Court Opinion

ID: 3613327
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:57:03.661722+00
Date Added: 2024-06-11T14:07:33.064057
License: Public Domain

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The respondent's counsel insists most strenuously that this court has no jurisdiction to review the order from which this appeal is taken. That is the question to be first considered and disposed of. In order to appreciate this objection, it is necessary to know just how the order originated and what it does or assumes to do. It was made in this proceeding, which, as the title indicates, was one to dissolve a corporation under the provisions of chapter 17, title 11 of the *Page 14 
Code (§§ 2419-2431). It is quite unnecessary to enter upon any argument to show that a proceeding for the voluntary dissolution of a corporation under this statute is a special proceeding. In fact, it is admitted that a final order made in such a proceeding is a final order in a special proceeding, and, therefore, reviewable in this court. It is from that order, as modified and corrected by the Appellate Division, that this appeal is taken, as appears from the notice of appeal and the facts disclosed by the record. It appears that a receiver of the corporation was appointed on the 5th day of August, 1897, and that subsequently he made his report to the court of his transactions, with a statement of the claims filed with him by creditors as allowed or disallowed. On February 7, 1898, the court appointed a referee to examine and pass upon the receiver's accounts and the claims presented by creditors against the assets. The referee made his report to the court on May 17, 1898. On May 27 following the report was confirmed and an order entered to that effect, which adjudged, among other things, that the Meacham Arms Company, a corporation organized and existing under the laws of Missouri, was a creditor in the sum of nearly eight thousand dollars. The order then directed that after making certain payments for the expenses of the proceeding, the balance in the hands of the receiver be distributed among the creditors, including, of course, the said Missouri corporation, pro rata.
On the 14th of February, 1898, Campbell  Company, New York creditors of the Missouri corporation, attached its interest in this claim in an action against the foreign corporation in the courts of this state to recover their debt. The order of the Appellate Division affects the lien of this attachment upon the fund, and the New York creditors are the parties who have appealed from the order to this court. It appears that on the 21st of December, 1897, the Missouri corporation, whose interest has been attached, executed a trust deed, in which one Bulkley is now the trustee, of all its property for the benefit of creditors, with preferences. After the entry of the final order for distribution this trustee applied to the court *Page 15 
at Special Term to have that decree or order corrected by providing that the claim of the Missouri corporation be paid by the receiver to him as trustee, instead of to the corporation itself, as the original order had provided. That motion was opposed by the New York creditors who had procured the attachment to be levied upon it and who were notified of the application. On a hearing the motion was denied, but Bulkley, the trustee, appealed from the order which denied his application and the Appellate Division reversed the order of the Special Term and granted the original application, and from this order the attaching creditors have appealed to this court.
We have seen that the order of May 27, 1898, was a final order in a special proceeding. The court that made it was asked to correct it in a single particular, but refused. Had it granted the motion, instead of denying it, the corrected order would then take the place of the first one and would still be a final order. What is conceded to be a final order in a special proceeding has not been changed into something else through a motion to correct it by substituting one name for another as the party to whom a dividend is payable. When the correction was made the order remained in its nature and character just what it was before. The Appellate Division made the correction in the order which the Special Term refused, and the order of that court is the order of the Special Term corrected and modified by substituting the foreign trustee or assignee as the party to whom the dividend must be paid in the place of the foreign corporation, the original creditor. It is quite clear, therefore, that the order of the Appellate Division must be a final order in a special proceeding since it has taken the place of another order which is conceded to be such. I am unable to perceive any force in the objection that the order is not reviewable in this court. (VanArsdale v. King, 155 N.Y. 325.)
On the merits we think that the order of the Special Term was right. It will be seen that the assignment for the benefit of creditors in Missouri was made before the attachment was *Page 16 
levied upon the claim in this state. If under that assignment the dividends payable by the receiver upon the claim in this state passed from the corporation to the assignee, then the attachment subsequently levied created no lien upon it in favor of the New York creditors since their proceedings are based upon the assumption that the foreign assignment was void as to domestic creditors. The fund when attached was here, and it had been realized from the assets of a domestic corporation in proceedings for a voluntary dissolution. There is grave doubt whether the foreign assignment to the trustee who procured the order to be changed operated to transfer the fund as against the attaching creditors in this state who now complain of that order. That doubt will exist whether the question is to be tested by the laws of this state or of the state where it was made, and yet that is the very question which has virtually been decided by the order appealed from in favor of the foreign assignee upon a motion to correct an order by substituting one name for another. It was, of course, open to the assignee to appear before the referee and prove his title to the fund, and to present the whole question to the court on the subsequent motion for confirmation of the report. His right to receive the money as against the attachment of domestic creditors could have then been decided in an orderly way upon the facts and the law. It is evident that he failed to present the question then, or, if he did, that it was decided against him. The legal effect of the order substituting the assignee as the owner of the claim is to determine that he took good title to it under the assignment, and that the attachment never became a lien thereon. It was competent for the assignee to apply for a rehearing before the referee or the court in order to have his right to receive the dividend determined. But a motion to correct the final order by substituting his name as the party entitled to it was not a suitable proceeding for that purpose.
