Coope v. Bowles — 18 Abb. Pr. 442

Majority

p. 442

COOPE a. BOWLES.

Supreme Court, First District;

General Term, June, 1864.

Headnote

Beceiver.—Complaint.—Assignment for Benefit of Creditors by one Partner.—Eights of Assignee under void Assignment.—Irregular Judgment on Eeferee’s Eeport.

Where a receiver brings an action to set aside an assignment, he must state in his complaint the equity of the party, .whose rights under the order of the court appointing him he represents, to maintain the action which he attempts to prosecute. A receiver in general is not clothed with any right to maintain an action which the parties or the estate which he represents could not maintain.

He must show a cause of action existing in those parties, and that by the appointment of the court, lawfully made, in a matter where the court had jurisdiction, the power has been conferred on him, in his representative capacity as receiver, to prosecute the action. It is not enough to allege generally that he was appointed receiver in supplementary proceedings. The judgment and other facts necessary to maintain supplementary proceedings must be set forth.^[1]

An assignment of partnership property for the benefit of creditors made by a part only of the partners in the absence of others, cannot be supported, unless due authority for its execution by the absent members of the firm, or its subsequent ratification, is proven.^[2]

Where an assignment is set aside as fraudulent as against creditors, whatever moneys of the estate were paid for expenses, or to creditors under the assignment, in good faith, before the commencement of the action, should be allowed to the assignee, but not payments to himself or to his own firm.

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Where after a trial by a referee he settles the form of the judgment and directs its entry, and it is entered without any direction from a judge of the court, this is an irregularity merely, and the remedy is by motion at special term to set the judgment aside. It is not a ground of reversal on appeal.

Appeal from a judgment.

This action was brought by Henry H. Ooope as receiver, against Charles S. P. Bowles, Cushing Stetson, Wiliam B„ Bowles, Joseph S. De Agreda, Lorenzo Jove, Esteban Ponte, and Antonio Jove Ponte.

The object of the action was to set aside an assignment for the benefit of creditors, executed by or in behalf of the defendants, De Agreda, Jove, and Ponte (who were partners under the firm-name of De Agreda, Jove & Co.), to the defendant C. S. P. Bowles.

The allegation of the complaint in reference to the plaintiff’s capacity to sue as receiver, was as follows:

“ The complaint of. the plaintiff suing under the direction of this court alleges that, on the 19th day of July, 1858, he was, by an order of this court, appointed receiver of all the property, credits, and effects of or belonging to the above-named defendant, Joseph S. De Agreda, and all property belonging to the defendants, Joseph S. De Agreda, Lorenzo Jove, Esteban Ponte, and Antonio Jove Ponte as co-partners, wheresoever and whatever the same may be, with power to sell personal property and bring suits, and with all the powers of receivers in similar cases, and has filed security according to the terms of the order appointing him such receiver.”

The complaint alleged that the assignment was void by reason of fraud, and especially by the preference of fictitious claims; among others, a pretended claim in favor of C. Stetson & Co., of which firm the assignee was a party; and also insisted that it was ineffectual because it was executed by only two of the four co-partners.

The cause was tried before I. T. Williams, Esq., referee, who found that the defendants were not guilty of any of the frauds alleged; but he found as matter of fact that the assignment in question was executed by only two of four partners; that there was no proof that the executing parties held powers of attorney of a character that would authorize the execution of that instru

p. 444

ment. Also, that there was received by the firm of Stetson & Co., of the assigned estate, $21,873.81. He further found, as a matter of fact,, that the testimony offered by the defendants tending to show a ratification of the assignment by the non-executing partners was too vague, indefinite, and uncertain to establish the allegations of such ratification; and, therefore, that the executing partners had no power from the non-executing partners to execute the assignment at the time they so executed the same, and that the non-executing partners had not since that time ratified the same.

He found as matter of law that the plaintiff may legally take this objection, and that as to him the assignment is absolutely void.

He found as a matter of fact that the assignors preferred in the assignment certain sums claimed to be owing by said co-partners to the wiyes of two of them; and that the proof tending to show that said wives had separate estates, was sufficient to establish such allegation.

He therefore found as a matter of law that the assignment was not void as against the plaintiff by means of such preferences.

He further found as a matter of law that unless the said executing partners had, at the time of the execution of said assignment, full and legal power from the non-executing partners to execute the same, so as to transfer the assigned property to the assignee irrevocably at the moment of the execution of said assignment, it would be absolutely void, and that no subsequent act of ratification on the part of the non-executing partners would be sufficient to give validity to said assignment.

He therefore concluded that the plaintiff was entitled to the relief prayed for, and directed that a decree might be drawn by the plaintiff, and settled before him on notice.

The judgment was accordingly settled, and was entered by the clerk upon the direction of the referee, without any application to the court.

The defendants Bowles, Stetson, and Bowles having excepted to the report, appealed from the judgment to the court at general term.

Osborn E. Bright, for the appellant.

