Fessenden v. Woods — 16 N.Y. Super. Ct. 550

Majority

p. 550

Henry P. Fessenden, Receiver, &c., Plaintiff, v. James H. Woods, Defendant.

Headnote

1. A receiver appointed in proceedings supplementary to execution to whom an assignment has been executed by the debtor of all his property, is entitled to recover from a creditor by judgment recovered subsequent to that in which such proceedings were had, but prior to his appointment, the value of property afterwards levied upon by such creditor’s direction under such subsequent judgment and sold.

'2. The title to the property in such case is vested in the receiver and his leaving it in the possession of the judgment debtor for ten months and down to the time of such levy, does not warrant the subsequent judgment creditor in treating the proceedings supplementary to execution, and the assignment to the receiver as fraudulent and void as against him, when it is not shown that the property was left in the debtor’s possession by collusion . with or by the consent of the creditor, at whose instance the receiver was appointed.

(Before Bosworth, Oh. J., and Hoffman and Woodruff, J. J.)

Submitted, November 4th;

decided, December 4th, 1858.

This is a controversy submitted without action, under the 372d section of the Code. On a case and statement of facts as follows, viz.:

“ On the 22d of December, 1855, Henry Dwight, Jr., was the owner and possessed of a black walnut buffet of the value of $600 and upwards, and mortgaged the same to James Brown and others, to secure payment of certain promissory notes then due and unpaid, amounting to a sum greatly beyond the value of the property so mortgaged. Such mortgage was on the 24th of the said month of December, 1855, duly filed in the office of the clerk of the town of Red Hook, in the county of Dutchess, in which town the said Henry Dwight, Jr., then resided, and the said buffet was and ever since has been. And for the purposes of this submission the said mortgage is. to be deemed to have been made in good faith.

“On the same 24th day of December, 1855, the said James Brown and others recovered judgment in the Supreme Court against the said Henry Dwight, Jr., upon the same debt secured

p. 551

by the said chattel mortgage, for the sum of two hundred and fifty-four thousand one hundred and three dollars and ninety-three cents; and such judgment was forthwith duly docketed in the county of New York and the county of Dutchess, and execution in the usual form issued thereon to both those counties. Afterwards, such executions having been returned unsatisfied, except in a small part not exceeding five hundred dollars, the said James Brown and others, prior to the 31st day of July, 1856, pursuant to the second chapter of the ninth title of the second part of the Code of Procedure, instituted proceedings against the said Henry Dwight, Jr., supplementary to the said execution!, and upon an affidavit showing the necessary facts, obtained an order from one of the Justices of the Supreme Court, requiring him to appear and answer concerning his property, before the said Justice, at a proper time and place in the said order specified, and prohibiting any transfer or other disposition of his property not exempted by statute from execution, and any interference therewith. This supplementary proceeding has been duly continued, by successive adjournments, until the present time; but no examination of the said Henry Dwight, Jr., has been had thereunder, nor any other proceeding taken, save the adjournments aforesaid.

“ On the 15th day of January, 1856,• the Sun Mutual Insurance Company of the City of New York, a corporation duly incorporated and existing under the laws of the State of New York, recovered in the Court of Common Pleas for the city and county of New York, a judgment against the said Henry Dwight, Jr., for nineteen thousand dollars and upwards; and the said judgment was duly docketed in the counties of New York and Dutchess. Executions on the said judgment, against the property of the said Henry Dwight, Jr., were also issued to the said counties respectively, and duly returned and filed, altogether unsatisfied. The said Henry Dwight, Jr., was a resident of the said county of Dutchess when the execution to that county was issued, and continued to reside there until it was returned.

“ On the first day of February, in the same year, the defendant, James H. Woods, also recovered judgment against the said Henry Dwight, Jr., in the Superior Court of the city of New York, for thirty-six hundred dollars and sixty-seven cents;

p. 552

which, judgment was regularly docketed in the counties of New York and Dutchess.

“ On the thirty-first day of July, eighteen hundred and fifty-six, both the said executions on the judgment recovered by the Sun Mutual Insurance Company having been returned wholly unsatisfied as aforesaid, the said company, pursuant to the second chapter of the ninth title of the second part of the Code of Procedure, instituted proceedings against said Henry Dwight, Jr., supplementary to such executions; and upon an affidavit showing the necessary facts, obtained an order from one of the judges of the said Court of Common Pleas requiring said Henry Dwight, Jr., (who was then temporarily residing in the city of New York) to appear and answer concerning his property before such Judge, at a time and place within the said county of New York, 'specified in said order, and prohibiting any transfer or other disposition of his property not exempted by statute from execution, and any interference therewith.

