Le Huray v. Hotchkiss — 2 N.Y. St. Rep. 650

Majority

p. 650

George H. Le Huray, as Receiver, etc., of Kennedy, Hutchinson & Co., App’lt, v. Charles A. Hotchkiss and others, Resp’ts.

(Supreme Court, General Term, First Department,

Filed June 28, 1886.)

Headnote

Injunction, when should be dissolved—Parties—When assignees entitled to come in.

In this action it appeared that the plaintiff was the receiver of the firm of"K., H. & Co. (No. 2), which was a new firm, consisting of new partners, having nothing to do witty the transactions between the firm of K , H. & Co. (Noll) and the defendant Hotchkiss, and K., H. & Co. (No. 2) were not responsible to him in any way for any of the transactions which he had with the old firm. In March, 1882, K., H. & Co. (No. 2) sold out collaterals belonging to defendant Hotchkiss, in part satisfaction of the balance due by him to them. In May, 1882, Hotchkiss brought an action against K., H. & Go. (No. 1), and recovered December 2, 1885. On December 24, 1883 he assigned any recovery which might be had in his action against K., H. & Co. (No. 1) to Anderson & Man, his attorneys, and to his brother. This was long before the present action was begun. An injunction was obtained by plaintiff in this action, restraining the entry of judgment in said action of Hotchkiss v. K., H. & Go. (No. 1), or payment of the amount

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by any of the members of K., H. & Co. (No. 1) to Hotchkiss or his assignees, etc. His assignees asked to be made parties defendant, with leave to appear and answer the complaint, which was done, and the injunction was dissolved. Held, that the dispos.tion was the proper one; that the defendant Hotchkiss has no interest in the claim, having transferred it to the persons named, who took it subject to all equities existing against it.

Appeal from order denying motion to continue a temporary injunction.

T her on O. Strong, for app’lt; Anderson & Man, for resp’ts.

In the years 1880 and 1881 the defendants, George H. Kennedy and William J. Hutchinson, were partners under the firm name of Kennedy, Hutchinson'& Company; their business was that of buying and selling stocks and other securities, and in carrying the same for their customers on a margin.

Between the first day of July, 1880, and the first day of December, 1881, the defendant, Charles A. Hotchkiss, was a customer of that firm of Kennedy, Hutchinson & Company, and had large and numerous transactions with them.

On the 31st day of December, 1881, the above mentioned firm of Kennedy, Hutchinson & Co. was dissolved and was succeeded by another firm in which the defendant Kennedy was not a member, and in which the defendant Hutchinson was a special partner, and the defendants Elihu C. Mitchell, George H. Brower and George W. McGowan were general partners.

This new firm was also known as Kennedy, Hutchinson & Company, and we shall call it for convenience Kennedy, Hutchinson & Company, No. 2.

At the time of the dissolution of K., H. & Co., No. 1, the defendant Charles A. Hotchkiss’ account on their books showed that he was indebted to that firm in the sum of $189,035.77, against which the firm held certain stocks deposited as collateral security and certain stocks which they were carrying for him.

On the first day of January, 1882, Hotchkiss’ account was transferred to the new firm of Kennedy, Hutchinson & Co., No. 2.

Hotchkiss’ account with K., H. & Co., No. 2, was opened with the sum of $189,035.77 as a debit, and K., H. & Co., No. 1, transferred to K., H. & Co., No. 2, all of the collateral which it held for said indebtedness, consisting of 150 shares of the Dry Dock Railway Company; 50 shares of the Broadway and Seventh Avenue Railway Company, and 1,500 shares of the Hannibal and St. Joseph preferred stock.

All this was done with the knowledge and consent of Charles A. Hotchkiss, who afterwards continued his stock, transactions with the new firm.

The value of the collateral transferred to the new firm on the first day of January, 1882, was $210,875.

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The correctness of this charge of $189,035.FT, made by the new firm to Charles A. Hotchkiss, was admitted by him, together with its right to hold the said collateral as security for the said indebtedness.

The said new firm has had the benefit of the whole amount of the said charge in their account with Charles A. Hotchkiss.

The new firm brought suit against Charles A. Hotchkiss to recover the balance resulting from the said account, on the basis that the said $189,035.T7 is correct, and they have attached his property for the purpose of enforcing that clcm cl

The said K., H. & Co.- No. 2 have also sold all the collateral securities which had been received from K., H. & Co. No. 1 in hostile proceedings taken by them against the said Hotchkiss for the purpose of collecting the balance due on the said account, on the basis and assumption that the said $189,035.11 was correct. This sale was made on the 11th day of March, 1882.

After the transfer of said account and collateral, and after the sale of said securities on the 11th day of March, 1882, the said Charles A. Hotchkiss, on or about the 25th day of May, 1882, brought an action against the said firm of K., H. & Co. No. 1 for an accounting. On the 2d day of December, 1885, George H. Adams, the referee in said suit for an accounting, reported in favor of Charles A. Hotchkiss against the said firm of K., H. & Co., No. 1, for the sum of $4,194.50.

Prior to December 24, 1883, the interest of Charles A. Hotchkiss in any recovery which might be made in his action against the said firm of K., H. & Co. No. 1 had been transferred to his attorneys, E. Ellery Anderson and Frederick H. Man, and to his brother, Benjamin F. Hotchkiss.

