Bernheimer v. Rindskopf

• Decision Date: 26 November 1889
• Parties: BERNHEIMER et al. v. RINDSKOPF et al.
• Court: New York Court of Appeals Court of Appeals

116 N.Y. 428

22 N.E. 1074

BERNHEIMER et al.

v.RINDSKOPF et al.¹

Court of Appeals of New York,

Second Division.

Nov. 26, 1889.

Appeal from supreme court, general term, first department.

A. Blumenstiel, for appellants.

Nathaniel Myers, for respondents.

BROWN, J.

This action was brought by the plaintiffs, who are judgment creditors of the firm of Rindskopf Bros. & Co., to set aside a general assignment made by that firm to the defendant Jacob W. Mack, September 19, 1884, on the ground that it was made to hinder, delay, and defraud creditors. It is alleged that this result was sought to be accomplished by preferring, in the assignment, numerous claims, some of which were fictitious, and for none of which the firm was liable. The defendants introduced no evidence on the trial, and the court found as facts that none of the preferences were fictitious, or for an amount for which said firm was not justly liable, and were not made for the purpose of reserving any portion of the property for the benefit of the assignors, or for the purpose of hindering, delaying, or defrauding their creditors. The burden of establishing, by competent and sufficient testimony, the allegations of the complaint, rested upon the plaintiffs, and, the findings of the trial court having been affirmed by the general term, the judgment must be sustained in this court, unless the evidence will admit of no other inference except that which plaintiffs claim for it.

The first and main ground upon which the assignment is assailed is that the preference to Max Nathan for the sum of $25,000, the amount of a promissory note made by James Thompson & Co., and indorsed in the name of Rindskopf Bros. & Co., is not based on a firm liability valid as against firm creditors. It appears that in December, 1881, upon the application of the defendant Buchman, a member of the assigning firm, and for the benefit of his daughter, Mr. Nathan loaned $25,000 to James Thompson & Co., and received therefor their note, indorsed by Buchman, payable one year after date. This note was renewed in January, 1883, and about the time of its maturity, in 1884, Nathan refused to renew it, unless it was indorsed by the firm of Rindskopf Bros. & Co.; and thereupon Mr. Buchman, in Nathan's presence, indorsed on the renewal note the name of said firm, and Nathan surrendered the old note, and accepted the renewal for one year. At that time Rindskopf Bros. & Co. were insolvent, but Nathan was not aware of that fact. The firm did not then contemplate an assignment, but hoped to be able to pay their debts in full. The plaintiffs attack the validity of the preference of this note in the assignment on three grounds: First, that the assignors were not liable on the note unless all the members of the firm authorized and consented to the indorsement, and that the burden was on the defendants to establish authority in Buchman to make the indorsement; second, that, assuming that the firm authorized the indorsement, it was in effect an appropriation of partnership property to the payment of the debt of an individual partner, made when the firm was insolvent, and hence a fraud upon the firm creditors; third, that there was a fraudulent misstatement in the deed of assignment of the nature of the liability of the assignors upon the note.

I shall briefly discuss these questions in the order in which they are stated.

The plaintiffs have cited a multitude of authorities to show that a holder of a note of a firm, given by one partner for his private debt, or for a matter outside of the firm business, and known to be such by the holder, must, in an action upon the note against the firm, prove that the other partners who did not sign consented to be bound by the contract. Such is undoubtedly the law. Each partner is the agent of the firm only as to matters within the scope of the partnership business, and if one partner gives a partnership note for his own debt, without the consent of his copartners, it is void in the hands of any party having knowledge of the purpose for which it was given. Such a note does not bind the other partners without their consent, and the burden of establishing such consent rests on the holder of the note. The respondents do not deny these legal propositions, but they do deny their application to this action. They would be applicable, and full effect would be given to them, if Nathan was suing the firm on the note, and the firm liability was denied. But the issue here is a very different one from what it would be in an action by Nathan against the firm. The plaintiffs, and not the firm, are attacking the validity of the note. As between Nathan and the firm, the firm liability and the validity of the indorsement is admitted. Nathan is not called upon to prove anything. He is not a party to the suit, and is not before the court in any capacity, and cannot be heard. The issue is solely between the plaintiffs and the assignee. The attack is upon the assignee's title to the firm property, and to his right to administer upon it under the trust-deed. The trust-deed is alleged to be fraudulent because of the admission and direction to pay a fictitious debt. The admission of the validity of the indorsement is the fraudulent act which plaintiffs claim destroys the assignee's title to the property. In substance, plaintiffs allege that the assignee is not entitled to retain the firm property and dispose of it in accordance with the terms of the assignment, for the reason that the purpose to which he is directed to apply it is a fraudulent one, and the fraud is alleged to consist in directing the payment of a debt for which the firm was not liable, and which is in fact a debt or liability of an individual member of the firm. Obviously, upon such an issue, the burden is upon the plaintiffs to establish their complaint. Among all the cases cited in the appellants' brief, there is not a single authority holding that in an action of this character the burden is on the assignee to prove the validity of the assignment or the liability of the firm for the debts the assignee is directed to pay. None, I think, can be found. The assignment is valid upon its face, and the presumption as to its entire validity must prevail until the contrary appears by evidence; and in this action an inference cannot be drawn that the firm are not liable on the note from proof of the fact that it does not represent a firm debt, because non constat it may have been indorsed with the consent and by direction of all the members of the firm, and that fact must be negatived before the assignee is put upon his defense. In the absence of all evidence on that question, the only proof before the court was the acknowledgment of the debt in the...