FIRST DEPARTMENT, FEBRUARY TERM, 1903.

[Vol. 79. (Polinsky v. People, 73 N. Y. 65.) Nor is there force in the defendant's further contention, that section 63 of the Sanitary Code was repealed by section 1172 of the charter of the city of New York (Laws of 1897, chap. 378, as amd. by Laws of 1901, chap. 466), and that the State Law (Agricultural Law, Laws of 1893, chap. 338, § 22, as amd. by Laws of 1900, chap. 101) is alone controlling upon this subject. The provision of the Sanitary Code is not inconsistent with the statute, but is, in its nature, merely a more rigorous and additional prohibition or requirement, valid and binding within the city of New York.

The single question presented, therefore, for our consideration is whether the mere possession of adulterated milk in the city of New York is an offense punishable under section 63 of the Sanitary Code. In addition to this section, which has for many years been in force, and was originally adopted in 1876 and known as section 186 of the Sanitary Code, we have the prohibitions of the general State Law embodied in section 22 of the Agricultural Law, to which we have already referred. This latter provision has frequently been construed, but therein nothing is said about mere possession of adulterated milk, nor is there anything therein or in any other law of the State to the effect that such possession alone is a crime. And whether section 63 of the Sanitary Code is broad enough to make it a crime has never, so far as we know, been passed upon. It is, however, certainly a strong argument in favor of the construction that mere possession does not under the ordinance constitute a crime, to find that, during the long period that has elapsed since the section was enacted, and with all the zeal displayed by the department of health to enforce the Sanitary Code, it has never before been urged that, apart from any intention to sell, the mere possession of adulterated milk was a crime. And here, as pointed out, the complaint did not attempt to charge the defendant simply with possession, but alleged that he "held, kept and offered for sale" impure milk.

The question for our consideration is whether section 63 is susceptible of the construction that thereby the bringing in of adulterated milk for any purpose is forbidden and the possession of such milk is made a crime. The language employed is, that such impure milk shall not "be brought into, held, kept or offered for sale," and

App. Div.]

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thus it will be seen that the purpose or intent for which the adulterated milk is brought in, held, kept or offered is an essential element of the offense.

Some force is lent to this construction from the language in the opinion in the case to which we have already referred of Polinsky v. People (supra), where, speaking of the difference between the general statute then in force (Laws of 1862, chap. 467, as amd. by Laws of 1864, chap. 544) which was similar to section 22 of the Agricultural Law and the ordinance, it is said (p. 70): “The third count (of the indictment) charges an offense not embraced in the statute of 1862 but which is embraced in the ordinance, viz., bringing adulterated milk into the city of New York for sale. The statute relates only to selling or exposing impure or adulterated milk for sale. The ordinance may be violated and the offense of bringing into the city impure or adulterated milk for sale may be complete without either selling or exposing it for sale." Although not authoritative, because the question was not there presented, we have here an argument for the construction which, we think, should in this case prevail, that in the ordinance, as well as in the statute, the intent or purpose for which the milk was brought into and held within the city, namely, for sale, constituted the gravamen of the offense. In other words, the intention to sell such milk or to have it for sale was, as stated, an essential element of the offense, and mere possession alone, apart from any such intent or purpose, was not inhibited. (People v. Wright, 19 Misc. Rep. 135; People v. Kellina, 23 id. 134; People v. McDermott-Bunger Dairy Co., 38 id. 365.)

If it were the design of those who formulated the ordinance to make possession alone, or the bringing into the city alone of adulterated milk, regardless of whether it was or was not intended for sale, a crime, then language is easily susceptible of being so molded as to express that design. The ordinance being a penal one is to be strictly construed, and it is sufficient to say that the language employed is so doubtful and inconclusive that we would not be justified after the lapse of all these years in giving a broader scope than that which has heretofore been claimed for it or which in any adjudicated case it has obtained.

Having reached the conclusion, therefore, that the construction given to the ordinance by the Court of Special Sessions, that mere

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[Vol. 79.

possession alone constituted a crime, was erroneous, it follows that the judgment appealed from should be reversed and a new trial ordered.

VAN BRUNT, P. J., PATTERSON and MCLAUGHLIN, JJ., concurred; LAUGHLIN, J., concurred in result.

Judgment reversed and new trial ordered.

ARMITAGE MATHEWS, as Trustee in Bankruptcy of the CLINTON H. SMITH COMPANY, a Corporation, Respondent, v. ENGELBERT HARDT and Others, Appellants, Impleaded with Others.

An agreement made by the president of a corporation that a party advancing money shall have a lien upon its assets binds the corporation — it is valid except against judgment creditors, purchasers or lienors—it is void under the United States Bankruptcy Act where possession of the assets is taken thereunder within four months of the filing of the petition in bankruptcy.

