Majority
Headnote
1. Fraudulent judgments; remedy of attaching creditors.] An attaching creditor, whose attachment has been levied upon tangible-property, or several such creditors together, can maintain an action to enjoin fraudulent transferees, and judgment creditors claiming under judgments fraudulently obtained by confession or offer,, from obtaining the assets until the plaintiffs can obtain judgment.This is an action by attaching creditors to' obtain judgment—First. That the sheriff retain or deposit
All the earlier authorities are seemingly against the right to maintain such an action. In Adsit v. Butler ( 87 N. Y. 585 ), which is an authority for the position that the judgment creditor alone has a standing in court to attach a prior incumbrance as fraudulent, the court says that, “ It is essential that the plaintiff be a judgment creditor.” This rule is likewise held in federal courts, wherein it is said that “ Equity will not assume jurisdiction to reach the debtor’s
The authorities cited as establishing the right to maintain an action of this character are the cases of Bates v. Plonsky ( 28 Hun, 112 ), Keller v. Payne, Bowe v. Arnold ( 31 Hun, 256 ). In Bates v. Plonsky the attachments were levied upon the stock in trade, and the execution upon confessed judgments were levied upon the same property. These latter, and the assignment made by the defendant,, were attacked by attaching creditors as having been fraudulent -and void, and made and entered into with intent to. hinder, delay or defraud creditors, and the plaintiff, therefore, claiming priority over the general assignee and the creditors in the judgments confessed, although their attachments were in point of time subsequent. It is therein said, “ It is entirely clear that no such suit can be maintained for the vindication and establishment of the rights of the attaching creditors, if the property seized under the attachments had not been of a tangible nature.” Upon this latter ground —that the property to be reached was not tangible and was not of a nature to be levied upon by attachment—the case of Bowe v. Arnold seemingly turned, and it was therein held upon the facts of that case, the action could not be maintained.[1] In the case of Smith v. Payne (Sup. Ct. Gen. Term ; not reported) it was held that because the assignee was not made a party the action was not maintainable. The case of Keller v. Payne[2] reasserted the doctrine laid down
* To the same effect is Throop Grain Cleaner Co. v. Smith, 110 N. Y. 83 .
† † The case of Keller v. Payne (above cited), which came up on an appeal from an injunction order, was as follows : Bartlett, J. —The plaintiffs are attachment creditors of the firm of Payne, Steck & Co., consisting of the defendants, William H. Payne- and Frederick D. Steck, dealers in diamonds and gold jewelry in the *353 city of New York. In November and December, 1887, according to the affidavit of the plaintiffs, the defendants’ firm made unusually large purchases on credit, and on December 28, in the same year, the members thereof confessed judgments aggregating over §80,000 in favor of four of the defendants herein, May L. Payne, Augusta L. Bamber, William Bamber and Louise Nellis. May L. Payne is the wife of the defendant, William H. Payne, and Augusta Bamber is his mother-in-law. Subsequently the partners made a general assignment for the benefit of creditors, which was recorded on the following day. Executions-were issued upon the confessed judgments, before the plaintiffs-obtained their attachment-, and the sheriff took possession of the goods in the store of Payne, Steck & Co. under these executions. The plaintiffs nevertheless claim a lien upon these goods, by virtue of their attachment, superior to that of the execution creditors, alleging that-the judgments were fraudulently confessed for the purpose of hindering, delaying and defrauding the honest creditors of the firm of Payne, Steck & Co. They have brought this suit to have the confessed judgments and the assignment declared void ; to enforce the priority of their own claims; to compel the sheriff to retain out of the proceeds of the sale of the goods of defendants’ firm, an amount sufficient to pay their demand ; and to enjoin him from paying over, or the execution creditors from receiving, this amount. A preliminary injunction was granted, and was continued by the special term. The order also fixed the amount of the plaintiffs’ claim at §5,200, and directed the sheriff to deposit that sum, out of the proceeds of the sale, with the United States Trust Company, to the credit of this action. The defendants now appeal. I think the order appealed from may be sustained upon the authority of Bates v. Plonsky ( 28 Hun, 112 ), even as limited by the subsequent case of Bowe v. Arnold ( 31 Hun, 256 ). There, upon facts very similar to those presented here, although hardly bearing as strongly against the defendants, it was held “ that the plaintiffs were entitled to enjoin the disposition of the proceeds, until the action could be tried, for the purpose of determining the rights of the different parties to such proceeds.” See 31 Hun, 257 . If it was right to continue the injunction in Bates v. Plonsky, it was right to continue the-injunction in this suit. *354 As to the alleged invalidity of the attachment, I think there was •enough in the papers to give jurisdiction to the officer who granted •the warrant. Hence, it cannot be deemed invalid, and so long as the attachment remains in force, it suffices to give the plaintiffs the standing of attachment creditors in the present action. The order appealed from should be affirmed with costs. 'Yan Brunt, P. J., and Macomber, J., concur.
Without, therefore, expressing any opinion upon the
It should be noticed that while the facts here are alleged with a view to maintain an action in equity for an injunction until judgments can be obtained for the purpose of setting aside the Rosswog judgment, the.prayer does not ask in terms, for any such relief in this action. It should also be noticed in this case that the affidavits raise a question as to whether the claims of the several attaching creditors are due. These objections are met by the suggestion that under the Code the plaintiffs, in order to vacate the judgment charged to he fraudulent, must be judgment creditors, and -that the rule laid down in Bates v. Plonsky and Keller v. Payne permits the bringing of this action to obtain the equitable relief of keeping the fund intact by means of an ¡injunction in the action until the plaintiffs can become judg-.ment creditors. And that if plaintiffs make out such a case, -which (if they were judgment creditors) would enable them to set aside the judgment, they will in an action of this character be entitled to a judgment for an injunction. However, if the action itself upon the facts is maintainable, the prayer of the complaint is not controlling, and if not broad enough the court, in a proper case, has power to -enlarge it. Concluding, therefore, that there is authority to ,sustain the bringing of this action, it is proper to say that mpon the facts presented, the plaintiffs show ample :grounds for believing a fraud was attempted. The question raised as to the invalidity of the attachments can be disposed of in the language of the learned judge writing
For the reasons stated the motion to continue the injunction should be granted.
Cases cited
- Adsit v. Butler 87 N. Y. 585 p. 351
- Board of Public Works v. Columbia College 17 Wall. 521 p. 352
- Smith v. Railroad Co. 99 U. S. 398 p. 352