Jones v. O'Brien — 36 N.Y. Super. Ct. 58

Majority

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LOREN JONES, Plaintiff and Respondent, v. JAMES O’BRIEN, Sheriff, etc., Defendant and Appellant.

Before Barbour, Ch. J., and Monell and Van Vorst, JJ.

Decided May 3, 1873.

Headnote

Where the evidence to some degree tended to show concurrent possession of the property by the judgment debtor, and the alleged purchaser (the plaintiff) of the same, the burden of proof would seem to rest upon the plaintiff, to rebut the presumption of fraud arising upon the relations of the vendor or debtor with the vendee (the plaintiff), and the subject of the sale, and the refusal of the judge under these circumstances and facts to charge the jury, “ That a joint possession by buyer and seller after the sale, will not amount to an actual and continued change of possession, within the meaning of the statute,” was erroneous.

Appeal from judgment.

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The facts in the case appear in the opinion of the court.

This action was brought to recover against the defend'ant for taking and converting a quantity of liquors on the 3d August, 1870, at 147 Duane Street, New York.

The defendant justified the taking under an execution issued upon a judgment of the Court of Common Pleas, in favor of Julia M. Foster, and others, against David M. Hollister, recovered February 28th, 1870. Upon the trial it appeared that Hollister had carried on the wine and liquor business at 147 Duane Street for a number of years. On the 22d of January, 1870, he was indebted to various persons and firms, and suits, including the one in favor of Julia M. Foster, were pending against him. On the day last named, he executed a bill of sale of all his stock and fixtures to the plaintiff, who paid, therefor, $700 in cash, and gave his notes for the balance of the purchase-money, $1,378.66, at six, nine, twelve, and fifteen months, two of which notes only, amounting to $475, have been paid. After the execution and delivery of the bill of sale, the property sold remained on the premises. Hollister remained there with his son, as did the plaintiff, attending to the business. The signs of Hollister were not removed, but after the sale Jones put up an additional sign above that of Hollister, having his own name and the words “ successors to,” printed thereon. On the day of the sale an agreement was made between plaintiff and Hollister as to his position in the store: it was verbal. There is some discrepancy in the plaintiff’s statements as to the precise form of the agreement. On his direct examination he says, “it was for him (Hollister) to have a commission “ on the sales, or an amount equal to one-half of the net 1 £ profits of the business ; he might take his choice. He “ elected, I believe,, to take the amount equal to one-half “ of the profits. That was a compensation for his services “ and those of his son, a young man who was there.”

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“ On his cross examination his evidence was as fol-4‘lows :

“Q. Did you make any agreement with Mr. Hollister “ in regard to his position.

“A. Yes, sir.

“ Q. What was the agreement ?

“A. To give him a portion of the profits for his ser- “ vices, and his son’s.

“ Q. What portion of the profits.

“ A. One-half of the net profits.

“ Q. Has Mr. Hollister drawn out money under this “ agreement; if yes, how much %

“A. Yes. I cannot say, without referring to the “"books. Hollister says that the amount he drew in six “months after the 22d of January, was about one thousand dollars.” The place of business was his headquarters ; he sold goods from, and bought goods for, the store. He asked for money as he wanted it, and sometimes expended money he had collected, and then reported it to the store. John W. Calvert, a witness for the defendant, testified that after February, 1870, Hollister, who had traded with him before, bought goods of him in the name of Loren Jones. He had never heard of Loren Jones before; Hollister did all the purchasing in Jones’ name during the year 1870.

On the 22d of July, 1870, an agreement in writing was entered into between Jones and Hollister, in these words: “ Whereas Loren Jones and David M. Hollister, both of the city, county, and state of Hew York, did enter into an agreement as follows: to wit: That, said Hollister and his son should give their services in aiding said Jones to carry on the wine and liquor business at 147 Duane Street, and in compensation for such services, said Hollister was to receive, and said Jones was to pay to said Hollister, at the end of one year from that date, an amount equal to one-half of the net profits of the business, it is now hereby mutually agreed that the fore

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going agreement is at an end, and no longer binding, and it is now hereby agreed that in place of the aforesaid agreement, and in fnll payment for the services of said Hollister and his son, said Jones is to pay monthly to said Hollister, at the rate of two thousand dollars per annum, from the 22d day of January, 1870, to the 33d day of January, 1871.

