Bagley v. Bowe — 6 N.Y. St. Rep. 842

Majority

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John A. Bagley, App’lt, v. Peter Bowe, Sheriff, etc., Resp’t.

(Court of Appeals,

Filed March 25, 1887.)

Headnote

1. Assignment for benefit of creditors—What will be deemed an authority to sell on credit.

In February, 1881, Dart, one of the firm of Swezey & Dart, made an assignment to plaintiff, with the following provision Second. To “execute acknowledge * * * for such consideration in money or other thing as he may deem sufficient, all such deeds, bills of sale or other conveyances in writing * * * as in his discretion may from time to time be necessary to carry into effect the intent and purpose of this instrument.” Held, that this should not be deemed to confer authority to sell the assigned property on credit, or to exchange it for other property.

2. Same—Authorizing assignee to compound or compromise debts.

A provision in a general assignment to compound or compromise debts owing to assignor, is valid. Following Coyne v. Weaver, 84 Ñ. Y., 386 .

3. Same—Question of fraud resting upon extrinsic facts for jury.

The trial court or the general term is authorized to set aside a verdict, and direct the issue to be re-tried before another jury, if in its judgment the verdict is against the weight or preponderance of evidence; but in a case which of right is triable by jury, the court cannot take from that tribunal the ultimate decision of- the fact, unless the fact is either uncontradicted or the contradiction is illusory, or where the answering evidence is a scintilla merely.

Appeal from judgment of general term of the superior court of the city of New York.

Action by assignee for benefit of creditors to recover property of the assignors taken by defendant as sheriff under executions and attachments issued against them.

Edwin B. Smith, for app’lt; Charles F. MacLean, for resp’t.

The trial judge directed a verdict for the defendant on the ground that the assignment of February 3, 1881, made by Dart, one of the firm of Swezey & Dart, to the plaintiff, was void, as having been made with the intent to hinder, delay, and defraud creditors. The assignment in form was- a general assignment for the benefit of the creditors of the firm of Swezey & Dart, and individual creditors of Dart, and was executed by Dart in the firm name, and also as an individual. It purported to transfer and assign to the plaintiff all the property of the firm, “real, personal, ana mixed, not exempt from attachment by law,” for the benefit of the firm creditors, and also the individual property of Dart for the benefit of his individual creditors. The general term affirmed the judgment, and the sole point now presented is whether the' question of fraud should have been submitted to the jury. In support of the judgment it is claimed that the assignment was void on its face, but it is also insisted that the evidence of fraud

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extrinsic to the instrument was so conclusive that the court was justified in withholding the case from the jury, and in ruling, as matter of law, that fraud in fact was established.

The provisions in the instrument of assignment upon which the defendant relies to establish its invalidity, relate to the powers conferred upon the assignee. First, “to compound, compromise and release” debts owing to the assignor; and second, “to execute, acknowledge, and deliver, in the name of the said parties of the first part, assignors, as such copartners, or in the name of the said Joseph Dart, individually, for such consideration in money or other thing as he may deem sufficient, all such deeds, bills of sale, or other conveyances, in writing, under seal, or otherwise, and all such releases, contracts, and other instruments in writing or under seal, as in his discretion may from time to time be necessary to carry into effect the intent and purpose of this instrument. ” The validity of a provision in the general assignment for the benefit of creditors, authorizing the assignee to compound or compromise debts owing to the assignor, has been recently affirmed in this court, and is no longer an open question. Coyne v. Weaver, 84 N. Y., 386 .

The stress of the argument against the validity of the instrument of assignment is placed on the clause conferring upon the assignee the power to execute deeds, bills of sale, or other conveyances in writing, “for such consideration in money or other thing ” as he may deem sufficient. This clause, it is insisted, authorizes the assignee to sell or dispose of the assigned property upon credit, or upon any consideration, whether in money or property. If this is the' true construction of the provision, there can be no doubt of its invalidity.

The law justifies and upholds trusts created by insolvent debtors of their property, through general assignments for the benefit of their creditors, only when they provide for the immediate and unconditional surrender and application of the assigned property to the payment of their debts; .and any attempt to confer upon the assignee the power to deláy the collection and conversion of the assets into money is held to be unlawful, and to vitiate the assignment. It has therefore been held that an authority contained in the assignment to sell the assigned property on “credit,” or for “cash or upon credit,” as in the judgment of the assignee may appear best, or to convert the property into “money or available means,” renders the assignment fraudulent and void. Nicholson v. Leavitt, 6 N. Y., 510 ; Burdick v. Post, id., 522 ; Brigham v. Tillinghast, 13 id., 215.

Construing the clause in question in view of the general rule of construction of written instruments, viz.: that a

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construction will be preferred which will uphold rather than one which will destroy them (a rule applicable as well to insolvent assignments as to other instruments), and the further rule that in construing a particular clause the whole context maybe considered, we are of opinion that the clause in question should not be deemed to confer authority to sell the assigned property on credit, or to exchange it for other property. The language of the whole paragraph seems more appropriate to a mere power of attorney than to an instrument of transfer or conveyance. It authorizes the assignee to execute deeds, bills of sale, etc., “in the name of the parties of the first part ” (the assignors), a power which they would very rarely, if ever, find it .necessary to exercise. But the power is in express terms limited to instruments which the assignee may deem necessary or requisite “to carry into effect the intent and purpose of this instrument.” Looking at the preceding parts of the assignment, it is found that the granting clause is followed by a declaration of the trusts upon which the assignee is to take the property, the first of which is “to take possession of and sell the same at public or private sale, and to convert the same into money,” and next to “apply the proceeds thereof,” after deducting necessary costs, charges and expenses, to the payment of the debts of the assignors, in the order specified.

