500 00

Interest on same.............................. 55 91

Cash advanced to pay note given for accommodation

of Buckley & Co., May 17, 1884 ............. 2,538 75

Interest on same.............................. 279 27

Making a total of......................... $14,139 85

“As against this claim there are credits of money paid to Major from time to time by Buckley & Co., as follows, viz.:

June 6, 1884, by check....................... $1,000 00

Interest to March 17, 1886..................... 106 83

October, 1884, by cash........................ 100 00

Interest thereon.............................. 8 50

December 18, 1884, by check.................. 50 00

Interest..................................... 3 74

November 15, 1884, by check.................. 50 00

Interest..................................... 4 02

February 5, 1885, by two checks............... 100 00

Interest..................................... 6 70

February 25, 1885, by check................... 50 00

Interest..................................... 3 18

Making a total credit..................... $1,482 97

Leaving a total debit...................... 12,656 38

He further found that the assignment was made in good faith,, with no intent to hinder, delay or defraud creditors; and, as a conclusion of law, that the preference in the assignment of the debt of Major was a valid preference to the amount of $12,656.88.

It also appears, in the facts found by the referee, that Major brought action against Buckley and Shirley upon his claim for money loaned, etc., and that on the 18th day of March, the day after the assignment, the defendants appeared by M. W. Yan Auken, their attorney, and made an offer of judgment, and that such .offer was accepted, and thereupon judgment was entered for

The referee found that the recovery should only have been for the sum of $12,658.24 ; that for that amount with costs it was .a good and valid judgment and might be enforced.

It will be observed that of the items of the claim so preferred that of $1,500.00 August 8, 1883, was fully paid and satisfied on the 11th of December thereafter, and that of $1,000.00, January 12, 1883, and $5,000.00 May 23, 1884, had no existence in fact, making a total of $7,500.00 that was fictitious at the time the assignment was made.

It is contended however that it was the indebtedness of Major that was preferred and not the items making up such indebtedness, and that a mistake in giving the items should not avoid the assignment provided that other items of indebtedness in fact existed. This view would deprive the other creditors of the advantage given them by the statute of knowing “ the true cause and consideration ” of the claim; but without assenting to the correctness of the proposition we may for the purposes of this argument assume it to be sound. The fact still remains that the amount actually owing Major falls short of the amount preferred in the sum of $845.32.

The statute provides that, “ A debtor making an assignment shall at the date thereof, or within twenty days thereafter, cause to be made and delivered to the clerk of the county where such assignment is recorded an inventory or schedule containing * * * 3. A full and true account of all the creditors of such debtor, stating the last known place of residence of each, the sum' owing to each, with the true cause and consideration therefor, and a full statement of any existing security for the payment of the same.” 4 B. S., 8th ed.; 2537, § 3.

Pursuant to this provision the assignors made and filed their inventory or schedule in which the same items were described as accounts and notes as then owing to Major without any qualifying words. _ The inventory must be regarded as part of'the transaction, and is to be read in connection with the assignment in respect to the matters which it is required by law to contain. Bur-rill on Assignments, § 151; Terry v. Butler, 43 Barb., 395 ; Kanavagh v. Beckwith, 44 id., 192-197.

The assignment in describing the form of the debt states that it is accounts and notes which assignors are unable to describe, and amount due about $12,000, and after giving the items is added, “as near as assignors are able to state.”

As we have seen, the inventory was filed twenty days thereafter, and in it the amount and items are stated without qualifying words, thus indicating that at that time the assignors were possessed of the requisite information.to correctly describe them. This inventory we are to read in connection with the assignment, and so reading the instruments we think that it is apparent that the assignors not only have, but intended to absolutely and unqualifiedly prefer the claim of Major to the amount stated. This view is strengthened from the provisions of the assignment re

In the Matter of the Assignment of Lewis, 81 N. Y., 421 , 424, Finch, J., in delivering the opinion of the court, says: “The assignee derives all his power from the assignment, which is both the guide and measure of his duty. Beyond that, or outside of its terms, he is powerless and without authority. The control of the court over his actions is limited- the same way, and can only be éxercised to compel his performance of a stipulated and defined trust, and protect the rights which flow from it He distributes the proceeds of the estate placed in his care according to the dictation and under the sole guidance of the assignment, and the statutory provisions merely regulate and guard his exercise of an authority derived from the will of the assignor. The courts, therefore, cannot direct him to pay a debt of the assignor, or give, it preference, in violation of the terms of the same and the right of creditors under it. To hold the contrary would be to put the court in the place of the assignor, and assert a right to modify the terms of the assignment, after it had taken effect, against the will of its maker, and to the injury of those protected by it. We agree that the assignee is merely the representative of the debtor and must be governed by the express terms of his trust.”

