Court Opinion

ID: 5189339
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:33:29.419158+00
Date Added: 2024-06-11T08:26:51.807852
License: Public Domain

O’Brien, J. (dissenting):
It is unnecessary to discuss the numerous objections urged by the Appellants, and I shall confine myself to the only one deemed worthy . of attention by the majority of the court, namely, that the failure to obtain a judgment and issue an execution is fatal to the action.
This I do not regard as an open question either in this court or in "the Court of Appeals. It has been twice before us in Patchen v. Rofkar (12 App. Div. 475; 52 id. 367), and before the Court of Appeals in National Tradesmen's Bank v. Wetmore (124 N. Y. 241). In the latter case, in referring to the necessity in all creditors’ •actions of obtaining a judgment and issuing execution, it was said: “ It has become the settled rule in this state not to dispense with . those preliminary proceedings at law, although it may be made to Appear by evidence that no benefit could result to the creditor from them. (Estes v. Wilcox, 67 N. Y. 264; Adsit v. Butler, 87 id. 585.) 'This is not founded upon any purpose of the statute to repeal or -curtail the common-law equity powers of the court, not inconsistent with the statute, to investigate the conduct of debtors in respect to their property in fraud of creditors, and to grant relief. The statute •did not purport to do that, but provided that c the powers and jurisdiction of the Court of Chancery are co-extensive with the powers •and jurisdiction of the Court of Chancery in England, with the exceptions, additions and limitations created and imposed by the Constitution and laws of this state.’ (2 R. S. 173, § 36.) In some of the .states the issue and return of execution preliminary to the action in ■equity is not required when it clearly appears that it would be utterly fruitless; and the same doctrine has been declared in the United States •Supreme Court. (Case v. Beauregard, 101 U. S. 690.) The rule in *114this state, in some sense limiting the exercise of jurisdiction of the court.so as to bring within its application all cases having in their purpose or relief sought, the nature of statutory creditor’s bills does not necessarily rest upon a want of equitable power of the court or its denial, but rather is adopted as a rule governing and regulating the exercise by the court of jurisdiction within its equitable powers. It has the merit of uniformity, and in effect relieves a case from any uncertainty as to what would have resulted from the use of an execution if one had been issued. And it is founded upon the doctrine that a court of equity will not take cognizance of a controversy which can be determined at law, and not until the remedy there is exhausted. Such has quite uniformly been the rule of the common law applicable to equitable jurisdictions. (M'Dermutt v. Strong, 4 John. Ch. 687; Hadden v. Spader, 20 John. 554.) But this rule is not so unrelenting as to. deny to a party the interposition of the equity powers of the court when the situation is such as to render impossible the aid of a court of law to there take the preliminary steps and produce what ordinarily may be treated as the condition precedent to the application for equitable relief.”
The rule thus enunciated has been followed not only in this court in the case referred to, but also in the General Term, fifth department, in Lefevre v. Phillips (81 Hun, 232). It is here sought, however, to destroy the force and binding effect of these decisions by a suggested distinction between actions where a court of equity has inherent jurisdiction and where its jurisdiction is statutory. If I am right in the view that this supposed distinction is more imaginary than real, then the cases cited should be followed. The sections of the Code of Civil Procedure (1871-1879) make no such distinction, but are applicable alike to all creditors’ actions; and if these conditions precedent as to judgment and execution are essential in any form of creditor’s action, then, clearly, they are essential in all. It is conceded that they are applicable to creditors’ actions in which a court of equity has so-called inherent power; and yet, as we have seen, the court has assumed jurisdiction where these, conditions precedent, from the nature of the case, could not be complied with by reason of the non-residence of the debtor or other cause. It- is true that the right to reach surplus income in an equitable action *115is derived from, statute, but in the very statute conferring the jurisdiction it is said (1 R. S. 729, § 57) that the surplus “ shall be liable in equity to the claims of the creditors of such person in the same manner as other personal property which cannot be reached by an execution at law.”
