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THIRD DEPARTMENT, JULY TERM, 1896.

right to take possession of the property, and accordingly delivered the same to him, but took an account of every article delivered to Hays. Templeton set forth the property so taken by Hays in the inventory made and filed by him as assignor, with this memorandum added: "The above goods are held by Daniel Hays as per bill of sale to secure endorsed paper. Bill of sale dated February 19th,

1895."

The trial court found, and I think the evidence sustains it in that finding, that the plaintiff was at that time ignorant of the facts relating to the claim of Hays, and believed in good faith that the latter had a right to the possession of the property mentioned in the bill of sale.

Thereafter Templeton appears to have been examined in supplementary proceedings, when plaintiff became cognizant of the facts in relation to Hays' claim; he thereupon, about the 21st day of May, 1895, demanded possession of such property from Hays, which was refused.

In the meantime a judgment had been recovered against Templeton by some of his creditors, and an execution thereon placed in the hands of the defendant Palmer, as sheriff of Fulton county; he made a levy upon such personal property and took possession, and refused to deliver the same to plaintiff upon demand, but claimed to possess the same by virtue of his levy under such execution, declaring the same to be the property of Templeton.

The court has found, and I think the evidence sustains it, that, at the time of the execution and the delivery to the appellant Hays of the mortgage and bill of sale, or chattel mortgage, on the 19th day of February, 1895, neither Hays nor Templeton contemplated an assignment by Templeton for the benefit of creditors, nor deemed that the same was imminent; and further finds that the assignment for the benefit of creditors was no part of any scheme contemplated by the assignor or the mortgagee to benefit the said mortgagee in any manner, nor as a protection to any fraud, in fact or in law, respecting the giving of the said mortgage, bill of sale, or chattel mortgage, or the retention of either of them from the records.

The contention is made here, upon the part of the appellants, that the assignment was fraudulent and void, and that, therefore, the plaintiff, as assignee, cannot maintain this action.

THIRD DEPARTMENT, JULY TERM, 1896.

[Vol. 8.

To set aside an assignment upon the ground of fraud, the evidence must establish a fraudulent intent on the part of the assignor at the time of the execution of the instrument, and that fraudulent intent must be proved; it will not be presumed. (Shultz v. Hoagland, 85 N. Y. 464.)

And where the instrument and the acts of the parties are fairly capable of a construction consistent with innocence and the general rules of law, they should be given that construction in preference to one which would impute a fraudulent intent, or defeat the general intent and purpose of the conveyance. The instrument must be interpreted according to the intent of the parties, and, if possible, such a construction given to it as will sustain and not defeat it. (Roberts v. Buckley, 145 N. Y. 215.)

The principal acts relied upon to show fraudulent intent are the execution and giving of the real estate mortgage and the bill of sale or chattel mortgage to Hays on the nineteenth of February, with the understanding that they were not to be placed upon record, and that the assignor should continue in possession of the property and merchandise, and continue to deal with them as before, coupled with the fact that, after the assignment was made, Hays was permitted to take possession of the property described and covered by his bill of sale, or chattel mortgage.

The bill of sale or chattel mortgage was undoubtedly void as against creditors. (Mandeville v. Avery, 124 N. Y. 376; Potts v. Hart, 99 id. 168; Stephens v. Perrine, 143 id. 476.)

But conceding the bill of sale or chattel mortgage to be void as against creditors, or even fraudulent, that does not necessarily avoid the assignment, although it may be considered in determining whether there was any fraud in the assignment itself. (First Nat. Bank v. Wood et al., 86 Hun, 491; Loos v. Wilkinson, 110 N. Y. 195.)

And in considering it as merely evidence of fraud in the assignment, we must take into consideration the circumstances under which the bill was made, and whether it had any connection with the assignment itself.

It appears from the evidence in this case, and the court has found, that at the time of the execution of such bill of sale, or chattel mortgage, neither party considered an assignment imminent, and it

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THIRD DEPARTMENT, JULY TERM, 1896.

was not executed and delivered in contemplation of any future assignment; and the further fact that, upon the eve of making the assignment, the assignor refused to deliver to Hays a bill of sale in place of it, under which he might take immediate possession of the property. The circumstances attending the interview at that time between Templeton and Hays show rather that the assignment so made was in antagonism to Hays' interest under his bill of sale, or chattel mortgage, rather than in aid of it.

The subsequent delivery by the plaintiff, as assignee of Templeton, to Hays of the property described and covered by the bill of sale, or chattel miortgage, appears to have been made by the assignee in good faith and under the impression and belief that Hays was entitled to the same, and not made for the purpose of aiding and assisting in any scheme to hinder, delay or defraud the other creditors of the assignor, or to commit any fraud upon the assignment itself.

