Strickland v. Laraway — 29 N.Y. St. Rep. 873

Majority

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John E. Strickland et al. Resp’ts, v. Ruth H. Laraway, App’lt.

(Supreme Court, General Term, Fourth Department,

Filed February 15, 1890.)

Headnote

1. Cbeditor’s action — Fraudulent conveyance — Assignment fob CEEDITOES.

In an action brought in December, 1888, in the nature of a creditor’s bill to set aside a conveyance made in May, 1888, by the defendant, Im

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i)y to the defendant Ruth, as in fraud of creditors, among whom as alleged were plaintiffs, it appeared that three months subsequent to the conveyance Emily made a general assignment which was immediately recorded. The assignees went into possession, and were discharged in March, 1889, before the trial of this action, and their proceedings showed a large amount of unpaid debts. No request was ever made to the assignees to bring this action. The court found the assignment valid as to the parties to it, and as to all others, until set aside, held, that such an action as the present, brought for the benefit of plaintiffs alone, could not be maintained. The assignees should have brought action; and until their refusal to do so plaintiffs had no case.

2. Assignment fob cbeditobs—Description of assignor.

An assignment reading “Emily Laraway, of the town of Croghan, Lewis county, New York,” is not void on its face, in that it fails to state the kind of business carried on by the assignees, and the place at which it was then conducted. The statute in this regard is directory.

8. Creditor's action—Right to bring determined by state of facts AT TIME OF COMMENCEMENT.

The right of a plaintiff to bring his action must be tested by the facts as they stood when he brought it. Hence the plaintiffs here, who brought action before the assignees were discharged, cannot avail themselves of the fact of the subsequent discharge to support this action now.

Appeal from judgment, entered in Lewis county, July 9, 1889, upon decision of Lewis special term April, 1889.

The action is in the nature of a creditor’s bill, based on a judgment recovered by plaintiffs against the defendant Emily Lara-way on the 24th August, 1888, for $174.17 damages, besides costs. In the complaint, after an allegation of the recovery of the judgment and the issuing and return unsatisfied of an execution, it is alleged that on the 10th May; 1888, the defendant Emily Lara-way, with intent to defraud creditors, among whom were the plaintiffs, executed and delivered to the defendant Ruth a deed of a certain house and lot in Croghan; that the deed was without consideration and Emily was then insolvent. Relief was asked that the deed be set aside as to the plaintiffs’ judgment and the premises be sold and the avails applied on plaintiffs’ judgment.

The defendants in their answers alleged, among other things, that on the 13th August, 1888, the defendant Emily in due form executed a general assignment for the benefit of creditors to Thomas P. Francis and John T. Laraway; that the assignment was recorded on the same day and the assignees accepted the trust' and took possession; that no request to the assignees to bring the action has been made and that the plaintiffs are not the proper parties to bring it.

It was found by the court in its decision that the deed from Emily to Ruth was made and received with intent to hinder, delay and defraud creditors.

It was also found as matter of fact that a general assignment was executed and delivered by Emily Laraway to John Laraway and John P. Francis on the 13th August, 1888; that it did not specifically state therein the residence, or the kind of business carried on by the debtor at the time, nor the place at which such business was then conducted and that no designation was therein made so as to identify the debtor; that it “ was made and received as a part of the same general scheme for the purpose of

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hindering, delaying and defrauding the creditors of the said Emily Laraway; ” that in March, 1889, and before the trial of this action the assignees took proceedings in the county court to account and a decree was therein duly made by which the assignees were discharged and the estate settled. As matter of law the court found that the deed from Emily to Euth was void as against plaintiffs and their judgment; that “ the said estate having been settled and the assignees duly under said assignment discharged, and there having been shown to be no other creditors, the making of the said assignment is not a bar to the maintaining of this action,” and judgment was ordered declaring the deed void as to the judgment and a lien paramount to the title of Euth.

Upon request of defendants, the court further found as matter of fact that this action was commenced about December 3, 1888, without any request by the plaintiffs to the assignees to bring the same and without their refusal to bring it, and as matter of law that the assignment transferred all the property and rights of action of the assignor to the assignees in trust for the benefit of creditors; that the assignment was valid between the parties and valid as to all other parties including the plaintiffs in collateral proceedings and until set aside; that the trust having been executed and the assigned estate distributed to the creditors entitled to the same, the assignment and the proceedings thereunder cannot be questioned by the plaintiffs in this action.

Hanibal Smith and F. F. Jaycox, for app’lt; Kilby & Kellogg, for resp’ts.

It is claimed by the defendants that the judgment, upon which this action is based, is void, on the ground that the justice, before whom the judgment was recovered, acquired no jurisdiction to render it The summons and verified complaint were personally served on the defendant by delivering to her copies thereof. The return of the constable did not show that the copies were left with her. The defendant did not appear, and thereupon the justice entered judgment for the amount demanded in the complaint Ho proof was made before the justice of the cause of action. By chap. 414 of the Laws of 1881, it is provided that in certain actions in j ustices’ courts the plaintiff may prepare in writing and verify his complaint, attach it to the summons and have them “ served upon the defendant by delivering to and leaving with him personally true copies thereof,” in which case, upon default of the defendant, he shall be deemed to have admitted the allegations of the complaint, and judgment may be entered for the amount demanded without further proof. Assume that the complaint was not sufficiently served to authorize the justice to enter judgment without further proof, that did not prevent the justice from taking proof and entering judgment accordingly. The summons was in the ordinary form, and it was served as required by § 2878 of the Code. By such service the justice acquired jurisdiction of the person, and he had jurisdiction of the subject matter. He had then power to proceed in the action to judgment. Whether he proceeded properly or entered judgment without

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proper proof, was a matter for consideration in a direct proceeding to review the judgment. In Blair v. Bartlett, 75 N. Y., 150 , it was held, with reference to a judgment by default in justice’s court, that whatever was requisite to be proved and established as facts by plaintiff in order to obtain judgment, is, so long as the judgment remains unreversed, res adjudicata between the parties and conclusive upon them. Within this principle the point raised by counsel is not available here.

