Lester v. Pollock — 26 N.Y. Super. Ct. 691

Majority

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Andrew Lester et al. plaintiffs, vs. Abbott Pollock et al. defendants.

Headnote

1. An assignment for the benefit of creditors, which directs or authorizes such a disposition to be made of property conveyed, or of its proceeds, as will, if carried into effect by the assignee; necessarily deprive .the assignor’s creditors of their right to have such property applied to the payment of their claims, is on its face fraudulent, as against the creditors of the assignor.

2. A firm, consisting of three partners, being dissolved, a new firm, composed of two of the partners, was formed, to whom the third sold out his interest in the former firm. Subsequently, the second firm made an assignment for the benefit of creditors, containing a provision to pay off all the debts due and owing by the second firm, or the late prior firm, or either of the members of said firms, to one of the assignees. Held, that the assignment was invalid, as to creditors of the first firm.

(Before Babbour, J. at special term,

February —, 1865.)

The plaintiffs respectively recovered judgments against the firm of Abbott, Pollock & Cochran, and after the return of executions unsatisfied, commenced an action against the judgment debtors and their assignees to set aside an assignment made by the firm of Pollock & Cochran, (Abbott having previously sold out his interest in the firm of which he was a

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member to the last mentioned firm,) to John Stewart and Cornelius Fiske, assignees, for the benefit of creditors. The assignment among other provisions contained this clause: “ To pay off all the debts due and owing by the said firm of Cochran & Pollock, or the late firm of Abbott, Pollock & Cochran, or either of the members of said firms, to Cornelius Fiske.”

C. Bainbridge Smith, for the plaintiffs.

A. Bordman, for the defendants.

An assignment for the benefit of creditors, which directs or authorizes such a disposition to be made of the property conveyed, or of its proceeds, as will, if so carried into effect by the assignee, operate to deprive the assignors’ creditors of their right to have such property applied to the payment of their claims, is proven by itselfj and, therefore, by evidence which is incontrovertible,- to be fraudulent, in fact, as against the creditors of the assignor. For the assignor must be held to have intended to do what he has done, and to have designed to defraud his creditors, if the assignment directs or permits it, and the evidence of such intention, there found, is conclusive under well established rules of law, and cannot be contradicted by oral testimony. In my view,- therefore, it is not material whether either of the three persons mentioned in the third direction, was or was not individually indebted to the assignee Fiske at the time the assignment was made ; for that instrument assumes that they were so indebted, and directs them to be paid, and to be paid, too, as I understand the effect of the direction, in preference to the creditors of the firm, or either of them, if the assignees shall so elect.

But beyond this, the authority given to the assignees to pay Mr. Fiske, was not a direction to pay any specified sums on account of such individual indebtedness, nor expressly to pay to him such amounts as those persons owed him at the time the assignment was made, as is usual in deeds of assign

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ment; but under the peculiar wording of such third clause of the trust, I see no reason why Mr. Fiske may not pay to himself out of the proceeds of the property as they shall be received, any claims that may then be due and owing to him. by either Abbott, Pollock or Cochran individually.

So far as regards the direction to pay the creditors of Pollock and Cochran individually, the assignment is unobjectionable, so far as concerns the plaintiffs here ; for the property belonged to the firm of Pollock and Cochran, and except for their legal obligation to apply the partnership property to the payment of the creditors of that firm, they had a perfect right to prefer their individual creditors other than those to whom they were indebted as members of the former firm of Abbott, Pollock & Cochran; but they were legally bound to apply their property to the payment of their own liabilities, including their indebtedness as members of the former firm, and had no right to appropriate it to the payment of the individual debts of Abbott, who had no interest in such property.

For these reasons, I am of opinion that the assignment is invalid as to the plaintiffs here, and that they are entitled substantially to the relief demanded in the complaint. The assignees, however, should be required only to pay the plains tiffs’ claim and the costs of this action out of the assigned property or its proceeds,.which was in their hands or under their control at the commencement of this action.