“ On the fifth day of August, eighteen hundred and fifty-six, the said Henry Dwight, Jr., appeared before the said Judge in pursuance of the said last mentioned order, and was examined under oath concerning his property, and thereupon the said Judge made an order, (the said James Brown and others having been notified and assenting,) appointing the plaintiff, Henry P. Fessenden, receiver of all property and estate, real or personal, legal or equitable, rights of action and equitable interests, of or belonging to the said Henry Dwight, Jr., or which were of him on the said thirty-first day of July, 1856; ■ and directing the said Henry Dwight, Jr., to execute and deliver to the said plaintiff, as such receiver, an assignment under seal of all such his property, estate, rights of action, and equitable interests; and such assignment was executed and delivered accordingly.

“ At the time of the commencement of both such supplementary proceedings, the said buffet was in the possession of the said Henry Dwight, Jr., and had been so ever since before the said twenty-second day of December, 1855.

■ ' “No copy of the said chattel mortgage to the said James Brown and others, nor any duplicate or original thereof, nor any statement of the mortgagees’ interest thereunder, was ever .filed in any town clerk’s or other office, except as aforesaid,

p. 553

although the sum intended to be secured by the said mortgage is due, and. for the purposes of this statement and proceedings, is to be considered wholly unpaid, except, in the said amount less than five hundred dollars. :

“ On the twenty-third day of June, eighteen hundred and fifty-seven, the defendant, James H. Woods, issued execution to the sheriff of the county of Dutchess against the property of the said Henry Dwight, Jr., upon the said judgment recovered in his favor; and: upon, the said'execution, caused the said buffet, then still in the possession- of the said Dwight, to be levied on and sold towards the satisfaction thereof. Prior to such sale, although not until after such levy, he had actual notice of the appointment of the plaintiff- as receiver as aforesaid, and of the said assignment to him as such. .

“The said, parties now submit the said case to the Court, the plaintiff claiming judgment against the defendant for the valué aforesaid of the said buffet, with interest, and the defendant insisting that no cause of action arises upon the facts aforesaid in favor of the plaintiff against him. .

“Dated New York, January, 1858.”

Ü.P. Fessenden, plaintiff, in person.

I. The receiver, by bis appointment, acquired an equitable title to.the buffet, subject to Brown,Brothers’ mortgage; which, in equity, was still but a mortgage.-

Upon the lapse of a year from, the filing of that mortgage, without the same being refiled, .that is on-the 25th December, 1856; which was long before the defendant’s execution was issued, the receiver’s title became absolute; because the mortgage, as against creditors, whom he represented, then ceased to be valid. (Porter v. Williams, 5 Seld., 142, 149; Charter v. Stevens, 3 Denio, 33 ; 2. R. S., 136, § 11.)

II. Whether, however,, the receiver holds the, buffet discharged of the mortgage or not, he still has the right of redemption and the right of possession which he acquired by his appointment. That right of possession was good as against all the world except the mortgagees. Unless, therefore, the defendant has succeeded to their rights, the receiver’s possessory right

p. 554

has been unjustly interfered with by the defendant. But the defendant cannot have acquired the mortgagees’ rights unless those rights first, as respected the defendant, revested in Dwight, so as to become liable to be seized under execution against him; and they could not so revest unless there had been some interest in Dwight on which they could attach; which was not the case. The true theory is, that the statute makes the mortgage void as against creditors, and if then the equity of redemption be in the debtor, he has the whole title in him, and the creditor’s execution attaches. Test the defendant’s position in another way. If Dwight had no interest in which the mortgagees’ rights could merge, it must be those rights themselves which the defendant acquired by his execution sale. But does the defendant admit any right of the receiver to redeem the buffet? If such redemption were proposed, must the whole mortgage money be paid, $200,000 and more?

ITT. The neglect of the receiver to take possession of the property raises no presumption of fraud against his title. He is not within the statute, because he does not claim under any assignment by the debtor (Porter v. Williams, 5 Seld., 147, 148), but by the appointment of the Court in invitwm. And if he were within the letter of the statute, it would not be applicable to an officer of the Court. (And see Rew v. Barber, S Cow. R., 272.)

IV". The defendant has, therefore, seized and sold property in which the receiver has either the whole title and interest, or at least a right of possession and good title against all but Brown Brothers & Co. The receiver is, therefore, entitled to judgment, and, the defendant being a stranger, to judgment for the full value of the buffet.

