
    John F. Gates, Assignee, App’lt, v. The Citizens’ Bank of Perry, Resp’t.
    
      (Supreme Court, General Term, Fifth Department,
    
    
      Filed June 23, 1892.)
    
    Assignment for creditors—Attachment.
    In an action by an assignee for creditors for wrongful attachment, the defense set up was that the assignment was fraudulent in law and fact. The assignment preferred certain notes which were claimed to be the individual indebtedness of one of the assignors. On motion, in the actions brought by defendant, to vacate the attachment the general term held that the assignment was void by reason of the preference, but this was reversed by the court of appeals. Prior to the decision of the latter court this action was tried, and the referee dismissed the complaint. In addition to the question of such preference, the evidence showed that the-agent who managed the business transferred certain private accounts of the partners to firm account a few days before the assignment, but without the knowledge of one of the assignors; that neither knew of the-financial condition of the business; that both drew small sums of money, and that the agent overdrew his account and transferred some real estate to his wife. Held, that the referee undoubtedly followed the decision of the general term, and this having been subsequently reversed, defendant’s main defense is eliminated, and the judgment should be reversed and a new trial granted.
    (Childs, J., dissents.)
    Appeal from a judgment entered upon the report of a referee, dismissing the plaintiff’s complaint, and from an order of the Wyoming special term, granting the defendant an extra allowance of costs.
    This action was commenced May 5, 1890, to recover $15,000-damages alleged to have been sustained by the plaintiff on account of the levy by the sheriff of Wyoming county of three warrants of attachment issued against the property of Helen A. and L. Sophia Williams, in three actions in the supreme court, in which •they were the defendants, and the defendant in this action was the plaintiff, which warrants were levied by the said sheriff, after being indemnified by the defendant, on a stock of merchandise-claimed by the plaintiff herein as such assignee. Issue was joined by the service of the defendant’s answer, July 23, 1890, alleging the issuance of such attachments, a recovery of judgments in said actions, and the issuance of executions thereon, and that the said assignment is fraudulent in fact and fraudulent in law, and the issuing of attachments, seizing of goods by virtue thereof. The issues were thereupon duly referred to a referee, to hear, try and determine. The action was brought to trial, and the referee-decided the case April 23, 1891, dismissing the plaintiff’s complaint, with costs against the plaintiff. An order was made at a special term of this court awarding to the defendant and against the plaintiffs an additional allowance of $800 costs.
    B. Frank Dake, for app’lt; F. C. Peck and Eugene M. Bartlett, for resp’t.
   Lewis, J.

—Helen A. and L. Sophia Williams, in September, 1886, formed a copartnership under the firm name of Williams & Co., to conduct the dry goods, cloak and carpet business in the village of Perry, N. Y. They continued in business as such co-partners down to the 81st day of January, 1890, when the firm was dissolved by the making of an assignment to the plaintiff, of their property, for the benefit of their creditors. Their assignment provided, first, for the payment of the expenses of executing the assignment, the salaries of employees, and them directed the assignee to pay out of the assigned, property, next after the above mentioned .costs, expenses and wages, two promissory notes, held and owned by E. M. Clark, of Perry, N. Y, amounting in the aggregate to the sum of $600. The assignee took possession of the assigned property and entered upon the discharge of his duties as such assignee. The defendant was, at the date of the assignment, a creditor of the assignors in the amount of six or seven thousand dollars.

Three actions were commenced by the defendant against the assignors to recover such claims, and an attachment in each action was procured, and the assigned property attached. The affidavits on which these attachments were granted stated the facts out of which the indebtedness to Mr. Clark, represented by the notes, arose, and claimed that it was the individual indebtedness of Helen A. Williams. A motion was made by the defendants,in said action to set aside the attachment on the ground that the facts stated in the affidavits upon which the attachments were issued did not establish-that the Clark claim was the individual debt of Helen A. Williams. The motion was denied and upon an appeal the ordels were affirmed by the general term of this department. An appeal was thereupon taken to the court of appeals, and pending that appeal this action was tried and decided by the referee. The referee found as facts in his report, the indebtedness of the assignors to the defendant, the recovery of the judgments by the defendant against the assignors, the issuing and levy of the attachments, the assignment to the plaintiff, who took possession of the assigned property, and that the only right or interest he had in the property was by virtue of the assignment, and found that the assignment was made with intent to hinder, delay and defraud the defendant and others, creditors of the assignors, and, as a conclu-' s-ion of law, that the assignment was void, and that the plaintiff’s complaint should be dismissed.

At the time of the making of the referee’s report, it was held as the law of this case, as decided by the general term of this department, that the facts stated in the affidavits mentioned proved that the preference of ■ the Clark claim made the assignment void. 'The referee undoubtedly followed that decision in making his report.' Since then the court of appeals has handed down a decisión in the appeal from the general term, deciding that the facts .stated in the affidavits upon which the attachments were issued ■did not warrant the issuing of the attachments, but that the Clark indebtedness was one which the assignors could legally prefer. The defendant, however, contends that, notwithstanding the failure of its defense under the attachment, there was other evidence sufficient to sustain the report.

