Shotwell v. Dixon

• Decision Date: 01 May 1900
• Citation: 57 N.E. 178,163 N.Y. 43
• Parties: SHOTWELL v. DIXON et al.
• Court: New York Court of Appeals Court of Appeals

163 N.Y. 43

57 N.E. 178

SHOTWELL

v.DIXON et al.

Court of Appeals of New York.

May 1, 1900.

Appeal from supreme court, appellate division, Third department.

Action by Samuel H. Shotwell against Walter W. Dixon and another to set aside preferences under an assignment for the benefit of creditors. From a judgment of the appellate division (48 N. Y. Supp. 984) reversing a judgment in favor of plaintiff, he appeals. Affirmed.

Andrew J. Nellis, for appellant.

R. P. Anibal, for respondents.

MARTIN, J.

For some years anterior to December 31, 1895, the defendants Baltie H. Dixon and George E. Wilkins were, as copartners, engaged in the manufacture of gloves and mittens under the firm name of Dixon & Wilkins. On the 28th of that month they ascertained that the firm was insolvent. On Monday, the 30th, they made and executed a large number of sales and transfers of their property, the proceeds of which were appropriated chiefly to the payment of the debts of the firm. There may have been one or more instances where a debt, or a portion of a debt, of one of the individual members of the firm was thus discharged, but practically the entire amount received in money, notes, checks, or otherwise was applied to the payment of the honest debts of the firm. On the following day they made a general assignment for the benefit of their creditors without preference, except such as the statute requires. Subsequently, the plaintiff obtained a judgment against the members of the firm upon an indebtedness created prior to the making of their general assignment, and which remains unpaid. This action was brought by the plaintiff in his own behalf as well as in behalf of other creditors who might become parties to this suit. Its purpose was to have all the sales and transfers of property by Dixon & Wilkins declared void upon the ground that they were made with an intent to avoid the provisions of the statute restricting preferences under a general assignment, and as a fraud upon the statute and rights of the general creditors, and to have all the property so transferred declared to be a portion of the trust fund created by the general assignment, and distributed thereunder. The case was tried at special term, which found that such sales and transfers were made in contemplation of a general assignment for the benefit of creditors, and as a part of an entire scheme to prefer the creditors to whom transfers and payments were made in excess of the amount allowed by statute; that the amount of such transfers exceeded one-third of the assigned estate after making the deductions allowed by law; and that each of the creditors, when his debt was paid or adjusted, knew that the firm intended to make a general assignment, and accepted such payment with the intent to secure a greater preference than the statute relating to assignments would permit. The court thereupon directed a judgment appointing a receiver, canceling certain mortgages, requiring the creditors who had been so paid to account to the receiver for all the money that had come into their hands, discharging the assignee named in the assignment and appointing another, and awarded the plaintiff judgment for costs and disbursements and 5 per cent. additional allowance against six of the defendants, named, who were creditors, and whose debts were paid. Upon appeal to the appellate division the judgment of the special term was reversed, and a new trial granted, with costs to abide the event. From that judgment the plaintiff appealed to this court, stipulating that upon affirmance a judgment absolute should be rendered against him.