It is further claimed by the defendants that, by reason of the general assignment before the recovery by plaintiffs of their judgment, the plaintiffs could not maintain this action.

The general proposition, as to the right of an assignee to maintain actions of tins kind, is not disputed by the plaintiffs, but they say the rule is not applicable to this case, for several reasons: First, the answers do not set up non-joinder of the assignees as defendants; second, the assignees have been discharged and the estate closed up; third, the assignment is void on its face; fourth, the assignment is void as made to defraud creditors, and the assignees were in collusion with these defendants.

1. The answers, in substance, alleged the execution, recording and existence of the assignment, and that the plaintiffs were not the proper parties to bring the suit There was no occason to allege the non-joinder of the assignees. The action was not in aid of the assignment. Assuming the assignment valid, as alleged, the plaintiffs under their complaint had no standing in court. The case is different from Fort Stanwix Bank v. Leggett, 51 N. Y., 552 . For there the objection that under the statute the assignee was vested with the cause of action was not taken upon the pleadings or on the trial. In that case, it is said that if the assignees were in complicity with the fraudulent parties, or refused on request to be plaintiffs, then the creditor might as plaintiff assert the right, citing Bate v. Graham, 11 N. Y., 237 . Such assertion, however, is for the benefit of the estate represented by the assignee. It was so held in the Bate case, and is now the established rule. Crouse v. Frothingham, 97 N. Y., 113 ,114, and cases cited.

The plaintiffs in the present case sought and obtained a judgment for their own benefit solely.

2. After the commencement of this action, the assignees had an accounting in the county court, and an order was made discharging them. For this reason, and upon the additional suggestion that there had been shown to be no other creditors, it was held at special term that the making of the assignment was not a bar to this action. The same evidence that showed the discharge showed the existence of a large amount of unpaid debts. There was no evidence to the contrary. There was no finding either way as matter of fact. If this fact was important to give the plaintiffs a standing, it was for them to show.

Aside from this, the query is, how can what occurred after the commencement of this action give the plaintiffs a standing, if they had no cause of action when the suit was commenced ?

If, as held in Spring v. Short, 90 N. Y., 538 , and the kindred

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subsequent cases, the assignee, or some one through him, is the only one, as between him and subsequent judgment creditors, who can maintain an action to set aside a prior conveyance as fraudulent against creditors, then plaintiffs, when they commenced this suit, had no cause of action in their own right such as they set out in their complaint. The rights of the parties must be determined at the commencement of the action. Wisner v. Ocumpaugh, 71 N. Y., 117 . Belief may be given sometimes in view of the situation at the trial, but the substantial cause of action must exist when the suit is commenced. Hare v. Van Deusen, 32 Barb., 92 . Whether the discharge would operate to clothe the plaintiffs with a right, it is not necessary to here determine. Under the statute, chap. 466, Laws of 1887, as amended by chap. 318, Laws of 1878, § 20, subd. 5, the discharge only operated to discharge the assignees “ from all further liability upon matters included in the accounting.” If other assets were afterwards discovered, it may be argued with some force that the assignee is still the only one to receive and administer, and that the discharge does not prevent this. In Clarkson v. Dunning, 4 N. Y. Supp., 430 ; 22 N. Y. State Rep., 73,-the discharge was in bankruptcy under a statute that authorized an absolute discharge. U. S. Rev. St., § 5096. The action was brought long after the discharge.

3. But it is said that the assignment was void on its face by reason of its failure to state the kind of business carried on by the assignor and the place at which it was then conducted. The statement in the assignment is: “ Emily Laraway, of the town of Crogkan, Lewis county, N. Y.”

In Taggart v. Herrick, decided by this court at this term, it is held that an assignment having a similar defect is not void on its face; that the statute in that regard is directory. Ante, 424.

4. Whether the assignment was voidable for fraud cannot be tried in this action in its present form. The complaint is not on that basis. The assignees are necessary parties to that issue. Russell v. Lasher, 4 Barb., 237 . Assuming the assignment is valid on its face, the plaintiffs are not in a position to assail the deed in question without also effectually assailing the assignment. Loos v. Wilkinson, 110 N. Y., 209 ; 18 N. Y. State Rep., 110. That is essential to their showing a cause of action.

If after the assignment there was collusion between the assignees and these defendants, the creditors interested in the assignment had a remedy. Matter of Cornell, 110 N. Y., 351 ; 18 N. Y. State Rep., 200. It would not operate to give the plaintiffs a cause of action in hostility to the assignment.

It follows that, as the case stood, the plaintiffs were not entitled_ to recover.

Judgment reversed on the exceptions and new trial ordered, costs to abide the event.

Harden, P. J., and Martin, J., concur.