Case Name: JAMES E. DEWEY and others, Respondents, v. HENRY MOYER and BETSEY MOYER, Impleaded with another, Appellants
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1877-01
Citations: 16 N.Y. Sup. Ct. 473
Docket Number: 
Parties: JAMES E. DEWEY and others, Respondents, v. HENRY MOYER and BETSEY MOYER, Impleaded with another, Appellants.
Judges: 
Reporter: Supreme Court Reports (Hun)
Volume: 16
Pages: 473–492

Head Matter:
JAMES E. DEWEY and others, Respondents, v. HENRY MOYER and BETSEY MOYER, Impleaded with another, Appellants.
Fraudulent conveyamae — discharge inbamkn'wptcy of debtor— confession of new judgment by — right of judgment creditor, to maintain action to set aside fraudulent conveyance.
This action was brought by the plaintiffs, in whose favor the defendant Eldredge had in 1870 confessed judgment upon claims accruing prior to 1858, to set aside as fraudulent certain conveyances made by the said defendant, Eldredge, to the defendants Moyer in 1858. The defendant Eldredge did not appear. The other defendants set up as a bar to the action that the defendant Eldredge had been discharged in bankruptcy in 1858, and upon the trial proved the said discharge and the deed to the assignee made in the course of those proceedings.
Held, (1) that as the defendant Eldredge did not set up his discharge in bank-. ruptcy when the judgments were taken against him in 1870, the .defendants Moyer could not now dispute their validity.
(2) That the defense, as set up in the answer, was the discharge of the defendant Eldredge in bankruptcy, and not that the right to maintain this action was vested in his assignee therein.
(3) That even if the legal title to the property was and continued, after the bankrupt’s discharge, to be m the assignee, yet as he held the same merely as a trustee for the creditors, any one of the cestuis que trust might bring an action, providing the assignee was made a party thereto.
(4) That if the assignee was not made a party the defendants must set up. this defect in their answer, or otherwise it would be waived. (Bockes, J., dissenting.)
On the discharge of an assignee in bankruptcy the property of the debtor unad-ministered by the assignee, passes to the debtor without a reassignment. (Per 'Leabned, P. J.)
Appeal from a judgment in favor of the plaintiff, entered upon the report of a referee.
This action was brought by the plaintiffs as judgment creditors of the defendant Clinton Eldredge, for the purpose of collecting their respective judgments, recovered in 1870, upon prior judgments recovered in 1856, out of property alleged to have been fraudulently transferred by the judgment debtor to the defendants Moyer, in 1858. The defendant Eldredge did not appear. The defendants Moyer set up as a defense to the action, first a general denial, and second, “that on or about the 17th day of August, 1858, at Buffalo, in the State of New York, the United States District Court, held in and for the northern district of the State of New .York, duly made an order and a decree discharging the defendant Clinton Eldredge of and from all his debts, of all of which proceedings in the said court in bankruptcy for such discharge the said plaintiffs and their said assignors, and each of them, had due notice; that the pretended indebtedness, if any such existed, or ever did accrue, accrued prior to the filing of the petition of the said Clinton Eldredge for his discharge from such debts in the said United States District Court, and prior to the granting of such discharge. * * * And the said defendant further answering said complaint, upon her information and belief alleges and avers that the said claims upon which the said pretended judgments, Nos. 4, 5, 6, 7, 8 and 9, as stated in said complaint, are based, were not valid, legal, subsisting claims against the said defendant, Clinton Eldredge, at the time the said judgments were obtained and recovered against him, by the said plaintiffs, as alleged in said complaint, if any such there are; by reason of lapse of time, and by reason of his said discharge from all his debts in the said United States District Court, but that the said judgments, if any exist, are fictitious, invalid and fraudulent, and were obtained by a fraudulent collusion, understanding, agreement and promise, made between said plaintiffs, or some of them, or their attorneys, or some of them, and the said defendant, Clinton Eldredge, that the same should not be enforced against him, nor should any portion thereof be collected from him, or out of his property or effects, but that the same should be only chargeable or attempted to be collected of and from the defendants Moyer, or either of them, for the joint and mutual benefit of the said plaintiffs and the said defendant, Clinton Eldredge. Wherefore, defendant asks that plaintiffs’ complaint be dismissed with costs.”