There was evidence tending to show that during the four or five years the copartnership existed the copartners resided in the village of Perry, and were accustomed to make purchases for supplies for themselves and their families in the village, which were charged to them individually, and that the merchants of whom they made these purchases made purchases at the store of the firm, which were charged to them upon the firm books, and that these accounts were annually adjusted, by having the parties to whom these accounts were owing credited the amount thereof on the books of the firm, and charging, upon the books of the firm, the partners respectively with the amounts of the accounts so settled. The accounts for the year immediately preceding the assignment were thus adjusted during the few days immediately prior to and after the making of the assignment. The record shows that neither of the copartners, with unimportant exceptions in the case of Helen A. Williams, paid any personal attention to the business. It was mainly managed by Fred. 0. Williams, a son, and Clarence M. Smith, a son-in-law, of Helen A. Williams. These transfers of accounts in 1890 were made by these agents, without the knowledge or consent, so far as the record shows, of L. Sophia Williams. There is evidence tending to show that Helen A. Williams knew that this .settlement of accounts was being made.

There is no evidence that at the time she was so informed, that either member of the firm had any knowledge or information as to the firm’s financial condition. There was also .evidence tending to show that the assignors withdrew from the assets of the firm, a short time prior to making the assignment, small sums of money and goods; not, however, of sufficient amount or value to justify an inference of a fraudulent intent. The evidence tends to show, that at the time of the settlement of these accounts, about the time of the making of the assignment, Fred C. Williams and Clarence M. Smith, the agents, knew that the firm was financially embarrassed. It is contended by the defendant that the assignors are chargeable with the guilty intent of their agent, Fred C. Williams, in making these settlements. The referee has failed to make any findings as to this branch of the evidence. There are authorities holding that, under some circumstances, the guilty intent of an agent may be imputed to his principal. The real question here is the intent with which the assignors made the assignment, and assuming that their agents were guilty of fraud in the management of the affairs of the firm, it does not necessarily follow that the assignors are to be chargeable with such fraudulent intentions.

There was evidence that Fred C. Williams had overdrawn his account with the firm to a considerable amount; and there was also evidence admitted, under the objection of the plaintiff, that, a short time prior to the assignment he transferred to his wife some real estate in the village of Perry. This evidence, it is claimed, was competent as tending to show the fraudulent intent-upon the part of the agent. Had such a transfer been made by one or both of the co-partners just prior to the assignment, it would have been important evidence; but it is quite doubtful whether the evidence of this transfer by the agent was competent.

The plaintiff was in possession of the attached goods under an assignment which was valid as between himself and the assignors. The defendant, under attachments which were, by the decision of the court of appeals, declared to be invalid, attached and took the goods into their possession. This action was commenced before the defendant obtained judgments in the attachment actions. It is the contention of the plaintiff that the attachments having been declared invalid, that the entire defense fails.

Without further reviewing or discussing the main points and authorities referred to in the very voluminous briefs of the counsel, in view of the fact that the defendant’s main defense is eliminated from the case by the decision of the court of appeals, the judgment, we think, should be set aside, and a new trial had before a referee who will not be embarrassed -with the question of the preference of the Clark claim.

Judgment reversed, new trial granted, with costs to abide the event.

Dwight, P. J., concurs.

Childs, J.,

(dissenting.)—The answer of the defendant contains numerous allegations of fraud on the part of the plaintiff’s assignors, and upon the trial testimony was given by the defendant in' support of such allegations, from which testimony the referee has found as a fact that the assignment under which the plaintiff claims “was made by said Helen A. Williams and L. Sophia Williams with intent to hinder, delay and defraud the defendant and others, creditors of said Helen A. and L. Sophia Williams.”'

It is claimed by the appellant, in substance, that such finding was influenced wholly by the decision of this court adjudging that said assignment was fraudulent in law by reason of the preference of the Clark notes to be paid from the copartnership assets. If this contention was supported by an examination of the case, it would of course lead to a new trial of the action, the court of appeals having reversed that determinaion.

My examination has led to a different conclusion. As before indicated, the defendant gave testimony in support of numerous-allegations in the answer attacking the bona fides of the assignment, one of such allegations' having reference to the Clark notes. Upon the whole of the evidence the referee has made the finding; above quoted. That this is so, and that the referee did not regard as controlling the testimony or decision in regard to the Clark: notes, is made clear by the fact that the referee declined to hold in response to the plaintiff’s request, “ that in the making and execution of said general assignment neither the said Helen A. Williams nor L. Sophia Williams had any intent to hinder, delay or defraud their creditors or the creditors of the firm of Williams & Co. any further than the presumption of fraudulent intent on their part in the making of said general assignment may arise from the fact that the said general assignment contains a direction for the payment of the said promissory notes to the said Ephraim M. Clark out of the copartnership assets of the firm of Williams & Co.”

Under these circumstances, the reversal of the decision in regard to the Clark notes can have no other or greater effect than to strike from the case all the testimony in relation thereto as tending to support any allegation of fraud on the part of the plaintiff’s assignors, and to leave the defense of fraud resting upon the other testimony in the case, which, if sufficient to support the finding of the referee, must lead to an affirmance of the judgment. An examination of the case will show that the finding of the referee is supported by the evidence, excluding all reference to the Clark notes, and it appearing that the referee entertained this view of the case and made his findings accordingly, I think the judgment entered on his report should be affirmed.

Judgment reversed and new trial granted, with costs to abide the event.  