It is claimed by the appellant that the judgment was reversed upon the facts, and that, as the court failed to so state in its order or judgment, section 1338 of the Code requires us to presume that it was reversed upon the law, and not upon a question of fact. If the judgment was reversed upon the facts, the contention of the appellant is entirely correct. Bomeisler v. Forster, 154 N. Y. 229, 236,48 N. E. 534,39 L. R. A. 240;Parker v. Day, 155 N. Y. 383, 386,49 N. E. 1046;Petrie v. Hamilton College, 158 N. Y. 458, 463,53 N. E. 216;People v. Adirondack Ry. Co., 160 N. Y. 225, 235,54 N. E. 689. But if, as was held by the court below, there was no evidence to sustain the finding of the trial court as to any one of the facts material and necessary to sustain the judgment, then a question of law was presented, which must be reviewed by this court. Gannon v. McGuire, 160 N. Y. 476, 55 N. E. 7;Canda v. Totten, 157 N. Y. 281, 51 N. E. 989;Spellman v. Looschen, 162 N. Y. 268,56 N. E. 761;Furner v. Seabury, 135 N. Y. 50, 60,31 N. E. 1004;Hannigan v. Allen, 127 N. Y. 639, 27 N. E. 402;David v. Leopold, 87 N. Y. 620. It is not claimed that the transfers by Dixon & Wilkins were made with an intent to hinder, delay, or defraud their creditors, and consequently void, under the statute relating to fraudulent conveyances (2 Rev. St. p. 137, §§ 1, 8). The sole theory upon which this action was based and has thus far proceededis that these transfers were invalid because in contravention of the provisions of chapter 503, Laws 1887. That statute, so far as material, declares: ‘In all general assignments of the estates of debtors for the benefit of creditors hereafter made, any preference created therein (other than for the wages or salaries of employees under chapter three hundred and twenty-eight of the Laws of Eighteen Hundred and EightyFour, and chapter two hundred and eightythree of the Laws of Eighteen hundred and Eighty-Six) shall not be valid except to the amount of one-third in value of the assigned estate left after deducting such wages or salaries, and the costs and expenses of executing such trust.’ It may be observed, in passing, that the statute relates only to general assignments for the benefit of creditors, and to preferences created therein, and does not, in terms, relate to any other transfers or transactions. So that, under its provisions, if the language employed was given only its usual and ordinary meaning, it would seem to have no application to a case like this, where the transfers were independent of the assignment. But the decisions of this court have given it a broader effect. Independently of that statute, the judgment debtors, although insolvent, had the right to sell and transfer the whole or any portion of their property to one or more of their creditors in payment of or to secure their debts, if that was their honest purpose, although the effect of the sale or transfer would be to place their property beyond the reach of their other creditors, and render their debts uncollectible. Tompkins v. Hunter, 149 N. Y. 117, 121,43 N. E. 532;Delaney v. Valentine, 154 N. Y. 692, 49 N. E. 65;Dodge v. McKechnie, 156 N. Y. 514, 51 N. E. 268. That right existed at common law as an incident to the right of property, and still exists, except as limited by the provisions of the statute of 1887 and the decisions under it. In 1891, in Berger v. Varrelmann, 127 N. Y. 281, 27 N. E. 1065,12 L. R. A. 808, the question of the effect and operation of the statute of 1887 was under consideration by this court. It was there held that the statute was not confined to preferences in the assignment itself, but also applied to those created by separate instruments in contemplation of an assignment, and it was intimated that the statute applied to all instrumentalities which the insolvent debtor, in contemplation of a general assignment, voluntarily employed to give a preference, and that the want of knowledge on the part of a creditor so preferred that an assignment was contemplated would not avail to validate the preference. From the latter part of that decision three of the judges dissented. This decision was handed down in June, and in the following December the same question arose in the case of Manning v. Beck, 129 N. Y. 1, 29 N. E. 90,14 L. R. A. 198, where the preceding case was considered and limited. It was there, in effect, said that the provisions of the statute of 1887 were not intended to and did not prevent a creditor from obtaining payment, or security, or a preference for his debt, even from an insolvent debtor, but that under the decision in the Berger Case, if a creditor accepted such security with knowledge that the debtor intended to make an assignment, and that the security was executed in contemplation thereof, it would result in a violation of the statute, and the security would be void. It was, however, plainly held that, if the creditor accepted the security or payment in ignorance of any such existing intent upon the part of the debtor, the provisions of the statute would not apply, and the security would not be rendered invalid by the fact that the debtor thereafter executed an assignment. That case was followed in Thalheimer v. Klapetzky, 129 N. Y. 647, 29 N. E. 1031. In Juanuary, 1892, in Spelman v. Freedman, 130 N. Y. 421, 429,29 N. E. 765, this court again had the question under consideration, and held that, inasmuch as it was in that case alleged and admitted that the acts of the creditors to whom transfers were made were performed in contemplation of an assignment by the debtors, it fell within the principle of the decisions in the Berger and Manning Cases, and was an evasion of the statute. In 1893, the case of Bank v. Seligman, 138 N. Y. 435, 34...