Opinion
June Term, 1896.
Frederick P. Bellamy, for the appellants.
Alfred B. Cruikshank, for the respondents.
The long record in this case has been most carefully studied, and after reading it through from beginning to end, the impression left upon the mind is, for the most part, the same as that which it seems to have left upon the mind of the learned judge at Special Term. We do not think that the members of the firm of Rope Co. ever contemplated any actual fraud upon their creditors, but it is difficult to resist the conclusion that they did mean to hinder and delay, until a more convenient season, the collection of the claims of those creditors who could not accommodate them as to the time of payment, and that their various transfers (with a single exception to be noticed hereafter), beginning with those to the Rope Lumber Company and ending with the general assignment, were made in pursuance of that design. A purpose to hinder is as fatal as a purpose actually to defraud. An assignment or transfer with intent to delay the collection of a debt is condemned by the statute and the common law, no less than a transfer or assignment into which the element of actual fraud enters. ( McConnell v. Sherwood, 84 N.Y. 522, 530.) As has well been said, the statute in reference to fraudulent conveyances applies "equally to the case of an actual intent to defraud the creditor of his just dues, and to the case where such intent is absent, but the necessary effect of the sale or transfer is to postpone the creditor, even for one day, in the enforcement of his demand." ( Warner v. Lake, 14 N Y Supp. 10, 12.)
In a judgment creditor's suit of this kind, where the issues have been decided one way or the other on sufficient evidence, the decision of the trial court should not be disturbed, in the absence of material errors of law, unless there is such a preponderance of proof as to require the Appellate Division to set aside the judgment and grant a new trial on that ground. ( Del Valle v. Hyland, 76 Hun, 493, 496.) It is not enough that the members of this court, if sitting at trial term, might have taken a different view of the facts and drawn different inferences from them. Applying this rule, we have no difficulty in sustaining the finding, made upon conflicting evidence or upon evidence from which conflicting inferences could be drawn by different minds, that Rope Co. were insolvent when the Rope Lumber Company was formed, and that the corporation was organized in order to place the property of the firm beyond the reach of their creditors.
In the case of The First National Bank of Champlain v. Wood (86 Hun, 491) the General Term of the third department held that the organization of a corporation by the assignors, while financially embarrassed, and the transfer of the greater part of their available assets to such corporation two years before they made a general assignment, did not vitiate the latter, inasmuch as the formation of the corporation was not shown to have had any connection with the subsequent assignment. In the present case, however, there was enough to warrant the court in inferring the existence of a common purpose which connected and characterized the two acts; that purpose being an intent to delay those creditors who refused to treat the firm as leniently as the partners desired, in view of the hard times then prevailing in the business world. Furthermore, we do not understand the decision in the third department as questioning the proposition that a transfer to a corporation under the circumstances stated would be indicative of fraud. What the court really decided was, not that the prior act in forming the corporation and transferring the property to it was not fraudulent, but that if it was fraudulent, the remedy lay in the hands of the assignee, because the assignment did not fall unless some connection were shown between it and the previous scheme of fraud, if there had been one. The fraudulent nature of a similar scheme was assumed without question in Galle v. Tode (60 Hun, 132, 134), and seems manifest enough without the citation of authorities. The transfer by an insolvent firm of all their tangible property to a corporation formed by the members of the partnership for the purpose of acquiring such firm assets, without giving any consideration save the issue of stock therefor, and without assuming any of the debts of the firm, is about as suspicious a circumstance and as indicative of an intent to hinder the firm creditors as anything that can readily be imagined. It requires a satisfactory explanation, to say the least; and the explanation offered in behalf of the appellants seems to us to be feeble, and inadequate to explain why or how such a course was calculated to facilitate a liquidation of the firm business for the benefit of the retiring partner, Charles R. Rope, unless by hindering and delaying the firm creditors, which was precisely what Rope Co. had no right to do in this way, no matter how desirable it might seem to them at the time.
On the whole, then, we find no reason for interfering with the judgment below. In one particular, however, an error seems to have been committed. The transfer of the Oswego property from William W. Rope to his wife was condemned by the learned trial judge, in part at least, because the alleged indebtedness of the husband had, as the opinion states, always remained secret. But evidence tending to disprove any such secrecy concerning the existence of this debt and claim was offered by the defendants and excluded. Its exclusion, to which exception was duly taken, constitutes an error in regard to this branch of the case which cannot be deemed harmless, in view of the emphasis given in the Special Term opinion to the secret character of the particular claim in question as a ground for rejecting it.
The judgment should be affirmed in all respects, with costs, except so far as it sets aside the Oswego conveyances from William W. Rope to Selina S. Rope. As to those conveyances it should be reversed and a new trial granted, with costs to abide event.
All concurred.
Judgment affirmed, with costs, except so far as it sets aside the Oswego conveyances from William W. Rope to Selina S. Rope. As to those conveyances it is reversed and a new trial granted, with costs to abide the event.