Bagley v. Bowe

• Decision Date: 25 March 1887
• Citation: 105 N.Y. 171,11 N.E. 386
• Parties: BAGLEY v. BOWE.
• Court: New York Court of Appeals Court of Appeals

105 N.Y. 171

11 N.E. 386

BAGLEY

v.BOWE.

Court of Appeals of New York.

March 25, 1887.

Appeal from judgment of general term of the supreme court of the city of New York.

Action by assignee for benefit of creditors to recover property of the assignors taken by defendant as sheriff under executions and attachments issued against them.

Edwin B. Smith, for appellant.

Charles F. MacLean, for respondent.

ANDREWS, J.

The trial judge directed a verdict for the defendant on the ground that the assignment of February 3, 1881, made by Dart, one of the firm of Swezey & Dart, to the plaintiff, was void, as having been made with the intent to hinder, delay, and defraud creditors. The assignment in form was a general assignment for the benefit of the creditors of the firm of Swezey & Dart, and individual creditors of Dart, and was executed by Dart in the firm name, and also as an individual. It purported to transfer and assign to the plaintiff all the property of the firm, ‘real, personal, and mixed, not exempt from attachment by law,’ for the benefit of the firm creditors, and also the individual property of Dart for the benefit of his individual creditors. The general term affirmed the judgment, and the sole point now presented is whether the question of fraud should have been submitted to the jury. In support of the judgment it is claimed that the assignment was void on its face, but it is also insisted that the evidence of fraud extrinsic to the instrument was so conclusive that the court was justified in withholding the case from the jury, and in ruling, as matter of law, that fraud in fact was established.

The provisions in the instrument of assignment upon which the defendant relies to establish its invalidity relate to the powers conferred upon the assignee- First, ‘to compound, compromise, and release’ debts owing to the assignor; and, second, to ‘execute, acknowledge, and deliver, in the name of the said parties of the first part, assignors, as such copartners, or in the name of the said Joseph Dart individually, for such consideration in money or other thingas he may deem sufficient, all such deeds, bills of sale, or other conveyances, in writing, under seal, or otherwise, and all such releases, contracts, and other instruments in writing or under seal, as in his discretion may from time to time be necessary to carry into effect the intent and purpose of this instrument.’ The validity of a provision in the general assignment for the benefit of creditors, authorizing the assignee to compound or compromise debts owing to the assignor, has been recently affirmed in this court, and is no longer an open question. Coyne v. Weaver, 84 N. Y. 386.

The stress of the argument against the validity of the instrument of assignment is placed on the clause conferring upon the assignee the power to execute deeds, bills of sale, or other conveyances in writing, ‘for such consideration in money or other thing’ as he may deem sufficient. This clause, it is insisted, authorizes the assignee to sell or dispose of the assigned property upon credit, or upon any consideration, whether in money or property. If this is the true construction of the provision, there can be no doubt of its invalidity.

The law justifies and upholds trusts created by insolvent debtors of their property, through general assignments for the benefit of their creditors, only when they provide for the immediate and unconditional surrender and application of the assigned property to the payment of their debts; and any attempt to confer upon the assignee the power to delay the collection and conversion of the assets into money is held to be unlawful, and to vitiate the assignment. It has therefore been held that an authority contained in the assignment to sell the assigned property on ‘credit,’ or for ‘cash or upon credit,’ as in the judgment of the assignee may appear best, or to convert the property into ‘money or available means,’ renders the assignment fraudulent and void. Nicholson v. Leavitt, 6 N. Y. 510;Burdick v. Post, Id. 522; Brigham v. Tillinghast, 13 N. Y. 215.

Construing the clause in question in view of the general rule of construction of written instruments, viz., that a construction will be preferred which will uphold rather than one which will destroy them, (a rule applicable as well to insolvent assignments as to other instruments,) and the further rule that in construing a particular clause the whole context may be considered, we are of opinion that the clause in question should not be deemed to confer authority to sell the assigned property on credit, or to exchange it for other property. The language of the whole paragraph seems more appropriate to a mere power of attorney than to an instrument of transfer or conveyance. It authorizes the assignee to execute deeds, bills of sale, etc., ‘in the name of the parties of the first part,’ (the assignors,) a power which they would very rarely, if ever, find it necessary to exercise. But the power is in express terms limited to instruments which the assignee may deem necessary or requisite ‘to carry into effect the intent and purpose of this instrument.’ Looking at the...