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Arguments for Respondent.
The cylinder and bed-plate were on hand at the time of the formation of the company, and were worth $50 or $60.
During the existence of the machine company, $15 worth of labor was expended upon it.
The balance and great bulk of the value, $495, was put upon it by Montgomery after he had resumed business in his own name, which latter interest most clearly was subject to the plaintiff's judgment.
But the jury have found that the company was organized by Montgomery and the business carried on in its name to defraud his creditors. Consequently Montgomery and the machine company were convertible terms, or two names for the same person — and that person Montgomery. The extract cited from Judge Mullin's opinion, could only have been written on the assumption that the machine company was a bona fide corporation, and not a mere fraudulent device to cover up and conceal the true ownership of the property bought, engines and machinery made, &c., which true ownership was in Montgomery.
As to plaintiff's alleged delay in assailing the machine company, on the ground of the fraud, it will be observed that his claim matured by installments; the last of $2,500 became due, January 1, 1860, and he prosecuted immediately thereafter.
III. The finding of the jury under the charge of the court establishes the fact that Montgomery intended to defraud his creditors, including Booth, by the formation of the machine company.
IV. The question put to Reeve was entirely proper. It was a part of the res gestæ. The issue was fraud. Montgomery was the chief conspirator. In such a case the widest latitude is given, and the acts and declarations of all the parties concerned in the fraud are admissible. (Woodhouse v. Jones, 5 N. Y. Leg. Obs., 20.) The examination of Deputy Sheriff Lawrence as to his not being able to collect execution of Bridges against Montgomery & Co., was also
proper. a circumstance bearing on the question of fraud, and a very significant one. TIFFANY.-YOL. VI.
It was Opinion of the Court, per POTTER, J.
V. The action being trover," that the defendants wrongfully took from the possession of the plaintiff and carried away a certain steam engine, the property of the plaintiff, of the value of seven hundred dollars, and converted the same to their own use,” the plaintiff was entitled to recover the highest value of the property intermediate the conversion and the trial. (Romaine v. Van Allen, 26 N. Y., 309.) Consequently, it was not error for the judge to charge, that if the jury found a verdict for the plaintiff, they should find according to the present value of the engine in question. The plaintiffs were entitled to even a more favorable charge in that respect than the one given; but if it was error, the value of the engine at the time of its conversion appears also, by two witnesses, to have been $350, and the error may be corrected without going through with the form of another trial.
VI. It is extremely desirable that finality should be given to this most troublesome and vexatious case on the present appeal, if possible. It would be an act of cruelty to both parties to order another trial, which would make the fifth, and would, as a matter of course, involve another appeal to this court, because none but this court of last resort can end this case.
The main question, that of fraud in the organization of the machine company, has been passed upon by three successive juries, who have each, without ten minutes' deliberation, found in the plaintiff's favor, and it is not to be supposed that any other jury will come to a different conclusion on that point, in view of the facts. The utmost that the defendants claim is but a nominal reduction of the verdict, and the costs of the action already exceed twice the amount of the verdict. The longer the case is litigated, the more complicated it will become. It never will present fewer or simpler questions than at the present time.
It is therefore respectfully submitted on the part of the respondent that the judgment should be in all things affirmed.
POTTER, J. This case may be regarded as a contest between bona fide creditors to secure their respective claims, in part or in the whole, from certain personal property, to wit, a steam
Opinion of the Court, per POTTER, J.
engine, and the question first to be determined is in whom was the title to the property at the time it was levied upon and taken by the defendants. It is conceded that the title to the engine in question, at the time of the plaintiff's levy upon it by his execution, was either in Montgomery and Lund, then lately composing the firm of Montgoinery & Co., or in the corporation called “The New York Steam Saw-mill and Machine Company.” The plaintiff claims the title to have been in the former, the defendants claim it to have been in the latter. This, it will be seen, became the material issue to be tried at the circuit. The organization of this company, in due form of law, was duly proved, and there was no evidence of its legal dissolution. The bedplate and cylinder of this engine was transferred by Montgomery and Lund to this corporation, and its completion as an engine was subsequent to that time. The debt upon which the defendants' judgment was obtained was contracted by this corporation in the ordinary course of their business, and their judgment was against the corporation, and their execution was against the property of the corporation. The property, when so levied upon by the defendants, was in the possession of the plaintiff, who claimed to have made title to it under a judgment and execution, levy and sale thereunder, against William Montgomery and William Garrabrant. William Montgomery & Co., before January, 1855, was composed of said Montgomery and Garrabrant, and one Isaac Reeve. Montgomery and Garrabrant purchased out Reeve's interest, and gave him the notes upon which plain. tiff's judgment was obtained in payment for Reeve's interest in the firm, Montgomery and Garrabrant continuing the firm of Montgomery & Co. Subsequently, Garrabrant sold out to Montgomery, and George D. Lund purchased an interest in Montgomery's business, and it was still continued to be carried on in the name of Montgomery & Co. Subsequently still, the Steam Saw-mill and Machine Company was organized, and Montgomery & Co. transferred their business and assets to this corporation, and Montgomery was its president and principal executive, financial and
Opinion of the Court, per POTTER, J.
