Sullivan v. United States Gas Fixture Co. — 134 A.D. 658

Majority

p. 658

Francis J. Sullivan, as Receiver of the Smith & Spector Company, Judgment Debtor in Proceedings Supplementary to Execution on a Judgment in Favor of Meyer Shapiro, Judgment Creditor, Respondent, v. United States Gas Fixture Company of the City of New York, Appellant.

Second Department,

November 19, 1909.

Headnote

Supplementary proceedings — contempt — assignment by secured creditor after restraining order — effect of appointment of receiver.

Where a judgment debtor prior to supplementary proceedings had assigned a bond and mortgage as security for a debt, the assignee in again assigning the security to another creditor of the debtor assigns merely his own interest and not the interest of the judgment debtor. Such assignment by the holder of the security is not a violation of an order in supplementary proceedings forbidding the transfer of any property belonging to the judgment debtor so as to put the assignor in contempt.

Such restraining order in supplementary proceedings is superseded by an order appointing a receiver of the debtor’s property.

Where after the appointment of a receiver in supplementary proceedings an order is entered directing a secured creditor to deliver the security to the receiver on the payment of his claim, he cannot he punished for a contempt in assigning the security to another creditor, if he was at all times ready to assign the security to the receiver on the payment of the debt, and only made the other assignment when notified by the creditor’s attorney that he intended to take no further steps in the matter.

Appeal by the defendant, the United States Gas Fixture Company of the Oity of Mew York, from an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 9th day of July, 1909, adjudging the said defendant guilty of contempt of court for willfully disobeying two orders ; one, an order in supplementary proceedings instituted by Meyer Shapiro as judgment creditor against the defendant Smith & Spector Company, judgment debtor, made March 22, 1909, requiring the appellant to appear for examination in said procéeding and forbidding it “ to transfer, or make, or suffer any other disposition of any property belonging to said judgment debtor not exempt by law from execution, or in any manner to interfere therewith, until further order in the premises ; ” the other, an order made May 11, 1909, directing the appellant, upon the payment to it of

p. 659

the sum of $870, with interest from the 1st day of February, 1909, to deliver a certain bond and mortgage, together with an assignment thereof, to Francis J. Sullivan, as receiver.

J. A. Seidman, for the appellant.

Francis J. Sullivan, respondent, in person.

It appeared that the judgment debtor had, prior to the institution of the supplementary proceedings, assigned a bond and mortgage for $2,800, owned by it, to the appellant to secure the payment of an indebtedness of $870 with interest from February 1, 1909. Information to that effect was furnished to the judgment creditor by Mr. Seidman, the appellant’s attorney, on the 12th day of April, 1909, together with an offer to surrender the same upon the payment of said indebtedness. On the 23d of April, 1909, an order was made in the supplementary proceeding appointing Francis J. Sullivan receiver of tbs,property of the judgment debtor. Said order contained no restraining order. It is not claimed that the order of May eleventh was ever served on the appellant. The motion papers upon which it was granted were, however, served on Mr. Seidman, and the judgment creditor’s attorney says that he mailed to Mr. Seidman a copy of the order with notice of entry thereof on May thirteenth, which Mr. Seidman denies receiving. On the 19th day of May, 1909, pursuant to an order of the court, the receiver sold said bond and mortgage at public sale. There is no proof that the appellant or its attorney had notice of such sale or that any tender of the moneys due the appellant was made to it or that any demand was made upon it for the assignment of said bond and mortgage prior to June 1, 1909. It appears without dispute that, for the purpose of assigning the mortgage to the receiver, Mr. Seidman procured from his client an assignment thereof in blank on the 3d day of May, 1909, which he retained until May 24, 1909, when upon the payment of the amount due his client he authorized the delivery of the said bond and mortgage and assignment to one Gustave Waclit, who was also a creditor of said judgment debtor. Because of that the appellant has been adjudged in contempt. After the appointment of the receiver, it was discovered

p. 660

that there was an apparent lien, on the. premises covered by the mortgage prior thereto; and the delay of the receiver in tendering the money due the appellant and demanding the assignment of the bond and mortgage was evidently due to the fact that the judgment creditor did not wish to pay the amount of the appellant’s debt without first removing said lien. There is no dispute that, up to May twenty-fourth, Mr. Seidman was at all times ready to deliver said bond, mortgage and assignment upon the payment of the amount due his client, that he so informed the receiver and the attorney of the judgment creditor, and that he even undertook to assist the latter in his attempt to straighten out the record, giving him all the information he possessed tending to show that the said prior lien was only apparent. He states in his affidavit that he did not authorize the delivery of the bond, mortgage and assignment to Mr. Wacht until he was informed by the attorney of the judgment creditor that the latter would not take the assignment or take further steps in the matter unless some deduction was made. That statement is not contradicted.

The order of March twenty-second did not restrain the appellant from transferring or disposing of its own property. The appellant had the legal title to the bond and mortgage as security for its debt. That title, and only that could it assign. It could not transfer the interest 'of the judgment debtor, and its assignee would take only such interest as it had. The transfer of its interest, therefore, was not a transfer or other disposition of any property of the judgment debtor. Moreover, said order, was superseded by the order appointing the receiver. (People ex rel. Morris v. Randall, 73 N. Y. 416 .) It is plain, therefore, that the appellant could not be punished for violating said order of March twenty-second.

I shall assume for the purposes of this decision that Mr. Seidman had notice of the order of May eleventh, that notice to him was notice to his client, and that the client could be punished for contempt for his act committed without its knowledge or direction. It would seem, however, that if a contempt were committed the attorney, not the client, should have been punished. But I do not think that the attorney disobeyed the order of May eleventh. That order, as I have said, directed the delivery of the bond and mortgage, together with the assignment thereof, to the receiver upon the

p. 661

payment of the sum of $870, with interest; and it is undisputed that at any time from May eleventh to twenty-fourth the receiver could have obtained the bond and mortgage upon paying said sum. It is very evident that the judgment creditor, did not wish to pay that sum without first having the prior lien discharged of record. The order required the delivery.of the assignment; that the attorney was willing to make. Being ready and willing to comply with the order, the receiver could not compel him to hold the bond and mortgage indefinitely, and the order did not require him to do so. In the face of the undisputed statement that he did not assign it until informed by the judgment creditor’s attorney that he intended to take no further steps in the matter, he could not be punished for contempt.

The order should be reversed, with ten dollars costs and disbursements, and the motion denied, with costs.

Woodward, Jenks, Burr and Rich, JJ., concurred.

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

Cases cited

People ex rel. Morris v. Randall 73 N. Y. 416 N.Y. 1878-04-23 p. 660