Hooper v. Tuckerman — 3 N.Y. Super. Ct. 311

Majority

p. 311

Hooper v. Tuckerman.

Headnote

An assignment which transfers to a trustee in trust for creditors, a larger amount of property than the assignee is empowered to distribute among the creditors, is void upon its face, the legal effect being to create a resulting trust to the assignor, after the trust for creditors is satisfied.

An assignment of a debtor’s property, executed by the proper officer to a trustee, under the insolvent Jaws of Massachusetts, on the debtor's voluntary application, effects a legal transfer of the personal property of the insolvent in this state. Such an assignment is in effect a voluntary assignment for the benefit of creditors, operating as if made directly by the insolvent.

Whether the assignment be deemed voluntary or not, it being a proper legal assignment under the laws of another state, the assignees may come into the courts of this state, for the purpose of enforcing any rights which they may equitably have as such assignees or trustees.

(Before Duer, Mason, and Campbex,l, J.J.)

Oct. 18 ;

Nov. 17, 1849.

The bill in this cause was filed in the supreme court, in May, 1848, for the purpose of setting aside two assignments made by the defendant, Gray, to the defendant, Tuckerman, and to compel the latter to account for, and pay over to the plaintiffs, the property so assigned.

The bill stated that tinder a statute of the state of Massachusetts, entitled “ An act for the relief of insolvent debtors, and for the more ecpial distribution of their effects,” the defendants, Horace Gray and one Nathaniel Frances, merchants in Boston, under the firm of Horace Gray & Go., on the 24th day of November, 1847, presented their petition to William Minot, a master in chancery in Boston, stating their inability to pay their debts, that they were desirous of surrendering all their property for the benefit of their creditors, and praying that a warrant might issue appointing some suitable person to take possession of their estate. Under this petition, and in conformity with the act, on the 7th day of December, 1847, the master executed an assignment of all of the property of the petitioners to the plaintiffs in this suit, as assignees and trustees for the benefit of the creditors of the petitioners; and they thereby

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became vested as such assignees, with all the estate and effects of the petitioners. The bill further stated that, by the provisions of the same statute as amended in 1841, every certificate of discharge granted to a debtor in pursuance of such proceedings, should he of no effect, if the debtor should, in contemplation of insolvency, within six months before filing his petition, make a payment, or any assignment, or transfer of any part of his estate, with a view to give preferences, and that the full value of all property so transferred, might be recovered by the assignees appointed under the act from the creditor so preferred, provided the creditor, when he accepted such transfer, had reasonable cause to believe the debtor was insolvent.

The bill further stated that the defendant, Gray, on the 23d of November, 1847, in contemplation of his becoming insolvent, and obtaining a discharge under the act, and being insolvent, with a view to give preferences to certain creditors, made and executed to the defendant, Tuckerman, residing in New York, two deeds or instruments of conveyance or assignment, bearing date on that day, and conveying certain property situated in New York and New Jersey belonging to the defendant, Gray, in trust, for the benefit of his individual creditors. That no creditor had executed, or assented to these assignments, and that only a portion of the property so assigned, was thereby made liable to the trusts of the assignment. The assignments were set forth at length in the bill, and are sufficiently stated in the opinion of the court.

The bill charged that the assignments to Tuckerman were invalid and void, by the laws of Massachusetts, and that the plaintiffs were entitled to recover the property conveyed by them. It prayed for a discovery, the appointment of a receiver, and that the assignments to Tuckerman might be declared void and set aside.

The bill was taken as confessed by the defendant, Gray.

The defendant, Tuckerman, demurred to the bill, on the ground that the assignment to the plaintiffs was made by an officer appointed for that purpose in the state of Massachusetts, under the provisions of the act referred to, and that the assignments to the defendant were voluntary assignments of property

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in the states of New York and New Jersey, which belonged to the defendant, Gray, individually, and which was not within the jurisdiction of the state of Massachusetts. And that those assignments were made for the purpose of a ratable division among the creditors of Gray, individually, and the surplus, if any, among the creditors of Horace Gray & Co.

W. If Hearts, for the complainant.

1. The plaintiffs, in their representative character, may sue in the courts of this state, and their title derived under the Mas-' sachusetts statutes, and the proceedings thereunder, will be here recognised and supported. (Story Confl. Laws, § 420 ; Alison v. Fimii/oal, 1 Comp. Mees. & Kosc. 296, and cases infra.)

