Bank of Mutual Redemption v. Sturgis — 22 N.Y. Super. Ct. 608

Majority

p. 608

The Bank of Mutual Redemption, Plaintiffs and Appellants, v. William Sturgis, Jr., et al., Defendants and Respondents.

Headnote

1. Where, in case of assets in controversy among creditors, a Receiver has been appointed in a suit brought by a part of the creditors, other creditors, prosecuting another suit, which seeks to appropriate and apply the assets, .to the exclusion of the rights claimed by the former, cannot have a second Receiver appointed, unless the first Receiver, or the creditors he represents, are made parties to the latter action, and have opportunity to be heard on the question.

:2. Thus, where the plaintiffs held bills drawn by R., upon, and accepted by S. & Co., his factors, who had a lien upon the general residue of goods in

p. 609

their hands for such acceptances and other advances, and, in actions on the bills against R., the plaintiffs issued attachments against his property, and levied on the goods in the hands of S. & Go., who certified to the Sheriff that they had no property of R; and the plaintiffs, after obtaining judgments, and their executions being returned unsatisfied, brought a creditor’s suit for the benefit of themselves and all other creditors similarly situated, seeking to reach the goods and have them applied to pay their judgments: ^Sdd, that as it appeared that other creditors, holding such bills, with an equal right to have the assets applied to their payment, had already had a Receiver appointed in an action on their own behalf, the Court should not appoint a second Receiver, at the instance of the present plaintiffs.

3. Even if S. & Co., should be deemed to have lost their lien as factors, by certifying that they had no goods of R., this cannot affect the right of other creditors, who, before the certificate was given, had acquired an equitable right to have the assets applied to pay aceeptancesdield by them.

(Before all the Justices.)

Heard, April 26, 1862;

decided, May 24, 1862.

The plaintiffs, a corporation of the State of Massachusetts, brought this action, on behalf of themselves and certain other creditors of Robert Rennie, against William. Sturgis, Jr., William Shaw, Henry Shaw and Latimer Bailey, composing the firm of Sturgis, Shaw & Go., and said Repnie. The plaintiffs had recovered four judgments against Rennie, in the Supreme Court of this State.

The actions in which the plaintiffs recovered such judgments, were instituted to recover the amount of certain bills of exchange drawn by Rennie, and accepted by his co-defendants (Sturgis, Shaw & Co.) Such acceptances were given pursuant to a course of dealing between them, by which course of dealing Rennie, who was a manufacturer, sent his products to Sturgis, Shaw & Co., who were commission merchants, to be sold, and the latter advanced their acceptances and cash, not on specific consignments, but ou the general residue of merchandise in their hands sometimes exceeding their value. Having made large advances, by these acceptances, and otherwise, they claimed the goods in their hands, as well as a mortgage which Rennie had assigned to them, as security therefor.

The plaintiffs were originally holders of some such acceptances of Sturgis, Shaw & Co., which they exchanged for

p. 610

other similar ones at longer periods, on which they brought the four actions, and recovered their judgments, before mentioned, against Bennie. At the commencement of those actions, the plaintiffs issued attachments against the property of Bennie, and notices thereof were served upon the defendants, Sturgis, Shaw & Co., who gave certificates to the Sheriff, stating'that they had no property of Jennie’s in their possession, although they had in their posession a large amount of goods consigned to them by him. After the judgments were recovered, executions were issued thereon, and returned unsatisfied. Both Bennie and Sturgis, Shaw & Co. have become insolvent.

The plaintiffs then brought the present action, alleging in their complaint that Sturgis, Shaw & Co., fraudulently certified they had none of Bennie’s property, although the only interest they had in such goods, &e., in their possession was to apply the same to the payment of the plaintiffs’ claim on their acceptances, and to those held by other similar creditors. The complaint also stated, that the plaintiffs brought the action “on behalf of themselves, and of all other creditors of said Bennie, whose debts against the said Bennie, or the defendants in this cause, are entitled to satisfaction out of the said goods, and who may come in and contribute to the expenses of this action.”

Sturgis, Shaw & Co. denied all fraud, and stated that the certificate was given under advice of counsel, and that Bennie was indebted to them for a considerable amount over and above all the acceptances, for which amount, as • well as to secure payment of the acceptances, they had a lien. They further stated, that they desired the proceeds,, subject to such balance for cash, as may be due to Sturgis,. Shaw & Co., to be applied equally towards the payment of all of said outstanding acceptances, including those-held by the plaintiffs, and that the plaintiffs should not, have a preference over the other holders of said acceptances, and they were advised and believed that the plaintiffs had no such preference.

p. 611

It was also shown, On the part of the defendants, that after the attachments, or some of them, had been served, and on or before the 20th day of February, 1862, in a certain action in this Court, wherein Gustavus A. Scheldt and another were plaintiffs, and William Sturgis, Jr., and others were defendants, Ogden Haggerty was appointed Receiver of the goods, mortgage* &c., mentioned in the complaint in this action.

On this state of facts, the plaintiffs claimed that, as judgment and attaching creditors, they were entitled to have the obstruction interposed by the claim of Sturgis, Shaw & Co., to hold the assets as security for advances by them, removed, and to be enabled to sell the same by an execution on the judgments, or to have the goods applied to the payment of their debts, and that of others standing in like attitude to them.

