p. 378damage was caused to the defendant, if any, by the delay in delivery of the goods. There was some evidence to show that a certain brush machine, named on a schedule given by the' plaintiff’s: assignor to the defendant, had never been delivered; but no satisfactory evidence was produced of the value of this brush machine, or the damage caused to the defendant by its nondelivery, and it appeared that the brush machine was not part of the plaintiff’s assignor’s plant, and never was at his factory.
The defense set up to all the causes of action that the plaintiff is not the real party in interest, and that the assignment to the plaintiff by her husband was invalid, and for the purpose of enabling him to gain an unlawful preference in the distribution of the assets of the corporation, I do not think well taken. Even assuming that the assignment was merely colorable, and without consideration, still it was good, in so far as it gave the plaintiff the right to sue (Sheridan v. Mayor, etc.,
68 N. Y. 30 ; Bedford v. Sherman, 68 Hun, 317 , 22 N. Y. Supp. 892 ;
Armitage v. Mace, 96 N. Y. 538 ;
Fruhauf v. Bendheim, 127 N. Y. 587 , 28 N. E. 417 ); and, even admitting that the object of the assignment was to enable the plaintiff’s assignor to get a preference over other creditors of the defendant, I do not think that the preference which it is claimed that the plaintiff or her assignor may have obtained by levy of the warrant of attachment is an unlawful preference.
The decision in the case of Throop v. Lithographing Go.,
125 N. Y. 530 , 26 N. E. 742 , was expressly based upon the statute of the state of New York, and the court says that it reached its conclusion with some hesitation, and three of the judges dissented. Under familiar rules of construction, therefore, this case is only authority upon a state of facts precisely similar to those there presented. It is well settled that the statute relied upon in the Throop Oase has no extraterritorial force (Hill v. Power Go. [Sup.] 18 N. Y. Supp. 813 ; Goats v. Donnell,
94 N. Y. 168 ); and there is no such statute in the state of New Jersey, nor do preferences of creditors by corporations seem to be prohibited in the state of New Jersey. In that state a corporation may prefer one creditor over another, and it may secure one' of the directors by mortgage, although the appointment of a receiver is at the time contemplated (Wilkinson v. Bauerle, 41 N. J. Eq. 635 , .7 Ati. 514; Whittaker v. Bank [N. J. Oh.] 29 Atl. 203 ; Bergen v. Fishing Co.,’ 42 N. J. Eq. 397 , 8 Atl. 523 ); so that, assuming everything claimed by the defendant,—such as the insolvency of the defendant, the knowledge of its insolvency on the part of the plaintiff’s assignor, and the object of his assignment to his wife, and the result of that assignment, and the levying of the warrant of attachment,—still I cannot hold that the preference which the plaintiff thus obtained by the attachment is an unlawful one.
Upon the whole case, therefore, I direct judgment for the plaintiff upon the first cause of action for the sum of $3,056.09, judgment for the defendant upon the second cause of action, judgment for the plaintiff for $92 upon the-third cause of action, and judgment for the plaintiff upon the counterclaim.
Argued before GOODRICH, P. J., and CULLEN, BARTLETT, HATCH, and BRADLEY, JJ.J. K. Long, for appellant.
P. Q. Eckerson, for respondent.
The plaintiff, as assignor of her husband, William M. Welling, sued the defendant on three causes of action,—the first for goods sold and delivered, the second for salary of the plaintiff’s assignor as president of the defendant, and the third for moneys expended for the defendant’s benefit. The referee reported in favor of the plaintiff on the first cause of action, and for part of the claim the subject of the third cause of action, and for the defendant on the second cause of action. The defendant moved for leave to tax a bill of costs on its recovery on the second cause of action. This application was denied. Judgment was entered in favor of the plaintiff on the report of the referee, with costs. From that judg
p. 379ment this appeal is taken, and the defendant gave notice of its intention to review the order denying it a bill of costs.
The learned referee wrote an elaborate opinion upon his decision of the case. It deals so fully with the questions of fact involved that it is unnecessary to review those questions further than to answer some criticisms on his decision made by the appellant. We think the answer of the defendant did not put in issue the sale and delivery of the goods claimed to have been sold by the plaintiff’s assignor to the defendant. The answer simply put in issue the value of the goods. The learned referee held that the written contracts under which these sales were made, and also the services rendered by the plaintiff’s assignor, and the subject of the claim in the second cause of action, were invalid, on account of the relation the plaintiff’s assignor bore to the defendant,—that of director. He held, however, that the defendant, having received and appropriated the goods sold, was liable for their value, apart from, the validity of the written contract. The only evidence of the value of the goods sold, which were partly manufactured, arid partly in process of manufacture, or raw stock, was their cost price. The contract belAveen the parties provided that the plaintiff’s assignor should be paid for them at such price. In his opinion the referee seems to have regarded this provision as controlling; but, as he had held i hat contract void, we do not see how the provision as to the price to be paid could have any effect. The plaintiff was only entitled to recover the fair and reasonable value of the goods. But the cost of the goods was undoubtedly some evidence of their value; in fact, in this case it was the only evidence offered on either side, and it is sufficient to uphold the finding of the referee in this respect.