In the case of Chapin v. Thompson, 89 N. Y., 270 , it was held that the assignee could not modify or change the provisions of the assignment, or prevent the payment of a debt provided for in the assignment, even if it was usurious.

. In the Matter of the Assignment of Ward, 10 Daly, 66 , it was held that the duty of the assignee for the benefit of creditors is to uphold his trust, not to impeach it; that he cannot object to the payment of a creditor preferred in the assignment, even upon the ground that the claim is fraudulent.

Bishop on Insolvent Debtors, § 359, says: “ A general assignment for the benefit of creditors, by its own terms, devotes the-debtor’s property to the payment of some or all of the assignor’s debts, and the debts provided for may be specified in the instrument itself, or they may be left to be otherwise determined.. When the assignment provides for the payment of specific debts, neither the assignee nor any creditor claiming under the assignment can dispute their validity. Pratt v. Adams, 7 Paige, 615; Jewett v. Woodward, 1 Edw. Ch., 195 ; Green v. Morse, 4 Barb., 332 ; Maynard v. Maynard, 4 Edw. Oh., 711. The question is one of intent, to be gathered from a fair construction of the deed of assignment. If the assignee is directed to pay certain persons

In the case of Kavanagh v. Beckwith, supra, it was held in the general term that the assignee was not bound to pay the debts at. the amount stated in the assignment. The assignment in that case-required the assignee to pay “ the debts due or to grow due from the assignor for which he is liable.” The amount in the assignment was overstated, but the true amount was stated by the assignor in the inventory subsequently filed by him. Reading the inventory in connection with the assignment, which required the assignee to only pay the amount for which the assignor was liable, and that true amount appearing in the inventory, presented a very different question from that in the case under consideration.

The rule to which we have referred may have no application to the general and unpreferred creditors, especially when, as in this-case, the assignment provided that in case there shall be any remainder after paying the preferred creditors in full that the other creditors may be paid the amount that may be owing to them respectively. The amount of their claims is not specified and the assignee is left to determine the same, but as we have seen it is very different with the favored creditors.

If, therefore, the assignee was required to pay the amount of Major’s claim as stated and described, it would of necessity follow that the general creditors would be defrauded in the amount that such preference was in excess of that which was, in fact, owing.

The referee has said that the assignment was made in good faith and without intent to hinder, delay or defraud the creditors, but the provisions of the assignment carried out deprives the general creditors of this sum, and the rule is that every party must be deemed to have intended the natural and inevitable consequences of his acts and where his acts are voluntary and necessarily operate to defraud others he must be deemed to have intended the fraud. ,

In the case of Coleman v. Burr, 93 N. Y. 17 -31, the referee found that the transaction was fair and honest. He, however, found facts from which the inference of fraud was inevitable. It

It may be said that the excessive preference was small in amount. Undoubtedly innocent errors of small amounts, resulting in no material loss to the creditors, may be disregarded, but in this case the excess is of a substantial amount, and if paid over to Major would result in a material loss to the unfavored creditors. _ If the assignment is fraudulent in part, the whole instrument is void. Mackie v. Cairns, 5 Cow., 547 ; Grover Wakeman, 11 Wend., 187 —225; Simons v. Goldbach, 56 Hun, 204 ; 31 St. Rep., 118 ; affirmed, 123 N. Y., 657 ; 33 St. Rep., 1028 ; Russell v. Winne, 37 N. Y., 591 .

No relief by way of a reformation of the assignment v as asked for in the pleadings, and we are consequently not- jailed upon to determine whether a court of equity would entertain such an action.

The appeal was properly brought by Vietor and Achilles. They were attaching creditors, and the amount of their claim is admitted by the inventory filed. The action was brought by the plaintiff on behalf of itself and all other creditors of the firm who desired to join with it in the action. Vietor and Achilles were made defendants, and answered, admitting the allegations of the complaint as to charges of fraud by Buckley & Co., and joined with the plaintiff in the action. The judgment took from them the benefit they claim through their attachment on the property of the assignors, and required them to turn it over to the assignee. They consequently had the right to appeal.

We have not thought it advisable to consider or discuss at this time the questions that arise upon the modification of the Major judgment, for upon a new trial evidence may be produced materially changing the facts.

We think the evidence supports the findings of the referee as to the claims of Adelia J. Sparks and Chloe Spencer, but are unable to find authority permitting him to change the assignment as to the amount directed to be paid to Daniel C. Major.

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

All concur, except Follett, Ch. J., and Vann, J., dissenting.