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Smith v. Payne

56 N.Y. Super. Ct. 451 24 Jones & S. 451 Court N.Y. Super. Ct. Decision date 1889-02-04 English

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p. 451
ALFRED H. SMITH, et al., Respondents v. WILLIAM H. PAYNE, et al., Appellants.

Headnote

Judgments by confession assailed as fraudulently obtained; as also general assignment in connection therewith. Injunction sought by attachment creditors against sheriff and the judgment creditors. Rights and duties of a general assignee in regard to fraudulent judgments against his assignor.
A. andB. confessed judgments in favor of C. and D., relatives and personal friends, upon which executions issued to the sheriff, who levied the same upon the property of A. and B. Two days after said judgments were confessed A. and B. made a general assignment of all their property to E., which was duly recorded. Afterwards F. and G., other creditors of A. and B., commenced actions against A. and B. to recover their demands, and obtained attachments against their property, which were issued to the same sheriff, and F. and G., tire attachment creditors, commenced an action against the aforesaid judgment creditors and the sheriff, claiming that the judgments were fraudulently obtained and that the assignment was made by A. and B. with intent to defraud their creditors, and seeking as relief to enjoin the judgment creditors from receiving, and the sheriff from paying to them, the money made on the executions issued to Mm upon the judgments so confessed; but the attachment creditors did not make the assignee a party to that action, nor seek to vacate and set aside the general assignment.
Held, that the general assignment having been admitted by all parties, and the general assignee not having been made a party to the action, said general assignment remains in full force and effect, and F. and G., said attachment creditors, are not in a position to assail the prior judgments and executions, and are not entitled to the injunction sought and obtained in their action, and it must be vacated. The right to controvert and assail those judgments on the ground that they were fraudulently obtained, etc., rests in the general assignee and not in the creditors (Loos v. Wilkinson, 110 N. T. 195-209) ; and the assignee is liable for a negligent omission to assail fraudulent transfers made by the assignors prior to the assignment. (In re Cornell, 110 N. T. 351.)
Before Sedgwick, Ch. J., Truax and Ingraham, JJ.
Decided February 4, 1889.
p. 452
Appeal from an order made at special term continuing an injunction pendente lite.
Franklin Bien, attorney for respondents, argued :—
The first point raised by the appellants in the court below was that, although plaintiffs were attaching creditors, they were not entitled to an injunction in that they were not judgment creditors. That although the greatest frauds could be perpetrated that there was no remedy except for a judgment creditor. That a fraud could be carried out before a creditor could obtain a judgment and stop the fraud, and that the court would not step in and prevent the fraud because forsooth the creditor was without a judgment, thus giving legal color to the fraud by allowing the courts to be used to carry it out by means of confessed judgments, etc., and then saying we can use the courts to do it, but you cannot use the courts to stop it, because you are without judgments. Courts have in all times stretched out their protecting power to the innocent against the fraud. The first case of this kind (similar to the one at bar) was the case of Bates v. Plonsky, 28 Hun 112 . There the same questions were raised as here, no judgments only attachments, yet the court held the remedy the proper one, and affirmed the order continuing the injunction.
Keller v. Payne, 48 Hun 620 , was precisely as the case now under discussion. It was against these same defendants and argued by the same counsel at special term. The facts in this case are much stronger than in Kellogg v. Payne. Under these authorities we claim the court had legal power to act.
L. Laflin Kellogg, attorney for appellants, argued :—
I. The attaching creditors have no standing in court to bring this suit. The right of action in the present case is entirely with the assignee. This rule is well established. The confessed judgments are the first lien, by virtue of the execution of date December 28, 1887.
p. 453
The assignment was filed December 29, 1887. The attachments followed at different dates thereafter, to wit, December 29th and 30th, and after both judgments and assignment. “ The right of action to set aside a fraudulent conveyance of the debtor’s property made before the execution of an assignment is vested in the assignee alone.” Swift v. Hart, 35 Sun 128. In the event of the refusal of the assignee to bring the action the judgment creditor might do so, after demand. In this case there is no proof of demand or refusal. “ In a creditor’s suit brought for the purpose of removing a fraudulent obstruction plaintiff must show that the removal will enable his judgment to attach upon the property.” Spring v. Short, 90 N. Y. 538 . In the case at bar this judgment cannot attach to the property for the reason that if the confessed judgments are set aside the assignment will intervene. The plaintiffs in this action ask for no relief against the assignment. The assignee is not even a party.
II. The plaintiffs, as attachment creditors, have no standing in court to warrant them in commencing this action. This right only belongs to judgment creditors, “ To entitle a plaintiff to maintain an action to set aside the conveyance of- his debtor, it is essential that he should establish his character as a judgment creditor.” Adsit v. Butler, 87 N. Y. 585 . “ Án ordinary creditor has no standing in court to attack conveyances.” Tradesmen’s Bank v. Wetmore, 22 Sun 360. “An attachment creditor could not maintain an independent action in the nature of a creditor’s bill to set aside an alleged fraudulent assignment by the debtor.” Thurber v. Blanck, 50 N.Y. 80 .

