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Statement of case.
not being a creditor of the firm, he is not, on that account, entitled to recover.
His honor refused so to charge, and defendants' counsel then and there duly excepted.
Sixth. If the jury find that the company was formed by Montgomery and Lund to defraud their creditors, and that the formation of the company was void on account of such fraud, then the firm of Montgomery & Lund became entitled to the property, and the plaintiff could only levy upon and sell Montgomery's interest in that property, and such property was still liable to be levied on by the defendants Bunce, Esler and Cobb, as creditors, and such levy being made in this action, cannot be resisted by Booth, in this case.
His honor refused so to charge, and the defendants' counsel then and there duly excepted.
His honor further charged the jury that they had to determine only one question, and that was, if the saw-mill and machine company was fairly organized, and the sale of the property to them by Montgomery and Lund was also fair, and done without fraudulent intent, then the defendants were entitled to recover in the action, and the plaintiff is not entitled to recover.
If, on the contrary, the company was organized to defraud the creditors of Montgomery and Lund, and the property transferred to them by Montgomery and Lund, in furtherance of that fraudulent purpose, then the plaintiff was entitled to recover in this action, and that no claim was made by either Garrabrant or Lund, to any of the property.
His honor also charged the jury, in the language of Judge LOTT, on the last trial of this action:
“That the question presented on these facts was, which of the parties had the best title; and that question, under the decision of the Court of Appeals, depended upon the intent and object with which the Steam Saw-mill and Machine Company was organized; that if it was organized, the property of William Montgomery, or of William Montgomery & Co., transferred to it, and the business of the company afterwards carried on in its name, with the fraudulent purpose on
Arguments for Appellents.
the part of William Montgomery, or of William Montgomery & Co. (then composed of Montgomery and Lund), of preventing the plaintiff from enforcing or collecting his debt, then such organization or proceeding was absolutely void as to the plaintiff, and he had the right to sell the engine in question, or at least Montgomery's interest in it, under his execution, and that his sale and purchase gave him a superior right to that of Bunce & Co., although they may have dealt with the company without notice of such fraudulent purpose or intent, and were in fact bona fide creditors of the company."
The defendants' counsel then requested his honor to restrict that part of the charge adopted from Judge Lort, so as to make it conform to the following part of the opinion of Judge Mullin, in the Court of Appeals in this case, viz. :
If the firm of Montgomery & Co., whose creditors were intended to be defranded, and for whose benefit the business of the corporation was carried on, was that composed of Montgomery and Lund, the plaintiff was not a creditor of that firm; if it was the firm of Montgomery & Garrabrant, then that firm, as such, had no interest in the property transferred to the corporation, nor was it in existence, so as to be entitled to the profits of the business.
His honor refused so to charge or restrict, and the defendants' counsel then and there duly excepted.
The plaintiff's counsel requested his honor to charge the jury, that if they found a verdict for the plaintiff, they should find according to the present value of the engine in question.
His honor did so charge, and defendants' counsel then and there duly excepted.
The jury found a verdict for the plaintiff for the sum of $525.
A motion was then made by the defendants' counsel 'for a new trial, on the ground that the verdict was against law and evidence, which motion was denied. The General Term affirmed the judgment entered upon the order and verdict, and the defendants appeal to this court.
A. Thompson, for the appellants.
Arguments for Appellants.
It is very desirable that the principles governing this action should be speedily and definitely settled, and this continual course of trials and appeals ended. We respectfully ask the court to examine the following arguments and authorities, and decide whether, under them, the plaintiff's complaint should not have been dismissed.
We conceive that upon no evidence that has been given in this case, or that can be given, will the plaintiff be entitled to go to the jury; because,
1st. The New York Steam Saw-mill and Machine Company were regularly incorporated, and their corporate existence cannot be called in question, except in an action by the people. (26 Barb., 205.)
2d. The plaintiff does not attempt to show that the corporation was organized to hinder, delay, or defraud him; on the contrary, it was proven that he had security on the whole machinery for the payment of one-quarter of its value. And all that this court held, per Judge SUTHERLAND's opinion, was that such an organization would be void as to the person intended to be hindered, delayed or defrauded.