Y. The appointment of the receiver, considered as made under Brown Brothers’ supplementary proceedings, and at a timé when their mortgage was in full force against the world, gives him a good title to the property in question, as against the defendant’s execution.

JE. W. Stoughton, for the defendant.

I. The receiver, by virtue of his appointment as such, was

p. 555

entitled to take only such property as Dwight possessed on the 81st of July, 1856, or, at most, when the order was made.

As to all property subsequently acquired, it could be reached only by supplemental complaint or proceedings. {Browning v. Bettis, 8 Paige, 572.)

Until the 24th day of December, 1856, the mortgage referred to remained perfectly valid as against Dwight and his creditors, and on that day it ceased, as against such creditors and Iona fide purchasers for value, having no notice of the mortgage, to be of any force whatever.

It was not, therefore, an invalid or fraudulent instrument, which could have been impeached by the receiver at the date of his appointment.'

It was then perfectly valid as against him, and therefore, he, by force of such appointment, was vested with no right, title or interest in or to the property covered thereby.

If we assume that he might impeach fraudulent conveyances, made by Dwight, they would be such only as were then in existence, and at that time subject to be impeached by his creditors, or those representing them.

The receiver, therefore, had no more right to take this property because of the failure of Brown Brothers to file the mortgage, by reason whereof their right to it as against creditors ceased, than he would have had to take property acquired by Dwight subsequent to the entry of the order appointing him receiver. In other words: All the rights which the receiver acquired were such as became vested in him by virtue of,' and at the time of, bis appointment as such.

The right of creditors to take this property did not then exist, and only arose upon the failure of the Browns to file a copy of the mortgage, as above stated. Hence it follows, that no such right could have vested in the receiver in the August preceding.

II. The object of a creditor’s bill, and of proceedings supplemental to execution, is, to sequestrate, for the benefit of creditors, all such interests and property as cannot be taken upon execution.

No right to seize this property, under execution or otherwise, existed in creditors, until after the 24th of December, 1856. Up to that time, Dwight had remained in the' actual possession of

p. 556

the property mortgaged, nor bad the receiver made any attempt to take possession of, or exercise any control whatsoever over the same.

If, therefore, it could be said, that he might have taken such possession, his failure so to do, or to make any attempt in that direction until after its seizure upon execution, gave to the creditors in whose behalf it was so seized, a right prior to and stronger than any which can be set up on behalf of a receiver, whose function it is to seize and collect only such equitable interests and property as the debtor was entitled to, or as his creditors might have reached at the time of filing the bill, or of commencing supplemental proceedings, as the case may be.

By the Court.

—It is unnecessary to inquire whether the mortgage to James Brown and others is valid or not, as between the mortgagees and the other parties in this action. When the receiver was appointed he became entitled to the possession of the buffet in question, either subject to the claim upon the mortgage or discharged from its lien. He would take the property and its proceeds for the benefit of the mortgagee, if it was valid, or for the benefit of those next entitled, if they could set it aside. His title was not in either aspect varied.

The plaintiff was appointed receiver on the 5th of August, 1856, by an order made in the action brought by The Sun Mutual Insurance Company, under proceedings upon their judgment of the 31st of July, 1856. This was ten months before the execution on the judgment in favor of Woods was issued. That order divested the title and interest in the property from the judgment debtor, and vested it in the receiver. (Porter v. Williams, 5 Seld., 142; Edmonston v. McLoud, 16 N. Y. R., 544.) An assignment also is stated to have been executed.

When then the levy was made, no legal right remained in the judgment debtor. He had no property which could be seized. It was in another by operation of law. It was in the custody of the law, and of the Court appointing the receiver. And this fact became known to the execution creditor, the defendant, before the sale, although after the levy.

This might appear necessarily to determine the case in favor of the plaintiff; but yet there is one circumstance to be regarded.

p. 557

The receiver, appointed in August, 1856, neglected to take possession ; left the debtor in uninterrupted control, and in June, 1857, the execution creditor so finds it.

I think, however, that the rule which prevails as to executions, supplies an analogy to govern this case. I understand that rule to be, that if a sheriff neglect to complete a levy by a sale, with merely the acquiescence, but no positive act of interference of the first execution creditor, the right of the latter will not be superseded by a subsequent execution. (Herkimer County Bank v. Brown, 6 Hill, 232 ; Knower v. Barnard, 5 Hill, 377 .) In Cosher v. Peterson, cited, (7 Halsted, 291,) Oh. J. Kirkpatrick states the law thus: “ If the execution should not be pursued, and a subsequent one be levied on the same property, then it will always be a question whether the first was kept up merely by color, and for fraudulent purposes.” ( 1 South., 317 .)