Thus it appears that the formal procedure and the manner of exercising the equity powers of the court to reach surplus income are assimilated to other creditors’ actions. Except that it is provided that the power shall be exercised in the same manner as in other creditors’ actions, there is no- express provision that it shall be exercised pursuant to the provisions of the Code of Civil Procedure (§§ 1871-1879). Because of the requirement, however, as to the manner of its exercise, the court would proceed — as it would do if there were no such requirement—in the same manner as in any other creditor’s action in equity. What has been done by statute is to bring a new subject into equity ; and with respect to the procedure to be followed or the manner in which the court should exercise its jurisdiction over such new subject, there can be no real or substantial distinction between such and other actions in equity. In the statute conferring the additional jurisdiction there is nothing which at all limits the manner of its exercise, except that, as has been stated, the manner, form and procedure have been assimilated to other creditors’ actions. It seems to me, therefore, to be a fanciful distinction to say that in one class of cases wherein the court has so-called inherent power it can dispense with these conditions precedent, while with reference to reaching surplus income, which by statute has been brought into equity, the power of the court has by some undefined and necromantic principle been mysteriously eliminated.
The authorities, as I read them, are against any such supposed distinction. As said in Russell v. Clark (7 Cranch, 89): “If a claim is to be satisfied out of a fund which is accessible only by the aid of a Court of Chancery, application may be made in the first instance to that court, which will not require that the claim should be first established in a court of law.” Hirshfeld v. Bopp (145 N. Y. 84) was an action by a creditor of a domestic banking corporation seeking to charge a stockholder under a statute which, as prerequisites, required the recovery of a judgment against the corpora*116tion and the return of an execution thereon unsatisfied. This clearly was a so-called statutory action. As said in the syllabus, “ It seems, that when an action has been brought by the People against Isuch a ■corporation, and a judgment has been rendered therein dissolving it, sequestrating its property, appointing a receiver and restraining creditors from bringing suit' against it, this is an' excuse for the nonperformance of the condition precedent requiring a judgment against . the corporation and the return of an execution unsatisfied.” The very distinction here sought to be made was thus referred to in the opinion: “ On the other side it is insisted that the liability of stockholders being purely statutory, performance is a necessary condition, without which no action can be maintained, and that no disability to sue the corporation, whether arising from the act of the law or from any other cause, can excuse its performance.” And in disposing of this contention, Judge Andrews reviews the decisions, and after concluding that the case' of Hunting v. Blun (143 N. Y. 511) put the question at rest in that court, continues: If it was necessary to find reasons supporting this decision, they are obvious ” — and then he proceeds to give them.
The further contention is made that a judgment entered after personal service upon the trustees only and service by publication on the defendants Castellane is open to constitutional objections, as depriving the latter of their property without due process of law. But this, if sound, would apply equally to actions whether the jurisdiction was inherent or conferred by statute, and equally applicable would it be to every suit brought by attachment which resulted in a judgment after publication of summons against non-resident defendants. The theory in attaching is that it is a proceeding in rem, just as this action, directed against the surplus of the trust fund, is in the nature of an equitable action in rem. Here, if the trustees had held an accumulated income, the plaintiff could have begun an action at law without reducing his claim to judgment or urging any excuse for not having done so. In such action he would' have attached the accumulated fund and published the summons against non-resident defendants, and after judgment the fund could have been seized and applied to the satisfaction of the judgment.
Further discussion of these contentions I deem unnecessary, because they have been disposed of in numberless decisions, and *117particularly in the case in this court to which I have already referred (Patchen v. Bofkar, 12 App. Div. 476), wherein the reasons why a court of equity may dispense with the conditions precedent are fully stated in the following language: “ It is apparent that the plaintiff could in no way secure a judgment in this State. * * * Moreover, a judgment recovered against the assignor (defendant) in another State where jurisdiction could be obtained of his person, would have no other validity in this State than a simple contract claim, and would no more constitute a basis for the ordinary creditors’ action here than the general indebtedness itself. * * * It thus appears conclusively that it is true, as alleged in the complaint, that the plaintiff has no remedy at law which he can pursue or exhaust, and that, unless he can maintain this action in equity, he must lose his total indebtedness.”
For the reason, therefore, that I do not regard the question as an open one, I dissent from the conclusion reached by the majority of the court, and think that the order continuing the injunction should be-affirmed, with costs.
Ingraham, J., concurred.