
    Bennett J. King et al., Plaintiffs, v. Adolph Baer et al., Defendants.
    (Supreme Court, New York Special Term,
    April, 1900.)
    1. Judgment creditor's action to set aside general assignment by two partners — Failure to serve one of them not available on appeal.
    The objection that the summons! ini. a judgment creditor’s action to set aside an alleged fraudulent general assignment made by two partners, had not been served upon one of them, cannot be made available when it is raised for the first time on appeal.
    
      2. Same — Failure to serve one partner in actions on which the credit- or’s action was based.
    Judgments recovered at law upon service of the summons on one ■ of two partners, followed by executions issued against the firm property and returned unsatisfied, 'afford a sufficient basis for a subsequent creditor’s action to set aside for fraud a general assignment made by both partners.
    3. Same — Fraud — Assets withdrawn in contemplation of insolvency.
    A general assignment will be set aside for fraud where it appears that the assignors- withdrew substantial sums from the assets at a time when, by hardly disputable inference, insolvency was contemplated by them.
    Action by judgment creditors to set aside a general assignment for the benefit of creditors. The nature of the action and the facts, so far as material, are stated in the opinion.
    
      Blumenstiel & Borsch (A. B. Blumenstiel, of counsel), for plaintiffs.
    Bachman & G-oldsmith (William N. Cohen and Theodore Baumeister, of counsel), for defendants Bevy and Max Baer.
    Theodore Baumeister, for defendant Adolph Baer.
    Platzek & Stroock (M. Warley Platzek, of counsel), for defendant Adler, assignee.
   Gtegebioh, J.