This explicit authority and direction to sell the assigned property, and convert the same into money, cannot be reconciled with the subsequent power to execute, in the 'names of the assignors, deeds, bills of sale, and other conveyances “for such consideration, in money or other thing,” as the assignee may deem sufficient, provided the latter clause, as is claimed by the defendant, authorizes the assignee to dispose of the assigned property on credit, or to exchange it. But we are of opinion that this supposed inconsistency does not in fact exist. It is not difficult to imagine cases Where, in the adjustment of property interests held in common by the assignors and third persons, mutual transfers and releases might become necessary, setting apart in severalty to each owner his interest in the common property, or where, in the process of conversion, it might become necessary for the assignee to execute instruments upon a consideration other than the payment of money, affecting the assigned estate, but not involving any sale or exchange. It is not improbable that the draughtsman inserted this clause without any very definite purpose, following some former precedent. But, however this may be, the provision is quite too vague to overcome the explicit direction in the prior clause, requiring, in substance, that the property should be sold for money, and especially in view of the

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expressed purpose of the latter clause that the power thereby given was “to carry into effect the intent and purpose ” of the instrument.

Two extraneous matters are relied upon to establish the existence of fraud in fact: First, that the assignor, Dart, intended to withhold from the assignee and the creditors ninety-six bales of twine owned by the firm of Swezey & Dart, upon the false and fraudulent pretense that they belonged to the Wilton Company, of which his mother-in-law was the proprietor; and, second, the matter of the “Peerless ” trade-mark, belonging to the firm, used to designate warps manufactured for and sold by the firm.

The question whether the judge was authorized to take from the jury the question of fraudulent intent arising upon the extrinsic facts is to be determined in view of the settled rule that, to justify the court.in directing a verdict in any case upon the facts, the evidence must be undisputed, or so certain and convincing that no reasonable mind could come to any but one conclusion. If there is ground for opposite inferences, and a conclusión either way would not shock the sense of a reasonable man, then the case is for the jury, although the judge may entertain a clear and decided conviction that the truth is on this or that side of the controversy. The trial court or the general term is authorized to set aside a verdict, and direct the issue to be re-tried before another jury, if in its judgment the verdict is against the weight or preponderance of evidence; but in a case which of right is triable by jury, the court cannot take from that tribunal the ultimate decision of the fact, unless the fact is either uncontradicted, or the contradiction is illusory, or where, to use a current phrase, the answering evidence is a scintilla merely.

It is claimed, on the part of the defendant, that the 96 bales of twine were clearly and incontrovertibly the property of Swezey & Dart, and not of the Wilton Company. It was conceded on the trial that they were the property of the firm, and it appears that the fact was so found by a jury in an action of replevin brought by the Wilton Company against the sheriff after the assignment. The goods are not mentioned in the schedule of assets made by the assignee and verified by Dart, April 9, 1881. Dart was sworn as a witness on the trial. He testified that he did not intend to transfer those goods by the assignment, and the assignee had no information in respect to them until weeks after the assignment was made-. The twine was manufactured by the Wilton Company, under some. arrangement with Swezey & Dart, the particulars of which do not distinctly appear. There is much evidence tending to show, ' and which would justify a jury in

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finding, that Swezey & Dart owned the goods at the time of the assignment, and that Dart so understood and believed. Dart, however, testified that when the assignment was made he believed that the twine belonged to the Wilton Company, and that Swezey & Dart held it for sale only for the Wilton Company on commission, and that it was not until the decision of the replevin suit that he became satisfied that the title to the twine was in Swezey & Dart. The relations between the Wilton Company and Swezey & Dart were somewhat peculiar, and are not clearly disclosed. Without going into further detail, it is sufficient for our present purpose to say that, whatever may be our view as to the preponderance of evidence, we think the evidence is not of so conclusive a character as to preclude a jury from finding that the intent of Dart to withhold the ninety-six bales of twine from the assignee and the creditors was the result of an honest conviction that they belonged to the Wilton Company, and not to the assignors.

The matter of the trade-mark was also, we think, for the consideration of the jury. The assignment of the trade-mark to Reynolds purports to have been made for the consideration of $1,500, on the 2d of February, 1881, the day before the execution of the general assignment. There are certainly suspicious circumstances connected with the transaction. The consideration has never been paid. The trade-mark was transferred by Reynolds to a corporation organized a few days after the general assignment was made, of which Reynolds & Dart were two of the corporators. Reynolds, the nominal purchaser, is named in the schedule of Swezey and Dart’s indebtedness, made in April, 1881, as a preferred creditor, in the sum of $1,591.80, when it is clear upon the evidence that he was then indebted to the firm, after allowing all offsets, in the sum of about $1,400. It does not affirmatively appear that Dart was cognizant of the insertion of this debt in the schedule. The circumstances in respect to the transaction with Reynolds are attempted to be explained by Dart. It is not for us to say whether the explanation is satisfactory. Reynolds was not preferred in any specific amount in the • assignment himself, but generally for any claim which might be established by him against Swezey & Dart. The assignment transferred all the property of the assignors, whatever may have been their secret intention. The assignment may, nevertheless, have been a fraudulent contrivance to embarrass and delay creditors. Shultz v. Hoagland, 85 N. Y., 465 . But this, we think, was a question for the jury.

The judgment should, therefore, be reversed, and a new trial ordered.

All concur.