which shall have refused to pay any of its notes or other obligations, when due, in lawful money of the United States, nor any of its officers or directors, shall transfer any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt, or upon any other consideration than the full value of the property paid in cash. No conveyance, assignment or transfer of any property of any such corporation by it or by any officer, director or stockholder thereof, nor any payment made, judgment suffered, lien created or security given by it or by any officer, director or stockholder when the corporation is insolvent or its insolvency is imminent, with the intent of giving a preference to any particular creditor over other creditors of the corporation, shall be valid, except as to any rights or interests which may be acquired thereunder by any person without notice or reasonable cause to believe that such conveyance, assignment, transfer, payment, judgment, lien or security would effect a preference * * * .'
Thus, in order to recover under Section 15 of the Stock Corporation Law, the plaintiff must show one of two things: (1) That the corporation had failed to meet its obligations when due, or (2) that the transferor was insolvent or imminently in danger of insolvency when it made a preferential transfer to a creditor.
Under the first sentence of Section 15, the words 'notes or other obligations' are defined to mean obligations embodied in some form of written instrument and the definition retains such limitation excluding from the meaning of 'obligations', indebtedness for merchandise or for work, labor and services upon a running account or which has not been embodied in some more or less formal writing. Tierney v. J. C. Dowd & C., Inc., 238 N.Y. 282, 144 N.E. 583.
Since, under section 70, sub. e of the Bankruptcy Act, the trustee in this action derives his right to recover property transferred in violation of the New York Stock Corporation Law if a creditor could have avoided the transfer under that law, the trustee is limited to pursuing rights of creditors and may not seek, in this action, to enforce a right of the corporation against a director for alleged illegal acts. Thus, unless there is a showing that there were creditors who were injured by the transfers above referred to, the plaintiff has failed to meet the burden of proof requisite under the statutes on which he relied, for the proofs must conform to the statutory requirements.
In Male v. National Pure Water Co. of Buffalo, Inc., 176 Misc. 743, 27 N.Y.S.2d 984, affirmed 261 App.Div. 1050, 27 N.Y.S.2d 1023, the court held that the statute making every transfer done in violation of sec. 15 void and not voidable, meant that such transfer is void only as to financially interested parties whose rights have been or will be wrongfully invaded.
In Campbell's Estate, 164 Misc. 632, 299 N.Y.S. 442, 448, the court in defining the meaning of the Act in question said: 'This section (section 15) of the Stock Corporation Law is intended for the protection of creditors existing at the time of the transfer condemned by it. It may be invoked only by creditors whose claims had then accrued. Ginsberg v. Automobile Coaching Co., 151 App.Div. 627, 629, 136 N.Y.S. 354.'
Thus, in order to impeach the transaction here complained of, it is incumbent upon the plaintiff trustee to prove not only that such transfers contravened the statutory prohibition, but also that there were existing creditors who were injured by the transfers at the time or times that the allegedly void transfers occurred and that these creditors continue as such upon the claims then existing. It is manifest that if the creditor has been paid off on the claim as it stood at the time of the transfer, he may not complain at a future date that he has been injured by the prior transfer.
There is no proof before the court as to which of the claims, if any, existed at the various dates on which the asserted preferential transfers took place. Since the trustee appears in this action entitled to have declared null and void any transfer which is fraudulent as against or voidable by any injured creditor of the bankrupt, he must show affirmatively the existence of such creditor or creditors as to each of the transfers he seeks to redeem. His failure in this case so to do is fatal to his action.
The records and exhibits before the court fail affirmatively to demonstrate the existence of any subsisting creditor who was such a creditor when the alleged fraudulent transfers were made and who continues as such at this date, with the single exception of this defendant himself. Thus, the plaintiff trustee finds himself in the anomalous situation of being compelled to rely, in support of his asserted action, upon the defendant as a creditor in order to void the transfers made to the defendant. The anomaly of the situation goes even further, however, for it is not sufficient merely that there has been an existing creditor, but it must further be a fact that such creditor was injured by the alleged void transfers.
If the creditor or creditors have suffered no loss or injury, they have no cause to complain. Caesar v. Bernard, 1913, 156, App.Div. 724, 141 N.Y.S. 659; In re Campbell's Estate, supra. While in this cause the trustee represents creditors, his rights are no greater than those of the creditors he represents. Since under the proofs before me the only creditor who might be in a position to void the alleged fraudulent transfers in point of having been an existing and subsisting creditor, is this defendant, and there being no proof that he suffered any injury or loss as such creditor, the proofs in fact being quite the opposite, it is difficult to find any positive ground on which the trustee plaintiff can rely.
The court is satisfied, for the reasons above noted, that the plaintiff cannot prevail on the third or fourth counts of this action under either of the New York statutes noted.
In view of this determination, it would seem unnecessary to discuss the question of possible or imminent insolvency of the company at any particular time. It may be pointed out as well, that under the facts incident to this case, the plaintiff can derive no benefit from section 276 of the Debtor and Creditor law of New York. Counts 3 and 4 being concerned with payments on a pre-existing debt, the alleged preferences are not assailable under this section governing fraudulent conveyances. Flierl v. Hickey, Sup., 24 N.Y.S.2d 573.
This action is brought under the authorization contained in 70, sub. e, of the Bankruptcy Act, and the trustee is subject to the restrictions and limitations explicitly and implicitly contained therein.
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