managing agent. The plaintiff claims that the organization and conducting of this corporation was a fraudulent device of Montgomery & Co. to hinder, delay and defraud their creditors, and that, as to the plaintiff, the said organization, and acts of user under it, were nullities, being fraudulent and void. On the trial the plaintiff offered evidence tending to prove this fraudulent device. The evidence was sufficient in strength to make it proper to have it submitted to the jury; and the learned judge charged the jury that they had to determine but one question, and that was, that if this corporation was fairly organized, and the sale of the property to them by Montgomery and Lund was also fair and done without fraudulent intent, the defendants were entitled to recover; if, on the contrary, the company was organized to defraud the creditors of Montgomery and Lund, and the property was transferred to them by Montgomery and Lund in furtherance of that fraudulent purpose, the plaintiff was entitled to recover. This charge, I think, was entirely sound; no exception was made to it by either party. The jury found their verdict for the plaintiff. This, it appears to me, is conclusive upon this feature of the case. It is insisted that this corporation, being regularly organized, and the defendants their bona fide creditors, their corporate existence cannot be called in question, collaterally, and thus destroy the defendants' claim against them; that only the people of the State have a right to raise the question of their corporate rights. This argument is not sound as applicable to a case of fraud. As we have had occasion to repeat in another case, “it is a principle as old as the law of morals, and which has been engrafted into the law of equity and justice, that good faith is the basis of all dealing, and that every description of contract, and every transfer or conveyance of property, by what means soever it be done, is vitiated by fraud. Whether the contract be oral or in writing; whether executed by the parties with all the solemnities of deeds by seal and acknowledgement; whether in form of the judgment of a court, stamped with judicial sanction, or carried out by the device of a corporation organized with all the
Opinion of the Court, per POTTER, J.
forms and requirements demanded by the statute in that regard, if it be contaminated with the vice of fraud the law declares it to be a nullity. Deeds, obligations, contracts, judgments, and even corporate bodies may be the instruments through which parties may obtain the most unrighteous advantages. All such devices and instruments have been resorted to to cover up fraud, but whenever the law is invoked all such instruments are declared nullities; they are a perfect dead letter; the law looks upon them as if they had never been executed. They can never be justified or sanctified by any new shape or cover, by forms or recitals, by covenants or sanctions which the ingenuity, or skill, or genius of the rogue may devise.” The effect of this finding of the jury is that this corporation was a device resorted to by Montgomery and Lund to hinder, delay and defraud their creditors. As between the plaintiff and Montgomery and Lund the plaintiff had a right to disregard the corporation as a void thing, and resort to the property of Montgomery to satisfy his demand. Had the defendants, as bona fide creditors of this corporation (which was a valid corporation as to them), obtained a lien by a prior levy under their judgment, it would have presented a different question. Their equities were, doubtless, equal to the plaintiff's — it was so held when last before it was in this court - but the plaintiff was prior in time with his lien. “Qui prior in tempore, potior est in jure."
So, too, it is urged that if the transfer by Montgomery and Lund to the corporation was fraudulent, and the corporation void as to the plaintiff, then the partnership interest of Land revived, and the plaintiff could only sell Montgomery's interest in the engine, which was three-fourths. This is, doubtless, true, but if true it cannot help the defendants. They are not the creditors of Lund but of the corporation. They could not take Lund's interest in this engine upon an execution against the “Saw-mill and Machine Company." The plaintiff had a right to take the engine upon his levy if it was the property of Montgomery and Lund, and is account. able to Lund only for his interest in it, or to his creditors in a proper form of action. Lund is not a party to this action