Stiefel v. Berlin

Benjamin. Blumenthal,. Otto Rothschild, and Julius Rothschild were co-partners in- business- in- the - city of New York, under the firm name- of Blumenthal' & Co¡, organized as- a. special partnership under the laws of the- state»; Blumenthal andi Otto Rothschild being the general partners, and Julius Rothschild the special partner. In the month of October, 1895; a- judgment was recovered in the city court of New York against the firm of BTumenthal & Co., upon which, execution» having been returned unsatisfied, proceedings supplementary to execution were begun, which resulted in an order appointing the plaintiff receiver of the property of the firm, and, after his appointment, he duly qualified), and assumed the duties of that office. Afterwards,, another judgment having been recovered by Spiegelberg and others against the same firm, proceedings of like- nature- were had, which resultedi in the- receivership being extended to that judgment also. In the months of September and October,. 1895, the firm, of Blumenthal & Co. was insolvent. The defendants, constituting, the firm, of Berlin & Trosky, were creditors of Blumenthal & Co., who- on the- 2-5th, 2.6th, and 27th of September, and the 16th of October, with intent to- give a preference to the defendants, paid money and transferred merchandise to them. After- the- appointment of the plaintiff as receiver, he brought this action, to set aside the transfers to the defendants, and to compel them to account to him, as receiver, in the interest of the judgment creditors whom he represented, for the

The first objection raised by the defendant is that the creditors who procured this receivership 'had not exhausted their remedy a t law--. The point be makes is that, in the action in which Spiegelberg and -others were plaintiffs, a proper -execution had. not been issued, and therefore the court had no jurisdiction to extend the receivership to the judgment recovered in that action. If this objection were well taken, it would not result in a reversal of the judgment, because there is no-question that the plaintiff was properly apx>ointed -in the judgment -in which Feigel and another were plaintiffs, -and, by virtue >of that ax>pointment, -would be -entitled to maintain this action. But the objection is snot well taken. While proceedings supplementary -to execution -are special proceedings (Code Civ. Proc. § 2433), yet they-are entitled to every .presumption of correctness which .attends any other proceeding in .a court of competent jurisdiction where the papers presented to the court, and upon which it is asked to take .action, show prima facie a case which gives it jurisdiction -to .act. That was shown by the papers presented to the city court in the case of Spiegélberg. It was for that court to-say, upon the papers presented, whether a ¡proper case was made for the issue -of an order for -examination in supplementary proceedings; -and whether the court was wrong-upon that point or not (a question we do not decide) cannot be determined collaterally. 'The ¡court had authority to ¡decide that -question, and, having decided-it, its ¡determination is conclusive until such decision has been reversed by proceedings taken in the manner ¡provided by the statute. Wright v. Nostrand, 94 N. Y. 31 , 45.

The receiver having been properly appointed, the -Code vests in him the title -of all the property of -the judgment debtor for the benefit of the -creditor in whose interest be -is - appointed. Code Civ. Proc. ■§ 2488. As the effect -of -that .appointment, he represented the creditor under whose judgment be was appointed, and he had the same right as the creditor-to prosecute-action-s to set-aside all transfers of property which -are void as -against creditors. Porter v. Williams, 9 N. Y. 142 ; Manderville v. Avery, 124 N. Y. 376 , 26 N. E. 951 . This right is expressly given to this receiver, among others, by the statute «which authorizes any receiver .©£ the property -of an insolvent-estate, corporation, association, partnership, e-r individual to set aside -such transfers. Laws 1858, c. 314; 3 Rev. St. (9th Ed.) p. 2166. The plaintiff therefore had a standing in -court to maintain this action.

The defendant -objects that there is a defect-of parties defendant, because all the -creditors -of -the firm of Blumenthal .& Go. are not made parties to this action. So far a-s this is merely a plea in abatement for defect of parties, it is -not ¡well pleaded. Wliere-sneh a.-plea"is attempted to be-set up, the rule requires that the-defendant should give the plaintiff a better writ, and he must do this by set