The referee found that the conveyance made by the defendant Eldredge to the defendants Moyer, in 1858, was made with intent to defraud his creditors, and upon the agreement that they should hold the farm for his benefit, and that they would restore it to him, after deducting the amount of their liens then existing thereon, and as conclusions of law:
First. That the defendant Eldredge having waived his discharge in bankruptcy, such discharge is, under the pleadings in this action, unavailable to the other defendants as a defense, and neither it nor the assignment connected therewith, furnishes any bar to the plaintiffs’ right of recovery in this action.
Second. That under the pleadings and proofs, the plaintiffs have a perfect right to maintain this action, and are entitled to judgment therein.
Matthew Hale, for the appellants.
The referee erred in not holding that the proceedings in bankruptcy and the assignment, and debtor’s discharge therein, were a bar to the plaintiffs’ right of recovery. All the property of the bankrupt vested in the assignee under and by virtue of the appointment of the assignee. (Bankrupt law of 1867, § 14; Jones v. Millbank, 6 Bans., 73.) No one but the assignee, since his appointment, has had a right to maintain an action to set aside a fraudulent conveyance. (Goodwin v. Sharkey, 5 Abb. [N. S.], 64; Stewart v. Isidore, id., 68; In re Meyers, 1B. R., 162 ; Thomas v. Phillips, 9 Penn. St., 355; Pomeroy v. Lyman, 10 Allen, 468; Williams v. Merritt, 103 Mass., 184.) The discharge granted to Clinton Eldredge was from all his debts, except those specifically excepted by the act. (Bankrupt law, § 32; and as to effect of discharge, see id., § 34.) And the debts were discharged, although the judgment was rendered after the filing of the petition. (Monroe v. Upton, 50 N. Y., 593.) After the judgment debtor is discharged in bankruptcy, a creditor cannot proceed against his fraudulent transferee. (Botts v. Patton, 10 B. Mon., 452; Ocean Bank v. Olcott, 46 N. Y., 12.) The confessions of judgment to plaintiffs by the bankrupt, subsequent to the discharge, do not aid the plaintiffs. They amount simply to a new promise and create a new debt, enforceable only against newly acquired property of the bankrupt. (Depuy v. Swart, 3 Wend., 135, 139; Baker v. Wheaton, 5 Mass., 509, 512; Lm-bury v. Weightman, 5 Esp., 198, note; Roberts v. Morgan, 2 id., 736 ; Stearns v. Tappen, 5 Duer, 294, 299; Oar son v. Osborn, 10 B. Mon., 155.) That assignee could maintain suit after and without vacating the discharge, as against a fraudulent grantee, see Re Dole (7 B. B,., 538). The proceedings in bankruptcy were sufficiently pleaded. (Code, § 161.) A fact necessarily understood or implied forms a part of a pleading as much as if specifically alleged, and a direct allegation of such fact, although proper, is never necessary. {Partridge v. Badger, 25 Barb., 146, 170; Hunt v. Bennett, 19 N. Y., 173; 2 Wait’s Brae., 315, and cases there cited.) It is unnecessary to state, in pleading, matter of which the court takes judicial notice. (Swennerton v. Ins. Go., 37 N. Y., 174; People v. Snyder, 41 id., 397; Shaw v. Tobias, 3 Comst., 188, 190.) And the court will take judicial notice of the public statutes of the United States. {Jack v. Martini, 12 Wend., 311, 329; Platt v. Ora/wford, 8 Abb. [N. S.], 297, 304.) The proof showing that the plaintiffs had no title or interest in the property sought to be reached, at the time this action was commenced, their complaint should have been dismissed. It was not necessary to take the objection before the trial. {Mosselman v. Oaen, 1 Hun, 647; Davis v. The Mayor, ete., 4 Kern., 506, 526; Greene v. Breek, 10 Abb., 42; D'eWitt v. Ohandler, 11 id., 459.)
