Jefferson Cnty. Nat. Bank v. Townley
| Decision Date | 13 June 1899 |
| Citation | 159 N.Y. 490,54 N.E. 74 |
| Parties | JEFFERSON COUNTY NAT. BANK v. TOWNLEY et al. |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Appeal from supreme court, general term, Fourth department.
Action by the Jefferson County National Bank against Margaret A. Townley and others A judgment in favor of plaintiff was affirmed by the general term (38 N. Y. Supp. 584), and defendants appeal. Reversed.
A. H. Sawyer, for respondent.
This action was brought by the plaintiff, as a judgment creditor of the Eureka Chemical Company. Its purpose was to set aside two judgments recovered by Margaret A. Townley against it upon claims for salary due to, and money advanced by, Hugh C. Townley, which were previously assigned to her by him. The latter was treasurer, general manager, a stockholder, and director of the corporation, which was duly organized under the laws of this state.
The action was based upon a statute which provides: ‘Whenever any incorporated company shall have refused the payment of any of its notes, or other evidences of debt, in specie, or lawful money of the United States, it shall not be lawful for such company, or any of its officers, to assign or transfer any of the property or choses in action of such company, to any officer or stockholder of such company, directly or indirectly for the payment of any debt; and it shall not be lawful to make any transfer or assignment in contemplation of the insolvency of such company, to any person or persons whatever; and every such transfer and assignment to such officer, stockholder or other person, or in trust for them or their benefit, shall be utterly void.’ 1 Rev. St. pt. 1, c 18, tit. 4, § 4.
The plaintiff's claim is that the object of the assignments to Mrs. Townley was to avoid this statute, which prevented her husband from securing a preference after the company had refused payment of its notes or other evidences of debt. If we assume that such was their purpose, yet, as the transfer was based upon a good consideration, and the title to the claim assigned was absolutely transferred, so that the assignee became the actual owner and entitled to enforce it, does it follow that such a transfer is void under this statute?
The statute, in substance, declares that, when certain conditions exist, it shall not be lawful for a corporation to assign or transfer any of its property to any officer or stockholder for the payment of any debts; that it shall be unlawful to make any transfer in contemplation of the insolvency of the company to any person whatever; and that every such transfer shall be utterly void. It is to be observed that what the statute declares unlawful are transfers by the corporation to its officers or stockholders, or transfers by it in contemplation of insolvency. We find nothing in the statute which prohibits the officers or stockholders of a corporation from transferring to others their own property, or even their claims against the company. It is the property of the corporation alone that is impounded, and not that of its stockholders or officers. Therefore the transfer under consideration was not forbidden by the statute, and is not within its letter or spirit. As was said by Judge Andrews in Throop v. Lithographing Co., 125 N. Y. 530, 534,26 N. E. 742: ‘The law for the protection of the body of creditors against favoritism interdicts the corporation and its officers, while the default continues, from making preferential transfers of the corporate assets to officers or stockholders in payment of debt.’
The uncontradicted proof in the record discloses that Mrs. Townley's husband was actually indebted to her for money which she inherited from her father, and which she loaned him in an amount largely in excess of the value of the claims assigned, and that among other evidences of his indebtedness she held his note for $2,500, which was the consideration for such assignments, and was canceled when they were made. The claims assigned amounted to the sum of $2,448.76 only, while the debt that was canceled amounted to more than $2,500. The trial court, however, found that these assignments were made and taken for the purpose of enabling the assignee to obtain a judgment and lien upon the property of the corporation, to avoid and evade the statute and the decisions of the courts under it, and to create and obtain an illegal preference over the plaintiff and other creditors of the Eureka Chemical Company. If this finding is to be construed as a finding that the assignments were a mere sham, and not intended to transfer the interest of the assignor in the claim assigned, but to simply place it in the name of his wife to collect it for his own benefit, it may well be that, if justified by the evidence, it was sufficient to sustain the judgment below. Therefore, it becomes necessary to examine the record, and ascertain whether there was any evidence to sustain the finding when thus construed.
If there is any such evidence, we have been unable to discover it in the record, except as it rests upon the mere fact that the parties to the assignment were husband and wife, and that they knew that the corporation was indebted to others when the assignments were made. The other proof bearing upon that question was plainly to the effect that the transfer was made in good faith, for a valuable and sufficient consideration, and for the sole purpose of paying a just debt which was owing by the assignor to the assignee. It also shows that there was no title, interest, advantage, or benefit reserved or retained, or intended to be retained, by the assignor, but that the assignments were absolute and unconditional, and were intended to and did transfer to her his entire right to the claims thus assigned, and with no intention to evade or circumventthe provisions of the statute. If the assignee became the owner of the demand, and was therefore entitled to employ the usual remedies for its enforcement, then surely she obtained no illegal preference over the plaintiff or any other creditor. We think the evidence in the record was insufficient to justify that finding of fact.
The only question relating to the merits of this controversy, briefly stated, is whether this statute prohibits an assignment by an officer of such a corporation of any claim he may have against it to secure or pay his bona fide creditors, where the transaction was in good faith, and with the intent of paying or securing a debt which he honestly owed. Obviously, if the transfer to Mrs. Townley was not in contravention of the...
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