Berger v. Varrelmann

• Decision Date: 09 June 1891
• Citation: 27 N.E. 1065,127 N.Y. 281
• Parties: BERGER et al. v. VARRELMANN et al.
• Court: New York Court of Appeals Court of Appeals

127 N.Y. 281

27 N.E. 1065

BERGER et al.

v.VARRELMANN et al.

Court of Appeals of New York,

Second Division.

June 9, 1891.

Appeal from a judgment of the general term of the supreme court in the first judicial department, which affirmed a judgment entered on a decision of the special term.

From June, 1888, to April 29, 1889, Henry Erdtmann and Gustave Varreimann were partners engaged in business at Nos. 252 and 254 Pearl street, New York, under the firm name of ‘W. & H. Erdtmann.’ April 29, 1889, they confessed judgment in favor of George E. Varrelmann (the father of Gustave Varrelmann) for $7,824.62, which was entered and docketed, in the office of the clerk of the city and county of New York at 26 minutes past 12 o'clock of that day; and on the same afternoon an execution thereon was delivered to the sheriff of that county, who on the same day ‘levied under such execution upon the entire stock and property of said defendants Henry Erdtmann and Gustave Varrelmann, in their several places of business, 252 and 254 Pearl street, and at the warehouse of W. A. Evis & Co., 63 Front street, in the city of New York.’ Immediately after the levy of the execution, and on the same day, the defendants therein executed and delivered a general assignment for the benefit of creditors to Clemans J. Kracht, by which their individual property was devoted to the payment of their personal debts, and the surplus, if any, together with the firm property, to the payment of its debts, and the surplus of the firm assets, if any, to the payment of their personal debts, (if their individual assets were insufficient for that purpose,) according to the interest of each partner. None of their individual creditors were preferred except employes, whose wages were to be first paid. The salaries and wages of the firm employes were directed to be first paid, after which the firm creditors were divided into six classes, which were to be paid in full in their order. April 30 and May 1, 1889, were legal holidays, and the assignment was not recorded until May 2, 1889, at five minutes past 9 in the forenoon. At the time judgment was confessed and the assignment executed an action was pending in the supreme court, brought by the plaintiffs herein against the assignors, for the recovery of the amount due on their promissory note for $1,000, which fell due April 4, 1889, in which action a judgment was duly entered and docketed at 10 o'clock and 10 minutes in the forenoon of May 2, 1889, and 10 minutes thereafter an execution thereon was duly issued and delivered to said sheriff. May 9, 1889, the sheriff sold, under Varrelmann's execution, all of the property upon which he had levied for $5,877.79, nearly all of which was purchased by the plaintiff in the execution. On the 9th of May, 1889, this action was begun to set aside the judgment so confessed, the execution issued thereon, and for the recovery for the benefit of the assignee, from the defendant George E. Varrelmann, the amount realized upon the sale under the execution, on the ground that the assignors, in contemplation of their general assignment, and as a part thereof, in violation of section 30 of the general assignment act as amended in 1887, created a preference for more than one-third of the assets of the assignors. The assignee refused to bring the action in his own behalf, and was made a party defendant. The judgment recovered, and which is appealed from, set aside the judgment confessed, the execution issued thereon the levy and sale made thereunder, and adjudged that George E. Varrelmann pay $5,877.79 (the sum collected on the execution) to the assignee, to be by him distributed according to the terms of the general assignment.

Rudolph Dulon, for appellant.

Frederic W. Hinrichs, for respondents.

FOLLETT, C. J., ( after stating the facts as above.)