J. E. Dewey, for the respondent.
The discharge was a personal defense for Eldredge only, a personal privilege, which he alone could set up or waive as he chose, like the defense of infancy, which is personal, and none but the infant can avail himself of it. {Sloeum v. Hooker, 13 Barb., 536; Parker v. Baker, Clarke’s Ch., 136-138; Masons. Dennison, 15 Wend., 64.) Bankruptcy and infancy are, in this country, put upon the same ground as a personal privilege. {Sloeum v. Hooker, supra; Blanehm-d v. Caswell, 7 Gray, 153-155.) So that of the statute of limitations. {Rawles v. The Am. M. L. Ins. Oo. , 27 N. Y., 282, 296; Hyde v. Van Valkenburg, 1 Daly, 416.) Also, duress and usury, or any other technical or statutory defense. {Boughton v. Smith, 26 Barb., 635; Murray v. Judson, 5 Seld, 73, 83-85; Farr v. Pymer, 2 Cb. Sent., 20; Parlcer v. Rochester, 4 Johns. Oh., 329, 331-333.) So the claim of exemption is personal. ' (Earl v. Gamp, 16 Wend., 563.) So, though a party may, when sued, defend, he is not bound to for the benefit of others, either by insisting upon the statute of frauds (Gahill y. Bigelow, 18 Pick., 369, 372) or upon lapse of time. (MoGartney y. Welch, 51 N. Y., 626, 627; Adams v. Gurlis, reviewed, 10 Alb. L. J., 274; S. 0., 4 Lans., 168, 169, Hoge-boom:, J.) So, if the judgment is irregular, he only can take the objection. (5 Seld., 73, 84.) A bankrupt discharge is waived, and in this case was waived by the debtor’s not pleading it or defending the suit. (Price v. Peters, 15 Abb., 197; Medbury v. Swan, 46 N. Y., 202; Rtodge v. Rundell, 1 T. & Cook, 649, 651.) Even the mere delay or laches of the debtor waives it. (46 N. Y., 200 ; 3 T. & Cook, 118 ; S. C., 756 ; Barston v. Hanson, 2 Hun, 334.) But a conclusive waiver of the discharge as to everybody was the bankrupt’s confession thereafter of these judgments to the plaintiffs. (Dusenbury v. Hoyt, 53 N. Y., 521; Stewart v. Wilson, 2 Law and Eq. R., 234,235.) Like the statute of limitations, a bankrupt discharge never paid or satisfied a debt. (Johnson v. A. and S. R. R. Go., 54 N. Y., 416, 426, 427.) Pleading the discharge only was not an averment of an assignment or of an assignee’s appointment. (Sutherland v. Paris, 10 Nat. Bky. Reg. R., 424.) It was necessary to aver the transfer directly, without leaving it to inference, conjecture or presumption. (Patterson v. Taylor, 8 Barb., 250 ; Fisher v. Mayor, etc., 3 Hun, 649 ; 3 Hen., 314; 6 Seld., 175; 29 Barb., 436, 442.) The making of the assignment was in no sense a judgment or deternvination of any court, and these defendants were, therefore, thrown back to the common-law rule requiring an averment of all the facts necessary to give jurisdiction. (Bankrupt act, §§ 11 and 14; Sto. Eq. PL, § 726, p. 562 [1st ed.]; Garitón v. Leighton, 3 Meriv., 667; Beames Eq. PL, 120-122; Cooper Eq. PL, 249, 250.) This objection now made amounts only to this : that the debtor’s assignee had the right, as between him and the plaintiffs, as a trustee, to collect and distribute it to them, and possibly to other creditors, not parties, and who may not get their share. It is, therefore, only an objection, for a defect or want of parties, plaintiff or defendant, which, under the Code, was warned by not taking it by answer. (Code, §§ 144, 147, 148; Fort Stcmwix Bh. v. Leggett, 51 N. Y., 552, 554, 555; Fox v. Moyer, 54 id., 125, 130; Merritt v. Walsh,- 32 id., 685; Zabrislde v. Smith, 3 Kern., 322, 336; Child v. Brace, 4 Pai., 314; Depuy v. Strong, 3 Keyes, 