Cruikshank v. Walsh

56 N.Y.S. 894, 39 A.D. 632

This text of 56 N.Y.S. 894 (Cruikshank v. Walsh) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cruikshank v. Walsh, 56 N.Y.S. 894, 39 A.D. 632 (N.Y. Ct. App. 1899).

Opinion

HATCH, J.

The recklessness in commercial dealing which characterizes this cause makes it, in many of its aspects, the most extraordinary case to which our attention has been called. The action is brought by the plaintiff to set aside an assignment as having been made for the purpose of hindering and delaying creditors, and that the same is therefore fraudulent and void. The assignor is James McCaldin, who, together with his brothers, William and Joseph, had constituted the firm of McCaldin Bros. It is needful, in order that we may obtain a fair view of the case, to examine somewhat the history of this firm. The business was started in a very small way by William J. McCaldin in 1865. In September of that year, James McCaldin joined his brother from Ireland, and worked for him until 1867, when a partnership was formed. The business was selling coal and wood, and the substantial capital of the firm consisted in the energy and business capacity of the two brothers. The business continued to grow to considerable proportions. Joseph McCaldin, the other brother, then about 20 years of age, came to this country in 1876, and worked for the firm until 1878, when he became a member. He put no cash into the firm, except such of his earnings as he had not drawn; but he was given a credit at the time of his entry into the firm of $6,000, and a one-quarter interest in the firm business. William McCaldin withdrew from the firm in 1887 on account of ill health, and the business was thereafter conducted by James and Joseph as equal partners. During this period of time the firm had extended its coal and wood business; was the owner of a lumber yard, [896]*896several lighters, steamships, and tugboats; and carried on successfully these different branches; it also had a one-half interest in the Morse Iron Works,—all of which appeared to be prosperous and earning money, except the Morse Iron Works. While the value of the firm property over and above its liabilities is not given, yet it is quite clear that a large surplus existed. It is stated generally that in 1894 and 1895 the firm suffered some heavy losses on account of the conduct of James McCaldin in speculations, gambling, and the indorsement of accommodation paper; but a careful examination of the record, in our opinion, leads to the conclusion that no losses whatever were sustained by the firm, except a possible small loss by reason of James’ indorsements of the Abeel note, to "which attention will be hereafter called. The claim is that a large loss was suffered by reason of the investment in the Morse Iron Works; but it appears in the record that while the iron works was financially embarrassed, and was placed in the hands of a receiver, yet it paid at least 65 cents on the dollar. When its property was sold, it was purchased by an agent of the McCaldins, and the firm thereafter organized a stock company called the Eoss Iron Works, dividing the bulk of the stock between the members of the firm, and in the conduct of the business within a year thereafter declared and paid a dividend of 20 per cent. It is therefore evident that so far as the investment of the firm in the Morse Iron Works was concerned, if it be admitted that a loss was sustained under the management of Morse, it was immediately recovered upon the sale and reorganization. Hence it is apparent that, so far as the firm of McCaldin Bros, is concerned, it was prosperous in every branch of its business, suffered no losses, and, at the time when James McCaldin took title in trust to the steamboat Caroline Miller, its prosperity had suffered no diminution, and its earnings thereafter were larger than at any prior time in its history. Although James Mc-Caldin up to June, 1894, owned a half interest in all the business of the firm, and had no outstanding liabilities which were tangible, except as the same are made to appear by bis oral testimony, to be hereafter noticed, yet in that year it suddenly developed that, without any losses, James had become largely indebted to his brother Joseph and to other persbns, his property was swept away, he became suddenly insolvent, and in February, 1895, was forced to make an assignment for the benefit of creditors.

The history of what has transpired since the assignment is quite as remarkable as the sudden insolvency. The inventory of assets shows that the assignor at the date of his assignment was possessed of premises at 164 South Oxford street, subject to a mortgage thereon for $8,000 and accrued interest, and about $400 in taxes for the year 1894. The other property consisted of 20 shares of stock of the Mc-Caldin Bros. Company, pledged to Henry C. Piercy to secure a note of $1,250, and 5 shares of stock of the Boss Iron Works, pledged to Matthew Jackson, of Brooklyn, as security for a note of $9,000. The only tangible asset, thereforé, which passed by the assignment, was the house and lot. The value thereof is stated to be $16,000. It was testified by Mr. Moffat that in 1896 he called upon the assignee, and asked what rent he was getting for this house, and that Walsh in[897]*897formed him that he was in receipt of no rent for it. It is conceded that the premises continued to be occupied by McCaldin as he had occupied them prior thereto, and that no change whatever had apparently taken place in respect of any property which he had at the time of making the assignment. Walsh, the assignee, was sworn as a witness; and, while he did not in direct terms dispute the testimony of Moffat that he stated he had received no rent, he did testify that the premises had been rented to the assignor for $600 a year; his testimony in this respect being that he met McCaldin upon the street by chance, told him lie must have some rent, that they agreed upon $600 a year, and that thereafter McCaldin paid in all $700, $30 of which he had paid to the surety company for his bond as assignee, $230 of which lie had paid to his attorney, and $200 of which he had credited to McCaldin as payment of interest upon the mortgage. As to this last payment, McCaldin produced no receipt from the mortgagee; the assignee gave McCaldin no credit for it, except in his head, and made no personal examination to find out whether it was paid to the mortgagee or not. The assignee further testified that he did not know whether the property was insured, or whether the taxes were paid, or whether the interest upon the mortgage was paid, except that as to the latter he accepted the statement of McCaldin, and credited him with $200. The assignee further testified that he had taken no steps whatever to discover whether the assignor had any other property than appeared in the schedules, or whether he had any equitable interests of any character which might be reached, and that he had given the subject-matter of the assignment no attention whatever, but had left the whole matter to- his attorney, relying upon him to do all that was necessary in connection with the assigned estate. Although he swore that McCaldin was indebted to him in the sum of $1,700, such indebtedness does not appear in- the schedules. In this connection it appears that the attorney of the assignee was also the attorney of the assignor, and had been prior to his assignment, and to some extent had represented the firm of McCaldin Bros. Such relation, however, can in no sense impugn the good faith of the attorney, or his integrity in the matter, and nothing which appears in the record in any wise reflects upon him.

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2 Johns. Ch. 283 (New York Court of Chancery, 1817)

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Bluebook (online)
56 N.Y.S. 894, 39 A.D. 632, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cruikshank-v-walsh-nyappdiv-1899.