Case ID: nys_1/html/0083-01.html
Source: Caselaw Access Project
Author: {"author": "Learned, P. J. Landón, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Harvey v. McDonnell et al.
    
    
      (Supreme Count, General Term, Third Department.
    
    May 17, 1888.)
    1. Fraudulent Conveyances—Refusal of Administrator to Bring Action to Set Aside—Rights of Creditors.
    Where the administrators of an estate refuse to bring an action, as authorized by Laws ST. Y. 1858, o. 314, to set aside, in behalf of creditors, assignments of property made by deceased in fraud of such creditors, a general creditor of intestate, the latter’s property having been all applied to the payment of debts except that alleged to have been fraudulently transferred, cannot bring such action, making the administrators parties defendant, without first obtaining a judgment at law. Land on, J., dissenting.
    2. Same—To Debtor’s Wife—Refusal of Debtor’s Administrator to Bring Action to Set Aside—Rights of Creditors.
    A general creditor of a deceased intestate who has not obtained a judgment at law cannot bring an action, making the administrators parties defendant, to set aside as in fraud of creditors a conveyance made to the wife of intestate during the latter’s life-time, and for which intestate paid the purchase money, though the statute makes the administrators trustees of such property for the creditors, as the administrators cannot enforce such trust, it not being derived through the debtor, and as such creditor must first exhaust his legal remedies.
    3. Executors and Administrators — Receipt of Insurance Money by — Right of Creditors to Recover.
    A general creditor of a deceased intestate cannot maintain an action to subject money paid to the widow on life insurance policies of deceased to the payment of the latter’s debts, the widow being administratrix of the estate, as the surrogate’s court, at the accounting of the administrators, is the proper tribunal to determine such rights.
    Appeal from special term, Montgomery county.
    This is an action brought by a simple contract creditor of John McDonnell, deceased, against his administrators for the purpose of declaring fraudulent, as against creditors, a certain conveyance of real estate, made by McDonnell in his life-time to one O’Brien, and a conveyance of the same made by O’Brien to said defendant McDonnell; also to recover from said Lucy McDonnell certain life insurance premiums paid by said McDonnell in his life-time on policies upon his life, payable to said Lucy at his death, as also equitably belonging to his estate. The complaint avers that the deeds were not delivered during McDonnell’s life, or, if so delivered, that they were fraudulent, as intended to defraud creditors. The complaint avers that all the other property of said McDonnell has been applied by the defendants to the payment of his debts, and that the administrators on request refused to bring this action. The complaint also asks similar relief in regard to land alleged to have been purchased by McDonnell in his life-time, of which the title was taken in the name of said Lucy; and it asks that the sums recovered be distributed among ..all creditors willing to come in and contribute to expenses. The complaint was dismissed at the trial, upon the ground that such an action could not be maintained by a simple contract creditor.
    Argued before Learned, P. J„ and Ingalls and Landon, JJ.
    
      E. F. Bullard, for appellant. N. C. Moak, for respondents.
   Learned, P. J.

The appellant admits that, if McDonnell were living still, an action could not be maintained except by a judgment creditor; but he urges that both before and since the statute of 1858, c. 314, that the administrators might have brought this action; hence that, on their refusal so to do, he, as one of the eestuis que trustent, may bring it, making the administrators parties. We do not think it important to examine the rights of administrators in this respect prior to the act of 1858; and we may notice, in passing, that that act speaks of “estate or property so held in trust;” and, again, of “property held by or of right belonging to any such trustee.” Whether an administrator, in any such sense, holds the real estate of the deceased that he can disaffirm conveyances thereof under this act, we need not inquire at this time. It seems to be assumed in Lichtenberg v. Herdifelder, 103 N. Y. 302, 8 N. E. Rep. 526, that the administrators may disaffirm conveyances of real estate. In regard to the real estate conveyed by Morris to Lucy, and for which the consideration was paid by McDonnell, the plaintiff relies on section 52, 1 Rev. St. 728, creating a trust in such property for creditors; but it has been decided that a receiver in supplementary proceedings cannot enforce that trust. Underwood v. Sutcliffe, 77 N. Y. 58. The opinion refers to the statute of 1858; and while it admits that a receiver may set aside fraudulent transfers, it holds that he cannot enforce this statutory trust. By analogy an administrator cannot. The creditor must enforce it directly by an action, (Garfield v.Hatmaker, 15 N. Y. 475;) but only after exhausting his legal remedies, (Bank v. Olcott, 46 N. Y. 12.) Therefore, in respect to this part of the complaint, it is plain that the plaintiff cannot maintain the action, both because the administrators could not have enforced the statutory trust created by section 52, ut supra, as it is not derived through the debtor, and also because the plaintiff has not exhausted his legal remedies, as was decided in Estes v. Wilcox, 67 N. Y. 264.