The plaintiffs moved for an injunction and .Receiver," before Mr. Justice Robebtson, who denied the motion conditionally, he holding, that plaintiffs might have enforced their equity in favor of all holding similar acceptances; but that they had no separate right, and as those tvho had no judgment or attachment could not come iüto this action without sustaining plaintiffs’ claim, they must elect either to strike out their claim to preference over other creditors holding acceptances, or to strike out all that professed to make the action for their benefit. The order entered accordingly declared, that the plaintiffs’ motion for an injunction and Receiver was denied, with seven dollars costs to-the defendants, “ unless the plaintiffs, in ten days after the entry of this order,, pay suQh costs, and elect to amend the complaint, iy strildny therefrom all averments now contained therein respecting the issuing of attachments and the proceedings thereon, against the defendants, or either of them, and also all averments now contained therein respecting the recovery of judgments and the proceedings thereon against the defendants, or either of them; and also amend the said complaint by inserting therein an averment that this action is brought on the behalf, and for the

p. 612

equal benefit of themselves and all other holders of acceptances of Sturgis, Shaw & Co., given or accepted in like manner with those held by the plaintiffs ;” and, if they made such amendment, the motion was granted, with the usual provisions as to appointing the same person as Beceiver who had been already appointed. And it was further provided, that if the plaintiffs should not amend as above required, they might, at their option, in ten days after the entry of the order, amend the complaint by making the same an action in form for their own benefit exclusively as attachment, judgment and execution creditors of the defendant, Bobert Bennie, in respect to the property mentioned in the complaint; and that, upon so amending, the motion for an injunction and Beceiver as against Sturgis, Shaw & Co., be denied, but that as against Bennie it be granted.

The plaintiffs appealed to the Court at General Term.

William Curtis Noyes, for plaintiffs, appellants,

on the questions of Sturgis, Shaw & Co.’s lien, and the waiver of it by their certificate, and plaintiffs’ right to levy, cited, Russell on Factors, 38, 191-213; Bell v. Palmer, ( 6 Cow., 128 ,) Marfield v. Goodhue, (3 Comst., 62,) Warner v. Martin, (11 How., [U. S.,] 209;) Cross on Lien, 45; Boardman v. Sill, (1 Camp. N. P., 410,) Jacobs v. Latour, (5 Bing., 130,) Thompson v. Trail, (6 B. & C., 36.) And to the point, that equity would compel the factors to resort first to the mortgage for their own claim, leaving the- fund produced by the goods to be applied to the acceptances, he cited Farmers’ Loan & Trust Co. v. Walworth, (1 Comst., 433.)

Augustus F. Smith, for defendants, respondents.

I. The holder of a consignor’s draft on the factor has no equity enabling him to sue for a Beceiver of the consigned property, upon the mere insolvency of the parties to the draft. (Marine Bank v. Jauncey, 3 Sandf., 257 .) There is no such equity even in case of partnership debts. (Robb v. Stevens, Clarke, 191; Kirby v. Schoon

p. 613

maker, 3 Barb. Ch., 46 ; Ketchum v. Durkee, 1 Barb. Ch. R., 481.)

II. Plaintiffs have not acquired any preference over other holders of drafts. Their attachments and executions bind nothing more than if they had sued on any other indebtedness.

III. It being conceded that they have no preference at law, this action being an attempt to gain a preference in equity, the maxim that “equality is equity ” is an answer. (Story’s Eq. Jur., §§ 557, 554; De LaVergne v. Evertson, 1 Paige, 181.) .

IV. The plaintiffs having sued for others as well as themselves, cannot claim a preference over such others. (Code § 119; Smith v. Lockwood, 1 Code R., N. S., 319; McKenzie v. Lamoureux, 11 Barb., 516 ; Habicht v. Pemberton, 4 Sandf., 657 ;. see also LaChaise v. Lord, 1 Abbotts’ Pr., 213 ; S. C., 10 How. Pr., 462 .)

V. The giving of the certificate does not amount to a waiver or forfeiture of the lien. (Story’s Agency, § 367; Dunlap’s Paley’s Agency, 217; Nash v. Mosher, 19 Wend., 431 ; Russell on Factors,. 216; Scarfe v. Morgan, 4 M. & W., 270.)

J. M. Van Cott, for appellants,

in reply, urged that the factors here were disentitled to use their lien, founded upon liabilities for Bennie, in hostility to their creditors’ legal process to enforce that identical lien. The relief sought by plaintiffs, in the application of the goods to pay the drafts, would exonerate the factors from the very liability ‘winch was the ground of their alleged lien.

1st. Sturgis, Shaw & Co. have a right to apply the consigned goods to pay their acceptances, unless they have lost that right by reason of the certificate they gave to the Sheriff, when the latter levied the attachments. (Russ, on Factors, 211; 5 B. & Ald., 27; Parsons’ Merc. Law, 161.)

2d. If they have not thus divested themselves of that

p. 614

right, the plaintiffs had no right to take and remove the consigned goods, without paying the amount of Sturgis, Shaw & Co.’s lien thereon. (Brownell v. Carnley, 3 Duer, 9 .)

3d. The equitable right of Scheldt & Oo., and others similarly situated, to have the proceeds of the eonsigned goods applied to pay the acceptances they hold, (if they ever had such a right,) became perfect before Sturgis, Shaw & Oq. gave to the Sheriff the certificate which it is claimed put an end to their lien. It is not easy to see how the giving of that certificate can affect rights which had previously accrued to third persons, who had no agency or participation in that act.

4th. The plaintiffs are not entitled, in this action, without other parties are brought before the Oourt, to a receivership in hostility to, or that can interfere with that already existing. The Receiver who has been appointed and has possession of the property, and the parties he represents, are not, nor is either of them a party to this action,

The Receiver or those parties should he made parties to this action, and be beard upon the question, before a Receiver can properly be appointed in aid of a suit which seeks to appropriate and apply the property, to the exclusion of the rights claimed by the parties represented by the Receiver of the property already appointed,

The order must be affirmed,' with $10 costs to abide the event.