Atlas Furniture Co. v. Freeman — 53 N.Y. St. Rep. 284

Majority

p. 284

The Atlas Furniture Co., Resp’t, v. George P. Freeman et al., App’lts.

(Supreme Court, General Term, Fifth Department,

Filed June 23, 1893.)

Headnote

Attachment—Affidavit—Fraudulent intent to assign or dispose of-property.

An affidavit for an attachment stated that on February 10th, for the purpose of obtaining an extension of credit, defendants represented that they were perfectly solvent and had just 1 alien an inventory showing that they had been making money; that on March 9th they wrote that they had finished the inventory and found they had met with great losses; that they were insolvent and were about to make a proposition of compromise: that when questioned in relation to their former statement it was stated that they had not then finished the inventory and did not know how they-stood, and further stated that if plaintiff undertook to collect its claim by suit it would get substantially nothing as tliev would make an assignment preferring the claim of their landlord. Held, that these facts did not establish a fraudulent intent to assign, dispose of or secrete their property, and was insufficient to warrant añ attachment on that- ground.

p. 285

Appeal from ail order of the Erie special term, denying defendants’ motion to vacate an attachment.

Norris Morey, for app’lts; A. C. Wade, for resp’t.

The affidavit upon which the warrant was issued shows that the plaintiff was located in Jamestown, N. Y., and the defendants in the city of FTew York; that the defendants were indebted to the plaintiff in the sum of $1,715; that upon the 10th day of February a payment was made thereon reducing the same to the sum of $1,433.29; that for that sum notes of the defendants were accepted and an extension of time given for the payment thereof upon the representation, as stated in the affidavit, that the defendants were perfectly solvent and able to pay their debts; that they had taken an inventory which showed that their business had been profitable and that they had been making money, and that if they could secure the further time in which to pay their indebtedness it would be a great accommodation to them.

Thereafter, and on the 9th day of March, 1893, the defendants wrote the plaintiff as follows: u On completing our inventory we find that we have lost a considerable sum of monev during the past year, due, in a great measure, to the enormous expense of the building which we have been occupying; that the rent provided for in the lease of this building amounted to $5,400 a year, and the lease has four years to run from the first of May. With this lease on our hands we should be immediately compelled to suspend and to turn our property over to an assignee for division among our creditors. We have, however, after considerable difficulty, convinced the landlord of the premises that it is for his best interest to cancel this lease, and to terminate it on the first of May next. But our losses have been so great that even this relief will not place us in a position to meet our obligations in full. Our Mr. Freeman has started west on the 7th inst., to confer with our largest creditors. We hope, within a few days, to submit to you and the rest of our creditors a proposition of compromise which will be acceptable to you. In the meantime rest assured that our only desire will be to protect the interests of all our creditors, and that no one will be permitted to gain an advantage over another.”

Upon the receipt of this letter the secretary of the plaintiff visited Flew York, and on the 15th day of March called upon the defendants, and saw the defendant Cheseb'ro, and was informed by him that the defendant Freeman had gone west; that they had been losing money for quite a long time; that they had their inventory completed, and that they could not pay to exceed forty cents on the dollar on their indebtedness; that Freeman was out trying to get a compromise with their creditors, and on being asked by the secretary of the plaintiff why they had informed him on the 10th of February that their inventory was completed, and that they were doing a prosperous business, he replied that they did not then have it completed, and that they did not then know just how their matters did stand.., The defendant Chesebro further stated. “ that if the plaintiff undertook to collect its claim.

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by suit, it would get substantially nothing on it, for if the plaintiff commenced suit the defendants would make an assignment preferring their landlord, and the plaintiff would get nothing.” He also stated “that his partner, Freeman, when he left home, had left with him, said defendant Chesebro, a power of attorney, authorizing him to make such a general assignment in behalf of the firm at any time if he, Freeman, should telegraph him to do so.” He further stated in substance “that the plaintiff had better keep still and do nothing, as it would'get nothing if it attempted to enforce the collection of its claim,”

The warrant of attachment was issued upon the ground that the defendants were about 'to assign, dispose of or secrete their property with the intent to defraud their creditors.

Does the matter stated in the affidavit show such intent? We-think not. It may perhaps be sufficient to create a suspicion than, such disposition of their property was intended, but a warrant of attachment will not issue upon a mere suspicion. The intent to-do the wrongful act must appear from the facts disclosed by the affidavit. Thompson v. Dater, 57 Hun, 316 ; 32 St. Rep., 361 .

On the 10th of February the defendants falsely stated that they were solvent, making money and were able to pay their debts if' time was given. Upon this statement they obtained from the plaintiff an extension of credit. One month thereafter they wrote-the plaintiff announcing their insolvency and their inability to pay their debts in full. When questioned in reference to their statement of February 10th, the defendant Chesebro stated that they had not at that time completed their inventory and did not then know how their matters stood. The defendants, in making the-representations upon which an extension of time was procured, may have been dishonest and they majr not. Possibly they at-that time supposed themselves solvent and able to pay. But, whether the representations were made innocently or dishonestly is unimportant, for in either case they do not establish a fraudulent intent to assign, dispose of or secrete their property. Johnson v. Buckel, 65 Hun, 601 ; 48 St. Rep., 924 ; Kibbe v. Herman, 51 Hun, 438 ; 21 St. Rep., 235 ; Fleitmann v. Sickle, 13 id., 399.

The further facts disclosed by the affidavit are in substance that if the plaintiff undertook to collect its claim by suit that it would get substantially nothing, for the defendants would make an assignment preferring the claim of their landlord. This they had the right to do, and the doing of that which is lawful is not fraudulent. Farwell v. Furniss, 67 How. Pr., 188 ; Hallenbeck v. Coenen, 34 St. Rep., 689 ; Stamp v. Herpich, 8 id., 446; Exans v. Warner, 21 Hun, 574 .

But it is claimed that the false representations made by the defendants in order to procure an extension of time within which to pay the plaintiff’s claim characterize the threats subsequently made that they would make an assignment and indicated a fraudulent intent Such representations were made in the case of Stamp v. Herpich, supra. But, notwithstanding, it was-held that the threat to make an assignment with preference to-others was not fraudulent under the law.

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Again, it is claimed that under the statute as it now stands a preference cannot be made of all of the assignor’s property. Very true, claims cannot be preferred to a greater extent than one-third of the assigned assets after paying the expenses of the assignment and the wages and salaries due employes. But the statute limiting the amount to be paid on preferences is addressed to the assignee and prevents him from paying more than that portion of the assets upon the preferred claims. And it is not apparent how this provision changes the effect of the threat that was made to make an assignment.

The case of Anthony v. Stype, 19 Hun, 265 , is distinguishable. In that case the affidavits upon which the warrant was issued showed that he kept his store open, continued to dispose of his goods and to appropriate the proceeds thereof to other purposes than to the payment of his debts, refusing to pay anything either in goods or money to his creditors.

The order should be reversed, with ten dollars costs and disbursements, and the motion to vacate the attachment granted.

Lewis and Bradley, JJ., concur.