Cole v. Mercantile Trust Co.

• Decision Date: 19 April 1892
• Citation: 30 N.E. 847,133 N.Y. 164
• Parties: COLE v. MERCANTILE TRUST CO. et al.
• Court: New York Court of Appeals Court of Appeals

133 N.Y. 164

30 N.E. 847

COLE

v.MERCANTILE TRUST CO. et al.

Court of Appeals of New York.

April 19, 1892.

Appeal from supreme court, general term, second department.

Action by Emory Cole against the Millerton Iron Company, the Mercantile Trust Company, and others. Defendants obtained judgment, which was reversed by the general term. The Mercantile Trust Company appeals. Affirmed.

Alexander & Green, (Thomas Thacher, of counsel,) for appellant.

C. B. Herrick, for respondent.

FINCH, J.

The plaintiff is a creditor of the National Mining Company, a corporation formed and existing under the laws of this state. He commenced an action to recover damages done to his property by the wrongful act of the corporation, serving the summons in October, 1887, and recovering judgment in July of the next year. During the pendency of the action all the property and assets of the debtor corporation were transferred to the Millerton Iron Company, also a domestic corporation, upon a nominal consideration, except an assumption by the vendee of the debts of the vendor; and thereupon the former executed a mortgage to the Mercantile Trust Company covering all its property, including that acquired from the National Mining Company. When the plaintiff obtained his judgment nothing remained upon which it was a lien, and his execution was returned unsatisfied. He then began this action, in which he assailed the transfers made, with a view of subjecting the property of the debtor corporation to the satisfaction of his debt. Upon the trial his complaint was dismissed, but the general term reversed the judgment, and ordered a new trial. From that order the trust company alone appeals, and has given the usual stipulation for judgment absolute.

The trial court has refused to find that the National Company was insolvent at the date of its transfer, but did find that such transfer suspended and terminated the regular business of the grantor, and was made and accepted with that purpose and intention. The practical effect was to dissolve the grantor corporation, and subject its charter to forfeiture at the hands of the state, for it voluntarily stripped itself of all its property and assets, and became incapable, and intended to be and remain incapable, of performing its corporate duties. Such a transfer, which involves the destruction of the corporation and an abandonment of the purposes of its organization, is illegal as against creditors whose rights are thereby sacrificed and their remedies destroyed. The transfer was illegal also because made in contemplation of insolvency. Those who accomplished it knew its necessary, and the inevitable, effect would be to make the corporation unable to pay its debts, and must be held to have intended that consequence of their acts. I do not agree to that reading of the statute which limits its prohibition to cases in which payment of some note or obligation has been previously refused. An interpretation so narrow would seriously maim and distort the obvious purpose of the statute, and make a transfer in contemplation of...