Booth v. . Bunce

24 N.Y. 592

• Court: New York Court of Appeals
• Decided: June 5, 1862
• Status: Published

Opinion

Sutherland, J.

The principle plainly announced in the opinions delivered at the general term, on both occasions when this case was before them, is: Assuming that the plaintiff was a creditor of William Montgomery, or' of William Montgomery & Co., at the time the New York Steam Saw-Mill and Machine Company was formally organized as a corporation under the"statute; and that it was so organized, and the business carried on in its name, to defraud the creditors o"f William Montgomery, or of William Montgomery & Co.; yet ■ that Bunce & Co. had the best or superior right to the engine in question, or to sell it under their judgment and execution, because the corporation was regularly organized, and they became its bona fide creditors without notice of the fraudulent purpose for which it was organized, the property of William Montgomery, or of William Montgomery & Co., transferred to it, and the business subsequently carried on in its name.

It does not appear to have been doubted, by either of the learned judges who delivered the opinions at general term, if the corporation was organized and the business subsequently carried on in its name with the fraudulent purpose aforesaid, that such organization or proceeding was absolutely void as to the plaintiff, and that he had a right, at the peril or risk of being able to establish such fraudulent purpose, to sell the engine in question, or, at least, Montgomery’s interest in it, under his execution; and that his prior sale and purchase under his execution gave him a title as against any creditor of William Montgomery, or of William Montgomery & Co., and would have given him a superior title as against Bunce & Co., had they dealt with and given credit to the corporation with notice of such fraudulent purpose. But the principle" ■ assumed in these opinions would appear to be, thaty the bona fide creditors of a corporation, organized, and the business of which is carried on by A. B. in its name, to defraud his creditors, have a right to property held by him in the name of the corporation superior to that of a defrauded creditor of A. B.; that the mere fact of the regular organization of the corporation gives its bona fide creditors a lien on, or a right to, such property, which no superior diligence of a defrauded creditor, in enforcing the payment of his debt by judgment and execution, can deprive them of.

2STo authority is cited in support of this principle, and we do not see any ground or reason for enforcing it in this case.

Assuming, in this case, that the corporation was organized, the property of William Montgomery, or of William Montgomery & Co., (we do not mean the particular property in question,) transferred to it, and the business afterwards carried on in its name, with the fraudulent purpose of preventing the plaintiff enforcing or collecting his debt, and that Bunce & Co. were bona fide creditors of the corporation, we think that, prior to the levy and sale under the plaintiff’s execution, the equities of the plaintiff and of Bunce & Co. were equal.

There is nothing in the case to show that Bunce & Co. gave credit to the corporation because it was a corporation, or in form and name a corporation.' From aught that appears, Bunce & Co. would have as readily have given the credit, had the business been carried on in the name of William. Montgomery,1 or of William Montgomery & Co. Indeed, it appears that, prior to the formal organization of the corporation, Bunce & Co. had dealt with William Montgomery & Co., and given William Montgomery & Co. credit for a considerable sum.

The question in this case is, not what disposition should or would have been made of the property held in the name of the corporation in a proceeding against it as insolvent. The question is between judgment-creditors enforcing, or trying to enforce, the payment of their judgments at law, by execution. The equities of the parties being equal, why does not the maxim, Qui prior est in tempore, portior est injure, apply ?

The plaintiff first levied on and sold the property in question. He did this, claiming that the organization of the corporation and the carrying on of the business in its name was fraudulent and void as to him. He sold it at the peril and risk of being able to prove the fraud; but if he can prove it, why does not his superior diligence, in accordance with the maxim cited, give him a good title?

The judgment of the Supreme Court should be reversed, and a new trial ordered.

Judgment reversed, and new trial ordered.