Albert v. Back — 52 N.Y. Super. Ct. 550

Majority

p. 550

NICHOLAS ALBERT, et al., Respondents, v. ALBERT BACK, et al., Appellants. WILLIAM S. TAYLOR, et al., Respondents, v. ALBERT BACK, et al., Appellants.

Headnote

M'audulent assignment—lien of creditor's till to set aside—when attaches on service of summons only—when funds still deemed in possession of assignee though chech has teen drawn to creditor's order and delivered to attorney for assignee, who has also received from creditor the evidences of Ms claim.

Before Sedgwick, Oh. J., and Freedman, J.

Decided December 7, 1885.

Appeal from order confirming, except as to a certain item of $3,000, the report of a referee appointed to take the accounts of an assignee for the benefit of creditors.

The defendants Back and Fishel, on October 14, 1884, made a general assignment for the benefit of creditors to the defendant, Moritz Kellner, which assignment preferred, among other, one F. Fishel, a brother of one of the assignors, for the sum of $3,000. Thereafter an action was commenced against the defendants herein by judgment creditors, other than the plaintiffs herein, to set aside said assignment as fraudulent and void as to creditors, and judgment was recovered in said action in favor of the plaintiffs therein. While that action was pending, to wit, on November 25, 1884, a check was drawn by the said assignee Kellner, to the order of the said preferred creditor, F. Fishel, to whom it was delivered, and

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it was thereupon indorsed by him and placed in the bauds of Mr. Kurzman, who was the attorney for the assignee in the said suit to set aside the assignment, and had acted as his counsel under the assignment. The note representing Fishel’s preference was also placed by him in Mr. Kurzman’s hands, with instructions to collect the money - On the check and pay the note. This check was not certified, and was, in fact, not paid until December 1. The proceeds of the check remained in the hands of Mr. Kurzman, who also retained the note given him by Fishel, and he stated that the money was not paid to Fishel because the suit herein came in between the drawing and payment of the check. This action was begun November 26, 1884, by the service of a summons upon all the defendants, and the defendant Kellner appeared through Mr. Kurzman November 28, 1884. The complaint was not served until after December 1, but it appears that the attorney for plaintiffs informed Mr. Kurzman a day or two before the service of the summons that he was about to begin an action in favor of these plaintiffs to set aside the assignment. Judgment was subsequently recovered in favor of the plaintiffs, declaring the assignment to be fraudulent, and directing the assignee to pay to Cephas Gr. Thompson, as receiver, all the funds coming into his hands as assignee, except his lawful disbursements and expenses, and said receiver was directed to pay the plaintiffs the amount of their claims. The referee appointed to pass the assignee’s account allowed as a paymefit the $3,000 heretofore mentioned. The court confirmed the referee’s report, except as to this $3,000, and directed the assignee to pay that sum to the receiver for the plaintiffs, from which direction this appeal is taken.

The following opinion was delivered at special term :

Under all the facts and circumstances of this case, I must regard the moneys received on the check for $3,000, which have not been paid over to the creditor, but which are still in the hands of the attor

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ney under whose advice the check was drawn, and with whom it was left by the drawee for collection, as still in a position to be affected by this suit—in other words, as funds of the assigned estate to be controlled. by the assignee under the judgment of this court. The attorney with whom the check was intrusted- by the creditor was the attorney and counsel for the assignee. .

“ The check, it is true, was drawn payable to the order of the creditor, who indorsed and delivered it to the attorney for collection, to whom he also gave the obligation which was the evidence of his claim against the assignors, the payment of which was provided for in the assignment. At this point of time, the attorney appeared" to occupy the two-fold position as counsel for the assignee and as agent for the creditor to the extent of collecting the moneys on the check for him, but he did not, by the whole transaction, cease to represent the assignee.

“I cannot but regard the action of the assignee as designed to frustrate this action, which was about to be brought, and of which the attorney, and counsel for the assignee had already been advised. Of this notice to his attorney, the assignee presumably had information.

“An action in favor of another creditor seeking to impeach this assignment was then pending, and this one was on the eve of being commenced. The action of the assignee in giving this check on November 25, leads irresistibly to the conclusion that it was a step on his part to get rid of the moneys in his hands through the payment of the claim of a preferred creditor which the action about to be brought was designed among other things to prevent.

“Assignees, it is true, should move with reasonable diligence in closing up the trusts committed to them. But I am not aware that they are called upon to exercise extraordinary speed to prevent the lien of a creditor’s action about to be commenced, especially when there is an action actually pending, which challenges the honesty and validity of the assignment.

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“Was the commencement of this action, by the service of a summons only, a notice to the assignee ? Under all the facts, I think it was.

“The object of the action, it is true, was not stated in the summons, but the assignee must have known the purposes of the suit from the summons itself. He could have known that the plaintiffs had no other ground of complaint against him in connection with the assignor, as a co-defendant, than such as arose from the assignment in question, which was already the subject of inquiry in a legal proceeding.

“ This question of notice is often one of difficulty, but I find none in this case. It would be idle to suppose for a moment that the assignee did not know, when the summons was served upon him, the object or purpose of the action in which he was impleaded with the assignor at the suit of a creditor of the latter. In any event, he was put upon inquiry.

“ The question involved in the transaction is one of good faith, and where a party knows facts sufficient to put him upon inquiry he is supposed to have ascertained the extent of the rights claimed (Williamson v. Brown, 15 N. Y. 354 ).

“ When the summons was served upon the assignee the moneys covered .by the check still stood to his credit undrawn in the bank. He could have stopped its payment in an instant by a notice. The moneys were not drawn till afterwards. The check was no assignment of the funds mentioned, and the creditors’ claims are still in the hands of the attorney.

“ The creditor is a little nearer the money than he was before this suit was commenced, but not so near as that he may rightfully claim it in opposition to the demands of this suit, which challenges the assignee’s right to dispose of it under the assignment which has been in this action, adjudged to be fraudulent and void as to the plaintiff.

“ By this result the creditor, although he may be dis

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appointed, is actually in no worse condition than he was before the check was drawn to his order. He has parted with no valuable consideration. He may be restored to his former position without damage. The unpaid note is still in the hands of his agent. The note may be returned to him and the money in effect to the assignee to meet the demand of this suit.

Blumenstiel & Hirsch, for appellants.

8. F. Kneelcmd, for respondents.

“ The referee’s report, to the extent that it approves of the transaction above, referred to, or credits the assignee with the payment of the money to the creditor, cannot be confirmed.”

Order appealed from- affirmed, with costs, &c., upon the opinion of the learned judge at special term.

Cases cited

Williamson v. Brown 15 N. Y. 354 N.Y. p. 553