The assignment having been properly executed, and apparently in good faith, and the assignee having taken possession of the property under the assignment, his subsequent act in delivering it to Hays, or permitting him to take possession of it, cannot be held to invalidate it. (Hardmann v. Bowen, 39 N. Y. 196.)

The bill of sale or chattel mortgage being void, the title to the property covered by and described in it vested immediately in the assignee. (Tremaine v. Mortimer, 128 N. Y. 1.)

And it was not only the right but the duty of the assignee to assail such conveyance of the property, and regain possession of it or its proceeds, for the benefit of the creditors. (Matter of Cornell, 110 N. Y. 351.)

The judgment should, therefore, be affirmed, with costs.

All concurred.

Judgment affirmed, with costs.

THIRD DEPARTMENT, JULY TERM, 1896.

[Vol. 8.

JOHN A. CLUTE, Respondent, v. JOHN W. WARNER, as Receiver of THE FIRST NATIONAL BANK OF WATKINS, Appellant.

Set-off right to offset a deposit in a bank against a note of the depositor held by the bank not affected by the fact that the bank has pledged the note as collateral to its own obligation to another party.

Where the payee of a note, made for his benefit by accommodation makers, procures the same to be discounted by a bank, which subsequently pledges the note to another bank as collateral to a note of its own, and the pledgor becomes insolvent before the maturity of the accommodation paper so pledged, the payee may elect to have the note, upon which he is liable, become due at once, and may offset the claim of the bank upon that note (then returned to and held by the receiver of the bank) against the amount of the deposit which the payee had in the bank at the time when the receiver was appointed.

APPEAL by the defendant, John W. Warner, as receiver of the First National Bank of Watkins, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Schuyler on the 22d day of July, 1895, upon the decision of the court rendered after a trial at the Schuyler Special Term.

S. D. Halliday, for the appellant.

C. M. Woodward and John B. Stanchfield, for the respondent.

HERRICK, J.:

On the 18th day of January, 1894, W. W. Clute and Smith G. Clute, as accommodation makers, and for his accommodation, gave the plaintiff their note for the sum of $2,500, payable in ninety days after date, to the First National Bank of Watkins, N. Y.

On that day the plaintiff procured said note to be discounted by the First National Bank of Watkins, N. Y., and the avails thereof were placed to his credit. On the 31st day of January, 1894, the First National Bank of Watkins, N. Y., made its note for $5,000, dated that day, payable to the Third National Bank of New York, two months after date, and as collateral security for the payment of such note it gave to the Third National Bank of New York the note of plaintiff, above referred to, together with a number of others.

The First National Bank of Watkins became insolvent and the

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THIRD DEPARTMENT, JULY TERM, 1896.

defendant was appointed receiver thereof February 24, 1894. At the time of such insolvency there was deposited in said bank to the credit of plaintiff the sum of $1,381.16.

Before the commencement of this action the note given by the First National Bank of Watkins to the Third National Bank of New York had been paid, and the plaintiff's note had been returned to the receiver. The plaintiff seeks to have the deposit in the bank to his credit set off against the amount remaining due upon the note. Without further statement of facts I think the judgment herein should be affirmed.

By transferring the note in question to the Third National Bank of New York as collateral to its own note, the Watkins National Bank did not cease to be the owner thereof, and was such owner at the time it became insolvent and the receiver was appointed. (Wheeler v. Newbould, 16 N. Y. 392; Farwell v. Importers, etc., National Bank, 90 id. 483; Smith v. Savin, 141 id. 315.)

The plaintiff was primarily liable to the Watkins National Bank upon the note made by W. W. Clute and Smith G. Clute for his benefit.

While that note was not due when the bank became insolvent, and its collection could not be enforced before maturity, the plaintiff had the right to waive the additional time and elect to have it become due at that time, and to make payment thereof by applying the amount of his money in the possession of the bank to such payment. There is under such circumstances an equitable right to offset one claim against the other. (Fera v. Wickham, 135 N. Y. 223; Hughitt v. Hayes, 136 id. 163; Scott v. Armstrong, 146 U. S. 499.)

The cases last referred to contain a very thorough discussion of the principles involved, and under circumstances similar to those in this case, together with a review of previous cases, and it seems to me that it is useless to attempt a restatement here.

Judgment should be affirmed, with costs.

All concurred.

Judgment affirmed, with costs.

APP. DIV.-VOL. VIII. 6