The plaintiffs allege that the defendants, William H. Payne and Frederick D. Steck, were indebted to them and others in various amounts; that they, the plaintiffs, commenced various actions to recover such amounts and that they obtained

p. 454
attachments against said defendants, William H. Payne and Frederick D. Steck, which attachments were duly issued to the sheriff of the city and county of New York; that prior to the commencement of said actions and to the issuing of said attachments, the said defendants, William ti. Payne and Frederick D. Steck, confessed judgments to the defendants, Mary L. Payne, Augusta L. Bamber and Louise Nellis; that executions were issued on said judgments to the sheriff of the city and county of New York, who thereupon levied upon all the property of the said defendants, William H. Payne and Frederick D. Steck; that thereafter said Payne and Steck made and executed a general assignment to one Arthur H. Smith; that said judgments were fraudulently confessed, and that said assignment was made with the intent to hinder, delay and defraud the creditors of said William H. Payne and Frederick D. Steck, and that the executions issued on said fraudulent judgments are liens, and said assignment is an incumbrance on the property of said Payne and Steck prior to the liens of the attachments issued as aforesaid in behalf of the plaintiffs; that the sheriff is about to pay to the said judgment creditors the money made by him on the executions issued on said fraudulent judgments, and the relief demanded is that the said defendants, Mary L. Payne, Augusta L. Bamber and Louise Nellis be enjoined from receiving, and the said sheriff be enjoined from paying to them, the moneys made on said executions “until the plaintiffs herein are enabled to obtain their judgments on the claims brought by them, on which attachments were issued as aforesaid, in order to determine the validity of the judgments upon which the executions were issued to the sheriff in favor of the defendants as aforesaid.”

It is to be noticed that the general assignee is not made a party to this action, and that as far as this action is concerned, said general assignment remains in full force and effect.

p. 455
The defendants, the judgment creditors above named, deny the allegations of fraud, but admit the general assignment. We do not, however, consider it necessary to determine on this appeal the questions of fraud as to the confessions of judgment. We cannot determine the question of fraud as to the assignment because the assignee is not a party to this action.

On the argument of this appeal the plaintiffs relied on the case of Bates v. Plonsky, 28 Him 112. That case differs from the case now before us in a very material aspect; in that case, as in this, there were judgments, executions and an assignment, which were all alleged to be fraudulent and void, but in that case the assignee was made a party, and part of the relief asked was that it be adjudged that the plaintiffs had a lien prior to the claim of the assignee. But even that case was limited by the same court in the subsequent case of Bowe v. Arnold, 31 Hun 256 .

We are of the opinion that the plaintiffs are not in a position to assail the prior judgments and executions as long as the general assignment remains in force. They have alleged the making and recording of the assignment, and have made the assignment itself a part of their moving papers. As long as that assignment remains in force, the right to assail the judgments and executions on the ground that they are fraudulent against creditors, rests not in the creditors themselves, but in the assignee. Loos v. Wilkinson, 110 N. Y. 195 -209, and cases there cited. And the assignee is liable for a negligent omission.to assail fraudulent transfers made by the assignors prior to the assignment. In re Cornell, 110 N. Y. 351 .

The order appealed from is reversed with costs, and the injunction is vacated with $10 costs.

Sedgwick, Ch. J., and Ingraham, J., concurred.

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