603-605.) The rights of the bankrupt assignees “ are not to be taken into consideration, unless they have themselves interfered.” {¡Drayton v. Dale, 2 B. & Cress., 293, 295,297; Fort Stanwix Bh. v. Leggett, supra ¡ Card v. Walbridge, supra; Freeman v. Denning, supra ¡ Seaman v. Stoughton, 3 Barb. Ch., 349; Fyster v. Gaff [S. C. U. S.], 13 Alb. L. J., 144, 145.) This is so, even where their rights are claimed either by or against the bankrupt in a suit to which he is a party. (See same cases; also Sanford v. Sanford, 58 N. Y., 67; Silhe v. Osborne, 1 Esp., 140; Evans v. Brown, id., 170; Fowler v. Down, 1 B. & P., 47, 48, 49; Bvrd v. Fierpoi/nt, 1 Johns., 126.) And certainly the fraudulent holder has less rights or none at all. The Moyers could not have set up an outstanding title in another without connecting themselves with it. (16 Wend., 563, 571; 11 id., 54, 57; 4 Duer, 438; 16 B., 595-597; 16 Ilow., 547.) Especially so, as against these plaintiffs, whose rights are better than, and prior to those of fraudulent holders. (4 Johns. Ch., 687.)

Opinion:
LeARNed, P. J.:
This action is brought by judgment creditors of Clinton Eldredge to declare certain other judgments in favor of the defendant Betsey Moyer to be fraudulent and void, on the ground that they were intended to defraud creditors; and also to reach property in the hands of the Moyers, alleged to be fraudulently held by them, as against the creditors of said Eldredge. The plaintiffs setup several judgments against Eldredge, recovered in June, September and October, 1870. The causes of action, on which they were recovered, are alleged to have arisen at certain times, prior to June, 1858.
The defendants Moyer, after denying the fraud, aver that on the 17th day of August, 1868, Eldredge was discharged by the United States District Court in bankruptcy from his said indebtedness to the plaintiffs; that their debts were provable in the bankruptcy proceedings, and that the plaintiffs are therefore barred from enforcing the same. On the trial the referee reported in favor of the plaintiffs, and the defendants Moyer appeal.
They insist, now, first: That tbe debts owing to tbe plaintiffs, were discharged by tbe proceedings in bankruptcy. However that may have been, it was for Eldredge to insist upon that discharge, when tbe judgments were taken against him in 1870. If be chose to waive bis discharge, be was at liberty to do so. And if be did waive bis discharge, or confess judgment, the defendants Moyer cannot dispute the validity of the judgments. (Price v. Peters, 15 Abb., 197; Rudge v. Rundell, 1 N. Y. S. C. [T. & C.], 649; Medbury v. Swan, 46 N. Y., 202.) It is not dishonest for a debtor, who has been discharged in bankruptcy, to waive the discharge and allow a judgment to be recovered against him for the original debt. (Dusenbury v. Hoyt, 53 N. Y., 521.) And if he permits a judgment to be thus recovered against him, the creditor has a right to enforce the judgment against any property of the debtor. One who is in possession of property of the debtor, transferred with intent to defraud creditors, cannot defend himself on the ground that the debtor might have had a defense against the judgment, if he had chosen to assert it.
But the second point, and one which is more strongly urged by the defendants Moyer, is that, after the appointment of an assignee in bankruptcy, he only can bring actions to set aside fraudulent transfers. (Goodwin v. Sharkey, 5 Abb. [N. S.], 64; Rev. Stat. U. S., § 5046.)