In May, 1870, Hollister had been examined in proceedings supplementary to execution returned unsatisfied.

After the sale to him of the goods, on the 33d of January, Jones took out a lease in his own name, of the premises, and, in his own name took out a liquor-dealer’s license, and insured the goods and merchandise bought and paid for in his name.

After the case was closed, the learned judge, among other things charged the jury in these words: “ Fraud against creditors always consists in the corrupt intention of the parties to the transaction. It is never presumed, but must be proved. It must be clearly established by facts and circumstances at least, which carry conviction to the minds of the jury, and it must be thus established by the party that asserts it, and relies upon it, which in this case is the sheriff. If, therefore, you should find upon the evidence, that the goods in question were not purchased and owned as the plaintiff testified, but that they were purchased with funds out of a business carried on for the benefit of David M. Hollister, and carried on with an intent on the part of both the plaintiff and David M. Hollister, either to hinder, or to delay, or to defraud the creditors of David M. Hollister; if, in short, you should find that the manner in which the business was carried on was but a mere cover or contrivance on the part of David M. Hollister, for the purpose of keeping the creditors of Hollister at bay, then the defendant is entitled to your verdict.

“In such case the law will not protect the mere paper

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title of the plaintiff, no matter how great a consideration he may have paid for it. So, if you should find upon the whole evidence that the plaintiff and David M. Hollister were actual partners between themselves, and interested not only in the profits but also in the losses of the business, then in that case the defendant is entitled to your verdict.”

The counsel for the defendant requested the court to charge the jury “that a joint possession of buyer and seller after the sale will not amount to an actual and continued change of possession within the meaning of the statute.” The court refused so to charge, to which refusal the defendant by his counsel excepted. The counsel excepted to that portion of the charge which states that fraud was never presumed, but1 must be proven, and to the instruction to the jury that the burden of proving fraud in this case was on the defendant.

The jury rendered a verdict in favor of the plaintiff for the sum of $1,262.31.

A motion was made by defendant for a new trial on the judge’s minutes, which was denied, and this appeal was taken both from the order denying a new trial, and from the judgment entered upon the verdict.

A. J. Vanderpoel, for appellant.

Joseph M. Dixon, for respondent.

It is a fair inference from the facts in this case that Hollister executed the bill of sale of his merchandise to the plaintiff on the 22d day of January, 1870, to avoid its seizure for his debts, some of which were then in suit. Without doubt, even in his then circumstances, he was not prohibited from making a fair sale of his property for a good consideration to a tona fide purchaser.

The avails of such sale in his hands could be reached by his creditors.

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But the fact that a vendor or assignor of property sold under such circumstances, remains on the premises in the possession of the property, solely or in connection with the vendee or assignee, and deals with, collects, sells, and disposes of same, has always been regarded as a badge of fraud, and properly casts suspicion on the good faith of the transaction. The language of the learned judge in his charge on the subject of fraud is ordinarily correct beyond controversy. “It is not presumed, but must be proven,” and the burthen of proving fraud in any transaction rests upon the person who impugns it. The sale of property by one man to another, in the ordinary way, and according to the accustomed forms, would be presumed to be valid. But it may be accompanied with such circumstances inseparable from it, as at once to rebut the presumption of its validity, and on the other hand raise such probability of fraudulent design as to cast the burden on the other side to explain or remove the presumption of wrong.

In Randall v. Parker (3 Sand. 69) it was held that a party asserting the validity of a sale of goods, where there has been no actual and continued change of possession, must prove affirmatively that the sale was made in good faith and without any intent to defraud creditors or purchasers, and he must prove both conditions, and if no such evidence be given, the law pronounces the conclusion of fraud.

