Ruhl v. Phillips.

disputed by either party; but he came to the conclusion that they were "not competent in law to establish or warrant the finding that there was an absence of any fraudulent intent, but that, in his judgment, they established directly the contrary, for two reasons," which he states as follows: "1st. The sale was of the entire effects of an insolvent copartnership, upon a credit of from four to twenty-four months, the necessary effect of which was to postpone the payment of the creditors until the expiration of the term of credit, as well as to make the ultimate discharge of the copartnership debts dependent upon the pecuniary ability of the purchaser to pay the notes given by him as they respectively fell due, and was thus an act to hinder and delay creditors; and, 2d. Because there was an understanding between the parties, cotemporaneously with the sale, that the purchaser was to pay individual debts of one of the copartners, to secure him in doing which, $5,000 of the notes received upon the copartnership effects were handed back to him, to be appropriated by him in part in this way."

The first of those reasons was involved in the decision by the court of appeals of the case of Loeschigk v. Bridge, 42 N. Y. 421, and it was there held that the mere fact of a sale, by a party in failing circumstances, of his property, to a purchaser having a knowledge thereof, to an amount more than double of that sold in this case for his notes, payable at an average credit for sixteen months for the whole of the purchase-money, except $1,000 paid in cash, does not per se establish fraud, or a fraudulent intent, to hinder, delay or defraud the creditors of the vendor.

The second reason is based on an error of fact. The understanding between the parties therein mentioned was not made cotemporaneously with the sale, which took place on the 21st day of May, 1861, whereas, the said understanding was, as found by the referee, made on or subsequent to the 22d day of that month.

That finding is sustained by the testimony, and is conformable to the thirty-third item in the request of the plaintiff's counsel to find certain facts which he claimed to have been proved, and it is assumed to be correct by him in his points on this appeal.

The individual debts of one of the copartners, provided for by that understanding, amounted to $214, and the notes for $5,000, that were given back to Phillips for the purpose of securing him, were not only for that debt, but for several firm debts which he agreed to pay, and also as security for his indorsement of certain notes of the

Ruhl v. Phillips.

firm for upward of $1,500, which he had indorsed for their accommodation.

The conclusion of the learned judge that the transaction was fraudulent, for the two reasons above stated, was based on and resulted from his application of the principles of law applicable to assignmente in trust for the benefit of creditors, prohibiting sales of the assigned property on credit, and the appropriation of partnership effects to the payment of individual debt of one of the partners, to the prejudice and loss of creditors of the firm. He said: "It can make no difference whether the sale of the whole of the effects of an insolvent copartnership upon credit, or the application of partnership effects to the payment of the individual debt of a partner, is accomplished by the creation of a trust, or by a direct sale to a purchaser, as in this instance. The effect in both cases is the same, to hinder and delay creditors, and what would be fraudulent in one form is equally so in the other." A material distinction between the two cases is overlooked. In the first case the transfer is voluntary and without consideration. Its effect is, moreover, to divest the assignor of all legal interest in and control over the proceeds of the assigned property, and the assignee, although vested with the legal title thereto, holds it subject to the trusts declared in the assignment, and no creditors, except those provided for therein, can claim any benefit therefrom, and their rights are fixed and regulated by the terms of the trust, and if they prescribe a sale on credit, the collection by the creditor of his claim is necessarily postponed until the expiration of the credit allowed. In the case of a sale, there is a consideration passing to the vendor from the purchaser, who becomes the owner in his own right of the property, and the vendor, while parting with the property, obtains the purchase-money therefor. This, whether paid in cash or in notes, is his property, and although it cannot in either case be reached by an execution, it is nevertheless liable to the claims of creditors, and can be reached by an appropriate action, or by the more summary proceedings supplementary to execution now authorized by the provisions of the Code.

If the avails are in notes or other securities, they can, under the order of the court, be converted into money, and be made immediately available in satisfaction of the debt sought to be collected.

There is, also, this material consideration, which has been overlooked as applicable to a sale. Although it may have been made on the part of the vendor with the intent to hinder, delay or defraud

Ruhl v. Phillips.

his creditors, yet that fact does not in any manner affect or impair the title of a purchaser for a valuable consideration, unless it appears that such purchaser had a previous notice of the fraudulent intention of his vendor, or of the fraud rendering his title void.

The facts found by the referee show, among other things, that the transaction in question was an absolute sale, without any trust, express or implied, or any agreement at or previous to the sale as to the disposition of the proceeds, except so far as to provide that the debts due or agreed to be paid by Phillips, the purchaser, should be allowed in part payment of the purchase-money, and he was to be secured against liabilities for or on account of his indorsements. The consideration he agreed to pay was adequate, or, at all events, not so far under a liberal valuation as to raise any presumption of fraud on that account, and he was of sufficient means and responsibility to make the purchase, and the terms of credit appear to have been fixed so as to secure the payment of the notes he gave for the purchase-money when they fell due.

