South Danvers National Bank v. Stevens

O’Brien, J.: There is much force in the claim that the general assignment was-void because it was not accompanied by an immediate delivery and followed by an actual and continued change of possession of the property assigned (2 R. S. 136, § 5 ; 3 id. [7th ed.] 2328, § 5), it appearing that between the date when the assignment was executed and the date of its record the property of the debtors was in the possession of the committee of creditors -under the agreement;, or, as stated by the terms of the agreement, was being “ collected and converted into cash * * * under the direction of said committee,” with a view to its distribution equally among all the creditors-who were parties to that agreement, which included all the creditors-except the plaintiff. It may be answered, however, that as it was-not a completed assignment, because not delivered, and was to be held from the day of its date when signed by the parties until further directions by the assignors, under the case of McIlhargy v. Chambers (117 N. Y. 532), it was not fraudulent as to creditors. In that case it appeared that 'the assignee signed and acknowledged the assignment-, and subsequently on the same day the assignor executed it and left it with his attorney. More than a week afterwards the assignor made a formal and unconditional delivery of the assignment to the assignee’s agent, who caused it to be recorded, and the assignee took possession of the assigned property. It was therein held that the assignment did not take effect until delivery, and that the jury was justified in finding that there was no delivery until the formal delivery to the assignee’s agent. In that case, however, there never had been any delivery to the assignee until the very day when it was recorded and possession of tli9 property taken, and immediately upon the assignment becoming effective the assignee took possession, and there was thereafter a continued change of possession. Here, however, the assignment was executed by both parties on the same day, and was delivered to the attorney, who waste hold it, according to the testimony of one of the assignors, until they gave directions in reference thereto, or, as stated by the assignee, until it could be ascertained finally whether they could. [396] obtain tlie consent of the plaintiff to the agreement with the other creditors. According to all the testimony it was to be used for the purpose of bringing in the plaintiff under the agreement, and if this were effected it was not to be recorded. We are thus presented with this dilemma, either that there was a delivery of this assignment upon the day it bears date, which was not followed by an actual and continued change of possession of the property assigned, or there never was any delivery at any time, because the evidence shows that the attorney, in whose possession it was left, without further consultation with any of the assignors, recorded the assignment after having failed in using it as an effective instrument with which to compel the plaintiff to come in under the agreement. Taking the intent with which the assignment was made, the use to which it was to be put, and the conditions which were thrown around its becoming effective, we fail to find sufficient to justify the legal conclusion that it was intended by the assignors, or by the assignee, as a legal instrument affecting the title of property. ■Ooncededly, its use was to coerce the plaintiff into a compromise, and that this was the real purpose is frankly avowed by the attorney who drew it, who states that at the time of the execution of the ■assignment his directions from the assignors were to have a further ■conference with the bank’s representatives and see if an arrangement could not be made; “ meanwhile I was to hold the assignment and have it recorded at the proper time, unless such a ■settlement could be made; ” that, having possession of the assignment, he went to the attorney of the plaintiff, showed him the .assignment and stated that it would not be used if judgment was not entered, and that it -would be if the bank insisted upon proceeding with the judgment, and it was only the day after such judgment was entered that the attorney, without further conference with the ■assignors, placed it on record. The case already cited (McIlhargy v. Chambers) restates the well-settled rule that it is essential to the validity of the assignment that the assignor should part with the instrument by actual delivery either to the assignee or his agent. In Kingston v. Koch (57 Hun, 12) the facts were in many essential features like the case at bar. ‘There the debtor had prepared and signed and placed in the hands of his attorney, after a suit had been brought against him, a general [397] assignment. This was placed in the safe of the attorney and there remained until the judgment in the action was procured, when the-attorney who had been defending the case went huiriedly to his office and, without further conference with his assignor, took the assignment from his safe and gave it to the plaintiff, the assignee therein named. In the course of the opinion it is said: “ This assignment never became effective as against creditors. When the assignor executed the same he had no intention of having it delivered as an effective instrument, but intended the same to be used only as a shield in case of necessity.” That case is authority further for the proposition that “ until delivery an assignment is a nullity, and unless the assignor has by his acts authorized a delivery, the instrument is inoperative; ” and that “ in determining whether an assignment was made for the purpose of defrauding creditors, it is not the intent of the assignee, but rather that of the assignor, before the delivery of the assignment, which is to govern.” Taking the intent of the assignors here and the evidence relating to the assignment, we are, as stated, necessarily brought to one of two views: either that there was a delivery on the day that the instrument bears date, which was not followed by a change of possession of the property and which reserved to the assignors the power of revoking the instrument and the right to withhold it from record at their pleasure, all of which would render the assignment void; or there was no delivery at that time, and, so far as the evidence shows, none thereafter, the attorney, acting upon his own judgment of the exigencies of the situation and recording the instrument after having failed to coerce the plaintiff. This, as we have seen, under the authorities, cannot be regarded as a delivery of the instrument or an act which would render the assignment operative. In addition, wo think, with the learned trial judge, that the assignment was fraudulent in fact. There is no doubt as to a debtor’s right to go to creditors with a view of effecting an amicable settlement, and in the course thereof informing such creditors that a failure to compromise will necessitate an assignment. But this is quite another thing from doing what was done here, namely, formally executing an assignment and then using it as a weapon for the purpose of coercing a creditor into an agreement by which he [398] gives to the committee having charge of carrying out a composition the right to discharge the debt, and thus foregoing the right which the creditor has, not only to receive a distributive share of his debtor’s property, but also to proceed for the balance against such debtor. Our conclusion, therefore, is that the judgment below was right .and should be affirmed, with costs. Barrett, Rumsey, Williams and Patterson, JJ., concurred. Judgment affirmed, with costs.