The defendants urge, in support of this point, the case of Ocean Nat. Bank v. Olcott (46 N. Y., 12). But the difference between this case and that, is that the debt of the plaintiffs, in that case, had been discharged, and they were no longer creditors. Hence, it was held that they could not avail themselves of the benefit of 1 Revised Statutes (m. p.), 728, section 52. But in the present case the plaintiffs are creditors, and the débts which they now hold have not been discharged. And the question is whether persons, who fraudulently took, and still hold, property of the debtor, shall be allowed to retain it, as against these creditors.
The defendants further insist that the present judgments create only a new debt, and can only be enforced against newly acquired property of Eldredge. But if this were so, it cannot be urged that a debt can only be enforced against property of the debtor thereafter acquired. Furthermore the complaint charged, and the referee finds that the fraudulent transfer was on a promise to restore the property to Eldredge, the debtor. Such a fraudulent transfer is void against even subsequent creditors. (2 R. S. [m. p.], 135, § 1.)
In reply to this second point of the defendants, the plaintiffs say that, if this were any defense, it was only a defect of parties, not set up in the answer, and therefore waived. (Code, § 144, 147, 148.) It is not set up in the answer. The answer only alleges the discharge of the debt, and rests (aside from denial of the fraud) on the allegation that the debt is discharged. It does not aver that an assignee was appointed or that he should be a party to the action.
In the course of the trial copies of the proceedings in bankruptcy were offered in evidence, and objection was taken to their admissibility. They were admitted, and they contain a certified copy of the assignment, made by the register in bankruptcy to the assignee (under Rev. Stat. U. S., § 5044). Now we pass the question, which is urged by the plaintiff, whether this is proper evidence of the execution of the assignment. The proceedings were pertinent to the issue of discharge, and this copy assignment was a part of these proceedings. The reception of these proceedings in evidence was not a waiver (especially when objection was made) of the objection to the 'consideration of the issue of defect of parties. (Williams v. M. and F. T. Ins. Co., 54 N. Y., 577; Codd v. Rathbone, 19 N. Y., 37.) The defendants set up Eldredge's discharge. The papers given in evidence were admissible to prove that. They did not set up that there was an assignee, and that the right of action was in him only, and therefore the proof (if there was proof) of the appointment of an assignee, coining in under the other issue, does not raise an issue which the defendants did not raise by their pleadings. A defense not pleaded is of no avail. (Kelsey v. Western, 2 N. Y., 501; Brazill v. Isham, 12 id., 9.)
An assignee in bankruptcy is but a trustee for the creditors, and does not hold the property as of his own right. When he makes a final dividend and renders his account, and it is passed, he is to be discharged from any liability to any creditor. (Rev. Stat. U. S., § 5096.) On his discharge the property reverts to the debtor without a reassignment. (Colie v. Jamison, 4 Hun, 284.)
While he holds the property the creditors are oestuis que trust, and a eestui que trust may bring an action such as this, if he makes the trustee a party. (Fort Stanwix Bank v. Leggett, 51 N. Y., 552; Fox v. Moyer, 54 id., 125.) And if he did not make the trustee a party, the defendant must set this up as a defect of parties.
The reasons for this are plain. It does not lie with these defendants Moyer, holding property fraudulently as against Eldredge's creditors, to make this an affirmative defense. The assignee in bankruptcy has made no claim against them. There may be now no other creditors of Eldredge than these plaintiffs. The assignee may have sold to the plaintiffs this property fraudulently held. If, however, the defendants Moyer thought that other persons, creditors of Eldredge, represented by the assignee as their trustee, were entitled to share in the property fraudulently held by them, they should have set up this defect of parties. The plaintiffs might then have had an opportunity to show, for reasons above suggested or for other reasons, that there was no such defect. Another reason might exist why the assignee should not be a party. His right of action is limited to two years. (Rev. Stat. U. S., § 5057.) This time begins to run, in a case like this, from his knowledge of the fraud. (Bailey v. Glover, 21 Wall., 342.) If the assignee then had had knowledge of this fraud, soon after his appointment, January 22, 1868, his time for commencing an action would have expired before this present action was commenced, in 1872. If that were so, it could not be claimed that the defendants Moyer would be entitled to retain this property, fraudulently transferred, as against judgment creditors of Eldredge.