1. The law of domicil governs the disposition of personal property. (Story Confl. Laws, § 384, 398, & 403, &c.; Holmes r. Hernsen, 4 J. Ch. R. 485; S. 0. in Error, 20 J. E. 262; JPlestoro v. Abraham, 1 Paige 236 ; S. C. in Error, 3 Wend. 538 ; Goodwin v. Jones, 3 Mass. 517 .)

2. No rights acquired by the law or legal process of this state, compete or conflict with the plaintiff’s claims. And no creditors having become parties to the assignments to Tuckerman, or either of them, they were revocable, and his application in insolvency is a revocation of them. (Acton v. Woodgate, 2 Mylne & Keen, 492; Wallwyh v. Coutts, 3 Merivale 707; Scott v. Hardier, 3 Mer. 662 ; Maher v. Holds, 2 Young & Coll. 317, 327; 2 Story Eq. § 1036, a & b, 1045, 1046.)

II. The two assignments to the defendant, Tuckerman, are clearlyi^roid against the policy and terms of the Massachusetts statutes. They are also fraudulent and void under the laws of this State. (2 E. S. 137.)

1. The conveyance is larger than the trust for creditors; the debtor’s property is thus removed from the reach of the legal remedies of his creditors, and a portion of it only, devoted to the satisfaction of their claims; this is to hinder, delay, and defraud creditors, and renders the assignments void in toto. ( Wakeman y. Gmver, 4 Paige 23 ; S. C. in Error, 11 Wend. 187 .)

2. The legal effect of such assignments is to create in the

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assignee a resulting trust for the benefit of the assignor for the residue of the assigned property, after the trust for creditors is satisfied; this is equivalent to an express reservation of such benefit, and renders the assignments void in toto. (2 Story Eq. 11196 a, and cases.)

3. The provision contained in the assignments for carrying on the business by the assignee, (especially the provision in the Port Henry assignment,) tends to delay, hinder, and defraud creditors, and renders the assignments void. (Hart v. Crane, 7 Paige 37 .)

G. W. Morris, for the defendant.

I. An assignment under the insolvent laws of Massachusetts, does not operate a legal transfer of the personal property of the insolvent in this state. (Abraham v. Plestoro, 3 ’Wend. R. 538.)

II. Such foreign assignees cannot maintain an action in the courts of this state, to withdraw such personal property from their jurisdiction to place it under the control of the courts of Massachusetts. (Raymond v. Johnson, 11 John. R. 488 ; 2 Kent’s Com. 407, 3d ed.; Ogden v. Saunders, 12 Wheat. 358 ; Abraham v. Plestoro, 3 Wend. 538 ; Johnson v. Hunt, 23 Wend. 87 .)

TIT. The assignment to Joseph Tuckerman, a citizen of the state of New York, of property in this state and in New Jersey, being for the benefit of creditors and meritorious, cannot be questioned in our courts by foreign assignees, as being fraudulent under the law of a sister state. (Same cases as citejj to last point.)

By the Court.

On. the 24th day of November, 1847, Horace Gray and Nathaniel Frances, of Boston, composing the mercantile firm of Horace Gray and Company, made application in that city for the benefit of the insolvent laws of Massachusetts, and such proceedings were had, that on the 7th day of December following, an assignment of the property was duly executed by the master in chancery, before whom the

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application was pending, to the plaintiffs in this suit. On the 23d of November, the day previous to that on which the application was made, Horace Gray, one of the partners, executed two individual assignments to the defendant Joseph Tuekerman, by one of which he assigned a large amount of property in the state of New Tort, and by the other a large amount of property in New Jersey, upon trust to pay, first, certain workmen, and then the individual creditors of Gray, and to distribute the surplus among the creditors of Horace Gray & Co. The bill was filed in this cause to set aside those assignments, and the defendants have demurred. It is alleged in the bill that the assignments are void upon their face, and that they are also void, being in fraud of the laws of Massachusetts. These assignments are charged in the bill to have been executed by Gray on the 23d of November, the day of their date, in the city of Boston, and that they were in fraud of the insolvent laws of that state, for the benefit of which he applied on the following day.

