App. Div.]

FIRST DEPARTMENT, JULY TERM, 1903.

It follows, therefore, that the order should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.

VAN BRUNT, P. J., PATTERSON, INGRAHAM and HATCH, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.

MICHAEL DONNELLY, Appellant, v. PATRICK J. MCARDLE, Respondent.

Action to have a bill of sale absolute in form adjudged to have been given as security only what proof is required to sustain it-fraud or mistake need not be established.

In an action brought to procure an adjudication that a bill of sale, absolute in form, executed by the plaintiff to the defendant was given as security only, it is not necessary for the plaintiff to establish fraud or mistake, but only to explain satisfactorily how the bill came to be drawn as an absolute instead of a conditional transfer; the fact that the plaintiff claims that he did not know, at the time he signed the bill of sale, that it was absolute in form is not a bar to his right to relief.

Semble, that if the plaintiff conceded that he intended to execute a bill of sale, absolute in form, but that it was understood between the parties that such bill of sale was to be held only as security, the plaintiff would still be entitled to the relief sought.

What evidence is sufficient to warrant a finding that a bill of sale, absolute in form, executed by one partner to another of the vendor partner's interest in the firm assets, was intended to be held as security for the firm's indebtedness to the vendee partner, considered.

APPEAL by the plaintiff, Michael Donnelly, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 26th day of October, 1899, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing the complaint upon the

merits.

The action is brought for the dissolution of a copartnership, for an accounting, and to have a bill of sale of the plaintiff's interest in APP. DIV.-VOL. LXXXVI,

3

FIRST DEPARTMENT, JULY TERM, 1903.

[Vol. 86. the firm to the defendant, executed on the 7th day of November, 1889, declared abandoned, rescinded and adjudged to have been taken as security for the firm's indebtedness to the defendant.

On the 27th day of April, 1887, the parties verbally agreed to form a copartnership for the purpose of dealing in scrap iron and similar articles, under the firm name of M. Donnelly & Co., and no time was specified for its continance. The appellant was to manage the business and give his entire time thereto, while the respondent was to contribute all the capital. The respondent was to receive six per cent interest on the capital invested, and the appellant was to draw twenty-five dollars a week and two dollars per day in addition for expenses. The profits and losses were to be shared and borne equally. The respondent had previously conducted and thereafter continued a separate business of the same nature at Buffalo and Albany, and he resided in the latter city. The appellant had conducted a similar business in the city of New York in partnership with one Dempsey. The parties had been friends since 1874, and in 1884 became brothers-in-law, having married sisters, and after that intimate family relations followed. The respondent had considerable property and states that he went into partnership with the appellant to help him along; the appellant claims that the respondent frequently said that all he wanted out of the business was what he had invested and interest; and respondent admits that to have been his position, but denies having so stated.

At the outset, the appellant, according to his own evidence, contributed $500, and other sums subsequently, but this is contradicted by the respondent. There was no specific agreement as to the amount of capital the respondent was to invest. He furnished capital from time to time as the necessities of the firm required, and then payments on account of the firm's indebtedness to him were made as the receipts of the business permitted. The firm had measurably increased its business, which was large and growing at the time in question. The bill of sale recited that the partnership theretofore existing between the parties was thereby dissolved; that the appellant, in consideration of one dollar, sold and transferred all his interest in the business and assets of the firm; that appellant had contributed no capital or money to the firm; that appellant agreed that Stephen J. McArdle should take charge of

App. Div.]

FIRST DEPARTMENT, JULY TERM, 1903.

the business, and to transfer to him all of the bank books, check books, money, drafts and notes belonging to the firm, and to account to respondent for any money, checks, drafts or notes belonging to the respondent that might come into his hands.

Both parties agree that respondent was dissatisfied with appellant's management of the business in the summer and fall of 1889, and talked with him concerning it every time they met. The appellant testifies, however, that the first mention of the bill of sale was made by the respondent's wife on a visit to his house the day before its execution; that she then said that her husband had sent her down to close up the business; that he was losing moneywould lose $20,000 — and had lost confidence in appellant; that he said to her in answer to this: "I have not lost confidence in him, and to show that everything is all right in this business, I will sign everything over for one dollar as security until such time as I can sell enough stock to pay him off, let him go to Albany where he belongs;" that she considered this very fair and said she would send for her lawyer and respondent to come down and fix the matter up. In his testimony as to what took place at this interview, appellant is corroborated by the testimony of his wife and niece. The appellant further testifies that the next morning the respondent's son, Stephen McArdle, mentioned in the bill of sale, then seventeen years of age, and Mr. Kelly, a member of the Albany bar, came to his place of business and said they were sent by the respondent; that the son informed him the respondent was going to give him another chance; that appellant referred them to the respondent's wife, who was stopping at his house, saying that she would tell them what he was going to do to satisfy the respondent; that they departed and returned in about an hour and arranged to go to the law office of McCall & Arnold at No. 38 Park row, where he signed the bill of sale in triplicate without reading it or having it read to him at the time, he then supposing it was the security he had offered to give; that Mr. Kelly commenced to read it to him, but he stated that was unnecessary, and that his own attorneys were in the same building, but he did not consult them.

