
    First National Bank of Hoosick Falls, Respondent, v. Truman J. Wallace and Others, Defendants. Norman B. Squires and Others, Judgment Creditors of the Defendants, Appellants.
    
      'Attachment-Ageneral assignment Try a firm—the fraud of one partner not known ... to the others will not vitiate it facts, not opinions, must be shown-.— honesty presumed— the question as to the validity of an attachment is one. of strict legal sight.
    
    Upon an Appeal from.an order denying a motion made by certain judgment cred- . itors to" vacate an attachment, it appeared that the action in which the attach- - ment was. granted .was brought against the defendants named therein as a firm; that the attachment was against the- firm property, and that the transfer complained of was a general assignment made by the firm for the benefit Of cred- ' itors, as to which the.affidavits alleged that one partner named. Wallace .had .' general control of the partnership funds and had transferred some of them to pay his individual debts and had given a firm note for his personal obligation, and that he had.shortly before the assignment transferred' individual property to his wife; had deceived one of the deponents with reference to paying certain firm notes; had secreted a large amount of the firm property, and that, the . assignment was an attempt to prefer the estate of one Wilder, deceased,, to the . extent of §12,300 and to pay from the firm assets money never borrowed from Wilder’s executors, included in which $12,300 was a §4,500 note, which the deponent stated that he believed,' from an' examination of Wallace’s bank ‘ account, that the firm had had no part of, as to' which acts there was, however,./ nothing to show connivance on the part of the other partners, but it appeared .rather that the firm had been defrauded by Wallace.
    
      Held, that the affidavits showed no facts establishing a fraudulent intent on the part of the firm, but merely tended to show acts of fraud’ upon the-part of Wallace; . ■ .
    That the opinion of an affiant was not a fact which would sustain an attachment;
    That where facts, aré stated on information and belief, the sources.of thcinformation and the grounds of the belief must also be stated;
    That if facts stated were as consistent with an. honest as with a fraudulent intent, fratid could not be inferred from them:' ■ . '
    
      That where subsequent lienors attacked an attachment, each party claiming a better lien, the sole question presented was whether the affidavit upon which the attachment was granted was sufficient to sustain the attachment, and the case became one of strict legal right, and did not, as might be the case where the judgment debtor moved to set aside the attachment, call for an explanation by the moving party of the facts alleged in support of the attachment.
    Appeal by Norman B. Squires and others, judgment creditors of the defendants, from an order of the Supreme Court, made at the Columbia Special Term and entered in the office of the clerk of the county of Rensselaer on the 24th day of July, 1895, denying their motion to vacate an attachment against the defendants’ property obtained by the plaintiff.
    
      Davenport & Hollister, for the appellants.
    
      George M. & H. J. Greene, for the respondent.
   Parker, P. J.:

The defendants are co-partners, doing business under the firm name of “Wallace, Jones & Ely,” and the plaintiff "claims that as such they are indebted to it in the sum of $23,000 and upwards. It also claims that the defendants have disposed of their property with the intent to defraud their creditors, and on that ground it has procured and caused to be levied an attachment against their property. The attachment recites that the defendants are co-partners, and that “ they have assigned, disposed of and secreted their and its property with intent to defraud its and their creditors,” and directs the sheriff to attach and safely keep the property of the defendants.

The action, therefore, is against the defendants jointly as a firm, and the attachment is against the firm’s property.

Other creditors of the defendants, having subsequently obtained judgment, levied an execution upon the property attached, moved at Special Term to vacate such attachment on the papers upon which it was granted, and from the order denying such, motion this appeal is taken.

The transfer complained of is a general assignment made for the benefit of creditors. There is no distinct statement in any affidavit that such an assignment was ever made, and we are left in ignorance whether the one complained of assumed to convey firm property only, or to include- the individual: property of the partners, but from the whole tenor of the , affidavits it may perhaps be assumed that the firm had -assigned its firm property to pay its firm debts.

Starting with that assumption, it becomes necessary, in order to sustain this attachment, for - the- plaintiff to show that the affidavit upon which it was .granted'contained a statement of facts from which the judge wllo granted it, in the exercise of his judgment, could legally infer that the firm made such assignment .with intent to defraud “its creditors.” (Bogart v. Dart, 25 Hun, 395; Central N. Bank v. Ft. Ann Woolen Co., 24 N. Y. Supp. 641; 76 Hun, 610.)- - The opinion of the affiant is not a fact upon which the judge’s conclusion may be , based. (Ladenburg v. Commercial Bank, 87 Hun, 269, 275; National Broadway Bank v. Barker, 16 N. Y. Supp. 75.) And-if the facts ’are stated on information and belief, the sources- of the information and -the grounds of the: belief must be also stated, so that the judge may himself determine; whether they have a proper -basis to' rest upon.' (Buell v. Van Camp, 119 N. Y. 160-164; Hitner v. Boutilier, 67 Hun, 203.) And if the facts stated are as consistent with- an honest intent as-they are with a fraudulent one, fraud may. not be inferred from them. (Stow v. Stacy, 9 N. Y. Supp. 1, 2; Morris v. Talcott, 96 N. Y. 107.) . '

After a careful study .of the affidavit upon which this attachment was granted I have been unable, to discover the statement of a single fact from which - it can. be legally "inferred that the assignment .complained, of was made with a fraudulent intent. .

The affidavit of Getty tends to show that the partner, Wallace, had the general control of the- co-partnership funds, and that the ■ affiant verily believes he had appropriated $2,530.40 thereof to the payment of his individual debts: Also, that he transferred to ■ his-wife some of his individual property a short time before the assignment. He also- says that' he believes, from the affidavits of Jones,•Easton and Greene,, that the assignment was made with the intent to' defraud, but as those affidavits were before' the judge who granted the attachment, a statement of his opinion of them added nothing to their effect.

