Murray v. Gerety — 32 N.Y. St. Rep. 240

Majority

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John A. Murray, Pl’ff, v. John B. Gerety et al., Def’ts.

(City Court of New York, Trial Term

Filed June 27, 1890.)

Headnote

1. Mechanic’s lien — Fraudulent assignment or judgment does not impair lienor’s right.

Plaintiff’s assignor was a material man under defendants, who were contractors, and the entire amount remaining due under the contract was owing to said assignor. The sister of Gh rety sued the firm on a claim of herself and brother, for loans which had in fact been made to Gerety alone, and of which his partner had no knowledge. The «summons was. served on Gerety only, who employed an attorney to appear for the firm and consent to judgment, which was done without his pai tner’s knowledge. An assignment preferring such sister and brother and the father of the. other partner was executed four days before the lien was filed. Seld,,

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that the judgment and assignment were fraudulent, and were invalid as against the lien.

2. Same — Court mat declare such transfers fraudulent.

The court has power, in proceedings to foreclose a mechanic’s lien, to adjudge fraudulent judgments and assignments and other transfers which are pleaded in defense.

This is an action to foreclose a mechanic’s lien filed against premises on Second avenue, near One Hundred and Twenty-street

The lien was for $1,190, filed December 13, 1889, by William McShane & Co., and thereafter assigned to the plaintiff.

The property was owned by Weld & Mayer, who made a contract with John Van Dolsen to erect the buildings, and Van Dolsen employed Gerety & Gildea to do the plumbing and gas-fitting; work, and Gerety & Gildea purchased the material therefor from William McShane & Co.

On the trial all the facts necessary to create a lien in favor of William McShane & Co., except as to the amount, were admitted. The assignment to plaintiff was admitted. The amount which was due from Van Dolsen to Gerety & Gildea was only $1,078.94, with interest. This amount the owner deposited in the county clerk’s office, the amount so deposited aggregating $1,110.20, which amount still remains on deposit.

For the purpose of saving the necessity of proving items, it was agreed by all parties that the amount due to William McShane & Co., or to the plaintiff as their assignee, from Gerety & Gildea, for the materials furnished for said buildings, was $1,078.94, with interest. In other words, that it equalled the amount due from Van Dolsen. The owners having deposited the money and deducted the amount from Van Dolsen, no personal judgment, either for claim or for costs, is applied for in this action, either against said owners or against Van Dolsen. It is substantially conceded that the plaintiff is entitled to judgment, and that the moneys be paid over to him, unless the mechanic’s lien was defeated by an assignment made by Gerety & Gildea on December 9, 1889, four days prior to the filing of the lien.

The facts in regard to the assignment are that prior to December 9, 1889, John B. Gerety ana Patrick Gildea, Jr., were partners, composing the firm of Gerety & Gildea, the firm having been formed on or about March, 1889. For a short time previous to December 9, 1889, the members of the firm disagreed. Patrick Gildea, Sr., commenced an action against the firm for $2,500, or thereabouts, on a note made by the firm, and he served both partners in that action.

On December 5, 1889, Alice Gerety commenced an action against the firm, through her attorneys, who prepared the papers, and caused them to be served upon her brother, John B. Gerety, m front of her lawyer’s office. Gerety, upon receiving the papers, went to the office of William B. Leonard and employed him in the name of himself and his partner. Patrick Gildea, Jr., had no notice whatever of the proceeding, and he did not know Mr.

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Leonard, but Leonard was employed to appear for both defendants, and to consent to judgment for the full amount claimed in. that suit, whereupon, on December 6, 1889, judgment for $591.81 was entered against both Gerety and Gildea, and execution issued. This was all without the knowledge of Gildea. From an inspection of the complaint in that action, it appears that there were two alleged causes of action, the first being for moneys alleged to have been loaned to the firm of Gerety & Gildea by Philip Gerety, which claim was assigned to Alice Gerety, the amount being $250. The second alleged cause of action was for moneys alleged to have been loaned the firm of Gerety & Gildea by Alice Gerety, the amount being $326. Philip Gerety was at the time and still is under twenty-one years of age, and had been employed, prior to March, 1889, as an apprentice, getting $4.50 to $5.00 a week. He inherited nothing and had no source of income except his wages. Alice Gerety, the sister, inherited nothing, and had no means except those which she derived from dressmaking and keeping boarders, and had no bank account, or other place for depositing her savings.

