
    The Home Bank, Plaintiff, v. J. B. Brewster & Co. et al., Defendants.
    (Supreme Court, New York Special Term,
    June, 1896.)
    1. Assignment for creditors — Corporations.
    A domestic corporation «has the right, under section 48 of the Stock Corporation Law, to make a general assignment without preferences.
    2. Same — Fraud.
    Just prior to making a general assignment, a corporation executed bills of sale of goods which were not delivered, delivered other property to creditors, and gave certain carriages to the wife of one of its officers and others, who were allowed to retain their entire value. Held, that these transactions were all part of a scheme to hinder, delay and defraud creditors, and should be set aside.
    . Action to set aside a general assignment and certain bills of sale, mortgage- and transfers, as in- fraud of creditors. ■
    
      R. B. Kelly (William 0. Beecher, of counsel), for plaintiff.
    Cortlandt Betts, Thomas G-. Shearman, W. E. Severance and Arthur Eurber, for defendants.
   Tun at, J.

This is an action brought to set aside an assignment made by the defendant, J. B. Brewster & Co., a domestic corporation, incorporated under the act of 1848, and the several acts extending and amending the same, and also to set aside several bills of sale and a mortgage made by said corporation prior to the making of the assignment, on the ground that the assignment was void and was-made with the intent to hinder, delay or defraud the creditors of the corporation, and that there was not an actual and continued change of possession , of the goods mentioned in the bills of sale, an¡i that the mortgage was not recorded as required by the recording act. I am of the opinion that the assignment .is not void, and that the ease of the Troy Waste Manufacturing Company v. Harrison, 13 Hun, 528, is no longer an authority. That case and the case of Vanderpoel v. Gorman, construing section 48 of chapter 562 of the Laws of 1890, which prohibited certain transfers of the stock or property of corporations, and provided that no officer, director or stockholder of a stock corporation should make any transfer or assignment of its property or any stock therein, to any person, 'in contemplation of its insolvency, and- that every such transfer or assignment to such officer, director or other person, or in trust for them or for their benefit, should be void.

The right of a corporation to make an assignment at common law has been recognized many times by the courts of this State. It was said in Vanderpoel v. Gorman, 140 N. Y. 568, that there can be no doubt that an insolvent corporation could at common, law make a general assignment in trust to an assignee for the benefit of its creditors; that the right to make such an assignment exists inherently in all corporations unless especially forbidden, and that in regard to domestic corporations it had especially been forbidden. Section 28 of the act above referred to was amended by section 48 of the Stock Corporation Law of 1892, and now- only prohibits such conveyance, assignment or transfer when made “ with the intent of .giving a preference to any particular creditor over other creditors' of the corporation.” This amendment has given to stock corporations the right to make general assignments without preferences.

The evidence shows that the corporation, J. B. Brewster & Co., was hopelessly insolvent when it incurred its. indebtedness . to the plaintiff, and when it made the transfers and assignment which the plaintiff seeks to set aside. The transactions of the corporation with Mrs. Smith, Mr. Mook and Mr. Cone were made by. the corporation with the intention of hindering, delaying or defrauding its creditors, and did, in fact, hinder, delay and defraud its creditors.' There was no actual and continued change of possession of. the property covered by the bills of sale. At all times that property, in effect, remained in the possession of the vendor. This, the statute says, is enough to raise the persumption that the sale was fraudulent and void as'against the creditors of the vendors. It may be that the persons above named were not intentionally parties to this fraud, but they must be deemed to have intended the natural and inevitable consequence of their acts, .which was to hinder, delay or defraud the'-creditors' of the insolvent corporation. Coleman v. Burr, 93 N. Y. 31. It may well be that what Mr. Cone did he thought he was doing for the benefit of the corporation, but. such was not its legal effect. It was the duty of the ' officers of .the corporation, when they ascertained the insolven' condition that the corporation was in, to take measures to secure a distribution of the assets of the corporation among all its creditors. This they did not do. Just before the assignment was made, and really as part of the assignment, they delivered certain property of the'eorporation to certain creditors. It is true that it is claimed that this property was substituted for other property that had been mentioned in the bills of sale, but in fact the property delivered just before the making of the assignment was not property . that had been mentioned in the-bills of sale. It was testified to on the trial that both Mrs. Smith’s and Miv Mook’s.carriages were to be taken at “.low cost,” that is, the actual cost to the corporation of the material and labor used in constructing the carriages, and that the difference between that price and the selling price was to belong to the company. The evidence, however, shows that the president of the company, on the day the assignment was made, delivered to’his wife five carriages, and on the day after the assignment was made seven carriages, and ’allowed her to keep the entire value of the carriages. Four carriages were also delivered to Mr. Mook under the same conditions. The evidence also shows that Mr. Cone, who was not an officer of the corporation, was al- ' lowed to name the assignee, and that in fact all of the proceedings relating to the appointment of the assignee were controlled by Mr. Cone.

I cannot' resist the conclusion, .from the evidence in the case, that the transfers, bills of sale, mortgage and assignment were all part of a scheme entered into on the part of the officers of the. corporation to hinder, delay or defraud the creditors of the corporation, and that the effect of such action was to hinder, delay and defraud. the creditors of the corporation. “ While prior fraudulent transfers by the assignor do- not necessarily avoid the assignment, they may be considered in determining whether there was' any fraud in the assignment itself.” Loos v. Wilkinson, 110 N. Y. 195.

I am of the opinion that the bills of sale, mortgage and assignment should be set aside; that a receiver should be appointed; that Mrs. Smith, Mr. Cone and Mr. Mook and. the assignee should account for the property, and that the plaintiff should have judgment as aforesaid, with costs, and an extra allowance of 5 per cent, to be paid in the first instance out of the fund. No costs against the defendant Armstead.

Ordered accordingly.  