But there is another aspect of the case by reason of which he insists that, as it appears that there are other creditors of the estate of Blumenthal & Co., the plaintiff cannot maintain this action. The statute by virtue of which this action is brought avoids, as against the creditors of the partnership, every sale or transfer of its property made by the partnership when insolvent, with intent of giving a preference to any creditor of the firm. 1 Rev. St. p. 766, § 20. The defendant insists that this statute not only forbids the giving of a preference by the partnership, but requires the court, whenever it shall appear that the firm is insolvent, to marshal the assets of the estate in an action brought for the benefit of all the creditors of the firm, and does not authorize a diligent creditor, who has acquired a lien upon the property of the firm, to enforce his lien to the exclusion of the other creditors. His argument substantially is that the object of the statute is to enforce an equal distribution of the assets of the partnership for all its creditors, and to prevent the acquiring of a preference by one creditor over another, whether that preference shall be gained by the act of the firm, or by proceedings taken. by the creditor himself. The question thus presented is not a new one, but has been more than once decided by the courts of this state, and always in favor of the diligent creditor, and against the contention of the defendants. The precise question presented here was determined by the court of appeals in the case of Van Alstyne v. Cook, 25 N. Y. 489 ; and the reasoning of the court in the opinion there delivered is so plain and conclusive, and so thoroughly applicable to this case, that it is not necessary to repeat it, or to consider the question further.

In Varnum v. Hart, 119 N. Y. 101 , 23 N. E. 183 , a like question was presented under the statute prohibiting an insolvent corporation from assigning or disposing of its property for the payment of its debts, and prohibiting any assignment in contemplation of insolvency. The court in that case held that, while that statute prohibited the giving of any preference by a corporation, it placed no restraint whatever upon the creditors, and permitted them to pursue their remedies against the corporation in all the ways allowed by the law, and to procure satisfaction of the claim if they could. The prohibitions of the two statutes are alike, and the same principles apply to each. The case of Innes v. Lansing, 7 Paige, 583, decides nothing to the contrary of this. No such question was presented in that case, and the chancellor did not undertake to decide anything further than that a general creditor of an insolvent special partnership might, without procuring a judgment, bring an action for the marshaling of all the assets of the partnership among all the creditors. His argument conceded that the right of a single creditor to assert against the assets of the firm any lien which he had acquired, and which would give him a preference over

It is claimed that the judgment is erroneous because it was not made to appear that the firm of Blumenthal & Co. made the transfer with the intent of preferring the defendants, or that the defend.ants were shown to have any intent to procure a preference. The facts clearly establish that, when this transfer was made, the firm of Blumenthal & Co. was insolvent, and that they made this transfer .to the defendants for that reason, and with intent to pay' them in full, although they had not sufficient assets to pay their other creditors. This clearly constituted a preference, and Blumenthal & Co., who knew that its necessary effect would be to prefer the de.fendants, must have been deemed to intend the consequences of their acts. Cole v. Iron Co., 133 N. Y. 164 , 30 N. E. 847 : It will be seen by reference to the statute that if the transfer is made by the firm when insolvent, with intent to give a preference to the -creditor who receives it, that fact of itself avoids the transfer, with-out reference to the intent of the creditor to whom the payment is made. But, if it were necessary to establish that the payment was received by the defendants with the intent to procure a preference, we think the evidence fully establishes that fact. It is not necessary here to recapitulate it. It is sufficient to say that it is very clear from the testimony of the defendant Trosky that he must have known that the firm of Blumenthal & Co. was unable to pay its debts in the due course of business, and that, when he took the goods which were transferred to him, he had every reason to believe that in no other way would he be able to secure the money which was due, because the firm of Blumenthal & Co. was not able to pay. In any aspect of the case, there was sufficient evidence to warrant the finding that not only was the transfer made by Blumenthal & Co., with intent to give a preference to these defendants, but that the defendants were aware of that intent, and procured the transfer for the purpose of obtaining that preference. The learned court was right, therefore, in concluding that the transfer to the defendants was void,«and must be set aside. But the plaintiff was not entitled to receive all the proceeds of the payment made to the defendants, unless it was all required to pay the two judgments in regard to which he was appointed receiver. He was entitled to ■take these proceeds simply to pay the judgments upon which he was appointed receiver and such expenses of his receivership as the court should allow; and, when those payments were made, his lien was satisfied, and he had no further claim upon the assets of this estate. The judgment, as entered, requires the payment to him ■of all the proceeds of this merchandise, without regard to its amount. In this it is erroneous. It should be so far modified as to require the payment of the expenses of the reference which is ordered in the judgment, of the expenses of the receivership which

With this modification, the judgment should be affirmed, but without costs to either party in this court. All concur.