No error was committed in refusing to allow the defendant to show that the goods were of less value to it than their reasonable market value. The argument of the appellant that it-should have been allowed to prove that the goods were not suitable for defendant’s purposes, or that it did not require them, is apart from any question raised by the pleadings. It did not deny that the plaintiff’s assignor sold the goods, and it did not allege any rejection. The claim that the defendant should have been allowed its counterclaim to the extent of $5,000, the value of the brush machine, Avhich it is claimed the plaintiff’s assignor agreed to sell to it, is not well founded. It was not part of the plant in Welling’s factory, in Center street, which he had agreed to sell to the defendant, but Avas then at Brooklyn, in the process of construction. The appellant asserts that it was included in the schedule part of the bill of sale subsequently executed by Welling to the defendant. I can find no evidence of this fact in the case. But, assuming it to be the fact, by that bill of sale the title passed to the defendant. There is no evidence that Welling ever converted it, or refused to deliver it. We can therefore see no ground on which this set-off or counterclaim can be sustained, though Ave differ from the referee in his opinion that the proof of the cost of the machine was not sufficient evidence to justify a finding of its value.
The plaintiff’s assignor was a director of the defendant, a foreign
p. 380corporation, organized under the laws of the state of New Jersey. Shortly before the commencement of the action, he transferred to the plaintiff his claims against the defendant. The defendant, in its answer, set forth the relation the plaintiff’s assignor bore to the defendant; the assignment to the plaintiff; alleged that at the time the defendant was insolvent, and unable to pay its debts; and that the assignment was made to the plaintiff for the benefit of the assignor, with intent to get a preference in the payment of his claims over those of other creditors of the corporation. The referee disposed of this defense on the ground that the law of this state prohibiting transfers by corporations in contemplation of insolvency did not apply to a New Jersey corporation, and that by the laws of New Jersey preferential transfers were not illegal. We are inclined to the opinion that the referee erred in his determination of the law of the state of New Jersey on this subject. The case of Montgomery v. Phillips, 53 N. J. Eq. 203 , 31 Atl. 622 , a later decision than any cited by the referee, holds that a director of an insolvent corporation cannot obtain, by the action of the board of directors, a preference over other creditors of the corporation. But, however this may be, and, also, however the question may be determined whether the laws of this state affect the disposition of property of insolvent foreign corporations doing business within this state, we think that the question does not properly arise as a defense to the action. In Throop v. Lithographing Co., 125 N. Y. 530 , 26 N. E. 742 , the question arose on a motion to vacate an attachment, which the plaintiff had obtained in the action. It was there held that the director of a domestic corporation could not, by attachment, obtain a preference in the payment of his claim. But in'that case the objection was raised by a motion to vacate the attachment, which was granted. The only other case on the subject of importance is that of Kingsley v. Bank, 31 Hun, 329 , the reasoning of which is referred to with approval by the court of appeals in the Throop Case. In the Kingsley Case a director had recovered judgment against the insolvent corporation, and, under an execution issued on the judgment, levied on the property of the corporation. The action was brought by the receiver of the corporation to set aside the judgment and execution, as creating ah illegal preference. The court held that the director had the right to bring the action, that there was no statutory restraint upon it, and that it might be necessary and proper, so as to determine the existence, validity, or extent of the claim of the director against the company. But it was held that he had no right to obtain a preference by the execution levy on the assets of the corporation. In accordance with this determination, the judgment was allowed to stand, but the execution and levy under it were set aside. Therefore, Kingsley v. Bank is authority that the facts pleaded on this subject by the defendant do not constitute a defense to the cause of action, but that relief against an unlawful preference must be obtained in another way. Here the plaintiff obtained an attachment, and we may assume has levied execution on her judgment uuon the attached property. If the proceedings taken by the plaintiff to obtain satisfaction of her
p. 381claim have resulted in an unlawful preference in favor of a director or officer of the corporation against other creditors, the defendant may obtain relief by a motion to vacate her attachment, and to set aside the execution, or the receiver of the corporation may maintain an action to set aside such attachment and execution; but we think that the facts shown do not constitute a defense to the action.
We are of opinion that the defendant was improperly denied its costs. As to the second cause of action, it obtained, not a nonsuit, but an affirmative finding in its favor that “judgment should be entered for the defendant upon the second cause of action set forth in the complaint,” upon the ground that “the contract upon which said cause of action is based is invalid.” This effectively disposed of that cause of action, lío new suit upon it can ever be brought. It is, therefore, precisely such a case as is stated in the opinion of Judge O’Brien in Burns v. Railroad Co., 135 N. Y. 268 , 31 N. E. 1080 , entitles the defendant to his costs, within the -provisions of the Code. In Moosbrugger v. Kaufman, 7 App. Div. 380 , 40 N. Y. Supp. 213 , the appellate division in the Fourth department, by a vote of three to two, in a case substantially the same as that now before us, held that the defendant was not entitled to costs. We look upon this decision as opposed to the doctrine of the Burns Case; and, Avhile it may be that the statement of the court of appeals on this question was obiter, and not necessary to the determination of the question before it, it certainly was related to the subject-matter, and fairly proceeded from its discussion. It should, therefore, be regarded as controlling authority. The case of Dougherty v. Insurance Co., 3 App. Div. 317 , 38 N. Y. Supp. 258 , is not in point. There there was not a decision of the second cause of action in favor of the defendant. On the contrary, the plaintiff on that cause of action recovered three dollars.
Judgment appealed from should be affirmed, with costs, except that the order appealed from should be reversed, with $10 costs and disbursements, and motion granted, with $10 costs; and that such costs and the costs of the action as they may be taxed by the defendant be applied upon the judgment hereby affirmed, and such judgment reduced accordingly. All concur.