“ Every sale made by a vendor of goods and chattels “in his possession, or under his control, and every assignment of goods and chattels by way of mortgage “or security, or upon any condition whatever, unless ' ‘ the same is accompanied by an immediate delivery, “ and be followed by an actual and continued change ! 1 of possession, shall be presumed to be fraudulent and “void, as against the creditors of the person making “such assignment, or .subsequent purchasers in good “faith, and shall be conclusive evidence of fraud, un-

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“ less it shall he made to appear on the part of the per-‘1 sons claiming under such sale or assignment that the “ same was made in good faith and without any intension to defraud such creditors or purchasers” (3 R. S. [5th ed.] 322, § 5).

In this case the vendor, contemporaneously with the sale made by him, entered into an arrangement with the vendee to continue on the premises with his son, and to have such relation to the business to be prosecuted with the merchandise he had sold as to be paid out of its net profits. According to one version of his testimony, he had a direct interest in the business; as modified by another statement, he was to be compensated for his service out- of the net profits—the amount of his pay depending upon the extent of profits.

In any view, he had a direct interest to continue and increase the business and its profits.

The evidence to some degree tended to show concurrent possession of the property by plaintiff and Hollister. It discloses a dealing by the vendor with the stock after the 22d day of January 1870. He disposed of it by sale, and added to it by purchase; he personally received and appropriated to himself its proceeds in part at least. Whatever position he occupied to the business, was not only with the vendee’s consent, but was in pursuance of an agreement between them.

While the evidence shows that the vendee came into possession after the sale, and performed acts of ownership, it does not show an exclusive possession and control in him. The evidence reveals acts of the vendee consistent with a joint interest and possession by himself with the plaintiff. It would seem that under such conditions the burden of proof, would rest upon the plaintiff to wholly rebut the presumption of fraud arising from the relations of the vendor with the plaintiff, and the subject of the sale, and that so much of the judge’s charge as suggested that the fraud be estab

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lished by the defendant by facts and circumstances to carry conviction to the minds of the jury, is erroneous. There was enough in the case from the facts and circumstances alluded to, unless satisfactorily explained by the plaintiff, to justify the jury in holding the transfer void as to the creditors of Hollister. And for a like reason, growing out of the facts and circumstances proven on the trial, the refusal of the judge to charge “that a joint possession by buyer and seller after the “sale will not amount to an actual and continued ‘1 change of possession, within the meaning of the stat“ute,” was erroneous.

A joint possession by two, is the possession of each, and neither is entitled to exclusive control.

If the possession, on and after the 22d January, was joint, it would manifestly be presumptively fraudulent, for it would tend to show that there was no point of time when the vendor was wholly out of possession.

In Butler v. Stoddard (7 Paige, same case ; 20 Wend. 507 ), it was held that the appointment of the seller, as agent of the buyer to retain the possession, and retail the goods, and collect the debts, is not a change of possession, and will be deemed fraudulent; concurrent possession of personal property by the vendor and vendee will not protect it from (the creditors of the vendor (Braun v. Keller, 43 Penn. 104 ; Oren v. Sherman, 27 Wis. 501 ).

The charge of the learned judge, being otherwise so faultless, and so clearly and explicitly presenting the questions involved to the jury, that we reluctantly hold the exceptions of the defendant, in these respects, to be well taken. But as these errors may have misled the jury, and given them a mistaken judgment as to which party should assume the burden of proof with respect to fraud in the case, and as to the consequences of a joint possession (if there were such), although a partnership might not actually have existed between plaintiff

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and Hollister—we think that the judgment should be reversed, and a new trial granted, with costs to the appellant to abide the event, which is so ordered.

Barbour, Ch. J., and Monell, J., concurred.

Cases cited

Stoddard v. Butler 20 Wend. 507 N.Y. Sup. Ct. p. 65