Case ID: ny-st-rep_8/html/0131-01.html
Source: Caselaw Access Project
Author: {"author": "Per Curiam", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Aaron D. Farmer et al., Resp'ts, v. William P. Shannon, App'lt.
    
      New York Superior Court, General Term,
    
    
      Filed February 14, 1887.)
    
    1. Action—Conspiring to defraud creditors not a cause of action.
    A general creditor cannot bring a civil action against Ms debtor or against those combining and colluding with him to make disposition of his property, although the object of these dispositions be to hinder, delay and defraud the creditors. Following, Adler v. Fenton, 24 How. U. S., 408.
    2 Same—Subsequent judgment does not make actionable.
    Where the things complained of were all done while plaintiffs were but simple creditors: Held, that if the acts were not then actionable they did not become so by a subsequent recovery of judgment in favor of plaintiffs.
    3. Same—For fraud—What not sufficient.
    In an action for damages because in another action brought by these plaintiffs against a corporation, this defendant, as president of said corporation, with intent to delay and defraud plaintiffs, made an affidavit which he knew to be false, and obtained thereby a stay of proceedings and after-wards interposed a false answer, and while the plaintiff’s proceedings were thus obstructed, he, the defendant, by collusive arrangements with others, procured and suffered the recovery of judgments against the corporation, and the issuing of execution thereon, under which all the property of the corporation was sold and disposed of bef re the plaintiffs could obtain their judgment, so that when the piaiutiffs did recover judgment, it was uncollcctable and worthless, although it could have been collected if the plaintiff had not been obstructed as stated. Ileld, that the action could not be upheld; that it could not be sustained as cne for fraud.
    Appeal by defendant from judgment entered against him upon the report of a referee.
    
      E. F Bullard, for app’lt; Thornton, Earle & Kiendl, for res’pts.
   Per Curiam

The defendant was held liable in damages because, in an action brought by the plaintiffs against the Queen Publishing Company, a corporation formed under the laws of New York, in the marine court of the city of New York, for goods sold on note and open account, he as the president of said corporation, with intent to hinder and to delay the plaintiffs in the collection of their claim in suit, and with intent to defraud them, made and swore to an affidavit which he knew to be essentially untrue and on it procured an order to show cause why a bill of particulars should not be furnished, with a stay of all proceedings in the meantime and an extension of time to answer, for twelve days, and thereafter, with the like intent, interposed an answer, also sworn to by him, which he knew to be false, and because, while the plaintiffs’ proceedings were thus obstructed, he, the defendant, by collusive^ arrangements with others, and in a great part upon fictitious claims, procured and suffered the recovery of judgments against the corporation and the issuing of executions thereon, under which all the property of the corporation was sold and disposed of before the plaintiffs could obtain their judgment, so that, when the plaintiffs did recover judgment, it was uncollectable and worthless, although it could have been collected if the plaintiffs had not been obstructed as stated. The foregoing facts were found by the referee, and there is evidence to sustain the findings.

This being so, and no error having been pointed out in the admission of evidence, the question is whether, upon the facts as stated and found, a civil action can be maintained.

In so far as the referre relied upon the decision in Moffat v. Herman, by the general term of the city court of New York, he cannot be sustained, because that decision was reversed by the general term of the court of common pleas. See 1 N. Y. State Rep., 97.

It was shown in Verplanck v. Van Buren et al. (76 N. Y., 247, 259),and cases there cited, that an action on the case will not lie against a witness for perjury committed by him on a trial; nor against a party for subordination of perjury, or for a contrivance by which untrue testimony is produced. In so far, therefore, as the action, rests upon the perjury of the defendant, it cannot be sustained.

But it was also shown in the case last referred to that there was in former time the writ of conspiracy at common law, which lay in two cases only, viz.: Conspiracies for treason, or a capital felony, the party being acquitted, and that there also was, and is now, an action on the case for conspiracy, or for acts in the nature of a conspiracy.

Such an action on the case lies where there is a combination for the purpose of fraudulently making use of legal proceedings and damage is effected by such use.

The plaintiffs are not in a position to claim a benefit from Verplanck v. Van Buren, because, if for no other reason, the complaint here does not charge a conspiracy.

It then remains only to be seen whether the action can be sustained as one for fraud causing damage. If there was an actionable fraud, it must have been one which was committed by the defendant individually. Upon this branch of the case the following considerations arise, viz.: All of the acts done by the defendant, of which the plaintiff complains, were done while the plaintiff was a general creditor of the corporation, of which the defendant was an officer. The defendant was not the plaintiffs’ debtor. His acts cannot be more actionable than would the same acts by the creditor.

Adler v. Fenton (24 How. U. S., 408), was an action begun by creditors of two of the defendants, upon the complaint that the latter had combined and conspired with their co-defendants to dispose of their property fraudulently, so as to hinder and defeat their creditors in the collection of their lawful demands, and that, by means of such fraudulent ants, the plaintiffs suffered vexation and expense, and finally incurred the loss of their debt. There was testimony to convict all the defendants of the fraudulent acts alleged against them.

The opinion of the court notices that at the time of the fraudulent act's, the creditors had no lien upon their debtor’s property, and that the debtor had a legal right to use and dispose of it, as he pleased. In citing Moron v. Dawes (Hopkins Ch. R., 365), it was said that it was clear that chancery would not interfere to prevent an insolvent from alienating his property to avoid an existing or prospective debt, even when there is a suit pending to estabish it. From Moron v. Dawes (supra), was cited that “a creditor acquires a lien upon the lands of his debtor by a judgment, and upon the personal goods of the debtor by the delivery of an execution to the sheriff. Before these liens are acquired the debtor has full dominion over his property; he may convert one species of property into another and he may alienate to a purchaser.” The court ended by saying that, “in the.absence of special legislation we may safely affirm that a general creditor cannot bring an action on the case against his debtor or against those combining and colluding with him to make dispositions of his property, although the object of these dispositions be to hinder, delay and defraud the creditors.”

In the case just cited the plaintiffs do not seem to have recovered judgment on their original demand. In the present case the plaintiffs have become judgment creditors. The things of which they complain were, however, all done while they were but simple creditors. If the acts were not then actionable, they did not become so by a subsequent recovery of judgment.

It has been determined in this state that there is no equitable right to an injunction to restrain a debtor intending to defraud his creditor, by transferring property, from accomplishing his intent. Reubens v. Joel, 13 N. Y., 488.

These considerations fully establish that the action cannot be sustained as one for fraud.

There being no aspect in which the action in this present form can be upheld, the judgment should be reversed, the order of reference vacated, and a new trial ordered, with costs to the appellant to abide the event.