Opinion
March 8, 1907.
Albert Francis Hagar, for the appellant.
Howard H. Williams, for the respondent.
The judgment appealed from must be reversed. There is absolutely no evidence to sustain a finding that the assignment of the Baker Berringer notes or the trade marks was made for the purpose of hindering, delaying or defrauding creditors or that the money paid to the firm of Warner Co. on the indebtedness of the J.F. Smith Company after the 25th of March, 1899, was paid with the intent of giving that firm a preference over other creditors. Warner Co. had been dealing with the corporation for several years, during the course of which and on the 25th of March, 1899, it was indebted to the firm in the sum of $2,684.91 for medicines manufactured and sold. The corporation then wanted a further credit. It also wanted to borrow $1,000. The firm gave the additional credit and loaned the money and to secure the payment of which, and for no other purpose, the Baker Berringer notes were assigned. There is not a scintilla of evidence to show when this was done, that any officer of the corporation knew or had reason to believe the corporation was insolvent or its insolvency then imminent; on the contrary, if the testimony of one of plaintiff's witnesses is to be credited, some of the officers of the corporation believed its assets at that time were largely in excess of its debts. The Baker Berringer notes were considered not only gilt-edge paper, but they also were accompanied by valuable collateral, and the fact that Warner Co. on the fifth of July, at the request of the corporation, gave these notes and the collateral accompanying them back to it and received in exchange the corporation's own notes secured simply by the trade marks, indicates, if evidence indicates anything, that neither of the parties then believed that the corporation was insolvent or that it would be unable to pay the notes as the same fell due. The fact that it subsequently turned out that the corporation was on the twenty-fifth of March and thereafter continued to be insolvent did not in and of itself establish that the assignments of the notes and trade marks or the payments made were for the purpose of giving the preference prohibited by section 48 of the Stock Corporation Law (Laws of 1892, chap. 688). Something additional had to be proved, viz., that the assignments were given and the payments made by the corporation with the intent of giving a preference. There is not only no evidence to show intent, but all of the evidence bearing upon the transaction negatives it. Intent to prefer is a fact which must not only be alleged, but proved ( Curtis v. Leavitt, 15 N.Y. 198) and it must be shown in addition that the assignment was made because insolvency then existed or was in contemplation. ( Paulding v. Chrome Steel Co., 94 N.Y. 334.) Where the evidence is capable of an interpretation which makes it equally consistent with the absence as with the presence of a wrongful act, that meaning must be ascribed to it which accords with its absence. ( Lopez v. Campbell, 163 N.Y. 340.)
Here, the evidence is not only capable of such construction, but any other would be contrary to evidence. After the transactions in March and April, of which the plaintiff complains, Warner Co., as we have already seen, advanced to the corporation $1,000 in cash and it did not thereafter receive from the corporation that amount in money, nor anything near like it. The Baker Berringer notes were given back to the corporation; therefore, their assignment could not, by any possibility, have hindered, delayed or defrauded creditors, or given the firm a preference. After the assignment of the trade marks the corporation paid only two of its notes. It is true Woodruff, its assignee, thereafter paid the balance of them, but this is no concern of the plaintiff, so far as the defendant is concerned. If Woodruff, in making such payments used the proceeds derived from sales of the medicines covered by the trade marks, and plaintiff as receiver was entitled to the same, then he can look to him, and in this connection it must be borne in mind that he has pursued this course and now has a judgment against Woodruff, requiring him to account for such moneys. The payments made to Warner Co. were made in the usual course of business and there was nothing in connection with any of them which indicates they were made in bad faith or for the purpose of giving that firm a preference over any other creditor of the corporation. Under such circumstances, if the payments made can be recovered by the receiver, then there is no safety in dealing with a corporation, if it should at any time thereafter turn out that at the time the dealings were had the corporation was insolvent. Obviously, this is not a proper construction of the statute.
The judgment appealed from, therefore, must be reversed and a new trial ordered, with costs to appellant to abide event.
PATTERSON, P.J., INGRAHAM, CLARKE and SCOTT, JJ., concurred.
Judgment reversed, new trial ordered, costs to appellant to abide event. Order filed.