Nat'l Park Bank of New York v. Whitmore

• Decision Date: 01 February 1887
• Citation: 104 N.Y. 297,10 N.E. 524
• Parties: NATIONAL PARK BANK OF NEW YORK v. WHITMORE and others.
• Court: New York Court of Appeals Court of Appeals

104 N.Y. 297

10 N.E. 524

NATIONAL PARK BANK OF NEW YORK

v.WHITMORE and others.¹

Court of Appeals of New York.

February 1, 1887.

Appeal from general term, supreme court, First department.

An attachment was granted in favor of plaintiff, the National Park Bank of New York, and against defendants, December 31, 1885, upon affidavits, on the ground that defendants were about to make an assignment in fraud of their creditors. The attachment was levied the same day. January 2, 1886, the defendants did make an assignment. Thereafter defendants moved to vacate the attachment. Defendants filed affidavits in support of their motion, and plaintiff in opposition to it. It was heard at special term, and granted February 1, 1886. Upon appeal to the general term the order of the special term vacating the attachment was reversed. From the order of the general term this appeal was taken.

Edward W. Sheldon, for appellants.

Charles W. Wetmore, for respondent.

EARL, J.

This attachment was granted on the thirty-first day of December, 1885, on the ground that the defendants were about to assign their property with intent to defraud the plaintiff and their other creditors. On the second day of January thereafter the defendants executed to William Whiting, of Holyoke, Massachusetts, a general assignment for the benefit of their creditors, in which they preferred him for upwards of $23,000. Upon motion made by the defendants at special term the attachment was vacated, as appears by the opinion there pronounced, upon the ground that the affidavits upon which the attachment was based did not sufficiently establish the fraudulent intent alleged. From the decision of the special term the plaintiff appealed to the general term, and there the order of the special term was reversed, as appears by the opinion pronounced, on the ground that the defendants had agreed with Whiting, at the time of the sale of certain goods to them, that in case of their insolvency, or of an assignment becoming necessary, he should be protected by a preference to the amount of the goods so sold to them and unpaid for. It was held that such an agreement was in law a fraud upon other creditors, and rendered an assignment giving a preference in pursuance thereof fraudulent and void. From the order of the general term the defendants have brought this appeal.

We have frequently held that we cannot look at the opinion pronounced below, in a case like this, for the grounds upon which the decision proceeded, and hence, if we find in this record any ground upon which the general term could, in the exercise of its jurisdiction, have reversed the order of the special term and thus sustained the attachment, its order must be affirmed, although we do not agree with its opinion.

We do not think that the promise of the defendants to make a preferential assignment in favor of Whiting was in law a fraud upon other creditors, or that it was so far conclusive evidence of fraud as to avoid the assignment made in pursuance thereof. The property which the defendants obtained by their agreement with Whiting added to their visible assets, and all their assets remained liable to the legal remedies of their creditors until the assignment was made. By adding $23,000 to their assets by goods thus obtained of Whiting, and then preferring him for the same amount in their assignment, no harm was done to or fraud committed upon their other creditors. It is said, however, that this sale, under a secret promise of a future preference, gave the defendants a delusive appearance of property and solvency, and thus enabled them to obtain credit which they otherwise could not have obtained, and that thus the agreement necessarily operated as a fraud upon other creditors. But it cannot be maintained that an agreement is fraudulent which simply adds to a debtor's assets, gives him the appearance of solvency which he does not in fact possess, enables him to obtain credit, and continue his business, and thus postpones impending failure. A debtor may obtain credit by a promise to pay in the future either in cash or in property, or by promising to give his check or an indorsed note, or a confession of judgment. Neither such a promise nor its performance is a legal fraud upon any one. And why may he not promise to give security upon the property purchased, or other property? Such a promise, honest in fact, has never been held to be a fraud, or to work a fraud upon creditors. Security, honestly given in pursuance of such a promise, relates back to the date of the promise, and, except as to intervening rights, is just as good and effectual as if given at the date of the promise; and it has generally been so held even in bankruptcy proceedings. Bump, Bankr. (10th Ed.) 821; Forbes v. Howe, 102 Mass. 427;Bank of Leavenworth v. Hunt, 11 Wall. 391;Burdick v. Jackson, 7 Hun, 488; Ex parte Ames, 1 Low. 561;Ex parte Fisher, L. R. 7 Ch....