Majority
p. 473JULIUS LEHMAN, as Receiver, etc., Respondent v. GEORGE F. BENTLEY, Appellant.
Headnote
Assignments or conveyances with intent to hinder, delay or defraud creditors.Action to set aside a bill of sale and an assignment of accounts as fraudulent and void as respects judgment creditors, represented by plaintiff as receiver.
Held, on appeal, that the evidence amply sustains the findings of fact made by the trial judge, and the judgment creditors represented by the plaintiff are not estopped from maintaining this action ; and the legal conclusions reached are the logical and inevitable result. Even in the absence of an actual intent to hinder, delay or defraud creditors, a conveyance
p. 474Before Sedgwick, Ch. J., and Freedman, J. Decided May 2, 1892. In proceedings supplementary to their execution, on the fifth day of February, 1891, or two years and thirty-six days after the insolvency of Sterling & Wilkinson, Lucius Hart & Co. procured the appointment of the present plaintiff as receiver of Sterling & Wilkinson. Admitting, as far as necessary, the application of the general principle, that a receiver of an insolvent unites in himself the rights of both debtor and the creditors, to such a degree that he may assert a claim as representative of the creditors which he might not as representative of the insolvent, and therefore disaffirm dealings of the debtor which have been in fraud of the creditors— Pittsburg Carbon Co., Lmtd., v. McMillin, 119 N. Y., 46 ; per Andrews, J., p. 53. Yet a receiver appointed in a proceeding supplemental to one execution, with no extension to the judgment of any other creditor, stands in no better plight than the creditors upon whose judgment he was appointed. He is privy with Lucius Hart & Co. Tinkham v. Borst, 24 How., 246 . That is, the right of the receiver to recover in this action does not spring from the debtor, for as to the debtor, the transfer is valid, but from the fraud perpetrated on the credi
or transfer of property, the only consideration of which is an agreement on the part of the transferee that he will apply the proceeds in payment of the debts of the transferor, is void, unless the same is executed in the manner prescribed for a general assignment, and a conveyance in consideration of future services of any kind is also void as against then existing creditors.
Appeal by defendant from a judgment entered upon the decision of a judge at the equity term.
John B. Uhle, attorney and of counsel, for appellant, argued:—
p. 475tor. Hence the right of the receiver is no greater than because the same as that of the creditor, and is subject to the adverse rights (whatever these may be) of the transferee, so that an estoppel against the creditor may be availed by the alleged fraudulent transferee to defeat the special receiver’s action. Bostwick v. Menck, 40 N. Y., 383 , 384-7; per Grover, J. Affirmed as to the power of the receiver as late as Haynes, et al., v. Brooks, et al., 116 N. Y., 491 . Standing in no better position than Lucius Hart & Co. and subject therefore to the same estoppel as that firm, who may be regarded as his principals, the important question is what was proved by the receiver in his suit? There was no necessity to prove the assignment of the accounts and the delivery of the bill of sale. The denials of the answer were directed entirely to the allegations of intent to hinder, delay and defraud the creditors of Sterling & Wilkinson, and of the defendant’s knowledge of that intent. In the efforts to prove his allegations, the plaintiff called Mr. Comstock, an indifferent witness, and the defendant. Their testimony established the controlling facts that Mr. Comstock planned the dissolution of Sterling & Wilkinson, procured the defendant to represent that firm while he represented the entire number of known creditors, directed the making of the bill of sale and assignment of accounts, and in the subsequent sheriff’s sale and replevin proceedings not only represented Lucius Hart & Co., but was actually assisted by their private counsel, now appearing in this action for them receiver. These facts constitute an estoppel en pais ; for since at least 1837, to stand by at a sheriff’s sale has estopped the silent party from proving any facts to the contrary of his inaction. Pickard v. Sears, 6 Adolphus & Ellis, 469; Dezell v. Odell, 3 Hill, 215 , 219. Such facts as these go to the original cause of action [the hill of sale and the replevin suit under it], and arising during the plaintiff’s proof, must be observed