The affidavit=of Jones tends to show that for years Wallace had kept the books which showed the financial condition of the firm, and. that, so far as he knows, the other partners did not know much, about it. ■ ..... ■

The affidavit of Easton shows that, a short-time before the assignment, Wallace gave him the firm’s note for a debt which he, Wallace, personally owed, and that Easton now holds it against the firm’s assignee.

Row, in neither of these affidavits is there a fact stated that is not consistent with an honest purpose on the part of the firm in making their general assignment.

Concede that Wallace transferred all his individual property to his wife; concede that the firm trusted him entirely with the management of its financial affairs, and that he, betraying such trust, used the firm’s moneys to pay his individual debts, do such facts impeach the good faith of. the firm, which, after it discovers them, and finds that it has not funds with which to meet the d'iafts Upon it, makes a general assignment for the benefit of all its creditors %

There is Hot a statement in any of those affidavits that tends to show that the other co-partners in any way connived with the acts of Wallace; on the contrary ^ it wmuld appear that they had been defrauded by him, and were, therefore, forced to make the assignment. Rot a fact is suggested in any of them that the co-partners, as a firm, have secreted or reserved to themselves any of the firm assets.

The only other affidavit is that of Mr, Greene. He also swears that he believes, from the affidavits of the others above named, that the assignment was made with intent to defraud, but it appears that his belief in that respect is based upon very insufficient grounds.

It remains to examine the statement of fact contained in his affidavit. It states that, on April twenty-second, the “ defendants herein purported to make a general assignment,” and that from the facts thereinbefore stated in his affidavit he believes it was with the intent to defraud their creditors. But the only facts before stated go to show that Wallace deceived him with reference to paying certain notes he held against the firm. Nothing whatever implicating the co-partners in any .fraudulent designs.

He then goes - on to state that the assignment did not intend to, and did not convey all tliefirm’s assets. The language of the assign-? ment is the best evidence of wliat it conveyed,, and his statement of what was intended or wliat it conveyed was hut the statement of an opinion.- The language, of the instrument is the source from which the judge should draw his own conclusion.

. The affidavit then goes on- to state that Wallace secreted a large amount of the firm' assets before the assignment, was made. Concede it, nevertheless, if they were firm assets they would pass by the. assignment to the assignee, and unless the other partners were privy to such concealment, it would not afiect. the good faith of the assignment. It was Wallace’s fraud on the firm, hot the firm’s fraud on its creditors.

He next states that in the assignment is an attempt to prefer- the estate of Lyman Wilder, deceased, of which the defendants Wallace and Jones were executors t-o the amount of $12,300., That such attempt is fraudulent and is an effort to pay from the firm’s assets money that the firm never borrowed from executors, and that Wallace had appropriated to his own use. Now, if there was a direct-statement that the- firm had in such assignment preferred such executors to the amount of $12,300, and that no such debt was owing them by the firm, we would have before Us a fact from which a fraudulent intent might be -inferred,, -and if such- was the fact, it was a very easy thing to have-so stated it,'

But the affiant makes, no such -statement. . He says an attempt to so prefer was made. What the assignment really provides on that subject is not disclosed, So he .says the firm never borrowed the money from the executors.- If it liad borrowed from the deceased, or if it had guaranteed its payment for one who did borrow from the executors, it might still owe the executors the. full amount. Also, he says Wallace had the money and appropriated it to his own use. Possibly Wallace borrowed the money and the firm guaranteed its payment and took security from-Wallace-for so doing. Possibly Wallace stole the money from the firm- after it borrowed from deceased; the facts connected with the transaction are not stated. ... . .

■ As to the $4,500 note, a part of the $12,300, the affiant believes from an examination of Wallace’s hank account that the firm had ho part of it. But would such account show whether the firm had it and what does it show ? The affiant’s idea of what it shows and liis belief deduced therefrom is not the fact upon which the judicial mind could base a conclusion.

The trouble is that no fact is stated in this connection from which it could be inferred that the firm had preferred to the executors a debt that it did not owe them. A valid indebtedness to that amount is entirely consistent with every statement made in that affidavit, and hence no intent to defraud can be based upon it. As to the remaining averments in this affidavit it is not necessary to analyze each by itself.

It is sufficient to say that none of them are inconsistent with an honest purpose on the part of the firm in making the assignment in question.

I conclude, therefore, that the prior fraudulent act of Wallace in diverting the funds of the firm to the payment of his individual debts or his design to secrete its assets to his own use, unless it was known to and acquiesced in by the other partners, would not be ground for attachment against the firm’s property. I further conclude that there is no fact shown in the moving papers from which the judge might lawfully infer that the co-partners of Wallace were privy to his fraudulent designs or that they made the assignment in question with the intent to defraud their creditors. In this matter the defendants are not the moving parties. If they were, the Special Term, in the exercise of its discretion, might, perhaps, have required them' to affirmatively show that the firm was not privy to Wallace’s acts, and because they did not on affidavits' fully explain the whole transaction, it might have allowed the attachment to stand. But subsequent lienors have not the means for such a full explanation, and the case becomes one of strict legal right between rival creditors, each claiming the better lien, and the sole question presented is whether the affidavits upon which the attachment was granted were sufficient to warrant it, (Haebler v. Bernharth, 115 N. Y. 463.) For those reasons the .order of the Special Term should be reversed, with' costs.

All concurred, except Herrick, J., not sitting.

Order appealed from reversed, with ten dollars costs and disbursements. • Motion to vacate attachment granted, with ten dollars: costs.  