In September, 1882, the said firm of K., H. & Co. No. 2 failed, and on the 13th day of September, 1882, the plaintiff, George H. Le Huray,' was appointed receiver of said firm.

On these facts the plaintiff, as such receiver, brought this action against the said Charles A. Hotchkiss and the members of the firm of Kennedy, Hutchinson & Co. No. 1, and the members of the firm of Kennedy, Hutchinson & Co. No. 2, and claims that as such receiver he is entitled to recover any amount which may have been found due on such accounting suit from the said firm of Kennedy, Hutchinson & Co. No. 1 to said Charles A. Hotchkiss.

On the 30th day of December, 1885, the plaintiff obtained an order from the Hon. Charles Donohue, enjoining the said Charles A. Hotchkiss from asking, demanding, collecting and receiving from George H. Kennedy and William J. Hutchinson, or either of them, the whole or any part of

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any amount decided, awarded or adjudged to be due to the said Charles A. Hotchkiss from the said Kennedy, Hutchinson & Co. Ho. 1 in said accounting suit, and also enjoining the said Charles A. Hotchkiss from entering any judgment in his favor in said action in said superior court, and also enjoining the said George H. Kennedy and William J. Hutchinson from paying anything to the said Charles A. Hotchkiss on account of the claim in said action, and also requiring the defendants in this action to show cause why the said injunction should not be continued.

The application to continue the injunction was argued before Mr. Justice Van Brunt, who, after hearing the parties, made an order, dated March 15, 1886, that E. Ellery Anderson and Frederick H. Man be made parties defendants in this action, and that the motion to continue the -injunctian be denied; that the injunction or stay in the order of December 30, 1885, be set aside.

This is an appeal taken by the plaintiff from Judge Van Brunt’s order of March 15, 1886.

It will have been perceived that K., H. & Co., No. 2, as it was designated herein, was a new firm consisting of new partners. They had nothing to do with the transactions between K., H. & Co., No. 1, and the defendant, Hotchkiss; and were not responsible to him in any way for any of the transactions which he had with the old firm. They agreed to take the account between Hotchkiss and the old firm as it stood on the first of January, 1882, with the collaterals held as security for the debit balance, and which balance was assigned to the new firm and the col-laterals transferred to and held by it.

It is quite apparent that the amount of the balance was of little consequence, provided the firm was satisfied with the collaterals, and provided, of course, that Hotchkiss assented to the transfer and agreed to the correctness of the amount charged to him by the new firm. It was conceded that Hotchkiss admitted the right of the new firm to charge him with a debit balance of §189,035.77, and it was also conceded that the value of the collaterals delivered to the new firm by the old on the 1st of January, 1882, was $210,875. It also appears that on the 11th of March, 1882, the balance due by Hotchkiss, as shown by their books, was $188,816.13, on which day they sold the collaterals belonging to him in part satisfaction of the balance due by him, and it appears that this sale was made in hostile proceedings against him, and after a demand for payment of the indebtedness then due, $188,816.13.

In May succeeding, Hotchkiss brought an action against K., H. & Co., No. 1 (the old firm), asking for an account, which resulted in a recovery by him in the sum of $4914.50.

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It also appears that on the 24th of December, 1883, the interest of Hotchkiss in any recovery which might be made in his action against the firm No. 1 was transferred to his attorneys, E. Ellery Anderson and Frederick H. Man, and to his brother, Benjamin P. Hotchkiss; and this' was long before the present action was begun. The plaintiff seems to think that by some principle of equity the money recovered by Hotchkiss from the old firm should be paid to the new one instead of being paid to Hotchkiss or his assignees.

His assignees asked by their motion to be made parties defendant to this action, and that they might have leave to appear and answer the complaint, which was done, and the injunction was dissolved.

The disposition made of it seems to be a perfectly proper one. The defendant Hotchkiss has no interest in the claim, having transferred it to the persons named, who took it, of course, subject to all the equities existing against it, if any whatever they may have been, and his assignees desired to be made parties. The plaintiff is a creditor at large, and the object of his action is to establish a lien upon the demand of Hotchkiss against the old firm which has been reduced to judgment, against all intervening equities. The facts did not disclose the existence of any lien for this demand in favor of the new firm, and its attempted assertion is confronted with the assignment made by Hotchkiss to Anderson & Man, already mentioned. -

The plaintiff’s remedy would seem to be against Hotchkiss for any sum which he owes to the new firm, and which must necessarily; spring out of a new state of facts, inasmuch as the original claim against Hotchkiss transferred to the new firm was enforced against him by the sale of his collaterals, and by suing him for the balance resulting from a charge of this amount. It is proper to observe that the new firm received exactly what it bought from the old firm, namely, a claim of $189,035 against Hotchkiss, secured by collaterals worth at the time the transfer was made $210,875.

Independently of all these facts the defendant Hotchkiss alleges in his answer that by reason of certain transactions of the new firm after the transfer of his account to them, he was greatly damaged, and that the whole balance due by him to them has been paid, and that there is a large balance of money due by the new firm to him.

Under these circumstances it seems to be beyond controversy that the disposition made of the motion in the court below was correct.

The order should be affirmed, with ten dollars costs and disbursements.

Daniels, J., concurs.