
    Cornelius D. Curnen, Respondent, v. Robert B. Reilly, Appellant.
    
      Assignment for the benefit of creditors — a subsequent purchase of the assigned property by the assignor from the assignee sustained.
    
    In dealing with property in the hands of an assignee, who is a trustee for creditors, the assignor must observe the utmost good faith and honesty to the end that he does not obtain any benefit or advantage to himself out of the assigned estate to the detriment of the creditors.
    There is no rule of law or statute to prevent an assignor, after the assignment is made, from becoming a purchaser, provided it is done fairly and openly and without detriment to the rights of creditors.
    A dealer in toys having made an assignment for the benefit of creditors during the summer, at which time there was no demand for his stock of goods, the assignee concluded, in the exercise of his best judgment, that it would be better to sell the stock as a whole at private sale than at public auction. He accordingly solicited and obtained bids, the highest of which was about §8,500. The assignor, thinking the stock could be sold at a much higher price if it could be carried until the Christmas season, asked one Reilly to advance sufficient money to enable the assignor to buy the goods and to permit him to sell them. Reilly consented to make the advance and it was agreed between the parties that he should receive as compensation the sum of §500. Pursuant to this arrangement Reilly offered the assignee §9,500 for the stock of goods, which he accepted. Reilly then delivered the goods to the assignor, who opened a store and proceeded to sell the goods under his own name as agent. Within eighteen months the goods were all sold for the aggregate sum of §19,031.22.
    In an action brought by the assignor against Reilly to recover his share of the moneys realized from the sale of the goods, it was
    
      Held, that as no creditor objected to the arrangement for the purchase of the goods, and as it did not appear that such purchase had resulted in any injury to the creditors, or that the assignee had not acted in good faith and for the best interest of the creditors, the transaction was valid as between the assignor and Reilly.
    Lau&hmn, J., dissented.
    Appeal by the defendant, Robert B. Reilly, from, a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 10th day of February, 1904, upon the report of a referee.
    
      John C. McGuire, for the appellant.
    
      Charles E. Mahony, for the respondent.
   O’Brien, J.:

The action is to recover for breach of an oral contract, and the questions presented relate to its terms. As to what occurred after the agreement was reached there is no dispute. The plaintiff had been engaged in the toy business, had overbought, and the failure to find a market compelled an. assignment. The stock was invoiced at about $28,000, but as the assignment was made in the summer time, when there was no demand, the assignee concluded that it would be better to sell at private sale than by auction. He, therefore, sought bids for the stock as a whole. The highest offer was about $8,500. At this point the plaintiff, feeling sure that if the goods could be carried along to the Christinas season and if he could personally dispose of them among his trade acquaintances, they could be sold at a much higher price, went to the defendant and told him the situation, asking if he would not advance the money to buy the goods and permit him to sell them. The defendant declined as he was not familiar with the toy business, but on the plaintiff’s persisting and showing him more of the prospects, he finally looked upon the plan with favor and in accordance with plaintiff’s suggestion made an offer of $9,500 for the goods to the assignee. This offer was accepted and the goods delivered to the defendant. The defendant turned them over to the plaintiff, who opened a store and commenced to sell the goods under his own name as agent. When sales were made the plaintiff gave the money to the defendant and eventually within about eighteen months they were all sold, the sums remitted aggregating $19,031.22. The plaintiff was paid $4,000 and various items for rents, etc. Of the balance in the defendant’s hands the plaintiff claims that the defendant is entitled to receive back the $9,500 which he advanced and in addition $500 which it was agreed he should receive for advancing the money, and that the remainder, $3,735.10, should be paid to the plaintiff. The action is brought to recover this amount.

The plaintiff’s account of the agreement entered into with the defendant is that the defendant was to advance or loan him the $9,500, in order to help him out and enable him eventually to pay his creditors and re-establish himself in business; that the defendant said it would be worth something for advancing the money and suggested $500 and to this the plaintiff assented; and that when the defendant in final settlement offered him sixty per cent, he immediately refused to accept such sum and reminded him of the agreement of $500 for the use of the money. This version is in part corroborated by the testimony of Dr. McG-uire who says he told the defendant in the beginning that he would personally advance the money to the plaintiff if he had it and wished the defendant would do so, and the latter said he would inquire into the matter and help him but did not want to lose by the transaction. On the other hand, the defendant asserts that he bought the goods on his own account and employed the plaintiff to sell them. He denied that he had agreed to accept $500 for advancing the money. He says he offered to pay the plaintiff sixty per cent which he thought a fair adjustment.