The first assignment recites that Horace Gray himself, and the firm of Horace Gray & Co., had refused payments, and that he (Gray) was desirous of giving his property to his creditors, a large portion of which was at Port Henry, near Lake Champlain in the State of New York, and it was for the interest of his creditors that the works in Port Henry should be kept in operation for at least six months. Then follows the grant and assignment to Tuekerman, of all the pig iron, fuel, ore, and other personal property at Port Henry, or any on the way to or from the iron works, together with the wood on the shores of Lake Champlain, and Ins share in the tow boat Ethan Allen, to have and to ¿iold the same, to Tuekerman, his executors, administrators, and assigns, to and for- the uses, intents, and purposes thereinafter mentioned, that is to say, first, to continue the works in full operation for the term of six months from the date of the instrument, of which works Gray was lessee, and to sell the pig iron made from the same as fast as received either for cash or credit, <fcc.; and then provision is made for disposing of the proceeds of the pig iron, by payment of workmen and the individual creditors of the assignor, and to divide the residue of such proceeds among the creditors of Horace Gray & Co. No

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provision was made for the disposal of the residue of the assigned property.

The assignment of the New Jersey property, executed at Boston, on the same day. transferred all the pig iron, coal, ore, and the iron, &c., at the New Jersey works, and all the promissory notes or bills receivable, or other personal property, &c., there, in trust to contiirae the manufacture of the materials on hand until the same are turned into manufactured iron, and then to sell the iron for cash or credit, and out of the proceeds to pay expenses, wages, &rc., and the individual creditors of Horace Gray, and divide the residue among the creditors of the firm. Nothing was provided as to the disposal of the other assigned effects.

Both of these assignments are manifestly void upon their face. They cover in direct terms a much larger amount of property than the assignee is empowered to distribute among the creditors. The effect must he a resulting trust to the assignor. The property is thus placed beyond the reach of creditors for the benefit of the debtor. We must therefore deem these assignments as made to hinder delay and defraud creditors; at least such are the necessary legal consequences, even though the failure to make provision for the entire distribution of the assigned property among the creditors, was the result of haste or inadvertence.

The assignments being void, can the assignees or trustees of the estate of the assignors appointed under the insolvent law of Massachusetts, prosecute this suit, in their own names, in our courts'?

It was urged on the argument, that an assignment under f^e insolvent laws of Massachusetts, does not operate a legal transfer of the personal property of the insolvent in this state. It may be true, that in cases of statutory assignments under bankrupt acts, such as those of England, where the proceedings are in invitum, a legal transfer of the personal property situated in other countries, is not effected, especially as against subsequent bond, fide purchasers, or against attaching creditors of the country where the property is situated, though the attachment may have issued after the assignment. In this case we are inclined to the opinion that the

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assignment was in law a voluntary one, and must have the same effect as if made directly by Horace Gray and Company to the plaintiff in this suit.

The petition of the 24th of November sets forth their insolvency, that they are unable to pay their debts in full, and that “ they wish to surrender all their property for the benefit of their creditors, and to obtain their discharge from said debts, according to the statutes in this behalf provided.”

“ Wherefore they pray, that a warrant may be issued for talcing possession of their estate, and that such further proceedings may be had in the premises, as the law in such cases prescribes.” This petition was signed by the insolvents Gray and Frances; and such proceedings were had, that, on the Tth day of December following, the officer to whom the petition was addressed, executed, according to the laws of Massachusetts, an assignment to the plaintiffs in this suit, of all the property, real or personal, of the insolvent debtors, or which they or either of them had on the 24th of November, when the petition was presented. The whole proceedings were voluntary. The debtors wished to surrender their property, and they prayed for a warrant to issue for taking possession of it. The warrant is issued, possession taken, and, on a subsequent day, a formal assignment made by the officer.

We can see no difference between this assignment, and one made directly by the debtors themselves. A voluntary assignment, it is conceded, transfers the property wherever situated.

But whether this assignment to the plaintiff be voluntary or not, it being a proper legal assignment, and valid by the laws of Massachusetts, we can see no reason why the assignees or trustees may not come into this state, and in their own name institute proceedings in a court of chancery, for the purpose of enforcing any rights which they may equitably have as such assignees or trustees. Mr. Justice Marcy remarked in the case of Abraham v. Plestero, that “ I do not discover that this comity has been any where so far withheld, as to refuse to foreign assignees a resort to our courts in their character as assignees or representatives of the bankrupt, to secure the rights they have acquired by the assignment; on the contrary, suits in their own

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names have, in repeated instances, been sustained, and their rights to sustain them established by express adjudication.” See authorities cited in Abrahams v. Plestero, 3 Wend. 551 ; especially Bird v. Pierpont, 1 John. 118 ; Bird v. Caritat, 2 John. 342 .

We entertain no doubt in this case, that the rights of the assignees to appear in, and prosecute this suit, ought to be admitted and sustained.

The demurrer must be overruled with costs.

Cases cited

Abraham v. Plestoro 3 Wend. 538 N.Y. p. 313, p. 314