■ The plaintiff claims that these transfers and proceedings were fraudulent and collusive, and made for the purpose of hindering and delaying creditors, and cutting off the right to make a lien on the property effective, and that by reason thereof the said transfer and proceedings do not defeat the lien filed by McShane & Co.

Thomas 0. Bnnever, for pl’ff; Beattys & Low, for def’ts.

The firm of Gerety & Gildea was, at the time the transfer was made and judgment recovered, insolvent and unable to pay its debts, and this fact was known, not only to the membei'S of the firm, but to Philip and Alice Gerety. Gerety & Gildea had no property excepting the moneys coming to them as a firm from the buildings in question, and these moneys were charged with an equity in favor of McShane & Co. for the amount of materials which they furnished, and which went into the buildings and created the fund. The assignment made by them was practically a general assignment, in which the sister and brother of Gerety and the father of Gildea were preferred, to the exclusion of McShane & Co. It was practically a general assignment, be' cause it transferred all the property of the firm.

Treated as a general assignment, it would be void, because not acknowledged or filed, and because it preferred creditors to an extent beyond one-third of the estate, Laws 1887, chap. 503, and a general assignment could not cut off the rights of McShane & Co. to file a lien. Smith v. Baily, 8 Daly, 128 ; Mandeville v. Reed, 13 Abb. Pr., 173 . Such an assignment, if void because fraudulent as to any part of it, is void in the whole. Burrill on Assignments, § 352, et seq. Treated as an assignment of a demand, it is invalid, because made to hinder, delay and defraud creditors, particularly McShane .& Co. The judgment recovered by Alice Gerety is invalid as against McShane & Co., if it was procured by fraud or collusion. Acker v. Leland, 109 N. Y., at p.

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16; 14 N. Y. State Rep., 23; Peyser v. Myers, 9 N. Y. Supp’lt., 229; 30 N. Y. State Rep., 837. That it was so procured is evident from the following circumstances: 1st. Philip Gerety, the brother, who claims to have loaned $250, kept no book or account of his alleged loans. 2d. Alice Gerety, the. sister, kept no book or account of her loans. In both cases the loans were claimed to have been made in small sums at different times. Neither Philip nor Alice had any money in any depository, and took no receipt, or obligation for the money. Gildea knew nothing whatever of the loans, and, if made at all, they were to John B. Gerety individually, and it is a fraud upon firm creditors for partners to prefer individual creditors. Saunders v. Reilly, 105 N. Y., at p. 18; 6 N. Y. State Rep., 452; Burhans v. Kelly, 17 id., 552; 2 N. Y. Suppl’t., 175. 3d. The manner of obtaining the judgment was significant, the mode of service on John B. Gerety alone, and that in front of her lawyer’s office, and the fact that immediately after the service John B. Gerety employed a lawyer to confess judgment against the firm, without the knowledge or consent of his copartner. For these, and like reasons, the transfer and the judgment and the proceedings founded upon it must be held to be no legal impediment to the lien filed by McShane & Co. Meehan v. Williams, 36 How. Pr., 75 ; 2 Daly, 367 ; Schafer v. Reilly, 50 N. Y., 61 .

This court has the same power in mechanic’s lien cases that the other courts of record exercise. They proceed alike under the same statute to attain the same end. The defendants plead the transfers in defense, and, like a general release or other document pleaded in bar of a recovery, the court may in a proper case, and even in a common law action, adjudge such instruments to be void so as to destroy their effect as a defense. The action is to foreclose the lien, and declaring fraudulent a transfer intended to defeat the lien is an incident to the jurisdiction necessary to make it effective. The case of McCorkle v. Herrman, 117 N. Y., at p. 305 ; 27 N.Y. State Rep., 333, is inapplicable to a case of fraudulent disposition, and applies only to transfers made in good faith. The present action is unlike Geery v. Geery, 63 N. Y., 252 , relied on by the defendants. In that case the action was to set aside conveyances alleged to be fraudulent, and the court held that such an action was maintainable only by a judgment creditor'who had. first exhausted his legal remedies.

As remarked before, the transfers in this case were pleaded in-defense, and it became necessary for the court to pass on their validity. Indeed, the very nature of the defense called upon the court to adjudicate this question. It follows that the plaintiff is entitled to judgment, the form of which will be settled when the decree is presented.