[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 70
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 71 There was evidence tending to prove all the facts found by the judge. His finding must be assumed as correct by this court. The judge found, among other things, *Page 73 that the assignor acting in concert with his son, one of the assignees, but without the knowledge of the other assignees, simultaneous with the making of the assignment procured from certain of the creditors, to whom a preference was given under the assignments, agreements in writing to lend to his son, one of the assignees, a large portion of the money that they should respectively receive upon their debts under the assignment for the term of five years; such loans to be secured by the notes of the son indorsed by the assignor, and authorizing the assignees to pay to this son the sums so agreed to be loaned and take his receipt therefor. That the name of the son was used for the benefit of the assignor. That the agreement was in fact made between these creditors and the assignor to enable the latter to prosecute business in the name of the son for his own benefit and to use the money in such business. And as an inference from the above facts, the referee further found that the assignment was made by the assignor with intent to hinder, delay and defraud his creditors. The counsel for the appellants is right in the position that this inference cannot be sustained in this court as a finding of fact unless warranted by the facts previously found, and from which it was drawn, for the reason that unless so warranted it is a finding wholly unsupported by the evidence. The assignor had a right to give such preferences among his creditors as he saw fit, if he by the assignment devoted the property absolutely to the payment of his debts, not reserving to himself any benefit other than that to be derived from the payment thereof. (Grover v. Wakeman, 11 Wend., 190.) In that case it was determined that the reservation by the assignor of any benefit to himself, in addition to the payment of his debts, was a fraud upon his creditors which made the entire instrument void; and it was further determined that giving a preference to certain creditors, upon condition that they should accept the sums received under the assignment in satisfaction of their entire debts, was the reservation of such a benefit, and made the assignment fraudulent and void as against creditors. In the *Page 74 present case, by the assignment the property was placed beyond the reach of the creditors, and by the agreement the assignor retained the entire control of the proceeds for five years, so far as the money to be loaned nominally to his son but really to himself from the proceeds was concerned. Not one dollar of his indebtedness would be paid. The son, although maker of the notes to be given for this money, was only surety for the assignor, and by this contrivance, if successful, the property was placed beyond the reach of creditors, and the assignor secured to himself the control thereof for five years. Had the assignment made the preference to the creditors conditional upon their loaning the whole or a part of what should be received under it to the assignor upon the terms specified in the agreement, it would have beyond question vitiated the assignment. The position of the counsel for the appellant is, as I understand it, that the assignor had a perfect right to give such preferences as he saw fit, irrespective of the motive. That the money received by the creditors under the assignment belongs to them, and they had a perfect right to loan it to the assignor if they chose. Hence he argues that the rights of no one are violated and no fraud committed. But the reason upon which Grover v. Wakeman was decided was, that the assignor had no right after placing his property beyond the reach of his creditors to cause them to do something for his benefit before permitting them to share in its distribution. If this is not permitted by inserting the provision in the assignment, it is a little difficult to see how the same result may be produced by an agreement made in contemplation of the assignment and cotemporary therewith. Spaulding v. Strang (37 N.Y., 135) and Spaulding v. Strang (38 id., 9) are cited to show that such agreements are not unlawful, and, therefore, will not vitiate an assignment. Both these cases arose upon the same assignment, and the questions were substantially the same in both. Bradner Furman, being in insolvent circumstances, made a proposition to their creditors to pay fifty cents on the dollar in full satisfaction of their debts, and a portion *Page 75 of the creditors agreed thereto. Thereupon an agreement in writing was made by the firm with such creditors, by which the former agreed to pay and the latter agreed to accept of fifty per cent of their debts in full satisfaction; providing further that in case the firm should be unable to pay pursuant to the agreement they should make an assignment, giving a preference as specified in the agreement of fifty cents on the dollar upon the debts of those who became parties to the agreement. Several creditors became parties and executed releases of their debts to the firm. The firm was unable to make the payments according to the agreement, and made an assignment giving a preference of fifty per cent upon the debts of those who had become parties thereto. The question was whether this made the assignment fraudulent. Held that it did not, for the reason that it was not found or proved that any coercion was used by the assignees to induce the creditors to make the agreement; and for the further reason that at the time the agreement was made the assignors had made no disposition of their property, that it was still subject to the remedy of the creditors, and that under these circumstances the parties were at liberty to make any contracts they chose in respect to the terms upon which the indebtedness should be discharged. These reasons are not applicable to the present case. Here the agreement for the loan was made simultaneous with the assignment, and in express reference thereto, and in fact constituted a part thereof. To hold that a debtor may exercise his right of giving preferences among his creditors so as to secure to himself the future control of the property assigned or of its proceeds, would give facilities for the grossest frauds and utterly defeat the ends for which assignments have been sustained, which are the application of the property of insolvents to the payment of their debts. It would enable insolvent debtors to coerce creditors into almost any agreement which they desired. Under such a rule such a debtor could not only compel a release of the whole upon preferring a part of the debt, but could, as in the present case, compel the creditors *Page 76 to leave the property in his hands, subject to his control, upon such terms as he should dictate. From the facts found, the conclusion that the assignment was fraudulent and void, whether regarded as one of fact or of law, was correct.
The counsel for the appellants insists that the plaintiffs are estopped by reason of their purchase of a portion of the assigned property from the assignees, and cites Hone v. Henriquez (13 Wend., 240) to sustain the position. In that case, the defendant had in writing accepted of the assignment. Other cases are cited holding that the acceptance of a benefit under the assignment will preclude such party from insisting upon its invalidity. In the present case the plaintiffs have done neither. They have in no manner accepted of the assignment. They have accepted of no benefit given to them by the assignment. They have merely purchased some property embraced therein of the assignees, which any one, though not a creditor, and an entire stranger to the assignment, might do. This purchase does not bring the plaintiffs within the reasons upon which the cases cited were determined.
The judgment appealed from must be affirmed with costs.
All concur.
Judgment affirmed.