App. Div.] Second Department, November, 1911. the father has paid a debt and aided the trust by the amount paid. Twenty-five shares of this stock the father sold to Boardman for $1,000, and to discharge a debt for $1,200, and applied the money on the $5,000 indebtedness to the State Bank, a transaction already noticed, and one entirely proper in every phase of it. In the following July, 1907, Frank pledged the other twenty-five shares, reissued to the trustee as above, to the Herman Capelle Company as collateral to two notes for $1,000 each, held by Frank, and received $1,880. This transaction analyzed is this: Pledged to creditors fifty shares of stock for $1,600; redeemed by father personally, and twentyfive shares pledged for $1,880 to the Capelle Company and twenty-five shares pledged as collateral to Boardman to raise $4,000 used to release the fifty-two shares of stock held by the State Bank, with the result that the trustee held twenty-seven of those shares free, and the other twenty-five shares subject to any loss that might come to Boardman. The result of the several changes is that, while the trustee released finally and Frank used some twelve pledged shares power preferred sold to Meech and six shares common sold to Crane, it was replaced by fifty-two shares power common, twenty-seven being left free, thirty shares power common and one share chair. From deficiency in the evidence I cannot ascertain how much Frank's cash payments exceeded his receipts, but excluding unshown payments of interest, which must have been considerable, the sum does not seem to exceed $1,220 as shown by defendant's statement. If the correct view be that the father, owing honest debts to his children, could only keep the collateral in trust therefor unaffected by fraud by leaving the assigned shares untouched by him, and leaving Frederick to struggle with the load and escape the burden of it as best he could, then the assignments were fraudulent. But, as will appear later, the debt was honest; its payment was sacredly obligatory. The father's property interests were fragmentary and in precarious condition. The son was twenty-four years of age, and it required the resources of the father to readjust the loans, paying one here and contracting another there, borrowing anew and selling stock where a little could be set free. Had it not APP. DIV.- VOL. CXLVII. 9 Second Department, November, 1911. [Vol. 147. been done, all would have been sacrificed. I do not regard the father's vigilance and interposition as an evidence of fraud, but as exhibiting a sense of just obligation. It is true that the assignments were made in June after actions begun in May against Frank and Frederick to recover judgments for causes of action based on negligence arising in February, 1904, whereon judgments were recovered in January, 1907, upon which were executions returned unsatisfied, and following which were proceedings supplementary to execution and the receiver was appointed in December, 1907. These facts must be considered in arriving at a judgment concerning the nature of the acts of the defendants. The Gerard judg ment against Frank was recovered in 1894; it was assigned to Frederick, trustee; the five children paid each $2,400; the judgment was a debt on June 29, 1904; Frank had some $16,400 of the mother's estate. Why should Frank not undertake to secure these debts? And he did. The matter was urged by the son, and the father made the assignments. They were assigned for the purpose stated in the letter of July 6, 1904, inclosing them, viz., to enable the trustee to realize the amount of the Gerard judgment and to apply the excess, if any, to liquidating the father's other debts "after Nancy and Daisy are taken care of." The other debts referred to relate to money owing the estate. The father made these assignments to effect payment of an existing indebtedness to his children, and he was quite justified legally (Lehrenkrauss v. Bonnell, 199 N. Y. 240) and morally. It may be that he feared those judgment creditors would seize his property, and that he preferred to pay other creditors, even his children. Preference of creditors is not fraud. (Maass v. Falk, 146 N. Y. 34, 40.) Although Frederick, the trustee named in the assignment of the Gerard judgment had not asked the security, Frank could make legal provision for it, and much the more so without the request or consent of the beneficiaries (National Bank v. Bonnell, 46 App. Div. 302 [see opinion, HIRSCHBERG, J., 26 Misc. Rep. 541]; Clements v. Beale, 53 App. Div. 419.) It may be that the, assignment will result in the payment of the children creditors and leave his later creditors unprovided for, but that does not taint with fraud the App. Div.] Second Department, November, 1911. transfers. (Dodge v. McKechnie, 156 N. Y. 514.) Even if the father made the transfers with a fraudulent motive, the son did not participate in his guilty intention, and if the father did what he did to secure his children their debt and to make compensation in whole or in part for what he had taken from the mother's estate, his act well and honestly done is beyond other assailing creditors, although he afterwards made substitutions in the subject of the trust. (Cohnfeld v. Tanenbaum, 176 N. Y. 126.) The father's statements on his examination in supplementary proceedings, contrasting with his testimony in this action, may make against the probity of his motive, but that does not affect the son's integrity in receiving the transfers. Frank did state, it appears, that he used the dividends to some degree for his personal expenses; on the trial he stated that all were used for payments of interest or principal upon loans; but beyond this testimony as