
    Gideon F. Smith, Assignee, Resp’t, v. F. Frank Smith, App’lt.
    
      (Supreme Court, General Term, Second Department,
    
    
      Filed May 11, 1891.)
    
    Assignment for benefit of creditors—Preferences—When fraudulent.
    The firm of M. & N. were successors to M. & H. H. sold out his interest in the property and business to N. The firm of M. & H. then owed one M. $1,000. This debt was assumed by the new firm, and they gave H. a note for the amount. M. & N. afterwards made an assignment for the benefit of creditors, and preferred H. for the amount of the note given, but in the inventory the debt was specified to be on the note held by M. Held, that the preference was not fraudulent, being made to secure the debt due M. from the assignors.
    Appeal from a judgment rendered on report of a referee.
    
      Nathan D. Petty, for app’lt; Wilmot M. Smith, for resp’t.
   Barnard, P. J.

—The plaintiff proves a title to the goods in question by virtue of a general assignment made by Mosbacker & Newey to him for the benefit of creditors, dated 12th of December, 1888. After he had taken possession of the property under the assignment, the defendant, a deputy sheriff of Suffolk county, by virtue of an execution on a judgment against the assignees, took from the plaintiff goods of the value of $649.10. The issue is whether the assignment was made with intent to hinder, delay and defraud the creditors of the assignee. The referee found in favor of- the validity of the assignment, and this appeal is from the judgment entered upon his report. The firm of Mosbacker & Newey were successors of Mosbacker & Howell. Howell sold out his interest in the property and business to Newey-November 10, 1887. The firm of Mosbacker & Howell then owed one Massury $1,000 for borrowed money. This debt was assumed by the new firm, and it was a question of fact whether at the formation of the new firm a note was given to the retiring partner Howell for $500, the amount remaining due to Massury after closing up his accounts with the old firm and after a money payment made therein by the new firm of $500. There is no difference as to the fact of the promise made by the new firm to pay this balance, but the assignment prefers Howell for a debt, and it is claimed that the preference should have been to Massury, who held the note.

The inventory specifies the debt to be upon the note held by Massury. Whether the preference be given to Howell or Massury, it is the debt which is preferred and clearly Howell had a right to enforce its payment to either himself under agreement with the assignee or to Massury who held the note.

There was no error, therefore, in the finding of the referee that the preference to Howell was not fraudulent, especially as he finds that Howell held the note of the two partners for the Massury balance. The case shows that between the 28th of September, 1888, and December 12, 1888, the date of the assignment, no books were kept showing receipts and disbursements of the firm. It was found by the referee that the firm had between these dates received from collections $1,341.50, and from cash sales $800. Two hundred and forty-one dollars in cash was handed over to the assignee. The books were solely kept by Mossbacker. He testifies: “ I paid bills with the receipts of the store Between September 1, 1888, to December 15th as fast as I got it.” The books showed the amounts drawn out by the partners during this period for cash but the exhibit is not returned (Exhibit C.). The testimony of Mosbacker is that between these dates the daily balances were kept on cash slips in the drawer and did not go upon the books. That the bills due creditors were filed each one separately and payments were entered on the firm’s book. This book Ho. 2 is not returned. The collection for goods sold on credit did in fact appear upon the books in another form and Mossbacker stated it exactly as found by the referee. The amount of the payment 'to Valentine & Berger is not proven. The referee does not find that the assignee kept back any money or property. He has found that the assignment was valid and has refused to find that it was executed with an intent to hinder, delay and defraud creditors. The point taken on the trial that the assignment did not conform to chapter 294, Laws of 1888, is not now presented by appellant. The firm of Mossbacker & Hewey agreed to pay the debt of A. G. Howell & Co., and a preference of these debts was a, preference of the debt of assignor.

The judgment should be affirmed, with costs.

Dykman and Pratt, JJ., concur.  