3d. The proof is (and the plaintiff does not deny it) that property was transferred to the saw-mill company by Montgomery and Lund, they being copartners, Montgomery owning three-quarters and Lund one-quarter. If the sale by Montgomery was fraudulent and void as to Booth, and if that is sufficient to declare the corporation void, then the partnership revived, and Booth could only sell Montgomery's interest in the property, and not the whole property.
It was so held by this court on former appeal in Judge Mullin's opinion. (38 Barb., 574; 1 Comst., 47.)
4th. If the corporation was void, Judge MULLIN says that the rights of the partners, Montgomery and Lund, would revive, consequently Booth's purchase of Montgomery's interest would make him a tenant in common with Lund (or the saw-mill and machine company), subject to the payment of the partnership debts; one of which was the debt due to Bunce & Co.
5th. If the above position is correct, Bunce & Co. had a right to collect their debt from the property, subject to such
TIFFANY.- VOL. VI. 19
Arguments for Appellants.
debt, in which Booth had purchased an interest. (2 Penn., 198; 24 Wend., 405.)
Booth could not withdraw such property from the execution of Bunce & Co., as creditors of the firm, or company. (1 Wend., 313.)
Booth, according to the decision of Chief Justice HOSMER (4 Conn., 540), took the whole property for the debt of one partner or corporator, and thereby assumed the firm's liability to their creditors, and, in the language of Judge COWEN (24 Wend., 389), Booth, as such purchaser, can maintain neither the action of trespass nor of trover against Bunce & Co. for collecting their debt.
The court will see in this case that much irrelevant testimony has crept in which it was difficult to exclude, but which evidently biased the jury.
The same thing has occurred on three trials, and conse quently the jury have always found for the plaintiff, although the court above has each time reversed their judgment. This will undoubtedly occur again, and may be repeated ad libitum unless the principles of the case are now settled.
We therefore respectfully ask the court to examine the authorities above quoted, especially 24 Wend., 389, and either overrule them or decide in accordance with them, that the plaintiff's complaint should have been dismissed at the trial.
II. The complaint should also have been dismissed upon the testimony, because the engine in question was not part of the property alleged to have been fraudulently transferred by Montgomery and Lund to the company, but was inanufactured subsequently by the company, and, as Justice MULLIN states in his opinion of case, “The corporation had carried on business after its organization, purchased property, contracted debts, manufactured engines and machinery, with which Montgomery, or Montgomery & Garrabrant had nothing to do. This property thus acquired could not be taken upon any principle of law or equity from Lund, and his creditors applied to the payment of the debts of Mongomery, or of Montgomery & Garrabrant.”
Arguments for Appellants.
Justice Brown and Justice Lott also, in their opinions, expressly gives as a reason why the plaintiffs could not succeed, that the engine was not in existence when the transfer was made to the company.
The plaintiff also had ample security for his debt, which was not affected or diminished by the transfer to the company, and if he was in danger of being hindered, delayed, or defrauded by the company, he should have moved at once, and thus have prevented innocent creditors of the company from becoming involved, but as he remained still. for over two years after the alleged fraud, he should not now be allowed to call the transfer void, to our detriment. (1 Hill, 302; 1 Denio, 74.)
It further appears that Montgomery and Lund entertained an honest and reasonable expectation of paying all their debts, and reserved what was deemed an ample provision for that
purpose; therefore this sale could not come within the operation of 2 R. S., 134, § 1. (Also see N. Y., 109.)
If this judgment is affirmed, it establishes the monstrous principle that the property of every corporation, whether banking, railroad, or manufacturing, may at any time be seized and sold upon a claim that an indebted stockholder had invested property in such corporation with intent to hinder, delay or defraud his creditors.
III. The court errred in refusing to dimiss the complaint as requested ; because,
1st. The case was put to the jury to find whether the company was formed to defraud the creditors of Montgomery and Lund; and there was not a particle of proof upon which to put such a question to the jury.
The whole testimony is the other way.
2d. There was no testimony upon which to put the question whether the company was formed to hinder, delay or defraud Booth.
3d. It was error to refuse to dismiss the complaint when there was no evidence to show that the company was organized or carried on for the purpose of hindering, delaying or defrauding the creditors of Montgomery and Lund, or of Booth;