The referee decided the disputed question as to the terms of the agreement in plaintiff’s favor, and as we do not think that his decision is clearly against the weight of evidence we have no right to disturb it.

The more serious question bears upon the legality of the arrangement or contract under which the plaintiff seeks to recover. The law is well settled that in dealing with property in the hands of an assignee, who is trustee for creditors, the assignor must observe the utmost good faith and honesty to the end that he should not obtain any benefit or advantage to himself out of the assigned estate to the detriment of the creditors. And in discussing the question upon the facts before us, it is first to be noted that no creditor is here objecting nor has it been shown that the arrangement for the purchase of the goods by the plaintiff in any way resulted in injury to the creditors. It may be, were the question directly presented upon an attack by the creditors, that though the transaction was not inherently bad or immoral or unconscionable, the courts might go to the extent of holding it voidable. As we have pointed out, however, the question here is between the plaintiff, who in reality was the purchaser from the assignee, and the defendant who, as the referee has found, loaned plaintiff the money for that purpose. There is no rule of law or statute to prevent an assignor after the assignment is made from becoming a purchaser provided it is done fairly and openly and without detriment to the rights of creditors.

There is no claim that in the effort to obtain the best price for the property the assignee did or refrained from doing anything but what was for the best interests of the creditors. If there had been evidence here, however slight, from which the inference could be drawn that the transaction was one hatched out between the assignor and the assignee for the benefit of the former, we would have little hesitancy in setting aside the arrangement and refusing to assist the plaintiff in obtaining advantage therefrom. Apart, however, from the fact appearing that the plaintiff assisted the assignee in appraising the property, which was most natural on account of plaintiff’s familiarity with the stock and its value, there is nothing in this record to show that there was anything wrong or fraudulent in his conduct.

The season of the year was unsuited for a sale of the kind of stock in his hands, and hence it does not appear that the assignee’s course in looking around for the purpose of effecting a private sale was actuated by bad motives, or was wanting in judgment or detrimental to the interest of the creditors. Starting, therefore, with the fact that the assignee, in the exercise of his best judgment, concluded to sell at private sale, in addition it appears that, in selling to the plaintiff — though the sale was nominally to the defendant — he did nothing which would subject him to criticism, nor do we think that the plaintiff, who was the assignor, was under such circumstances prevented from purchasing at private sale provided he paid a fair and reasonable price and an amount equal to or more than the assignee could obtain from other bidders.

According to the testimony the best bid obtainable was $8,500, while the price actually paid for the stock by the plaintiff was $9,500. It is true that, as the result of the plaintiff’s knowledge, experience and the time given for a period of eighteen months, there was realized for the stock, at retail, nearly $20,000. This was a great advance over the sum paid by the plaintiff, but taking into account the factors which produced this result, to which we have adverted, viz., the manner in which the stock was handled, and the period during which the plaintiff was thus engaged, we have an explanation of the cause of the great difference between the price paid and the amount realized. Although the plaintiff did not bid openly in his own name, in view of his financial straits, this cannot as matter of law be held fraudulent.

A transaction such as this will always be carefully scrutinized by the courts, and slight evidence of bad faith or resulting injury to creditors will be sufficient to cause the courts to condemn it. In the absence, however, of any facts upon which bad faith or inequitable, advantage can be predicated, we do not think that, even though inclined to view it with disfavor, we would be justified in holding the transaction void or the contract such as, between the parties, should not be enforced.

We think, therefore, that the judgment must be affirmed, with costs.

"Van Brunt, P. J., Patterson and McLaughlin, JJ., concurred; Laughlin, J., dissented on the ground that permitting the purchase by the assignor is against public policy.

Judgment affirmed, with costs.  