Merchants' National Bank v. Hagemeyer

This is an appeal from an order made at the special term, by which the assignee for the benefit of creditors of the defendants Hagemeyer was permitted, on his own petition, to be made a defendant, and directing an amendment of the summons and complaint by including such assignee as a defendant on the record. The action is upon a promissory note made by the de: fendants Hagemeyer, as partners, under their firm name of George Hagemeyer & Son, and against Chew, an indorser. The note is dated in November, 1894. On March 19, 1895, Hagemeyer made an assignment for the benefit of creditors to one Hutchinson, the petitioner. On the 22d of April, 1895, this action was begun. The defendants Hagemeyer have interposed an answer alleging that they received no consideration for the note, that it was usurious, and that it was diverted from the purpose for which it was originally intended and given. The cause is now at issue, awaiting trial. The motion to be permitted to come in as a defendant is made on the ground that the assignee is interested in the subject of the action, and he claims the right, under section 452 of the Code of Civil Procedure, to be made a defendant, in order that he may contest the plaintiff’s claim. The court below concurred in this view of his right, and made the order from which this appeal is taken.

In a common-law action, where a money judgment only is sought, a plaintiff had the right to make defendants only such persons as are directly liable upon the contract or cause of action sued upon, and he could not be compelled to bring in any other persons. Chapman v. Forbes, 123 N. Y. 532 , 26 N. E. 3 . There is no inherent power in the court to introduce a third party into the controversy, ágainst the objection of the plaintiff. But the second subdivision of section 452 of the Code of Civil Procedure has made a new rule, which authorizes a third party, on his own application, but not otherwise, to become a defendant in an action at law, under certain circumstances. Rosenberg v. Salomon, 144 N. Y. 92 , 38 N. E. 982 . The provision of the Code referred to is as follows:

“And where a person not a party to the action is interested in the subject thereof, or any real property, the title of which may. in any manner be affected by the judgment, and. makes application to the court to be made a party, it must direct him to be brought in by the proper amendment.”

The question arising on this provision of the statute is one of construction. Is the authority to intervene one applying to actions at law generally, or merely to actions in which, either directly or incidentally, the title to property may be affected? It is claimed by the appellant that the phraseblogy is susceptible of two constructions: that it should be read as authorizing the third party to intervene only when specific property is claimed. It is noticeable that all the cases to which our attention has been called, and in which the third party was permitted to come into the action, related in some way to the title or to the possession of some specific property. Thus, Rosenberg v. Salomon, supra, was an action in replevin; and People v. Albany & V. R. Co., 77 N. Y. 232 , involved title of the defendant as a lessee of property. In Johnson v. Trim Co., 79

“In the ease of Chapman v. Forbes, 123 N. Y. 532 , 26 N. E. 3 , we held that in an action at law, pure and simple, a plaintiff could not be compelled to bring in other parties, where the determination of the subject-matter involved in the action itself could be completely had between the original parties, and where the judgment in that action would form no obstacle to-any claim which a third party might thereafter make against the defendant in that action.' In an action at law of that nature, and in regard to the circumstances of that particular case, we held that the sections of the Code (sections 452, 457) did not give to the defendant the right to have another party brought in as a party defendant, where his presence was not necessary to a complete determination of their rights, as between the two parties to the action.”

Here we have both a definition of the word, viz. that it means “the subject-matter” of the action, and a statement of the condition under which the third party will be allowed to come in, viz. where the judgment will form an obstacle to any claim which a third party may make against the defendants, which includes both

“In creating debts, or establishing the relation of debtor and creditor, the debtor is accountable to no one, unless he acts mala fide. A judgment, therefore, obtained against the latter without collusion, is conclusive evidence of the relation of debtor and creditor against others—First, because it is conclusive between the parties to the record, who, in the given case, have the exclusive right to establish it; and, second, because the claims of other creditors upon the debtor’s property are, through him, and subject to all previous liens, preferences or conveyances made by him in good faith. Any deed, judgment, or assurance of the debtor—so far, at least, as they conclude him— must estop his creditors and all others. Consequently, neither a creditor nor stranger can interfere in the bona fide litigation of the debtor, or retry his cause for him, or question the effect of the judgment as a legal claim upon his estate. A creditor’s right, in a word, to impeach the act of his debtor, does not arise until the latter has violated the tacit condition annexed to the debt,—' that he has done and will do nothing to defraud his creditors. Where, however, fraud is established, the creditor does not claim through the debtor, but adversely to him, and by a title paramount, which overreaches and annuls the fraudulent conveyance or judgment by which the latter himself would be estopped. It follows, from the principles suggested, that a judgment obtained without fraud or collusion, and which concludes the debtor, whether rendered upon default, confession, or after contestation, is, upon all questions affecting the title to his property, conclusive evidence against his creditors, to establish—First, the relation of creditor and debtor between the parties to the record; and, second, the amount of the indebtedness.”

