
    Moses Eliassof, Harry N. Eliassof and David N. Fisher, Plaintiffs, v. Glidden A. De Wandelaer and Lewis F. Eckler, as Assignee of said Glidden A. De Wandelaer, Under a General Assignment for the Benefit of Creditors, Defendants.
    (Supreme Court, Albany Trial Term,
    November, 1897.)
    General assignment — Validity — Failure to provide for the payment of nonpreferred creditors, unless they could be paid in full — Effect ' of an insufficiency of assets.
    The intention ofythe parties to, and the legal effect of, a general •assignment made for the benefit of creditors must be determined from the instrument itself; and where it, after directing the payment of the expenses of the trust and of the salaries of employees and after giving preferences within the statutory limit, directs the assignee to “ pay all and singular all other debts and liabilities ” of the assignor, and that, if they cannot be discharged in full, then the assignee “ shall apply the residue of said proceeds to and in the payment of the debts and liabilities mentioned in the preference, ratably, and in proportion to the respective amounts thereof,” and further that “ if after the payment of all the said debts and liabilities in full there shall be any remainder or residue of said property,” it shall be returned to the assignor, there is, upon proof that the payment of the preferences alone would more than exhaust the- whole estate, no provision made for nonpreferred creditors who cannot be paid in full; and as the effect is to hinder and delay such a creditor, in the colleetion of his debt, by placing a part of the estate where- he cannot reach it by ordinary legal process, he is entitled to have the assignment set aside.
    Action to set aside an assignment for the alleged benefit of creditors.
    Mead, Hatt & Palmer, for plaintiffs.
    Edward R. Hall (H. V. Borst, of counsel), for defendants.
   Chase, J.

On the 8th day of January, 1897, Glidden A. De Wandelaer executed and delivered to Lewis F. Eckler a general assignment for the alleged benefit of his creditors. Lewis F. Eckler accepted the trust and entered upon the discharge of his duties as such assignee. By this assignment De Wandelaer conveyed to Eckler all of his property of every description except such property as is exempt by law from levy and sale under an execution. Following the grant the assignment provides: “ In trust nevertheless to take possession of the same and to sell the same with all reasonable dispatch and to convert the same into money, and also to collect all such debts and demands hereby assigned' as may be collectible and with and out of the proceeds of such sales and collections.”

First. Provides for the expenses of executing the trust, commissions of the assignee and the payment of the wages or salary actually owing to employees of the assignor at the time of the execution of the assignment.

Second. Provides for the payment of a note of $2,500 in full “ If there are sufficient proceeds applicable according to law.”

Third. Provides that after the payment in full of the note mentioned in the previous preference, the assignee shall, pay five other notes specified, amounting to about $1,800, “if the residue of said proceeds applicable, according to law, as provided in chapter 503 of Laws of 1887, shall be sufficient for that purpose,” and if not sufficient, provides for the payment of such residue so applicable, according to law, on the notes so mentioned ratably.

“ Fourth. And after fully paying and discharging all the aforesaid debts as before provided, the said party of the second part shall pay all and singular all other debts and liabilities of the party of the first part; and if such residue be not sufficient to pay and discharge all such debts and liabilities in full, then the said party of the second part shall apply the residue of said proceeds to and in the payment of the debts and liabilities mentioned in the preference, ratably and in proportion to the respective amounts thereof.

“ Fifth. And if, after the payment of all the said debts and liabilities in full there shall be any remainder or residue of said property or proceeds, to repay and return the same to said party of the first part, his executors, administrators and assigns.”

The amount realized by the assignee from the estate which came into his hands, under the assignment, does not exceed $2,500, and the debts proven against the assignor exceed $4,000. The plaintiffs are copartners doing business as such in the city of Albany under the firm name of Eliassof Bros. & Go. On the 9th day of February, 1897, plaintiffs recovered a judgment against the defendant De Wandelaer for the sum of $277.84, which judgment was'. on that day docketed and judgment-roll filed in the Albany county clerk’s office. On the 10th day of February 1897, a transcript of said judgment was duly filed and docketed in the office of the clerk of the county of Montgomery, and thereafter an execution was issued on said judgment to the sheriff of said county of Montgomery, that being the county in which the defendant De Wandelaer then resided and .now resides; which execution was prior to the commencement of this action returned by said sheriff wholly unsatisfied. This action is brought by the plaintiffs to set aside the said assignment and for the appointment of a receiver of the property so transferred by the said De Wandelaer and to secure the payment from said property of said judgment of the plaintiffs and also the claims of such other judgment creditors of the defendant De Wandelaer as shall elect to come in and share the expenses of this action.