The amount of the notes was not sufficient to pay all the debts of the firm, and it was the object of Many, the member thereof who made the sale, to prefer certain of their creditors, including a copartnership of Many, Baldwin & Many, in the payment of debts due to them, and to indemnify them against liability on indorsements made for their accommodation. This object, although known to Phillips at the time of his purchase, did not render it fraudulent as against the plaintiff or any of the creditors who were not to be so preferred. A debtor, notwithstanding his insolvency, is allowed to make such preference, if bona fide, and a sale for that purpose is not invalid.

It appears that one of the debts which Many wished to secure was a note made or indorsed in the firm name of Many & Lewis for the private debt of Many himself, and indorsed by the said copartnership of Many, Baldwin & Many; but I infer, from what is stated relative thereto, that it was valid and obligatory on the firm, and properly chargeable against it. But if it was otherwise the fact cannot affect Phillips, the purchaser. It is not found by the referee, nor is it claimed that he had any knowledge or notice, at the time of his purchase, of the origin or consideration of that note, or the purpose for which it was given.

I will only add, that on a careful examination of the facts found by the referee (and they are presented by his findings as favorably

Breese v. United States Telegraph Co.

to the plaintiffs as the testimony warranted), I am brought to the conclusion that there was no sufficient ground for the reversal by the general term of the judgment entered on his report, either on the ground of error upon the questions of fact or of law involved in the case.

It follows that the order of reversal should be reversed, and that the original judgment must be affirmed with costs of the appeals to the general term and to this court.

Judgment accordingly.

BREESE, appellants, v. UNITED STATES TELEGRAPH Co.

(48 N. Y. 132)

Telegraph company — condition in message as to repeating

Conditions in telegraphic messages as to repeating are reasonable; and where a person writes a dispatch and signs his name upon a blank containing a printed condition that the company will not be responsible for the correct transmission of a message unless it is repeated at an additional expense, he cannot recover for an error in transmission, the condition as to repeating not being complied with, and there being no allegation of gross negligence or willful misconduct on the part of the company. (See note, p. 532.)

ACTION to recover for an error in the transmission of a telegraphic message. The message was written and signed by G. W. Cuyler, president of the First National Bank of Palmyra, upon a blank form of defendants, containing the following provisions: "In order to guard against errors or delays in the transmission or delivery of messages, every message of importance ought to be repeated, by being sent back from the station to which it was directed to the station from which it was sent, and compared with the original message. Half the tariff price will be charged for this repeating and comparing. And it is hereby agreed between the signer or signers of this message and this company, that this company shall not be held responsible for errors or delays in the transmission or delivery of this message, if repeated, beyond the amount of fifty dollars, unlesa a special agreement for insurance be made and paid for at the time

Breese v. United States Telegraph Co.

of sending the message, and the amount of risk specified in this agreement; and that in case this message is not repeated, this company shall not be held responsible for any error or delay in the transmission or delivery of same beyond the amount paid for transmission, unless specially insured, and the amount of risk paid for and specified in this agreement at the time, nor shall this company be held liable for errors in cipher, or obscure messages." "Send the following message subject to the above conditions and agreement." The facts appear in the opinion. Judgment was rendered at general term for defendants, on a case agreed upon and submitted. Plaintiffs appealed to this court.

Charles McLouth, for appellants.

G. P. Lowery, for respondent.

...

LOTT, C. C. The questions involved on this appeal do not, as stated by the appellants' counsel, "take a wide range," but are, by the facts detailed in the case, reduced to a narrow compass. It is therein stated that the defendants are a corporation, duly incorporated under the laws of the State of New York, and engaged in the business of transmitting messages and dispatches by electric telegraph, for hire, over a line of telegraphic wires owned by them, at their office in Palmyra, in this State; that they received and duly transmitted a dispatch or message, for and on behalf of the plaintiffs, to Camman & Co., of the city of New York, directing the purchase of "seven hundred ($700) dollars in gold;" but, as the case states, by error of some of defendants' operators working between Palmyra and New York, the precise cause of which is unknown, it was received in New York, and sent and delivered to that firm, containing an order to buy "seven thousand dollars in gold." This dispatch or message was written by the plaintiffs' agent upon an ordinary blank of the defendants, containing certain provisions intended to limit their liability, particularly set forth in the statement of the case, and the principal question arises on the legal effect of those provisions.

It does not appear that the incorporation of the defendants is ander a special act, and I shall assume, as the appellants' counsel states in his second point, that they are a corporation created under the general law (chaper 265 of the Laws of 1848) providing for the incorporation and regulation of telegraph companies, and the acts