Columbus Watch Co. v. Hodenpyl

The plaintiffs were creditors of the firm of Stem & Stern, in New York city, and had procured attachments to be issued upon their claims as set forth in their several actions. They then brought this action for equitable relief, seeking to set aside certain judgments recovered against Stern & Stern, and the executions issued thereon against the property attached, and to restrain the sheriff from paying the executions until they, these plaintiffs, could perfect j udgments in their other actions. The grounds upon which plaintiffs base their right to such equitable relief, are a fraudulent collusion in obtaining the judgments, and the nullity of the executions for being issued against executors in contravention of the requirements of the provisions of the Code of Civil Procedure. In 1886, Joseph Stern, a member of the firm of Stern & Stern, died, leaving a will, whereby he constituted his widow, tlie defendant Dinah Stern, and his partner, the defendant Simon Stern, the executors of his estate, and therein authorized them “to conduct his interest in the business then carried on by him under the firm name of Stern & Stern, in conjunction with his brother, in such manner as they should deem proper, and for such time as they should deem for the interest of his estate.”

Thereafter, the business of the testator’s firm was carried on by the surviving partner and Joseph Stern’s executors, until November 29, 1889. On that date the judgments complained of were recovered against the firm of Stern & Stern and executions thereon issued to the sheriff. The trial j udge found that each of the judgments was for a debt justly owing by the firm to the party, or parties, in whose favor the judgment was entered ; and nothing which is pointed out by the appellants’ counsel would warrant us in saying that the findings were not justified. Indeed, their counsel bases his attacks upon the judgments upon inferences from the methods in which the judgments were recovered; rather than upon anything which amounts to evidence affecting the bona fides of the claims of the judgment creditors.

They were entered upon offers made by the defendant firm to allow judgment to be taken for the amount claimed, and, of course, in such a sense, they might be called collusive; but, if made to secure the payment of a just indebtedness, the offer to allow judgment to be entered is not a collusion which violates any rule of law, or gives the right to another and less fortunate creditor to interfere. The existence of some other purpose must be shown, which involves the commission of a fraud, or a legal injustice upon creditors, to render fraudulently collusive the preference permitted to a creditor in allowing an immediate entry of judgment in his suit. The judgments were all for goods sold and. delivered to the firm, with the exception of three, which were for moneys loaned to the firm. These latter judgments were recovered by relatives and they are particularly the subject of attack.

I think, too, that the general, term justices correctly held the burden to have been upon the plaintiffs to show that there was no such indebtedness and that it was not incumbent upon the defendants to establish its existence, or bona fides, until it had been impeached. The appellants say that the executions issued upon the judgments of the defendants were null and void; and cite § 1371 of the Code; which provides that an execution upon a judgment for a sum of money, against an executor, is regulated by §§ 1825 and 1826 of* the Code. Those sections provide that the surrogate, in such a case, must permit the execution to issue by an order and for the giving of a notice of six days. The judgments, however, were not against the estate of the deceased partner and were not within these Code provisions. They were upon debts owing by the firm of Stern & Stern and the executions were not issued against the defendants, who were executors of Joseph Stern, the deceased partner, as such executors. They were partners in the business and in affixing to the names of Simon Stern and Dinah Stern the words executor and executrix, they were used as descriptive merely of the persons. As ' executors they were not interested in the business of the firm, otherwise than as the will authorized them to take part in it. The interest in that business which testator had at the time of his decease was continued by his executors and his general estate was not engaged. The claims of the judgment creditors were contracted either upon loans to or in the course- of business with the firm of Stern & Stern, and what was subjected to the hazards of that business was the particular part of the testator’s estate invested in his firm’s business. As to such a fund, the executors became co-partners and the debts incurred in the business were claims upon the partnership primarily, and not upon the testator’s estate. This will differs from that in Willis v. Sharp, 113 N. Y., 586 ; 23 St. Rep., 670 , in that here the testator did not subject his general assets to the hazards of the business; while there the language of the will was so general, as to the powers conferred upon the executors to dispose of the whole estate in the conduct of the business, as to bind the general estate of the testatrix for the business debts. The right of executors to continue a business in which their testator had been engaged has been the subject of much consideration by the courts and the rules of construction as to the powers of executors, in such cases, are well settled. They derive those powers not from their office, but by virtue of the authority in the will. Such an authority must be explicitly found and the language of the will must be resorted to, when a question arises as to the

The question was carefully reviewed in Willis v. Sharp, supra, by Judge Andrews, and the present case presents no occasion for a further discussion. The direction to the executors, in Joseph Stern’s will, was explicit enough, and nothing appears in- the case-warranting any other conclusion than that his executors, with respect to the 'business of Stern & Stern, subjected to its risks only that part of the estate which their testator had left invested in it, and gave to creditors dealing with the new partnership the usual rights of partnership creditors.

The claim of appellants that certain of the judgments were for loans made in the lifetime of Joseph Stern, the deceased partner, and that, therefore, resort could only have been had to his executors, is untenable. In the one case, a legacy was due to a daughter from her father’s estate; but she let it remain in the business, drawing interest upon it. She thereby waived her right to insist upon its payment out of the estate and elected to become a creditor of the firm, and being such a creditor, she had the right to pursue her remedy against the firm assets for the recovery of the money loaned. In the other case, a loan had been made to the old firm, which was continued with the firm formed upon Joseph’s death, and which was reduced in amount from time to time by payments by the new firm. For the balance due in 1889 she held the firm’s note, which was placed in judgment. She thus become a creditor of the firm, and, as such, entitled to pn ceed by judgment and execution in the ordinary way. As all the claims put in judgment were upon an indebtedness of the partnership, the provisions of the Code, relied upon by the appellants, did not apply, as they undoubtedly would have, had the judgments, to collect which the executions were issued, been recovered upon claims against the estate of the deceased testator.

These views are, in substance, those stated by the learned justice who spoke for the general term, and as the other questions are sufficiently answered in his opinion, I think the judgment appealed from should be affirmed by us, with costs.

All concur.