The judgment which the appellant abtained by the confession of his debtors is sought to be set aside, and the money collected by virtue of it recovered for the benefit of the creditors of the judgment debtor, on the ground that when confessed the confessors intended to make a general assignment, and prefer the claim of the appellant through a judgment and execution, and thereby evade the prohibition of the thirtieth section of the assignment act, which is as follows: ‘Sec. 30. 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 employes under chapter three hundred and twenty-eight of the Laws of 1884, and chapter 283 of the Laws of 1886) 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 expensees of executing such trust; and should said one-third of the assets of the assignor or assignors be insufficient to pay in full the preferred claims to which, under the provisions of this section, the same are applicable, then said assets shall be applied to the apyment of the same pro rata, to the amount of each said preferred claims.’ Chapter 503, Laws 1887. The appellant insists that his judgment and execution by which he secured more than one-third of the estate of the insolvent debtors are not brought within the prohibition of the section, because: (1) The trial court did not find as a fact that the debtors contemplated making a general assignment when the judgment was confessed; (2) the trial court did not find as a fact that the appellant knew when he received the confession of judgment, and seized the property by virtue of the execution issued thereon, that the debtors contemplated making a general assignment; (3) the preference was not created in the general assignment, but by a separate instrument. Before this section was added, in 1887, to the general assignment act of this state, the practice, which had become so prevalent that it may be said to have become a custom, for failing debtors to devote by general assignment the whole or a large part of their estates to the payment of a few preferred creditors, often near relatives, resulted in so much hardship and injustice that the section above quoted was adopted to mitigate the evils arising from the practice. The section, being remedial, should be liberally construed, so as to prevent the mischiefs at which it was aimed. White v. Cotzhausen, 129 U. S. 329, 9 Sup. Ct. Rep. 309;Hudler v. Golden, 36 N. Y. 446; Hart v. Cleis, 8 Johns. 33.

The trial court found that the estate of the assignors was not worth three times the amount of the appellant's judgment, and that its collection consumed more than one-third of it, and that, when the judgment was confessed, execution issued and levied, and the assignment executed, the assignors and George E. Varrelmann all knew that the sale under the execution to be issued would absorb more than one-third of the debtor's assets. The decision signed by the trial judge contains 17 findings of fact and 7 conclusions of law. The first and second of the latter are as follows: ‘ First. The judgment confessed in favor of the defendant George E. Varrelmann and the execution and levy which followed, were made by the defendants Henry Erdtmann and Gustave Varrelmann in contemplation of their general assignment, and as part thereof, and for the purpose of preferring said defendant George E. Varrelmann, in whose favor the said judgment was confessed by them, out of their property, for more than one-third of the assets of the said defendants Henry Erdtmann and Gustave Varrelmann, and to prevent the said assets from going into the hands of the defendant Kracht, as assignee, and being distributed to the plaintiffs, and the other creditors of the said defendants Henry Erdtmann and Gustave Varrelmann, pursuant to the terms of their general assignment deed. Second. Said confession of judgment, and the execution and levy which followed, were made in fraud of the said general assignment, and are void, and should be set aside and vacated, and the assets levied upon, or the entire proceeds thereof, should be paid the defendant Kracht, as assignee, to be distributed pursuant to the terms of the deed of general assignment.’

The learned counsel for the appellant insists that these conclusions cannot be given the effect of findings of fact, but must be held to be conclusions of law, and that the facts so found cannot be considered on this appeal. This contention is not well founded, for it is well seettled that, though a ‘finding of fact’ be called a ‘conclusion of law,’ and improperly classified as such, in the decision signed, (Code Civil Proc. § 1022,) it will, for the purpose of upholding a judgment, be given the same effect as though embraced within and designated as one of the findings of fact. Parker v. Baxter, 86 N. Y. 586;Murray v. Marshall, 94 N. Y. 611;Adams v. Fitzpatrick, 125 N. Y. 124, 26 N. E. Rep. 143. The facts found in the conclusions of law above quoted-that the assignors confessed the judgment in contemplation of making a general assignment as a part thereof, and for the purpose of preferring George E. Varrelmann for more than one-third of their estate; that the confession of judgment, the execution, and levy were made in fraud of the general assignment-will be given the same force in support of this judgment as though they had been properly classified in the decision signed. It would not be claimed, we think, that a preference for more than one-third of the assigned estate, when created by an instrument known as a ‘general assignment,’ would be valid, though executed without the knowledge of the preferred creditors. If such a position could be successfully maintained, the section would be wholly inoperative, as it would be quite easy, as, indeed, it is frequently the practice, to execute those instruments without consulting the favored creditors. If the absence of preknowledge on the part of the creditors that a preference is to be...