Citizens' Bank of Perry v. Williams
| Decision Date | 16 June 1891 |
| Citation | 128 N.Y. 77,28 N.E. 33 |
| Parties | CITIZENS' BANK OF PERRY v. WILLIAMS et al. |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
B. Frank Dake and Owen Harris, for appellants.
Eugene M. Bartlett, George F. Danforth, and Morris A. Lovejoy, for respondent.
The defendants were copartners in the mercantile business at Perry, Wyoming county, under the firm name of Williams & Co., and in their firm name they executed a note to the plaintiff for borrowed money. It commenced this action, and obtained an attachment against them on the ground that they had assigned their property with intent to defraud their creditors. They made a motion to set aside the attachment, based upon the same papers upon which it was granted, and the motion was denied at the special term, and the decision there was affirmed at the general term, and then the defendants appealed to this court. The allegation of fraud against the defendants is based upon the following facts: At the time the defendants became partners, Helen A. Williams owed E. M. Clark about $800, and for that indebtedness they gave him their two joint and several promissory notes, signed by them. L. Sophia Williams, however, signed the notes simply as surety for Helen A. Williams, who was and remained the principal debtor. Thereafter, in February, 1890, the defendants having become insolvent both as a firm and as individuals, executed a general assignment of all their firm and individual property for the benefit of their creditors, in which they directed the two notes held by Clark to be paid out of the proceeds of the firm property; and the fraud alleged by the plaintiff consists in this direction, the claim being that the notes were not firm debts, but the individual debts of Helen A. Williams, for which L. Sophia Williams was only surety, and that, therefore, it was necessarily a fraud in law upon the firm creditors to appropriate the proceeds of firm property for their payment. We think the learned courts below fell into error in granting and upholding the attachment upon the grounds specified. These notes were joint debts of the defendants for which they were jointly liable to Clark, and it was therefore not a fraud to appropriate their joint property for their payment. Clark could have recovered a judgment upon the notes against the defendants, and could, by execution, have seized the firm property to satisfy the judgment, and a purchaser at the execution sale would have obtained a full and absolute title to the firm property purchased. Although the defendants were insolvent, they could have paid these debts either in money or in property belonging to the firm, and in so doing they would have perpetrated no fraud upon their creditors. As they could thus pay the debts, either with firm money or firm property, we cannot perceive why they could not, through an assignee, direct the same debts to be paid out of the proceeds of the firm property. It certainly cannot be a fraud upon firm creditors to apply firm property to the payment of debts for the satisfaction of which such property could be taken. It is a mistake to suppose that the firm property is now in the hands of a court of equity...
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