In an action brought by a trustee in bankruptcy of a corporation to set aside as fraudulent a transfer made by it to the defendant firm, it appeared that the corporation was organized in September, 1899, and that it had no working capital whatever; that, for the purpose of obtaining a supply of working capital, the president of the corporation made an oral agreement with the firm, by which the firm agreed to advance to the corporation working capital to the extent of $35,000 or $40,000 and, in addition thereto, to discount the sales made by the corporation. This agreement provided "that when the corporation sold goods, the bills therefor should be payable to the copartnership which discounted the bills for the corporation, and that for the advances made, the copartnership should at all times have a lien upon all of the assets of every kind either then owned, or which might thereafter be acquired."

The firm performed its part of the agreement until October, 1900, when, having advanced during that period between $40,000 and $50,000, it refused to make further advances. The president of the corporation thereupon abandoned the business and a few days later the firm took possession of all the assets of the corporation and sold the same, realizing thereon about $7,000.

In December, 1900, the corporation was adjudged bankrupt and the plaintiff was appointed trustee.

Held, that the agreement, although not evidenced by a formal resolution of the board of directors or by vote of the stockholders, was binding upon the corporation;

That such agreement was, however, voidable under section 60 of the National Bankruptcy Act as being a preferential transfer made within four months of the filing of the petition in bankruptcy;

App. Div.]

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That the question whether the transfer was made within four months of the filing of the petition was controlled by the time when possession of the assets of the corporation was taken under the oral agreement and not by the time when such oral agreement was made.

Semble, that, aside from the provisions of the Bankruptcy Law, the agreement was enforcible except as against judgment creditors, purchasers or lienors who had intervened before the firm took possession of the assets of the corporation under it.

VAN BRUNT, P. J., dissented.

APPEAL by the defendants, Engelbert Hardt and others, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 12th day of May, 1902, upon the decision of the court, rendered after a trial at the New York Special Term, setting aside a certain transfer as fraudulent and appointing a referee to determine the value of the property transferred.

In pursuance of a petition filed on December 26, 1900, by certain creditors of the Clinton H. Smith Company, that corporation was duly adjudicated bankrupt and the plaintiff was appointed trustee and brought this action to set aside, as fraudulent and void as to creditors and as having been made with intent to give a preference, the transfer of property of the bankrupt company to the defendants Hardt, Von Bernuth and Krause, who, in October, 1900, had taken possession of such property by virtue of an agreement previously made with the corporation.

Clinton H. Smith had, prior to September, 1899, been in business individually and had failed and made an assignment for the benefit of creditors among whom were the defendants named and who constituted the firm of Hardt, Von Bernuth & Co. A compromise was effected with the creditors by the formation of a corporation in September, 1899, designated "The Clinton H. Smith Company" with a capital stock of $100,000, half of which was in common and half in preferred stock. The common stock was issued for the good will and trade marks of the business which had been carried on by Mr. Smith, and of the preferred stock $23,400 was issued for the machinery and merchandise which went into the corporation and such stock became his property. To the creditors was given twenty-five per cent of their claims in cash or fifty per cent in stock of the new company, and in this manner there passed to the

FIRST DEPARTMENT, FEBRUARY TERM, 1903.

[Vol. 79. firm of Hardt, Von Bernuth & Co. seventy-five shares of preferred stock and Mr. Krause was made one of the directors of the corporation. The new company had thus no working capital whatever, and Mr. Smith, who was made its president and was also made a director, applied to Hardt, Von Bernuth & Co. at the time of the organization and requested the advance of cash to the extent of $35,000 or $40,000 to enable the corporation to carry on its business. He proposed that the firm should cash the bills representing the sales made, and, in addition, advance, as required, moneys to the amounts stated. This latter was to be an open credit over and above what was advanced on the discount of the sales of the corporation.

It was thereupon orally agreed between them "that when the corporation sold goods, the bills therefor should be payable to the copartnership which discounted the bills for the corporation, and that for the advances made, the copartnership should at all times have a lien upon all of the assets of every kind either then owned, or which might thereafter be acquired." This agreement as stated was made about the time of the organization of the corporation; and thereafter the firm of Hardt, Von Bernuth & Co. continued to make the advances requested and to discount the sales made by the corporation down to about the 1st of October, 1900, when Mr. Smith made an application for additional capital, and the defendants, having up to that time advanced between $40,000 and $50,000, refused to advance more. Thereupon Mr. Smith resigned as presi dent and as a director of the corporation and abandoned the business. A few days later the defendants, Hardt, Von Bernuth and Krause, took possession of the machinery, goods, merchandise, accounts and practically all the assets of the corporation, which thereafter they sold, not realizing, however, anything like a sufficient amount to pay the indebtedness to them.

It appears that at the date when the defendants took possession, in October, 1900, the corporation was insolvent, and it was subsequently, in December, 1900, that other creditors filed the petition of involuntary bankruptcy resulting in the plaintiff's appointment as trustee and the bringing of this action by him for a return of the property received by the defendants or its value.

The sum realized upon the sale was about $7,000, which left the defendants creditors in the sum of about $50,000, or, as stated in