If the defendants Moyer had set up this defect of parties, and the plaintiffs had chosen so to do, they could have brought in the assignee as a party to the action. But since this defect was not set up in the answer, and the defendants Moyer went to trial on two issues: that of denial of the fraud, and that of a discharge of the debt: and failed on these; it is too late now for them to setup that the assignee should have been a party.
In Sands v. Codwise (2 Johns., 486), an action was brought by creditors against a bankrupt, making the assignee a party defendant, on the ground of his refusal to prosecute. It was held not necessary to substitute a person who had been appointed a new assignee. Erom this it appears that the fact of the appointment of an assignee is not a bar or defense to the action. It only shows a defect of parties. The cause of action is good enough; only, if the_ defendant so claims, another party should be brought in. But if the defendant waives this, by not setting it up in the answer, then the action proceeds, and the fact that an assignee has been appointed is no defense on the trial.
For it is evident, as above suggested, that there are cases where the assignee would really be only a nominal party; as, for instance, where there were no other creditors but those who had joined as plaintiff's. And we must notice that in this case, the question is not between these judgment creditors, plaintiffs, on the one side and the assignee in bankruptcy on the other. It is between judgment creditors on one side and fraudulent holders of the debtor's property on the other. The defendants Moyer are not trying to protect other creditors (if there be any) of the bankrupt, but they are trying themselves to keep what they took for the purpose of defrauding creditors. If in good faith they had desired to protect other supposed creditors, they should have averred the appointment and existence of an assignee in bankruptcy (if he has not been discharged of his office), and should have caused him to be made a party.
Whether such an assignee could recover of these plaintiffs, as part of the bankrupt's estate, the amount of this present recovery, it is unnecessary to inquire. We have only to do with the liabilities of the defendants Moyer to these present plaintiffs under the issues joined herein.
The judgment should be affirmed, with costs.
Boasdmak, J.:
The defense of Eldredge's discharge in bankruptcy was not available against the plaintiff to Eldredge or the Moyers ; the new judgment, since the discharge, obviates any possible effect of the discharge as to such judgment; that defense was therefore a nullity, and the evidence to sustain it was in fact incompetent and immaterial. Upon the pleadings and proofs, so far as they were effectual and competent, the only issue to be tried was the fraudulent transfer to the Moyers; that is found against the Moyers, and is sustained by th© evidence given upon the trial.
But taking the case as it was tried; plaintiff, as a creditor of the bankrupt, had an equitable interest in his assets. The assignee in bankruptcy may have had the legal title, but the latter was not made a party to the action ; the defendants do not object to that fact by their answer. Why, then, may not the plaintiff recover, at the peril of being compelled by the assignee to account for and pay over the amount of his recovery for ratable distribution among all the creditors, plaintiff being one ? (Ex Parte Foster, 2 Story, 131, cited by Justice BooKEs.)
All the creditors are cestuis que trust, and alike interested in the amount collected ; the assignee is the trustee. I see, therefore, no good reason why the recovery may not be allowed to stand, and the plaintiff be allowed to receive the same, subject to any rights which the assignee in bankruptcy or the other creditors of the bankrupt may have therein. It having been determined that the title of the Moyers is fraudulent, there is very little virtue or propriety in aiding them in retaining the fruits of their fraud, as against a plaintiff who is entitled in equity to the whole or some portion thereof.
I therefore concur with Mr. Justice LbabNED in an affirmance of this judgment with costs.