Another claim of the complaint is that Lucy McDonnell, one of the defendants, has received, from life policies payable at the death of her husband, more than she might lawfully. Laws 1870, c. 277. Yow, this money must-have been paid .after the death of the intestate. We do not see why any liability to account for such money could not have been heard by the surrogate, in the accounting of the administrators. Code, § 2739; Shakespeare v. Markham, 72 N. Y. 400; Boughton v. Flint, 74 N. Y. 476. That accounting seems to be the proper place to determine the question as to the insurance money; whether it belongs to Lucy McDonnell individually, or to her as administratrix.

Then, as to the real estate of which McDonnell executed a deed to O’Brien, and O’Brien to Lucy. According to the averrment of the complaint, these deeds were not delivered in McDonnell’s life-time. If so, it would seem to follow that they never took effect, and the land descended according to law. Then the plaintiff should reach it as he would reach any land of a deceased person. But that is not the course he has taken in this action. If, according to another allegation, the deeds were delivered, but with intent to defraud ■creditors, then it is a settled rule that the creditor must first exhaust his legal remedies by judgment and execution, or, at least, must have acquired, by judgment or execution, a lien on the property said to be fraudulently assigned. Adsit v. Butler, 87 N. Y. 585; Estes v. Wilcox, ut supra; Bank, v. Mead, 18 Hun, 303; Reubens v. Joel, 13 N. Y. 488; Gardner v. Lansing, 28 Hun, 415; Bank v. Wetmore, 42 Hun, 359.

In the case of Bate v. Graham,, 11 H. Y. 237, the plaintiff was a judgment creditor. He sued to recover for the estate certain personal property fraudulently transferred by the deceased. How, before the statute, 2 Rev. St. 449, .§ 17, it had,been held that where a fraudulent vendee had taken possession of goods prior to the death of the vendor, and remained in possession, he might be charged as an executor de son tort, though there was a rightful executor. Hence it had been held that, after that statute, the executor might sue the fraudulent vendee for the goods thus taken, (Babnock v. Booth, 2 Hill, 181;) and the plaintiff’s action was sustained. He was, as above observed, not a .simple contract creditor. The eases of Dewey v. Moyer, 72 N. Y. 70; Bank v. Leggett, 51 N. Y. 554; Crouse v. Frothingham, 97 N. Y. 105; and Sands v. Codwise, 4 Johns. 536,—were also cases of judgment creditors. The case cf Bates v. Bradley, 24 Hun, 84, was one of simple contract creditors. The debtors had filed a petition in bankruptcy, and therefore the creditors could not put their claims into judgment. Rev. St. U. S. § 5106. The case of Overton v. Olean, 37 Hun, 48, was an action for an injunction to restrain the village from permitting a railroad company to erect a permanent structure in the street. Of course, there could be no prior judgment. It was not a case of contract, but of tort. It is no exception, then, to the doctrine we have stated. It may be asked, why should a judgment first be obtained? Because .a court of equity is not a place in which to recover or to establish debts. The ■existence and the amount of the debt should be established in a court of law, and legal remedies to collect should be taken before resort is had to equity to remove fraudulent obstructions. So it was said, Estes v. Wilcox, ut supra, 266, that the reason of the rule “does not fail by the death of the debtor before judgment recovered for the debt.” The judgment “ would conclude the creditor as to the amount of the debt. ”