The respondent claims that the bill of sale was intended to be absolute, and testifies that he, not his wife, first spoke to the appellant concerning it three days before its execution; that he had com

FIRST DEPARTMENT, JULY TERM, 1903.

[Vol. 86. plained to appellant that the business was in an insolvent condition and that he could not afford to let his money remain in this losing business, as he had a large family and could use the money to better advantage in Albany, and that at this interview, three days before the execution of the bill of sale, he said to appellant that he wished to close out the business as he was losing money there all the time and wanted a bill of sale of everything he had, which the plaintiff agreed to give; that on his return to Albany he instructed his attorney to draw papers so that the business would be turned over to him so that he would have full possession in case of any trouble; that nothing was said about the instrument being intended as security, and after its execution appellant's connection with the business was that of a clerk at a salary of twenty-five dollars a week and two dollars a day for expenses, which is the same as it had been before. The respondent's wife admits the visit to appellant's house at the time specified, but denies the conversation attributed to her, and claims she had nothing to do with the giving of the bill of sale; but her evidence is conflicting, and she admits having talked with appellant at that time about giving her husband a bill of sale and some paper as security. The attorney testifies that he informed appellant that respondent "was dissatisfied the way the business

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was being conducted, and he had said they had lost money from the time they had started in business up to that date, the 7th of November, and he wanted a dissolution and transfer of the business," to which appellant replied "all right;" that he then went to the law office mentioned, prepared the papers and notified appellant, who came and signed them in triplicate and was paid one dollar. The respondent's son corroborates the attorney, but says appellant's reply was, "If Mr. McArdle is dissatisfied with the management, why I am satisfied to dissolve the partnership." Both the attorney and the respondent's son deny that they had any interview with the respondent's wife prior to the execution of the bill of sale. She denies any conversation with them upon that subject, but admits that they called upon her that morning.

After the execution of the bill of sale, the appellant, the respondent's son and the attorney visited the People's Bank, where the firm had an account. The appellant's evidence is not clear as to what took place there, but the attorney and respondent's son say that an

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FIRST DEPARTMENT, JULY TERM, 1903.

official of the bank was informed of the dissolution of the firm and shown the bill of sale, and that the account was changed to respondent's name. They also visited the Columbia Bank, where the firm had an account. The appellant says the transaction there consisted in leaving a power of attorney authorizing respondent's son to draw checks, and he supposed that the firm account had been transferred to respondent's name. The attorney and respondent's son say the bill of sale was also exhibited there. A representative of the bank testified, however, that the account was not changed, but was continued in the firm name, and a power of attorney authorizing the respondent's son to draw checks was subsequently filed, and this is not controverted. No firm checks were drawn by appellant for six weeks thereafter, and all checks in the firm business during that time were drawn by respondent's son, who came to New York to represent his father and resided with appellant. It appears without substantial controversy, however, that with these exceptions, the business was in the main conducted and managed by appellant the same after as before the execution of the bill of sale. He testified that on the day after the execution of the bill of sale he met respondent at the Grand Central Station and, after some friendly general talk about the execution of the papers the day before, respondent asked him if he needed any money, to which he replied that he could use a little, and then respondent said, "You make me out a little note for whatever amount you want and I will give you a check for it," and respondent gave him a personal check on an Albany bank for $614.19 to the order of the firm, for which appellant handed him a note made in the firm name. The appellant indorsed the firm name on the check, which also bears the indorsement, “P. J. McArdle by S. J. McArdle, Atty." The check was deposited to the credit of the firm and used in the firm business. The respondent does not deny this conversation.

It appears that some five or six weeks thereafter the parties met again at the Grand Central Station, and appellant's version of the conversation which then ensued between them is as follows: "He came out to me and he said, 'Donnelly, go over and draw me $500 out of the Columbia Bank.' I said, 'I did not sign any checks since the time I signed that security paper for you.' He said, 'That is all right, the account is changed to your name.' I said,