Opinion
July Term, 1898.
Chas. H. Blood, for the appellant.
George S. Tarbell and S.D. Halliday, for the respondent.
An assignment for the benefit of creditors must be interpreted like other instruments, according to the intent of the parties, and, if possible, such a construction given it as will sustain rather than defeat it. ( Roberts Co. v. Buckley, 145 N.Y. 215. )
When, however, the distribution of the estate is to be made unequally among the creditors, and some are preferred to others in payment, the assignment is not viewed by the court with any favor, and is only tolerated and upheld when all conditions are met for the prevention of fraud. ( Mills v. Parkhurst, 126 N.Y. 89.)
And when it also appears that all the persons to be preferred in this unequal distribution of the estate are the relatives of the assignor, the assignment should be viewed with still less favor by the court, and the whole transaction rigidly scrutinized, to see that the provisions of the statute have not been availed of to defeat its spirit and benefit the assignor and his family at the expense of creditors.
While it has been held that relationship between assignor and assignee, and a preference given to the latter as a creditor, prove nothing by themselves, but are consistent with honesty and innocence, yet it was also held that other circumstances indicative of fraud may invest them with a new character and purpose, and transform them from equivocal and ambiguous facts into positive badges of fraud. ( Shultz v. Hoagland, 85 N.Y. 464.)
Here we have much more than the assignee being a relative and a preferred creditor; all the other preferred creditors are likewise relatives, and the person to whom the property was finally transferred is also a relative.
Many of the suspicious circumstances in this case are transactions that occurred after the assignment; and while an assignment is valid or invalid at the time of its execution, and cannot be made either by subsequent unconnected acts, yet subsequent acts may reflect light back upon the original intent and help us to discern that correctly. ( Shultz v. Hoagland, 85 N.Y. 464; McNaney v. Hall, 86 Hun, 415.)
The use that is made of the assignment, and the acts of the parties under it, furnish data to judge of the motive and intent with which it was executed. ( Forbes v. Waller, 25 N.Y. 430.)
And coupling these after occurrences with what took place before and at the time of the assignment, I cannot resist the conclusion that this assignment was made with the intent to hinder, delay and defraud the creditors of the assignor.
The assignor considered himself solvent; his reasons for making an assignment, as stated by him in brief, were that he thought more could be realized from his property in that way than if his creditors entered up judgments against him, and his property was sold out upon execution; yet, so far as appears from the evidence, only one of his creditors was pressing, and while he could not then raise the money to pay such claim, still it could have been adjusted, and time secured for its payment by giving his notes, indorsed by his father, extending over a series of months, with an agreement to renew them if he was unable to meet them at maturity; his father expressed his willingness to indorse if he desired him to do so; he agreed to furnish such notes, specified the times when he would have them prepared, which promises he did not keep, and avows that he did not mean to keep them when he made them; he makes an assignment to his father, whom together with other of his relatives he makes preferred creditors; he remains in possession and conduct of the business, except when excluded by the sheriff, and with the fruits of his earnings, while transacting that which before the assignment was a part of his business, he either by himself or through his wife causes negotiations for the purchase, and purchases are actually made, of claims against him for a third of their face value; and, finally, what remains of the property is transferred to a brother, who is by profession a teacher, for a consideration apparently much less than its value, and for the larger portion of which purchase price time is given and the note of the alleged purchaser taken, and payments made upon that partially from the proceeds of the business and partially by extinguishing a note of the assignee held by the purchaser.
Considering the circumstances under which this sale was made, it was incumbent, I think, upon the parties to it to show that the price was adequate; and if the apparent value of the remainder of the estate was not the real value I think it was incumbent upon the plaintiff to show that fact.
For these reasons I think the assignment should be held fraudulent and void, and it follows that the order and judgment appealed from should be reversed.
All concurred; MERWIN, J., concurred in result.
Judgment and order reversed and a new trial granted, costs to abide the event.