The action is brought by judgment creditors to set aside a general assignment for the benefit of creditors, made by the firm of Baer & Schwartz, of then® copartnership property, to the defendant Jacob Adler, on the 28th day of December, 1897, and to reach assets alleged to have been fraudulently diverted. It is insisted by the defendants that the plaintiffs-creditors have no standing to maintain this action, because their judgments against the assignors were obtained after service of the summons upon one only of the two defendants, and it is also urged that, for the failure of service of process upon the defendant Schwartz, in the present action, a judgment setting aside the assignment cannot be rendered. The last contention proceeds upon the theory that this defendant is an essential party to the suit, but the fact that he was not served was adverted to and admitted early in the course of the trial, without any suggestion by the defendants that the omission could affect the case as against them. Had the question been raised, any possible difficulty could have been obviated by a direction to bring in the party (Kaliske v. Weil, 33 N. Y. Supp. 413; 67 N. Y. St. Repr. 246; 24 Civ. Pro. 248), but the point is touched upon for the first time in the briefs, after the conclusion of a protracted trial, and hence, not being presented by “ timely objection” (See Sherman v. Parish, 53 N. Y. 483; Kinnan v. Forty-second St. R. Co., 1 Misc. Rep. 457; affd., 140 N. Y. 183), is not to be successfully insisted upon: ' The objection, founded upon the nonservice upon one of the partners in the actions at law, is -without merit, the return of executions, unsatisfied, under the judgments thus obtained, being sufficient to support an action of this character by the judgment creditors to set aside the firm assignment and to reach firm assets. Produce Bank v. Morton, 67 N. Y. 199; Hiler v. Hetterick, 5 Daly, 33. As to the merits, I must conclude that the assignment should be set aside for fraud, as evidenced by the acts of the assignors in withdrawing substantial sums from the assets at a time when, by a hardly disputable inference, the insolvency was contemplated. The circumstances compel the conclusion that the sudden and material increase 'of the weekly withdrawals by each partner, and the further withdrawal by Baer of $1,500, and by Schwartz of $1,640, within about six weeks of the failure, were not consistent with the usual and orderly prosecution of the business, and that the firm was not in a solvent condition at the time. According to these partners, they were solvent until within "six weeks of the assignment, made, as above noted, on December 28, 189Y; but the fact that the assets were short some $20,000 an that date, without'any reasonable explanation in view of the small capital involved, leads to the finding that the firm was, to their knowledge, in no position to justify the withdrawals referred to. Again, payments were charged to labor, ■during this late period, about seven times greater than corresponding expenses of the previous year; and, from a comparison of the amount of goods sold during the- year with the cost price, in view of the partner’s (Baer’s) testimony that no goods were sold at a loss, it is apparent that the sums charged to labor could not have been so applied. Therefore, the conclusion is irresistible that the labor account was a cover for very substantial withdrawals. Leaving the matter of the assignment, a question remains as to the right of the plaintiffs, upon the facts, to reach funds paid over by the firm to the defendants Levy and Max Baer, in purported settlement of loans made by those parties. It .is urged for the plaintiffs that these loans were fictitious, that the money loaned was first furnished by the firm and that the payments were received by the ostensible lenders merely for the purpose of turning the amounts back to the partners or .for their benefit. With regard to the Levy transaction, I think that the proof is insufficient to disclose fraud. The loans were made during a period commencing some two years before the failure, and it is not to be inferred that a fraud upon creditors was contemplated at any such remote period. I must assume, therefore, that the moneys loaned were, in fact, the funds of the lender, Levy, and there is not sufficient evidence to support a finding that, when accepting payment, he knew of the insolvent condition of the firm or entered into a scheme to defraud the firm’s creditors. The manner in which he dealt with the funds, thus received presumptively for a valid debt, is not inconsistent with the honesty of his purpose. As to the payment to Max Baer, however, a different situation is disclosed. This loan was $2,500, made on the 20th and 28th days of October, 1897, two months before the assignment, and repaid on the third day of December of the same year, and, while the payments and repayments were by check and the firm books made the transaction appear regular, the circumstances as brought out by the evidence cannot well be harmonized with an honest ^course of dealing, if due regard be had to the ordinary probabilities of the case. The disposition of these partners to cover their assets before the failure is a fact which is impressed upon the mind, and that they had funds at the time of this loan sufficient to furnish the lender with the requisite amount is a necessary conclusion from the facts as to the state of their relation to their labor ” accounts. The availability of this labor fund negatives the probability that they really required a loan at the time, but apart from this, the books of the firm import the fact that no expected demand called for their resorting to their credit for funds at the date when the loan, so called, was received. The transaction thus discloses the borrowers’ standing as more than questionable, and a reason for the loan cannot well be founded in the surmise that they intended to defraud the lender, since repayment was made by them from the funds in hand shortly before their failure. Under these circumstances, the only apparent purpose of the firm being to cover a withdrawal of assets, something more than the mere forms of regularity should be looked for to bear out the bona fides of the purported lender, who was the brother of one of the partners. It appears that this individual was a retail butcher, with a small business, and that his bank deposits, generally, were such as to result in but a slight standing balance. Shortly before this loan was made by him to the firm, he made cash deposits in amounts of $400 or $500 at a time, and thus his account became good for the two checks which he drew in favor of the firm; succeeding the deposit of the firm’s check, in repayment, his account with the bank was again brought to its accustomed level by personal drafts. His explanation was that he had no confidence in banks, and that his large deposits, before the loan, were furnished from moneys earned at a past period in his business and kept in his safe, and that upon depositiúg the firm’s check he withdrew the money and put the greater part hack in the safe, where it had remained until the trial (some two years afterwards). When asked why he had thus prepared his bank balance, he stated that his brother had told him of the firm’s intention to ask for a loan, and in explanation of his choice in passing the money through the bank rather than by a delivery of the cash, his testimony was that he wished to have evidence that the loan was made. I think that the circumstances-surrounding this transaction are so consistent with a fraudulent intent, and so inconsistent with honest dealing, as to necessitate a finding that the apparent loan was no loan, and that the defendant Max Baer came into possession of -the firm assets merely as an assistant in the endeavor to secrete them from creditors. It is well-nigh inconceivable that a person such as this defendant, with fairly developed business instincts, would indeed refrain for years from making any investment of a sum which, to him, was of substantial proportions, preferring to have the fund in his safe. That he did so is, of course, possible, hut the fact is so extremely improbable as to he out of all harmony with the situation, and the care with which he endeavored to guard against an attack for fraud is a guide to the inference that fraud was at work. Bridger v. Goldsmith, 143 N. Y. 424, 428. It follows from these views that there should he judgment for the plaintiffs declaring the assignment void and for an accounting by the assignee, and by the defendant Max Baer, to a receiver to he appointed, with costs against defendants Adolph Baer and Max Baer, and that the complaint should he dis-. missed, without costs, as to the defendant Levy.

Ordered accordingly.  