Passavant v. Cantor , 43 N.Y. St. Rep. 247 ( 1891 )

Barrett, J.

I concur in the result, and, unreservedly, in all that the presiding justice says with regard to the shares of Pacific Mail stock. But I cannot agree to the proposition that the declarations of the assignor made prior to the execution of the assignment, and forming no part of the res gesta, are admissible as against the assignee. They are undoubtedly admissible as against the assignor, and they are also admissible against the assignee when they form part of the res gesta. Thus the declarations of the assignor with regard to the subject-matter of the transfer, made while he is in possession, and characterizing such possession, are admissible as part of the res gesta. So, also, the declarations of the assignor made contemporaneously with the assignment, or in immediate contemplation thereof, and illustrating its fraudulent character, are admissible as part of the transaction. But the mere naked statements of the assignor, whether made before or after the assignment, not connected with the principal fact, cannot be permitted to destroy the trust title of the assignee. Any other doctrine would put it in the power of a debtor to make or unmake assignments at his pleasure. The assignee represents the creditors, and these beneficiaries should not be deprived of their vested rights by any loose talk of their debtor. If it be true, as matter of fact, that the assignor’s design in making the assignment was fraudulent, the instrument cannot stand; and, so far as the assignor is concerned, his general confessions, whether made long prior or long subsequent to the assignment, are evidence of his guilty intent. But as to the assignee and the beneficiaries under the assignment, while the rule of law is the same, namely, that the assignor’s guilty intent is alone sufficient to avoid the instrument, yet the rule of evidence is different, and such guilty intent must be proved as an independent fact by the acts and doings of the assignor, and not by admissions forming no part of the res gesta. The presiding justice suggests that, because the declarations of the assignor are admissible against him, they must, if they establish fraud, form the foundation of a judgment to set aside the assignment; and he thinks that this principle is recognized in Wright v. Nostrand, 94 N. Y. 31. I do not thus read this case. There the fraudulent grantor, Yostrand, was called as a witness for the grantee to support the conveyance, and the prior declarations were admitted to affect his credibility. This is apparent from the text of the opinion, which is as follows: “ The defendant Yostrand had been called as a witness for the defendants on the trial, and had given material evidence for them. The deposition received in evidence was competent, not only for a limited purpose, as against him, as an admission in the case made by one of the defendants therein, but was also competent at the time it was offered, as against all of the defendants, for the purpose of affecting the credibility of the testimony given by such witness for them on the trial.” Yor was the principle recognized in Loos v. Wilkinson, 110 N. Y. 195, 18 N. E. Rep. 99. There the bill was filed to set aside a deed of real estate executed by the debtors in May, 1884, and also a general assignment by the same persons executed in the following December. It was held that the fraudulent transfer, so made in May, might be considered in determining whether there was fraud in the subsequent assignment, and that declarations of the fraudulent grantors and assignors, made while they continued in possession of the estate and exercised acts of ownership over it,— that is, intermediate the deed and the assignment,—were admissible for the purpose of characterizing their possession. It was also held that as the deed was kept from the record, and concealed from the public, and as it was part of a fraudulent scheme concocted by the grantors and grantee to obtain credit, the declarations were admissible as a part of the means used to accomplish the fraud. Earl, J., placed the decision distinctly upon the ground that, under the circumstances of that case, the declarations were in the nature of res gestee. In Bush v. Roberts, 111 N. Y. 284, 18 N. E. Rep. 732, which is also cited in support of the distinction between an assignee for value and an assignee in trust for creditors, the doctrine of Truax v. Slater, 86 N. Y. 632, was reaffirmed, and the following language of Earl, J„ in the latter case, quoted with evident approval: “The mere declarations of an assignor of a chose in action, forming no part of any res gestee, are not competent to prejudice the title of his assignee, whether the assignee be one for value or merely a trustee for creditors, and whether such declarations be antecedent or subsequent to the assignment.” Clearly, there is no distinction in principle between the assignment of a chose in action and the assignor of a chattel, so far as the present question is concerned. The case of Truax v. Slater was also cited in support of the decision in Flannery v. Van Tassel, (N. Y. App.) 27 N. E. Rep. 393, where the declarations held to be inadmissible were in fact made'upon the very date of the transfer. The assignee for the benefit of creditors is not to be treated as a holder of the assignor’s estate by privity of representation or by legal devolution. The distinction contended for might properly be made in such cases. But when it is considered that, although not a bona fide purchaser in value, the assignee is at least a trustee for the assignor’s creditors, and as their representative may himself attack fraudulent transfers made by his assignor, (Spring v. Short, 90 N. Y. 538; Crouse v. Frothingham, 97 N. Y. 113; Loos v. Wilkinson, supra,) his vested estate, and the creditors’ vested rights therein, should clearly not be disturbed without legal evidence of the assign- or’s guilty intent.

The effect of denying to a trust assignee the position of a transferee for value is simply that he takes the estate subject to all existing equities. These equities may, under certain circumstances, be evidenced by the assignor’s admissions; and his declarations may then be resorted to, to establish such equities. We must not, however, confuse this principle with that which governs when a direct attack is made upon the assignment itself. In the former case the assignee, seeking to reduce the estate to possession in the ordinary way, stands directly in the shoes of the assignor. But he may also, under the act of 1858, c. 314, act in direct hostility to the assignor, and may seek to reduce the estate to possession by avoiding the assignor’s fraudulent transfers. In assuming that attitude, he no longer stands in the shoes of his assignor. So, also, in defending his estate and the vested rights of his cestuis que trustent from attacks upon the assignment itself, he stands in no one’s shoes but his own,—his own as trustee and as legal representative of the creditors. As against such trustee and legal representative of creditors, the guilty intent of the assignor should be proved as any other independent fact is proved; and the trust assignee should not be bound by declarations made in his absence, and forming no part of the res gesta.

I think, however, that the assignee in the case at bar was not prejudiced by the admission of the assignor’s declarations. These declarations were by no means vital to the conclusions finally reached. Much, at least, of what such declarations tended to establish, was proved by other and entirely competent evidence; and, further, there was abundant evidence without these declarations to sustain the judgment. Indeed, if any other conclusion had been arrived at with regard to the Pacific Mail stock,—leaving these admissions entirely out of the case,—I should unhesitatingly have voted for a reversal of the judgment upon the facts. I therefore concur in the affirmance of the judgment.