Littmann v. Harris

Scott, J.: Plaintiff appeals from a judgment dismissing the complaint upon the merits. The action is- by a judgment creditor of a corporation named “ Francizca,” and Frances A. Harris, formerly its president and one of its trustees. Plaintiff sued the corporation for wages on April 28, 1908. A defense was interposed and the action came on for trial on June 16, 1909, when the' defendant corporation defaulted and the plaintiff had a judgment. In March, 1909, while the aforementioned action (of which the defendant Harris had knowledge) was pending, the composition and management of the corporation was completely changed. Certain gentlemen who had theretofore been stockholders and trustees sold their stock to one Dann, a' brother-in-law of the defendant Harris, and resigned as trustees. The defendant Plarris also resigned as president, and Dann, her brother-in-law, was. elected president in her place. He was then engaged in business in Brooklyn and afterwards embarked in business in Philadelphia. It does not appear that he ever took any part in conducting the affairs of “ Francizca ” except to transfer all of its assets to the defendant Harris. At the same time that Dann was elected president the father and sister of defendant Harris were elected trustees, so that the board of trustees was thereafter composed entirely of Mrs. Harris' and members-of her family. All the assets of the corporation were thereupon transferred to the defendant Harris, as she expresses it, by “arrangement” with her brother-in-law Dann. The fixtures were sold to her for the expressed consideration of $1,350, the stock on hand for an expressed con [33] sideration of $2,000, and the outstanding accounts for no definite consideration so far as appears. It does not even appear what their amount was or how much was collected upon them, although defendant Harris thinks that she collected about $300. There is no evidence as to the value of the fixtures or as to the value of the stock except that defendant Harris after-wards sold the goods at an advance of $300. The sole consideration, so far as appears, for these transfers to Mrs. Harris was an alleged indebtedness to her from the corporation of which no evidence was given except her declaration that the corporation was indebted to her. Even the amount of this alleged indebtedness is not made clear, for she puts it on the trial at $3,400, while, when examined in supplementary proceedings, she had fixed it at $2,000. In our opinion the evidence established prima facie a fraudulent transfer to defendant Harris. There were presented all the facts which are generally considered indicia if a fraudulent conveyance. First. The transfer was made while a suit for a considerable amount was pending against the corporation to which it apparently had no available defense since it permitted judgment against it to go by default. Second. The transaction stripped the corporation of all of its assets available to meet the demand of the creditor who was suing it. Third. The transfer rendered the corporation insolvent. Fourth. The whole transaction was had with relatives of the defendant Harris, who had undoubtedly been elected officers and trustees to carry this very transaction through. Fifth. The consideration for the transfer to defendant Harris is sought to be found in past advances, not clearly proven, and the amount of which is left vague and uncertain. Sixth. All the circumstances were well known to the transferee. (Lawrence Brothers, Inc., v. Heylman, 111 App. Div. 848; affd., 189 N. Y. 573; Riker v. Gwynne, 129 App. Div. 112.) These facts are certainly, sufficient to cast upon the defendant Harris the burden of proving that the transaction was bona fide and that the consideration passing to the corporation was adequate. If the transfers were made in fraud of plaintiff’s rights, the transferee in the present case was certainly cognizant of the intent. [34] It follows that the judgment appealed from-must be reversed and a new trial granted, with costs to appellant to abide the event. Ingraham, P. J., Clarke, Miller and Dowling, JJ., concurred. Judgment reversed and new trial ordered, with costs to appellant to abide event.