Upon this principle, the legal title of the plaintiff, prior in date, ought I think to prevail. Whether the assent of the persons to his appointment, gives them any rights as judgment and execution creditors, need not now be inquired into.

The receiver will hold the money for those who may be entitled to it, and cannot pay it away without an order of court made when the rights of the parties are determined.

Judgment should be ordered for the plaintiff, for the value of the property, with interest from the time of the sale.

—It is not material in this case to inquire whether as between James Brown and others and the plaintiff, the mortgage to the former is a valid security or ceased to be valid as against the other judgment creditors by reason of the omission to refile (as to which see 4 Kern., 71.) The validity or invalidity of that mortgage cannot determine the rights of the parties to this suit as between themselves.

If the mortgage to Brown and others is invalid, it is alike invalid as to each of the parties to this action, and their rights must be determined by their relations to the subject, just as they would be if no such mortgage had existed.

If that mortgage is' valid as to either of these parties, it is so as:, to both, and' as 'before, their rights, between themselves, depend upon other questions.

p. 558

Whether the mortgage was valid or invalid, the plaintiff when he was appointed receiver became entitled to the possession of the buffet in question. His right to the buffet was subject to the claim of Brown and others as mortgagees only. If the lien of the mortgage had ceased as to him, then his title to the property was absolute. If such lien had not then ceased, then he acquired a right of possession and a right to redeem the property, or in other words, he had a title to the property, subject to the mortgage.

As between the plaintiff and the defendant, the plaintiff’s right and title was, at the time of his appointment, prior in time and in equity to the right of the defendant to seize the property on an execution subsequently issued.

The judgment in favor of the Sun Mutual Insurance Company, was recorded and docketed (January 15, 1856,) before the judgment in favor of the plaintiff (February 1, 1856). Pro: ceedings supplementary to execution were had at the instance of the insurance company. Dwight was enjoined against disposing of his property, and the plaintiff was appointed receiver, and in obedience to the order then made, Dwight executed an assignment to the plaintiff as such receiver, and all this was done in July and August, 1856, ten months before the issuing of the execution on the defendant’s judgment, on which the property was taken.

By instituting supplementary proceedings, in the nature of a creditor’s bill, the judgment creditors by whom they were instituted, and the receiver on their behalf acquire a preference over other creditors in respect to any property discovered, subject only to prior liens, which may have been acquired by prior proceedings of the same nature..

As between these parties therefore, the remaining question is, whether the receiver’s title was lost, or is to be held invalid as against the defendant, because the receiver had not taken actual possession of' the buffet before the defendant’s execution was levied thereon ? For as between these parties the question whether the plaintiff will be ultimately directed to apply the funds in his hands, in the first instance to the payment of the judgment of Brown and others, (which was the first judgment recovered against Dwight) or not, does not arise. Brown and

Concurrence

p. 559

others instituted the first proceeding supplementary to execution; that proceeding is still pending. The Court or Judge would not appoint two receivers of the same property. And presumptively the ultimate appropriation of the property in the receiver’s hands will be among creditors, instituting such proceedings, in the order of priority, corresponding with the times when those proceedings were respectively commenced.

To recur then to the remaining question above stated.

There is no pretense of any actual fraud or collusion. There is no evidence that the delay of the receiver in taking possession was by the consent or direction or even with the assent of the creditors at whose instance he was appointed. Under such circumstances the judgment creditors ought not to be prejudiced by that delay. The receiver is the officer of the Court and acts under its direction, or that of the Judge by whom the appointment was made. To the creditors on whose behalf he acts, his relation is similar to that of a sheriff; as to whom see the cases 5 Hill, 377 ; 6 id., 232.

At the time the defendant’s execution was levied and the property was sold, there was no legal title in Dwight the judgment debtor. When the property was sold, the defendant had actual knowledge of the plaintiff’s title as receiver.

No rule of law and no equities between the parties warranted the defendant in proceeding to sell the property in disregard of the plaintiff’s title, for there is no proof of any bad faith or that the plaintiff’s title was sought to be used as a protection to Dwight or to hinder or delay his creditors.

The plaintiff should have judgment for the value of the property with interest from the time of the sale.

—I concur in the conclusion last stated, and in the reasons assigned by Woodruff, J.

Judgment for the plaintiff for the value of the property and interest from the time of the sale, with costs.