This will appear more clearly if we consider the questions that must arise in any contest for the money between the assignee and the attaching creditors. The assignment not *Page 17 
only preferred certain creditors, but in terms provided that if the assignor should pay the debts therein specified within thirty days from the date of the instrument then the transfer should be void, but in case the corporation making the assignment did not so pay the debts within that time then the trustee should proceed to convert the property into cash and distribute the same according to the terms of the deed among the preferred creditors, and the residue, if any, among the creditors unpreferred. This instrument did not make an absolute appropriation of the debtor's property for the benefit of creditors, and hence was not a general assignment, but in the nature of a mortgage to secure debts. (Union Bank v. Kansas City Bank, 136 U.S. 223; Crow
v. Beardsley, 68 Mo. 435; Hargadine v. Henderson,97 Mo. 375.) Whether a transfer of this character operated to exempt the property of the debtor in this state from the lien of an execution or attachment subsequently levied at the suit of creditors here who had no notice, actual or constructive, of the execution of the instrument, is a question that ought to have been presented and determined in some form other than a motion to change the name of a party in an order directing distribution.
But if the instrument should be construed to be a general assignment the question must arise whether it is valid as against domestic creditors under the law of this state or of the state where it was made. We know that in this state a general assignment with preferences is not good, except to a certain extent, and the following provision seems to be a part of the statute law of Missouri: "Every voluntary assignment of lands, tenements, goods, chattels, effects and credits made by a debtor to any person in trust for his creditors, shall be for the benefit of all the creditors of the assignor in proportion to their respective claims; and every provision in any assignment providing for the payment of one debt or liability in preference to another shall be void." (Rev. Stat. of Mo. 1889, § 424.) It is true, as the learned judge who gave the opinion of the court below remarked, that there was no proof *Page 18 
on the hearing of the motion as to what the law of that state is on this question, but the notice of motion informed the attaching creditors only of an application to insert the name of the trustee as such in the decree for distribution just before that of the corporation which appeared therein as the creditor to which the dividend was payable. All questions concerning the claims of creditors and their right to share in the distribution had then been settled by the confirmation of the referee's report after all parties in interest had been heard. The court had power on such a motion to correct any mistake in the names of creditors entitled to receive the dividend and to make the decree conform to what had been decided and adjudged. But it had no power, without reopening the case, to determine the conflicting claims of outside parties to receive the distributive share of the money in the hands of the receiver applicable to any particular debt. That was an original and fundamental question which should have been passed upon before the decree was entered and was not involved in a motion to insert one name in place of another in the decree. The court of original jurisdiction having denied the motion the order should, I think, have been sustained on appeal. The assignee could not, at the Appellate Division, enlarge the scope of the motion so as to procure for the first time the determination of important questions concerning the validity of a foreign assignment as against the attachment of domestic creditors. It is apparent that the record at the Special Term did not disclose the facts necessary to the determination of such questions. The motion on its face embraced nothing more than the correction of some mistake in framing the decree. After the denial the court upon appeal enlarged the scope of the application in such a way as to involve original questions of great importance between a foreign assignee and domestic creditors who, so far as appears, were not parties to the original proceeding. These questions were not fairly embraced within the issues presented by the motion to correct the decree. Such a motion contemplates only such changes as are necessary to make, the decree conform to what has been *Page 19 
adjudged and cannot be extended so as to embrace new questions involving important rights not litigated before.
The assignee should be required to present these questions in the regular way, either upon a rehearing after an application to open the final decree or upon an application to vacate the attachment. It would be unjust to the attachment creditors in this state to have the fund paid over to a foreign assignee by force of a mere correction of the record which the Special Term made in the case when it is not claimed that there was any mistake or inadvertence in that respect. On a direct issue the question will be presented whether the fund passed to the assignee under the foreign assignment, or is subject to the attachment in behalf of the creditors in this state. Both parties will then have a fair opportunity to present the facts and the law bearing upon the question, including, of course, the law of the state where the transfer was made. That question has not yet been tried in any court of original jurisdiction, and since the facts which may control the decision have not and could not have been developed on the hearing of the motion to correct the decree, we refrain from expressing any opinion on the merits.
The order of the Appellate Division should be reversed, and that of the Special Term affirmed, with costs in all courts to the appellants.
All concur, except GRAY, J., not voting.
Order reversed, etc.