p. 476by the trial term, without pleading on the defendant’s part. Rogers v. King, 66 Barb., 495 . Of course, Lucius Hart & Co., and their attorneys, George C. Comstock and Blandy & Hatch and Hatch & Warren and Mr. Peyton, all stand on one level. Such an elementary fact was recently recognized in Bolt v. Hauser, 10 N. Y. Supp., 397 , 400; affirmed 11 N. Y. Supplem., 366; S. C., 57 Hun, 567 ; Hawley v. Griswold, 42 Barb., 18 , 23. And it is of no importance whatever, whether express language or open and general conduct cause the estoppel. Calaman v. McClure, 47 Barb., 206 , per Miller, J. The attorney for Lucius Hart & Co. allowed the discontinuance of the replevin proceedings by which the goods mentioned in the bill of sale were obtained by the defendant, by virtue of that bill of sale. This, in effect, was a direction to the sheriff to surrender these goods to the defendant and was in law tantamount to a delivery by Lucius Hart & Co. [and the other execution creditors] of these goods to the defendant. And this without a scintilla of evidence of any misstatement or other fraud in fact by the defendant. The motive of this delivery is apparent from the evidence but is really immaterial, for “ It is enough that the act was calculated to mislead and actually did mislead the defendant while acting in good faith and with reasonable care and diligence. Blair v. Wait, et al., 69 N. Y., 113 , per Miller, J., citing Bank v. Hazard, 30 N. Y., 226 . 1. A conveyance of property, the only consideration of which is an agreement on the part of the transferee that he will apply the proceeds in payment of the debts of the transferor, is void, unless recorded in the manner prescribed for a general assignment. Such a conveyance is deemed to be made to hinder, delay and defraud creditors, for the reason that it deprives them of the
Hatch & Warren, attorneys and of counsel, for respondent argued:—
p. 477right to collect their claims by process of law or of the protection given by the general assignment act. It enables a debtor to pay his debts, when and how he chooses, through an assignee, who is not accountable to any court, and the terms of whose trust may be kept secret. Nichols v. McEwen, 17 N. Y., 22 ; Britton v. Lorenz, 45 Ib., 51; Hine v. Bowe, 46 Hun, 196 , and affirmed in 114 N. Y., 350 . II. A conveyance in consideration of future services of any kind, is void against creditors for want of consideration. Davis v. Briggs, 24 State Rep., 896; Swift v. Hart, 35 Hun., 129 ; Moore v. Ryder, 65 N. Y., 438 , p. 443. A retainer, in consideration of legal services yet to be rendered, is certainly not a more meritorious consideration than an agreement to furnish food, lodging and clothing, which was the consideration in Davis v. Briggs, supra, and cases cited. III. The evidence clearly sustains the findings of the trial judge in favor of the plaintiff at all points. The plaintiff rested his case entirely upon the testimony of the defendant and of Mr. Comstock, his cousin and associate in the transaction. There is not the slightest pretence anywhere that a dollar’s worth of present consideration passed from Mr. Bentley, the defendant, to either Cooper & Co., or to Wilkinson. IV. The defendant’s admission in the answer is conclusive upon him and he is not at liberty to offer proofs to contradict it. Paige v. Willett, 38 N. Y., 28 ; Robbins v. Codman, 4 E. D. S., 315, p. 325. V. This case is something more than a mere assignment of moneys to be realized upon and to be applied to the payment of creditors in a manner forbidden by the statute. The evidence shows conclusively that the defendant has attempted deliberately to convert this property entirely to his own benefit. It is admitted that he has never parted with any money to any person as a consideration of getting it, and he now claims the right
p. 478to hold it in consideration of his having rendered services in collecting it, in defending his title to it against the very judgment creditors for whose benefit he was to take it, and he has even the effrontery to claim that his services to the firm in collecting these moneys are worth more than anything he has received, and to ask forty dollars ($40) additional compensation for the services rendered by him in converting these assets to his own use. It is difficult to see upon what theory of law or justice such an arrangement can be allowed in a court of equity.
A careful examination of the whole case has satisfied me that the evidence amply sustains the findings of fact made by the trial judge and that the judgment creditors represented by the plaintiff, as receiver, are not estopped from maintaining the action. The admissions made by the defendant in his answer are conclusive upon him. Under then circumstances the legal conclusions reached are the logical and inevitable result. Even in the absence of an actual intent to hinder, delay or defraud creditors, a conveyance of property, the only consideration of which is an agreement on the part of the transferee that he will apply the proceeds in payment of the debts of the transferor, is void unless executed in the manner prescribed for a general assignment. Britton v. Lorenz, 45 N. Y., 51 . And a conveyance in consideration of future services of any kind, is also void against then existing creditors. Davis v. Briggs, 24 N. Y. State Rep., 896; Swift v. Hart, 35 Hun, 129 .
The exceptions taken by the defendant are untenable.
The judgment should be affirmed, with costs.
Sedgwick, Ch. J., concurred.