Groves v. Rice

Headnote

1. Estoppel—Acceptance op benefits.

A subcontractor, by requesting the contractor’s assignee to complete the contract, is estopped from attacking the assignment as fraudulent.

8. Same.

An estoppel, arising from the ratification of an assignment for the benefit of creditors, operates as to claims against the assignor purchased after the ratification.

Appeal from a judgment dismissing the complaint.

The opinion of Mr. Justice Bradley, at special term, is as follows:

The assignment was made and dated July 30, 1891. It expressed .■ertain preferences, amongst which was that in behalf of the plaintiff, to the amount of five hundred dollars ($500). The plaintiff’s relation as creditor of the defendants Rice, as alleged in the complaint, is founded upon four judgments recovered.by the Central Bank of Rochester against them in November and December, 1891, upon which executions were issued, and returned unsatisfied, and which judgments were assigned to the plaintiff. This action was commenced in December, 1891, and by the complaint the plaintiff charged that the general assignment of the defendants Rice was made with the intent to defraud the creditors of the a-signors. The defendants Rice were, and had been for several years, partners doing a plumbing business in the firm name of Rice Bros. The plaintiff had for some time prior to the time of the assignment indorsed their notes for their accommodation. The j udgments before mentioned were recovered upon their notes so indorsed by the plaintiff, and upon which he had been charged with liability as such indorser. Before such assignment was made to the defendant Olancey, and on the 8th day of December, 1891, the defendants Rice, in their firm name, had entered into a contract in writing with the plaintiff whereby they undertook to do all the steam fitting, and furnish all the material therefor, to heat what was designated as the “Jenkinson Building,” belonging to the plaintiff, and situated in the city of Rochester, for the sum of two thousand three hundred dollars ($2,300). The defendants Rice had before the time of making their general assignment commenced, and only partially performed, the work; that is to say, the work then done upon the job amounted, at the rate of the contract price, to a sum not exceeding seven hundred dollars ($700). Thereafter, at the request of the plaintiff, and for him, the defendant Clancey, as such assignee, proceeded in the performance of the work, and it was substantially completed in the fall of 1891. It is unnecessary here to determine whether or not, in the performance of the contract after the assignment, all the work was done, or caused to be done, by the assignee.

The plaintiff, treating him as such trustee, deriving his title and powers from the assignment, requested him to proceed with the work his assignor had agreed to perform. By that means the plaintiff received the beneficial result, so far as it was such, of the performance of such work; and this recognition of the relation to the assignee, and so dealing with him in that relation, was an adoption of it by the plaintiff for the beneficial purposes he had in view, and which were by that means accomplished in his behalf. Having thus proceeded in recognition and in affirmance of the assignment, the plaintiff cannot, without the aid of some further cause for relief from the effect of his adoption of it, be permitted to impeach its validity. Hone v. Henriquez, 13 Wend. 240 ; Rapalee v. Stewart, 27 N. Y. 310 ; Toy Co. v. Daggett, 9 Civ. Proc. R. 408. The procurement by the plaintiff of the assignee to appropriate the trust funds in the performance of such contract, and then to repudiate the trust by proceeding to impeach the assignment, would seem to indicate inconsistent purposes, and it may be seen that such dealing and such opportunities might result unjustly to somebody. Such consequences are prevented by the legal principle that a party that has made his election is concluded by it, and cannot adopt and successfully pursue another, inconsistent with it.

It is, however, urged on the part of the plaintiff that he is not estopped by his adoption of the assignment, or assent to it, in the manner he did, because the judgments upon which his action is founded were not, nor were the debts upon which they were recovered, owned by him at the time he so availed himself of the relation of the assignee in the performance of the contract with the assignors, and that he took by the assignments of the judgments all rights and remedies of the Central Bank, for the purpose of the relief in view. The plaintiff was a creditor at large of the assignors at the time the assignment was made. He then, also, was indorser of the notes upon which such bank judgments were recovered, and was charged with liability thereon at their maturity. These facts in relation to the bank notes may not have any important bearing upon the question, and, in the view taken, have none. They merely tend to show why he became the owner of the judgments. It may be assumed that he was required to pay to the bank the amount for which he, as indorser, was liabl§ to it upon Bice Bros.’ paper. Assuming that the plaintiff had, by ratification of the assignment, denied himself the right, in respect to the debt then owing to him by the assignors, to effectually take proceedings to impeach the assignment, it does not seem evident .that he could found an action for such purpose upon a debt which he might subsequently obtain by transfer from another, against the assignors. The affirmative of that proposition is urged by the plaintiff’s counsel, and is illustrated by reference to the doctrine to the effect that the innocent purchaser of property sold in fraud by creditors takes unimpeachable. title, and his transfer of the property to another having knowledge of the fraud will vest perfect title in the latter. The reason of that rule is in the essentiality of giving to the innocent purchaser the full enjoyment of his prop