The plaintiff’s argument is that the administrators are trustees for the ■creditors; and, if the administrators will not act, the creditors may. It is rather a new doctrine that an administrator is a trustee of the real estate of the deceased. Even over the real estate of which the deceased was seized at his death the administrator has no power. He can institute proceedings to .subject it to the payment of debts; so can creditors. It seems somewhat strange that an administrator, who is not trustee of the real estate of which the deceased died seized, should be called trustee of that of which the deceased did not die seized; and a careful examination of the section of 1858 will show that the right of the administrator, as of other trustees, is limited to such property as is held by, or of right belonging to, such trustee or estate. So it was held in Underwood v. Sutcliffe, ut supra, that the statutory trust did not belong to a receiver, and could not be enforced by him, although it might be enforced by a judgment creditor. So, in the present case, if there had been no conveyance of McDonnell to O’Brien, and of O’Brien to Lucy, would the land belong to the administrators? They could not even allow the claims of creditors against heirs and devisees. In re Haxtun, 102 N. Y. 157, 5 N. E. Rep. 111. If not, how can the execution of those deeds make the land belong to the administrators? Or how can the setting aside the deeds as fraudulent give the administrators any title thereto which they would not have had if the deeds had never existed? It seems inconsistent to say that a trustee may disaffirm acts which, when disaffirmed, give him no more property or rights than he had before. It was, however, held in Barton v. Sosner, 24 Hun, 467, that an administrator might bring an action to set aside a fraudulent conveyance of land. It may be said that Liehtenberg v. Herdtf elder, ut supra, decides that, even if a judgment had been recovered, the action could not be maintained. What was said as to action by administrators was not necessary to the decision. It is not strictly necessary for Us here to consider how relief is to be obtained in regard to land fraudulently transferred by the deceased; but we may remark that the statute makes such transfer void, (2 Rev. St. 137, § 1;) that a creditor recovering a judgment during the life of the debtor may under execution sell the land just as if no transfer had been made, and may then test the question of fraud by ejectment; or he may, after obtaining a lien,, bring an action to set aside the fraudulent conveyance. If the conveyance made with fraudulent intent is void, then it would seem that, at least as to creditors, the land, at the death of the debtor, must be treated as going to his heir or legatee; and that the creditor treating the conveyance as void as to him, must reach the land as he would any other land which had belonged to-the deceased at his death. Section 274, et seq, or section 1843, et seq. Sec- ■ tian 2762 in the former proceeding seems to provide opportunity for a litigation with the fraudulent grantee over the alleged fraud, prior to any sale. In. the other proceeding a lis pendens can be filed, (section 1853,) which probably would be a sufficient ground for an action against the fraudulent grantee,, should the creditor prefer not to wait till he acquires a title under the sale by virtue of his judgment. But this is a matter we do not decide. Judgment, affirmed, with costs.

Ingalls, J., concurs.

Landón, J.,

(dissenting.) The complaint alleges that the plaintiff was a general creditor of John McDonnell, who died intestate, and of whose estate-the defendants are administrators; that a portion of plaintiff’s debt has been paid by the administrators, in part from the personal property, and in part from the sale by the surrogate of the real estate of the intestate; that the intestate in his life-time transferred to the defendant Lucy McDonnell certain property in fraud of his creditors, and that all of his assets have now been applied towards the payment of his debts, except the property thus fraudulently transferred to the defendant Lucy McDonnell; that she claims to own such property, and refuses, though requested, to apply the same, or to pay the balance of the debt due the plaintiff; that the plaintiff has requested defendants to bring an action to set aside such conveyances, which they decline to do; that the only property applicable to plaintiff’s debt is that thus transferred by the intestate to the defendant Lucy McDonnell. The complaint does not allege that plaintiff recovered any judgment against the intestate or the administrators. The prayer for relief is the usual one in a creditors’ bill, except that the amount realized be distributed among all the creditors who-come in, etc. Upon the trial the plaintiff offered to prove the facts set forth in his complaint, and to prove the decree of the surrogate’s court directing the sale of the intestate’s real estate, not including that described in the complaint, to pay his debts, the sale, the application of the proceeds, and the-balance unpaid upon the plaintiff’s claim, and that a large amount of other debts of the intestate were not fully paid. The court, upon the objection of' defendants’ counsel to the evidence as insufficient to establish1 a cause of action against the defendants, and upon their motion that the complaint and facts offered to be proved did not constitute a cause of action against them,, dismissed the complaint; the court holding that the plaintiff, as a general creditor, without judgment and execution, could not maintain the action.