I. The assignment, though not executed by all the partners, was valid.

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II. The objection of want of authority to make the assignment in any number of the partners less than the whole cannot be made by the plaintiff; it can only be made, if at all, by the partners themselves. (Pierpoint a. Graham, 4 Wash. C. C., 235 ; Sheldon a. Smith, 28 Barb., 593 .)

III. Subsequent ratification of the assignment by the non-executing partners gave it validity. Pierpoint a. Graham, supra; Clement a. Brush, 3 Johns. Cas., 2 ed., 180; Sheldon a. Smith, supr a Smith a. Kerr, 3 N. Y., 144 .

IV. Material findings of fact are contrary to the evidence.

V. The decree and judgment are unauthorized and irregular.

1. The referee had no power to settle the decree nor to direct the entry of judgment. His powers, except to settle the case on appeal, were at an end when he signed his report. {Code, § 272; Hancock a. Hancock, 22 N. Y., 568 .)

The judgment should have been entered as by the court.

2. The allegations of fraud having been unsustained, the plaintiff was not entitled to the relief granted. Heither the assignee nor the preferred creditors could be required to account for moneys received and applied in good faith, in accordance with the terms of the assignment, before the commencement of the suit. (Wakeman a. Grover, 4 Paige, 24; Ames a. Blunt, 5 Ib., 13; Hawley a. James, 16 Wend., 61 , 182; Barney a. Griffin, 4 Sandf. Ch., 552 ; affirmed, 2 Comst., 395; Averill a. Loucks, 6 Barb. S. C., 470 , 471; Collumb a. Read, 24 N. Y., 505 .)

The action was commenced August 16th, 1858. Yearly the whole sum collected by the assignee was received and paid out to bona-fide preferred creditors prior to July, 1858.

3. But assuming that the assignee and the preferred creditors could be compelled to account for moneys so received and apt plied, yet C. Stetson & Co. are improperly charged with an amount which they never received. An unascertained portion of the $21,873.81 was certainly paid to other preferred creditors and to the attorneys of the assignee.

VI. Hie judgment should be reversed, and a new trial ordered.

VII. The order of reference should be vacated.

W. W. Goodrich, for the respondents.

Neither the statements of the complaint, nor the evidence adduced at the trial, gives the court jurisdiction to declare the assignment from De Agreda, Jove & Co., to Charles S. P. Bowles, void, or to set it aside. No authority is stated in the complaint or proven in the case, which will authorize the court to direct a receiver to prosecute an action for such a purpose. It is alleged that the receiver was appointed in supplementary proceedings. That is not enough. The judgment and other facts necessary to maintain supplementary, proceedings are wanting. A simple contract-creditor cannot maintain' an action to set aside an assignment for the benefit of creditors. Eeceivers are appointed by the court with the like powers with the plaintiff in this case in various other kinds of actions, as in actions between partners, <&c., but the receiver must state in his complaint the equity of the party, whose rights under the order of the court appointing him he represents, to maintain the action which he here attempts to prosecute. A receiver in general is not clothed with any right to maintain an action which the parties or the estate which he represents could not maintain.

He must show a cause of action existing in those parties, and that by the appointment of the court lawfully made, in a matter where the court had jurisdiction, the power has been conferred. on him, in his representative capacity as receiver, to prosecute the action.

The complaint and the proofs are wholly defective in these particulars. The judgment has not cured it.

The assignment was declared void. because it was not executed by all the members of the firm personally. The firm consisted of four members. Two were here and executed for themselves, and also as attorneys for the others, who were absent from the É-Staté. I think it was sufficiently proven that De Agreda held a power of attorney.from one of the absent members, Mr. Jove, authorizing him to do any act in connection with the business of the firm in- his discretion. The proof was entirely defective in showing a sufficient power of attorney from the other absent member, Mr. Ponte. The evidence of ratification as to Ponte, is also insufficient; -but as to Mr. Jove, there can be no doubt that he was satisfied with the act of his partners here, and ratified it.

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It is not necessary to pursue the examination of the facts found by the referee, or his conclusions of law, unless it be as a guide to the court in this case, should there be any future trial. It must be conceded that the assignment cannot be supported unless due authority for its execution by the absent members of the firm, or its subsequent ratification, is proven.

Whatever moneys of the estate were paid for expenses, or to creditors under the assignment, in .good faith, before the commencement of this action, should be allowed to the assignee, if the assignment should finally be held invalid. Payments to himself, or to his own firm, would not come within this principle.

The referee, it appears, settled the decree and directed its entry by the clerk, but no judge of the court has directed the entry of judgment. «The question is one of regularity merely, and is not a ground of reversal on appeal from the judgment. The question can properly arise only on a practice-motion at special term to set it aside for irregularity. The powers of the referee to hear and decide are terminated when he has made his report, with the exception that he can settle the form of the. case, and the findings of fact, and conclusions of law.

The judgment should be reversed and a new. trial ordered, with costs of the appeal to the appellants, with leave to the respondent to apply at special term to amend his complaint.

Order accordingly.