“The defendants rely upon a class of cases which hold that a judgment recovered for a debt establishes, not only the relation of debtor and creditor between the parties to the judgment, but also as to third persons, so as to preclude them, in the absence of fraud or collusion, from questioning the validity of the judgment, or denying that the debt upon which it was rendered actually existed. The case of Candee v. Lord, 2 N. Y. 269 , is a leading authority upon this point. That was a judgment creditor’s action, charging that the defendants had, under fraudulent judgments, sold the debtor’s property, and received the proceeds; and the defendant sought to assail the plaintiff’s judgment on the ground that the indorsement upon which the action was brought was forged. No fraud or collusion was alleged or shown between the parties, in the procuring of that judgment, and it was held that the defendants were bound, and could not relitigate the question of forgery in the creditor’s action. In several subsequent cases of the same general character, brought to •set aside transfers in fraud of creditor's, it was held that the defendants could not, in the absence of fraud or collusion, impeach the consideration of the judgment upon which the action was founded, or be permitted to show that the contract upon which it was rendered had in fact no existence, or was not enforceable. Burgess v. Simonson, 45 N. Y. 225 ; Carpenter v. Osborn, 102 N. Y. 552 , 7 N. E. 823 ; Decker v. Decker, 108 N. Y. 128 , 15 N. E. 307 .’’

It is immaterial whether the judgment was recovered before or after the assignment was made. In Candee v. Lord the plaintiff’s judgment was recovered in 1844, and the judgment attacked was in 1843, and the property conveyed was also transferred prior to the recovery of the plaintiff’s judgment. The cases cited establish the rule as to the binding force of the judgment, except where it is recovered by fraud or collusion. And it may be said, in addition, that such a judgment could be made the basis of a creditor’s bill to set aside the assignment, and could not be questioned by the assignee, and he would be powerless to protect the assigned estate against it. Young v. Heermans, 66 N. Y. 374 .

We think, for the reasons above given, the order appealed from should be affirmed, with costs.

O’BRIEN and WILLIAMS, JJ., concur.

I cannot concur with Mr. Justice PATTERSON. It has been expressly held by the court of appeals that, but for the last sentence of section 452 of the Code, the court would have no power, in an action at law, to make any one a party to the action against the protest of the plaintiff. The plaintiff has a right " to select those that it will sue, and as it asks no judgment against the moving party, and protests against its being compelled to sue him, I do not think that he could be made a party, unless, under the express provisions of the Code, authority is given to allow him to intervene in this action, which is entirely between the plaintiff and the original defendants, its debtors. So much of section 452 as is a literal re-enactment of the old section 122 applies only to equitable actions. See Chapman v. Forbes, 123 N. Y. 532 , 26 N.

.“Where a person, not a party to the action, has an interest in the subject thereof, or in real property, the title to which may in any manner be affected by the judgment, and makes application to the court to be made a party, it must direct him to be brought in by the proper amendment.”

And in Rosenberg v. Salomon, 144 N. Y. 92 , 38 N. E. 982 , this provision was construed as applying to a person who claims an interest in specific property, where a replevin action is brought to recover possession of such property. It was there held that the applicants in that case, who claimed to be the legal owners of the property, had an interest in the subject-matter of the action—First, to have their property go in discharge of their own debt; and, next, to save and retain any possible surplus beyond; and that it was their title (namely, the applicants’ title) which is involved. This case is certainly no authority for the granting of this application. There the subject of the action was certain specific property. The applicants were the legal owners of the property, and the court of appeals held that they had an interest in the subject-matter of the action, namely, the property that the plaintiff sought to recover. This action is not brought to affect any specific property, but plaintiff seeks to recover a money judgment for the amount of a promissory note made by the original defendants. The original defendants have interposed an answer setting up a defense which, we assume, if established, will be sufficient to defeat the plaintiff’s cause of action against the defendants. The only judgment that could be rendered in this action would be a money judgment against the original defendants, and it seems to me plain that the moving party has no interest in the subject-matter, namely, the right of the plaintiff to recover a money judgment against the original defendants. By no amendment of the complaint would the plaintiff allege any cause of action against the respondent. The plaintiff has asked, and now asks, no relief against him. He is a mere volunteer seeking to interject himself into a controversy that does not concern him, and where no judgment could be granted either in his favor or against him. The Code does not give a person who is interested in the event of an action the right to intervene, but only to one interested in the subject of the action involved. It is a little difficult to understand just what is meant by the term “subject of the action,” when applied to an action which, under the old system of pleading, would be an action of debt. It was, however, defined by Peckham, J., in the case of Chapman v. Forbes, supra, as, “The subject of the action is to obtain payment of the debt due plaintiff from defendants.” And the court cites with approval the decision of Webster v. Bond, 9 Hun, 437 , and states that that case held “that a person bringing a legal action cannot be compelled to sue any person except such as he may elect to sue.” If this definition of the meaning of the term “subject of the action” at law is correct, namely, that it is the right of the plaintiff to obtain payment of the debt due from

VAN BRUNT, P. J., concurs.