Case ID: ny-st-rep_36/html/0199-01.html
Source: Caselaw Access Project
Author: {"author": "Bartlett, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The National Broadway Bank, Resp’t, v. David G. Yuengling, Jr., et al., App’lts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed December 31, 1890.)
    
    1. Fraudulent conveyance—Parties.
    The complaint in an action brought by judgment creditors of a partnership alleged, that such copartnership, together with a brewing company and their several creditors, entered into an agreement by which a new corporation was to be formed, to which the assets of the partnership and brewing company were to be transferred in exchange for its capital stock, the new corporation to assume payment of the indebtedness to such creditors as should sign the agreement and issue bonds secured by mortgage to be executed to a trust company, the capital stock to be transferred to trustees to secure payment of said bonds, which were to be taken in full payment by the creditors; that such agreement and transfers were made to hinder, delay and defraud creditors, and asked that the agreement and transfers be set aside. Held, that as the complaint assailed the agreement itself, the brewing company and the creditors who signed the same were necessary parties.
    3. Same.
    The trust company was not a trustee for the creditors as to any rights which they acquired under the agreement, but merely their trustee under the subsequent mortgage, and this relation does not make it an adequate representative of them in this action.
    Appeal from interlocutory judgment entered upon an order overruling a demurrer to the complaint interposed by the defendant, David Gr. Yuengling, Jr., on the ground that there was a defect of parties defendant.
    
      Moses Weinman, for app’lts; Charles A. Deshon, for resp’t.
   Bartlett, J.

The National Broadway Bank is a judgment creditor of the defendant, David Gr. Yuengling, Jr., having recovered twenty judgments against him as the general partner in a limited copartnership doing business under the firm name and style of D. Gr. Yuengling, Jr., the special partner being the defendant, William Belden. The present suit is brought by the bank to set aside certain conveyances, transfers and assignments made by this firm of D. G. Yuengling, Jr., and by the defendants, Yuengling and Belden, to a corporation known as the D. G. Yuengling, Jr., Brewing Company, and also to have certain mortgages adjudged fraudulent which had been executed by the said corporation to the Farmers’ Loan & Trust Company, as trustee, in so far as the same cover property against which the plaintiff’s claims would be enforceable if still in the hands of the limited partnership or of the members of that firm.

The transfer and mortgage thus attacked were made under and pursuant to an agreement between David G. Yuengling, Jr., and William Belden, composing the firm already mentioned; David G. Yuengling, Jr., individually; The New íork & Staten Island Brewing Company; such creditors of the three parties already mentioned as actually signed the instrument, and Conrad N. Jordan, George M. Hard and Octavius D. Baldwin, as trustees. This agreement recited that the firm, the defendant Yuengling, individually, and the New York & Staten Islánd Brewing Company had incurred obligations which they were unable to meet at maturity, but they claimed to have assets respectively more than sufficient to discharge their respective obligations if the same were properly administered in connection with the brewing business of said firm and company. To this end it went on to provide that the defendants Yuengling and Belden should procure the formation of a corporation to be known as the D. G. Yuengling, Jr., Brewing Company, with a capital stock of $2,000,000, to which should be transferred the property of the limited copartnership and of the-defendant Yuengling, individually, in return for which the corporation thus organized should issue its capital stock to the firm, and would assume payment, by means of its mortgage bonds, of all the indebtedness owing to such creditors of the firm and of the defendant Yuengling, individually, and of the New York & Staten Island Brewing Company as should sign the agreement, such indebtedness not to exceed fifteen hundred thousand dollars ($1,500,000) in the aggregate.

It further provided that the new corporation should execute a mortgage to the Farmers’ Loan & Trust Company upon the property thus transferred to it, to secure payment of the bonds which were, to be issued to the creditors who signed the instrument; that the limited copartnership should assign to Messrs. Jordan, Hard and Baldwin, as trustees, all the capital stock in the new corporation, to be held by them as security for the payment of the mprtgage bonds, and the copartnership and the New York & Staten Island Brewing Company should also procure all the capital stock of the latter corporation to be assigned to the same trustees as like security, and that the creditors of the firm and of the defendant Yuengling, individually, and of the New York & Staten Island Brewing Company who signed, should accept the mortgage bonds of the new corporation in full release, satisfaction and discharge of their several claims. The complaint alleges in substance that this agreement was carried out, but that the conveyances and transfers thereunder were made by the defendant Yuengling and his firm and accepted by the D. G. Yuengling, Jr., Brewing Company, with the intent and for the purpose of hindering, delaying and defrauding their creditors. The New York & Staten Island Brewing Company was not made a defendant in the present suit, nor was any one of the creditors who signed the agreement, and the defendant Yuengling demurred to the complaint on the ground that both the brewing company and these creditors were necessary parties to the action. His demurrer was overruled at the special term and he has appealed to this court.

We think the demurrer ought to have been sustained. The complaint does not merely attack the transfers and conveyances of the judgment debtors’ property, which were made pursuant to the agreement that has been mentioned; but it assails the agreement itself. In the fifth subdivison of the complaint is an express averment that the said agreement was made by the said firm of D. G. Yuengling, Jr., and the said David G. Yuengling, Jr., with intent to hinder, delay and defraud their creditors, and among them this plaintiff; ” and further, that all the parties to the agreement had notice at the time it was executed of such intent to hinder, delay and defraud.

And in the demand for judgment, the first prayer for relief is that the said agreement of October 22nd, 1887, be declared in all respects null and void as against the plaintiff. The averments of the complaint, as already set forth, suffice to show the existence of an interest on the part of the New York & Staten Island Brewing Company and the signing creditors in opposition to any judicial action which might invalidate the agreement even- as to a third party, like the present plaintiff; and we do not see how the court could properly adjudicate that this corporation and these creditors entered into the agreement knowing it to be fraudulent, as the complaint charges that they did, without affording them an opportunity to be heard on that subject. They are parties to the agreement and they must be parties to any suit in which the agreement is annulled.

A different question would be presented if the plaintiff had made no reference in his complaint to the agreement, but had attacked only the subsequent transfers and conveyances.

It was the opinion of the learned judge at special term that the creditors were .sufficiently represented by the Farmers’ Loan & Trust Company, which has been made a defendant. That corporation, however, is not a trustee for these creditors as to any rights which they have acquired directly under the agreement; nor does it appear to have been in any sense the representative of the creditors in entering into the agreement. It is merely their trustee under the subsequent mortgage, and this relation does not make it an adequate representative of the creditors in an action to set the agreement aside.

The interlocutory judgment should be reversed, with costs, but with leave to the plaintiff to amend the summons and complaint upon the payment of such costs.

Barrett, J., concurs ; Van Brunt, P. J., concurs in result.