Opinion
October 20, 1916.
Sidney R. Lash, for the appellants.
Frederick M. Harris, for the respondent.
The action is brought in aid of an attachment which was issued in an action by the plaintiff Richard Doughty against the Felber Engineering Works, a foreign corporation. The attachment was served upon the Sicilian Asphalt Paving Company, a debtor of the said Felber Engineering Works, and this action was originally brought against the said asphalt company, which interpleaded the defendant, alleging that it had been notified by said defendant, some twenty-three days before the attachment was issued, that he claimed to be entitled to the payment of the sum due under an assignment from the Felber Engineering Works. The question in the case is whether or not that assignment ever became effective so as to transfer title to the claim to said defendant. If it did become effective and the plaintiff Doughty is entitled for any reason to attack its validity he must seek relief in another form of action. ( Throop Grain Cleaner Co. v. Smith, 110 N.Y. 83; Thurber v. Blanck, 50 id. 80; Doughty v. Weston, 90 Misc. Rep. 304.) If, however, as plaintiffs claim, the assignment, although executed, never became effective so as to pass title to defendant, the plaintiffs may recover the fund in this action.
It appears that the Felber Engineering Works had come to a point where it was unable to pay its creditors in cash. It does not appear that it was actually insolvent, for it seems to have had property which possessed value but was not readily convertible into cash. A meeting of its creditors was called at which a number of the creditors, including the plaintiff Doughty, appeared, and a committee was appointed, consisting of defendant and two others, to investigate the affairs of the company and to submit a report thereof and a recommendation as to the best procedure to secure payment in full of all creditors without legal proceedings. Subsequently the Felber Engineering Works made an offer to its creditors by which it proposed to pay twenty-five per cent of its indebtedness in cash, and seventy-five per cent in notes. For the payment of the cash it relied upon collecting the amount due from the Sicilian Asphalt Company. The acceptance of this offer was strongly urged by defendant and his committee, and a large proportion of the creditors, but never all of them agreed to accept it. The assignment of the claim against the Sicilian Asphalt Company was made, in writing, to defendant in his capacity as chairman of the creditors' committee, and was a voluntary one resting upon no consideration save a nominal one. The defendant makes no personal claim to the fund, except as chairman of the creditors' committee, and concededly the assignment was made and accepted only in order that the Felber Engineering Works' offer to pay twenty-five per cent in cash might be carried out if accepted by the creditors.
It becomes important, therefore, to determine the conditions upon which the assignment was made and accepted, and to ascertain whether or not those conditions were ever complied with. It is well settled that in case of an assignment or other instrument, absolute in form and actually delivered, which is executed for a particular purpose and is intended to become effective only if certain conditions are fulfilled, an inquiry may be made as to whether or not the conditions ever were fulfilled, and if it appears that they were not, the instrument will be held never to have become effective. ( Holbrook v. Truesdell, 100 App. Div. 9, 12; Smith v. Dotterweich, 200 N.Y. 299; Higgins v. Ridgway, 153 id. 130.) Concededly, as has been said, the assignment of the claim to defendant was made solely in order that the sum should be used in making the cash payment suggested in the proposition submitted to the creditors, and there is ample evidence in the case to justify a finding that it was the understanding of the defendant that the settlement was not to be carried out, and the cash payment of twenty-five per cent was not to be made as a part of that settlement unless all the creditors agreed thereto, which all of them never did. This evidence is to be found in letters signed by defendant urging creditors to accept the proposed settlement, because it would not become effective without the concurrence of all. If the assignment was made upon the condition referred to, which was never fulfilled, the consideration for the assignment failed and it never became effective to divest the Felber Engineering Works of title to the fund, and to invest such title in defendant, and the claim became subject to attachment.
The determination and judgment appealed from are, therefore, reversed and a new trial granted, with costs in all courts to the appellant to abide the event.
CLARKE, P.J., McLAUGHLIN, DOWLING and SMITH, JJ., concurred.
Determination and judgment reversed, new trial ordered, costs to appellants in all courts to abide event. Order to be settled on notice.