erty, which includes the opportunity to sell without restraint occasioned by the fraud of the vendor in the original sale. In O'Brien v. Browning, 11 Hun, 179 , cited by the plaintiff’s counsel, the appellants, founding their claim upon a judgment against the assignor, were held not barred or estopped from coming in, and availing themselves of the benefit of a recovery in an action to set aside an assignment for fraud, because they had been defeated in an action for a like reason founded upon another judgment against the assignors. The view of the court was that the question whether the assignment was fraudulent against the one judgment of those parties, or the demand upon which it was recovered, was not adjudicated in the action or proceeding founded upon the other judgment. It may be observed that in that case there was no voluntary adoption of the assignment, by accepting anything under it. . There was no acquiescence in its validity. The estoppel arising from effectual ratification of an assignment is personal to the party thus affected, and he is not relieved from such disability in respect to further debts of the assignor which he may have afterwards purchased. In such case the right of the party in respect to the manner of proceeding may not be as ample as that of his assignor of the judgment, but may be qualified by the relation which he may have assumed, or become chargeable with, to the trust created bv the assignment; and his relation in that respect, for the purposes of remedy founded upon such judgments, is not changed by taking title to them.

After careful examination of the evidence, the only ground discovered for the predication of fraud in the assignment, or against the assignors, is in the fact that they, in contemplation of the assignment, respectively drew moneys for their individual purposes; that is to say, that, on the day before the assignment was made, William H. Rice drew out of the moneys of the firm one hundred and eighty dollars ($180), and on the same day John Rice drew out one hundred and seventy-five dollars ($175). They drew this money to pay their personal debts, and it was used for that purpose. Bach understood that the other drew this money, and entries of it were made in their respective accounts on the books of the firm. They had been in the habit of drawing weekly sume money for their personal expenses, but the sums drawn on that day by them were larger than they had been accustomed to take weekly. The firm being insolvent, and about to make a general assignment, they could not, without the imputation of fraudulent intent, withdraw or withhold any considerable portion of the funds or property from its creditors. Whatever, in such case, may have been the actual intent of the assignors, the law will treat it as fraudulent against their creditors, for the* purposes of relief against their assignment. Menagh v. Whitwett, 52 NT. Y. 146 ; Ransom v. Van Deventer, 41 Barb. 307 . The sums so drawn by the members of the defendants’ firm were not large, nor do the circumstances under which they were taken and used necessarily indicate any actual intent on their part to defraud the firm creditors. The amounts were charged to them, respectively, upon the books, on the day the funds were taken and appropriated. But, in view of

the legal rule applicable to such cases, it must be held that the withdrawal of the money by the defendants for their individual purposes was fraudulent, as against the creditors of the firm. But that fact is not important for the purposes of the result in this action, if the plaintiff had effectually estopped himself from assailing the assignment by his dealing with the assignee, and before mentioned. It is suggested that such could not have been the effect unless the plaintiff at the time had knowledge of the facts upon which the charge of fraud could have been founded. The plaintiff, in his testimony, does not assert or claim ignorance on his part of that or any fact in that respect which afterwards led him to. bring this action. And in view of that, and what appears, it is not to be assumed that he was for that cause misled into the course he at first adopted. The books of the firm were under the control of the assignee, and it may be supposed that they were accessible to the plaintiff. Upon the books, or some one of them (the cash book), appeared the entries of the sums drawn by the members of the firm, that day charged to them, respectively, under date of July 29,1891. I am inclined to think that the action of the assignee in proceeding with the performance of the work at the request of the plaintiff may properly be treated as a benefit taken by the latter under the assignment. If these views are correct the complaint should be dismissed.