first given by Frank, not available against Frederick and the other defendants, I find no evidence that any moneys received from stocks were used for Frank's own purposes. It may be that Frank was beguiling his own children, as well as seeking to defraud other creditors, and that his claims and declarations present too many varieties to exculpate him, yet when I look at what he wrote and did on June 29 and July 5, 1904, I find that he made a valid trust, which neither he nor Frederick could undo and which could not be wrecked by any changes or manipulations that either permitted. The beneficiaries acquired interests which were beyond disturbance by misconduct on the part of the trustee or his father. It would be a dangerous doctrine that a trust may be found fraudulent because the trustee abused his office. It is urged that upon former appeals all questions here involved have been decided favorably to respondents. The appeals were from judgments dismissing the complaint. (134 App. Div. 617; 137 id. 94.) The testimony relating to the transfer was the evidence of the father in supplementary proceedings and on the trial. The court was undoubtedly influenced in its decision by the infirmities of the father's evidence, whereon the dismissal was dependent, but the present record shows by documentary evidence, aided by the evidence of the son, what the transaction was, and while Second Department, November, 1911. [Vol. 147. it may not reconcile the father's testimony, it does establish a legal status on the part of the beneficiaries that is not affected by the father's intention or action. The opinion of the court (137 App. Div. 94) relates to the appeal by Aymar. The evidence did not show that Aymar's stock was returned for a special and temporary purpose consistent with the continuance of the lien. But the present record shows that the stock was returned for the purpose of reissuing it to Frederick, trustee, and then returning to Aymar. The purpose and acts are clear and credible, inasmuch as the testimony of Frank is substantiated, as to the forty-nine shares, by the correspondence. The matter is simple. Aymar held the certificates directly from Frank. Frederick, trustee, held assignment (save twenty-five shares of power stock) of the pledgor's interest. The same result in a preferable form was secured by reissuing the stock, the trustee actually bettering himself by securing the equity in the twenty-five shares of power stock. Aymar received again precisely what was his own; the trustee lost nothing save five shares subjected to Aymar's lien, and made the gain stated. There is not the slightest evidence that Aymar had any knowledge of any fraud contemplated or effected. His action was, so far as I can discover, beyond criticism. In this connection it will be noted that much of the evidence upon which reliance is placed to find fraud on the part of the father and son is not admitted as against Aymar and the Herman Capelle Company, another pledgee of stock accused of a fraudulent holding. This is so as to Frank's evidence in supplementary proceedings received against him alone; so as to Frank's agreement with Boardman; so especially as to Aymar, the transaction with Boardman that followed, and the transaction with the United States Rattan Company; so as to much of the above history of the fifty-two shares pledged to the State Bank; so as to Capelle, the delivery of the twenty-five shares to Aymar and the exchange of certificates by Aymar; so as to Aymar and Capelle, the exchange of the eighty-five shares with the People's Trust Company; so as to Aymar and Capelle, the transaction with the Bugbee stock. It would appear that it was the executed purpose of the trial court to exclude, as to Aymar and Capelle, all evidence of subsequent App. Div.] Second Department, November, 1911. dealings with the stock by Frank, save as they were severally privy to it. With such matter absent from the record, the case against Aymar has no support, and in my judgment the finding of fraudulent participation by the trustee is not sustained. The letter from Frank to the son, dated July 6, 1904, states that the assignments are specifically to realize money to pay the Gerard judgment and to apply any excess to his indebtedness to the estate, giving a preference over the last purpose to Nancy and Daisy, Frederick's sisters. The suggested provision for Nancy and Daisy seems to have been to meet individual indebtedness of Frederick. But Frank's property could not be appointed to that purpose. So the trust is effectual only to reimburse those advancing the money for the Gerard judgment and for the several sums earlier stated, to wit, $2,900, $6,000 and $7,500, so far as they shall appear to have been used at the time of the assignment by Frank H. Cowperthwait for his individual purposes. The judgment should be reversed and a new trial granted, costs to abide the final award of costs. CARR, J., concurred. Judgment affirmed, with costs. SAMUEL BROADBENT, Respondent, v. NEW YORK EVENING JOURNAL PUBLISHING COMPANY, Appellant. Second Department, November 17, 1911. Master and servant-negligence — injury by slipping on inclined gangway - Employers' Liability Act-contributory negligenceassumption of risk. A servant suing his master to recover for personal injuries under the Employers' Liability Act is, nevertheless, bound to show freedom from contributory negligence. The statute by section 3 only modified the doctrine of contributory negligence by making the servant's negligence in continuing in employment after knowledge of the conditions causing the injury a question of fact for the jury, subject to the power of the court to set aside a verdict which is contrary to the evidence. |