
    German Bank v. Meyer.
    
      (Supreme Court, General Term, Fifth Department.
    
    December 30, 1889.)
    Attachment—Fbahdulent Teanseeks.
    A debtor having property in warehouse for which he holds receipts, who assigns the receipts to his creditor as security, intending to transfer title to the property by such assignment, and reserving the right to sell the property and apply the proceeds to the debt, is guilty of a fraudulent disposition of his property, within Code Civil Proc. N. Y. § 636, subd. 2, allowing an attachment in such cases, if. without intending to apply the proceeds of his sales to the debt, he sells the property, as he still has title sufficient to make his transfer a disposition of his own property.
    Appeal from special term, Erie county.
    Action by the German Bank against Joseph 0. Meyer, to recover a debt and to attach property. An attachment was issued and vacated, and plaintiff appeals.
    Argued before Barker, P. J., and Dwight and Macomber, JJ.
    
      John L. Romer, for appellant. Tracy C. Becker, for respondent.
   Macomber, J.

The warrant of attachment in this ease was issued at the

instance of the plaintiff, upon the alleged ground that the defendant had assigned, disposed of, or secreted property with the intent to defraud the plaintiff, within the meaning of the last clause of subdivision 2, § 636, of the Code of Civil Procedure. The motion made at special term in behalf of the defendant was upon affirmative affidavits, as well as upon a claim that the affidavits upon which the writ was granted were insufficient to sustain the original order. The learned judge at special term in his opinion says that he disregards the moving affidavits, and bases his decision solely upon the ground of the insufficiency of the affidavit upon which the order was granted, and the affidavit read in support thereof on the motion. The special term was of the opinion, further, that the question raised was identical with the one decided at special term in the case of Bank v. Dash, 60 How. Pr. 124. That decision proceeded upon the proof that the property which the defendant was accused of disposing of contrary to the statute belonged wholly to the plaintiff in that action, in which the defendant had no interest. It was there held that the transfer by the defendant of property other than his own, and which he had a right to sell, and account for the proceeds thereof, under an agreement with the plaintiff in that action, was not fraudulent as against creditors. The case, however, seems not to have taken into the account fully the true relationship existing between a party who had pledged property for the payment of a debt and the person who had an absolute and unincumbered title thereto. The decision already referred to is not consistent with the case of Bank v. Lang, 87 N. Y. 209. In that case the warehouse receipts, with the exception of names and dates thereon, were, in substance, the same as the one in the case at bar. There, as here, the owner who turned out the warehouse receipts as security for advances already made, or thereafter to be made, agreed in writing that the property had been paid for; that the same was, at the time of entering into the agreement, free from all liens, charges, and incumbrances; and that he does “hereby transfer title to said bank.” In the absence of the intervening rights of creditors, and while the question exists only between the original parties to the transaction, the fact that the property pledged was not actually put into the possession or custody of the person to whom the warehouse receipts were delivered is unimportant. The true inquiry is, what was the real transaction, and not what were its formal parts. As the court in the last-named case say: “It was not intended that the property pledged should actually and in bulk be transferred to the possession of the pledgee, but that result was to be reached by setting aside specific property to be represented by what are termed in the case * warehouse receipts.’ * * * They in no manner transferred the possession of the property, or represented any such actual transfer. There was therefore never any valid pledge by the borrower, nor any actual warehouse receipt. What was so called simply operated, in each instance, to transfer the title of the property described as between Wippner and the bank, and such transfer, being collateral to the payment of a debt, could operate only as a mortgage. * * * The recital in the defendant’s agreement indicated an intention to pledge property to the bank, while the actual arrangement was valid only as a mortgage. ” See, also, Smith v. Beattie, 31 N. Y. 542; Leitch v. Hollister, 4 N. Y. 211; Ely v. Carnley, 19 N. Y. 496. We cannot concur, therefore, in the conclusion of the opinion of the learned justice that the defendant had no such title to the property as that a fraudulent transfer thereof would enable a creditor to ask for a writ of attachment against his property.

The order, however, which was entered has no such limitation of its scope .as is indicated in the opinion. It is general in its terms, granting the motion, and it appears to have been made upon the moving, as well as upon the original and opposing, affidavits. The affidavit made by the defendant himself upon this motion, while denying, in a general way, all intent to defraud the plaintiff, does not contain that relation of facts touching the transfer of this large amount of barley malt, covered by the warehouse receipts, as the court should be led to expect upon such a motion. He fails to show to whom he sold the barley malt, for what prices, and to what places it was shipped. There appears in his affidavit to be a studied concealment of the true facts surrounding that transaction, save the positive assertion that he had a right to sell the same by the special direction of the officer of the bank. He is corroborated in this last allegation by the affidavit of the attorney of record, who had an interview with the same officer in the presence of the defendant, when it is alleged the admission was made that the defendant had a right to sell the barley malt. This may be conceded to be true without impairing the sufficiency of the warrant of attachment, because the question is not whether the defendant sold the property, or disposed of it, but whether he so disposed of it with the intent to defraud creditors, and among them the plaintiff. This is the foundation of the claim against the defendant, that, being permitted to hold in his possession this property, and tacitly having the right to sell it, provided he applied the proceeds in payment of the indebtedness for which it was mortgaged, he secretly and fraudulently sold it or disposed of it, and ■cheated his creditors. This, in our judgment, brings the defendant within the operation of subdivision 2, § 636, of the Code of Civil Procedure. For these reasons we think the order appealed from should be reversed, with $10 costs, and disbursements. All concur.  