It is claimed by the plaintiffs in this action that no provision whatever is made in the assignment for the payment of the unpreferred debts and liabilities of the assignor, unless such unpreferred debts can be paid in full. The authority of the assignee is derived wholly from the instrument of assignment, and resort cannot be had herein to equitable principles to direct in regard to the distribution of the fund. Citizens’ Bank v. Williams, 128 N. Y. 81.

No evidence has been given on the trial of this action that in any way throws any light on the intention of the parties to such assignment, or that in any way explains any of the provisions of such assignment. The intention of. the parties as well as the legal effect of the assignment, must be ascertained from the instrument itself. The assignment conveys to the assignee all of the property of the assignor, other than property exempt by law from levy and sale under an execution, and provides for the payment of certain preferred debts, and after the payment of the preferred debts in full, for the payment of the other debts and liabilities of the assignor in full, and after the payment of all said debts' and liabilities in full, for the return of the residue of the proceeds to the assignor.

It is conceded that there are not assets sufficient in the hands of the assignee to pay all of the claims, preferred and unpreferred, in full, and the assignment itself recites that the assignor is indebted to divers persons in sundry sums of money which he is unable to pay in full. The payment of the preferred claims as specified in the second and third division of the directions to the assignee, are. expressly limited to the amount applicable according to law. The statement in the fourth division of the directions to said assignee by which it is provided that in case the other debts and liabilities of the assignor are not paid and discharged in full, that the assignee shall apply such residue of the proceeds to and in the payment of the debts and liabilities mentioned in the preference, would result in the payment to the preferred creditors, of more of the assets of the assigned estate than is allowed by chapter 503 of .the Laws of 1887. "A direction in an assignment for the payment of more than one-third of the assets of the assigned estate to specified creditors does not vitiate the assignment itself. The-only effect of the statute is to limit the effective operation of the preference to the permissible one-third. Central National Bank v. Seligman, 138 N. Y. 435; Abegg v. Bishop, 142 id. 286.

Only one-third of the assets of the assigned estate can be paid to " the preferred creditors under any or all of "the provisions of the assignment. This leaves two-thirds of the assets of the assigned estate to be distributed in accordance with some other direction in the instrument if there is any provision of the instru'rnent directing in regard to such distribution. In ' case the debts and liabilities of the assignor other than those preferred, cannot be paid in full there is no express direction in regard to the ■ distribution of the fund or in regard to the. fund being returned to . the assignor. If I were allowed to speculate as to the probable or possible intention of the assignor in making this assignment I would say that he inadvertently or- negligently omitted the words “ including those after the words then said party of the second part shall apply the residue of said proceeds to and in the payment of the-debts and liabilities ” in the last part of the fourth division of the directions to said assignee, and that the addition of such words might carry out his intention. There is no authority in the court, however, to interpolate words unless it is necessary to carry out the evident intention of the assignor and such intention must appear from the instrument itself. No such intention can be found in this instrument. It is suggested that the assignment is made for. the benefit of the creditors of the assignor, and as the provisions for the payment of the preferred creditors fail in part, it -should be inferred that the assets are to be applied to the payment of the unpreferred claims. The assignee holds the estate in trust for specified purposes particularly set forth in the assignment. If the fourth division of the directions to the assignee had been entirely omitted, it is possible that the court would have a right to infer from the fifth division of the directions to the assignee that such residue of the estate should be distributed among the unpreferred claims, but the fourth division of the directions to the assignee expressly providing for the payment of the unpreferred claims in full, is followed by the fifth division of the directions to the assignee that if they were paid in full the balance shall be paid to the assignor; while, if the unpreferred claims are not paid in full, then-the latter part of the fourth division of the directions to the assignee expressly provides for the distribution of the residue among-the preferred claims without any direction whatever to the assignee in case such distribution cannot be carried out.

I am unable to see how any inference can be indulged in for the-benefit of the unpreferred claims, when not only is there no express-provision made for them in case they are not to be paid in full, but the assignment in that case expressly provides for the distribution of all the assets of the assigned estate, entirely omitting any reference whatever to the unpreferred claims. An inference that the assignor intended that in case the residue of the assigned estate was insufficient, to pay the unpreferred claims in full, that such residue should be distributed among the unpreferred claims ratably would be an inference in direct opposition to an express direction of the assignment. • As the plaintiffs cannot be paid in full, they are unprovided for in the assignment either by express provision or by any legitimate inference to be drawn from the instrument itself, and, consequently, some portion of the proceeds of the assigned’ estate is placed where the plaintiffs cannot reach it by the ordinary process of the courts, and they are hindered and delayed in the collection of their debt and the- assignment should be set aside' for that reason.

A decision may be prepared in accordance with this memorandum, and if the form of the judgment is not agreed upon by the attomeys for the respective parties, it may be settled before me on, five days’ notice. '

Ordered accordingly.  