New York County NyArchives Court.....Rothschild, Sigmund Vs. Emanuel Salomon 1889
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Source: Reports Of Cases - New York
Written: 1889

First Department, May Term, 1889.

SIGMUND ROTHSCHILD and Others, Appellants, v. EMANUEL SALOMON and Others, 
Respondents.

Assignment — a withdrawal from the firm assets, before an assignment, of money 
for the future living expenses of the parties, and a false entry in the firm 
books thereof, vitiate the assignment.

In an action, brought to set aside an assignment for the benefit of creditors on 
the ground that the assignors had reserved money out of the assets of the firm 
for the benefit of the individual members thereof, it appeared that the 
assignment was made on January 23, 1888; that, on January twentieth, a check was 
given to the wife of one of the assignors for $402, which was charged to 
household expenses, and on January twenty-first another check was drawn for 
$3,640, of which $600 was paid to such assignor in cash, $740 to another of the 
assignors, and $2,300 was delivered to the wife of the first-named assignor, and 
charged on the books as a loan returned to her. This whole sum of $4,042 was 
drawn for household uses. There were small bills owing for such purposes to the 
amount of $1,700, and the balance was intended to be used for living expenses 
after the making of the assignment. The charge on the books of $2,300, as a loan 
returned to Mrs. Adler, was false.

Held, that this entry made on the books of the firm showed that there was an 
intent to conceal the true facts in regard to the drawing of this money, and a 
knowledge on the part of the defendants that they had done wrong in making such 
an appropriation of the fund.

That the abstraction of this money, in anticipation of, and in preparation for 
the assignment, entered into and constituted a fraudulent element in a scheme of 
which the assignment was a part and parcel, and rendered the whole proceeding 
void.

Appeal by the plaintiffs from a judgment rendered at the New York Special Term 
in favor of the defendants, and entered in the office of the clerk of the county 
of New York on the 16th day of February, 1889.

Elihu Root, for the appellants.

B. F. Einstein, for the respondents.

Van Brunt, P. J.:

This action was brought to set aside an assignment for the benefit of creditors 
made by the defendants Emanuel Salomon and Henry Adler to the defendant Gustav 
Salomon.

The assignment is not claimed to be void for anything that appears upon its 
face. But the appellants urge that it was part of a fraudulent scheme by these 
insolvent debtors to create debts abroad by means of false representations, and 
with the proceeds to protect favored creditors at home; and that the assignment 
was part of a device to hinder, delay and defraud creditors in respect to their 
remedies against the real estate of the firm, and that the assignment is 
fraudulent and void, because of the reservation of moneys out of firm assets by 
the members of the firm. In the disposition of this appeal, the last objection 
is the only one that it is deemed necessary to consider. The assignment was made 
on the 23d of January, 1888. On the 20th of January a check was given to the 
wife of the defendant Adler for $402, which was charged to household expenses. 
On the 21st of January another check was drawn for $3,640, of which $600 was 
paid to the defendant Henry Adler, as cash, and $740 to the defendant Emanuel 
Salomon, and $2,300 was handed to Mrs. Adler, and charged on the books as a loan 
returned to her. It appears from the evidence in this case that this whole sum 
of $4,042 was drawn for household uses; that there were small bills owing to the 
amount of $1,700, and that the balance was intended to be used for living 
expenses after the making of the assignment; and that the charge in the books of 
the $2,300, as a loan to Mrs. Adler, was a false charge, no such money ever 
having been lent by her, and nothing being due to her.

It is claimed, upon the part of the defendants, that from these facts no 
fraudulent intent can be deduced, because they were advised by counsel that they 
had a right to draw certain sums of money for the purpose of subsistence, prior 
to the making of the assignment. Whether items to the extent of $4,000 could be 
sustained upon this basis is a question not necessary to be determined, for the 
reason that the fact that a false entry was made in the books in reference to 
this matter shows that there was an intent to cover up and conceal the true 
facts in regard to the drawing of this money, and a knowledge upon the part of 
the defendants that they had no right to make this appropriation of the fund.

It is true that frauds, prior to the execution of an assignment, will not always 
invalidate the assignment. In other words, there may be frauds upon an 
assignment without there being fraud in the assignment. But where the acts are 
connected together, and form one scheme, for the purpose of the disposition of 
the property of the judgment-debtors, then all the acts are to be taken 
together, and the intent governing the debtors in the doing of one act 
establishes an intent as to the whole. So, in the case of a voluntary 
assignment, where there are different acts which are performed leading up to the 
assignment, and the assignment is only the culmination of the whole thing and a 
carrying out of the whole scheme, fraud in any one of these acts will vitiate 
the whole proceeding.

In the case at bar, this money was abstracted in anticipation of and in 
preparation for the assignment. It was intended to reserve it from the operation 
of the assignment for the future benefit of the assignors, and the assignment 
was only a part and parcel of the scheme, and, therefore, the fraudulent intent 
in withholding this money permeated the making of the assignment, which was 
simply a culmination of the whole scheme, and renders the whole proceeding void. 
We do not see how, in view of the large amount abstracted, and the making of the 
false entry to cover up the same, that it is possible to overlook it, or that 
the judgment-debtors were actuated by any other motive than that of making 
future provisions for themselves by abstracting property from the reach of the 
assignment which they then contemplated making. It is true that our attention 
has been called to the case of Vietor v. Nichols (13 N. Y. St. Rep., 461). But 
the facts in that case were very different from those before the court. There 
the amount of money abstracted was limited in the extreme, and was taken for the 
purpose of paying debts which were due and not for the purpose of supporting the 
assignors and their families after the making of the assignment. We do not see 
how any other conclusion can be drawn from these conceded facts, than that there 
was in the abstraction of this money a fraudulent intent, and that it was part 
and parcel of the scheme which resulted in the assignment and which fraud must 
vitiate the whole transaction.

The judgment must be reversed and a new trial ordered, with costs to appellants 
to abide the event.

Cullen, J., concurred.

Judgment reversed and new trial ordered, with costs to appellants to abide event.

Additional Comments:
Reports of Cases Heard and Determined in the Supreme Court of the State of New 
York. Marcus T. Hun, Reporter. Volume LIX, 1889, HUN 52. Banks & Company, 
Albany, NY. 1901.

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