We think the court erred in supposing that the principles applicable to creditors’ bills, or actions in the nature of creditors’ bills, governed this case. The single question presented is whether a general creditor of an intestate, all of whose property has, in the due course of administration, been applied to the payment of his debts, except the property which it is charged that he transferred to defraud his creditors, can, under chapter 314 of the Laws of 1858, upon the refusal of the administrators to bring the action in behalf of the creditors of the intestate to set aside such fraudulent transfer, himself bring the action in behalf of himself and the other creditors, joining the administrators as parties defendant. We think he can. The statute cited confers the right upon the administrator to bring the action “for the benefit of creditors.” The authorities are conclusive that this means creditors at large, not merely judgment and execution creditors. Southard v. Benner, 72 N. Y. 424; Potts v. Hart, 99 N. Y. 168,1 N. E. Rep. 605. The right to bring the action is not merely given by the statute, but the duty is enjoined. Lichtenberg v. Herdtfelder, 103 N. Y. 302, 8 N. E. Rep. 526. The administrator is the trustee of the creditors for the purpose of enforcing such rights and remedies in their favor as may be needful to protect them. Bate v. Graham, 11 N. Y. 237. If the administrator, as such trustee, refuses to do this duty upon request of the creditor, the latter may bring the action making the trustee a party. Id.; Bates v. Bradley, 24 Hun, 84; Overton v. Village of Olean, 37 Hun, 48; Sands v. Codwise, 4 Johns. 536, 601; Crouse v. Frothingham, 97 N. Y. 114; Bank v. Leggett, 51 N. Y. 554; Dewey v. Moyer, 72 N. Y. 70,78. The relation of trustee and cestui que trust existing between the administrator and the creditors, equity has plenary jurisdiction to enforce the proper performance of the trust. Bate v. Graham, supra. It seems incongruous to insist that the general creditor must, before he can resort to such a remedy, obtain judgment, and proceed to execution thereon, when the statute which gives this remedy gives it in favor of creditors at large. It is further incongruous, for the reason that the remedy is given in favor of all creditors alike, not in favor of the vigilant or execution creditor. Lichtenberg v. Herdtf elder, supra. If the argument in defense of the necessity of becoming a judgment creditor is valid, it is valid only as to form; for if one creditor obtains his judgment, and proceeds to execution, he can pursue this remedy in behalf of himself and of other creditors who remain creditors at large. It is obvious that, since the general creditor would be entitled to share in whatever assets the administrator might realize by such an action, his claim or right to promote the action cannot be enhanced or improved by exhausting his legal remedies in other directions. The statute gives this remedy in favor of the general creditor. He therefore need not cease to be such before he can resort to it. It is a manifest mistake to suppose that the mere incident of some of the actions under this statute is a condition precedent to all of them. Lichtenberg v. Herdtfelder, is cited in opposition. But that action failed because the plaintiff brought it for himself alone, and did not make the administrators parties. The case recognizes the principles upon which this action is based. The court, however, in the discussion of a question not before it, remark that the surrogate has ample power, under section 2481 of the Code of Civil Procedure, to compel the administrators to bring such an action. Ho doubt that is true; but the power given by the Code to direct the action of administrators in this respect is not exclusive of that general jurisdiction of trusts which the constitution confers upon the supreme court.

The judgment should be reversed, new trial granted; costs to abide the event.