Court Opinion

ID: 3620480
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:02:23.967128+00
Date Added: 2024-06-11T13:46:40.221722
License: Public Domain

A reference to some facts, in this complicated case, is essential for the purpose of making clear the points I seek to raise. The chronology is important. The firm of J.B. Brewster 
Company, carriage manufacturers in the city of New York, made a general assignment for the benefit of creditors to John A. Garver on the 11th day of October, 1895. Prior to that time several banks and the Spring Perch Company, creditors of the assignors, had recovered judgments at law on their claims and issued executions which were then outstanding in the hands of the sheriff. *Page 396 
Shortly after the execution of the general assignment and transfers these judgment creditors brought separate actions in equity attacking the general assignment and other transfers of property as fraudulent; also in aid of the executions in the hands of the sheriff, it being alleged that the general assignment and other transfers were obstacles to making the levy upon such of the assigned property as was subject thereto. It was thereupon stipulated that the suit of the Home Bank, which was begun in November, 1895, should be tried and the others abide the result.
It was conceded at the trial of this latter suit that the assignee was not guilty of intentional fraud in connection with said assignment and transfers in which he was concerned.
The suit of the Home Bank resulted in a decision setting aside the general assignment and transfers attacked as fraudulent, as to the bank, thus removing all obstacles to an immediate levy of the executions.
It is at this point that we encounter irregularities of large extent. The Special Term judgment under this decision was entered on July 10th, 1896. The plaintiff erroneously treated the action as a judgment creditor's suit after execution returned unsatisfied instead, as it really was, an action to remove obstacles to the levying of executions outstanding under judgments at law. The result of this error was the entry of a judgment which extended the temporary receivership (a temporary receiver having been appointed, pendente lite, at the time the action was begun) to a permanent receivership then created of all the property of the assignors, including non-leviable property, over which the court had no jurisdiction in that action. The judgment further provided that the temporary receiver should account and pay over to the permanent receiver the assets in his hands. Upon appeal the Appellate Division modified this judgment by striking out the provisions as to a receivership, thereby leaving the judgment in proper form, the leviable property to be redelivered to the assignee "to the end that the plaintiff may levy its executions *Page 397 
upon such property and sell the same to satisfy such executions or judgments upon which they were issued." The judgment was so amended by the Appellate Division May 4th, 1897.
It thus appears that at the time of the Special Term judgment, July 10th, 1896, the judgment creditors were at liberty, had they followed the proper practice, to issue their executions against the leviable property, and a similar opportunity was afforded them when the Appellate Division modified the judgment, as above stated, May 4th, 1897.
It is apparent that these judgment creditors were not content to follow leviable property which was in existence at that time, but were reaching out for assets that could not be dealt with in aid of the executions. After the Special Term judgment had been so modified the plaintiff entered an order of reference to take and state the accounts of the permanent receiver. The referee in this accounting made his report December 2d 1897, in which he found, among other things, that the plaintiff had no lien upon the non-leviable assets, including a life insurance policy for $50,000 on the life of J.B. Brewster, and directed all the property to be restored to the assignee. Thereupon the plaintiff made a motion at Special Term to set aside and disaffirm the report of the referee. At the same time a motion was made by the assignee to overrule the exceptions and confirm the report. The Special Term sustained the exceptions of the plaintiff and directed the permanent receiver to pay to the sheriff of the county of New York the balance of cash in his hands, to be applied on account of plaintiff's executions, and to deliver to the sheriff carriages and lumber to the end that the same might be sold to satisfy the executions. It was further ordered that the receiver should deliver the policy of insurance to the defendant upon receiving the sum of $6,272.25 from the proceeds thereof. The defendant appealed from this order to the Appellate Division, where it was reversed, and the report of the referee in all respects confirmed. (33 App. Div. 330.) The plaintiff appealed from this latter order to the Court of *Page 398 
Appeals, where the appeal was dismissed on the ground that it was an order in the action and not appealable. (159 N.Y. 526.) This order was entered about April 25, 1899.
Early in November, 1898, after the Appellate Division had confirmed the report of the referee, the permanent receiver, after the defendant had made a motion to punish him for contempt for failure to comply with the directions of the referee's report, paid over to the assignee the sum of $866.86, and also delivered to him certain carriages. We thus have leviable assets in the hands of the assignee at this time.
It appears that on November 18th, 1898, after due notice, the assignee sold all of said carriages at public auction, receiving therefor the sum of $2,219.90, which shows clearly the amount of leviable assets in the hands of the assignee, and which, with a quantity of lumber, had theretofore been in the possession of the permanent receiver ever since the Special Term judgment of July 10th, 1896. During this entire period there was no obstacle to levying under the executions.
It is argued that the leviable property having been disposed of for the benefit of the assigned estate, these judgment creditors, who had prosecuted litigations resulting in a fund to be distributed among the general creditors where otherwise there would have been none, are entitled to come in and share therein with the other general creditors. A few more facts will shed light at this point. Prior to the judgment of July 10th, 1896, the court made an order upon the joint affidavit of the temporary receiver and assignee, authorizing them to pay out of the funds in their possession the sum of $16,000.00, constituting a lien on the said policy of life insurance, together with interest thereon, and to hold the policy jointly during the pendency of the action; the interest amounted to $1,048.00. This sum of $17,048.00 was accordingly paid to the American Deposit and Loan Company, the temporary receiver contributing $5,000.00 and the assignee $12,048.00. The temporary receiver and the assignee were at that time in joint control of the estate, the action not having proceeded to judgment in the Special Term. *Page 399 
It appears in the accounting of the permanent receiver before the referee that the assignee advanced the further sum of $3,662.76 on account of premiums due on the said policy, making with said sum of $12,048.00 the total of $15,710.76 that he advanced to protect the policy.
It is thus established that the assignee had made the greater part of the advances necessary to protect the policy of life insurance, and would have had no difficulty in caring for the same entirely had it not been for the fact that he was improperly deprived of the full control of the possession of the assigned estate by a judgment that was unauthorized by law and was practically set aside by the Appellate Division, that learned court having declared the receivership and the removal of the estate from the assignee's control to be wholly irregular.
I have before stated that the erroneous practice of the plaintiff in the Home Bank case had to a great extent wasted this estate. The attorney for the temporary receiver was awarded the sum of $1,028.30 for counsel fee and disbursements; the attorney for the permanent receiver was awarded the sum of $1,118.38 as counsel fee and disbursements; the referee received the sum of $300.00 for his services; the assignee also states in his affidavit in this proceeding that the estate has been put to other very great expense by reason of the litigation arising from this irregular practice.
These general statements of the assignee will be better appreciated when it is understood that the Home Bank began a second action against the assignee and the sheriff of the county of New York, wherein it demanded, in a complaint verified December 20th, 1899, the following relief: (1) That it may be adjudged and determined that the plaintiff the Home Bank had and has a lien upon all leviable property of said J.B. Brewster 
Company, which has come into the hands or possession of the defendant Garver, and which was in the city and county of New York at the time of the issuing of the several executions hereinbefore referred to, and that the said lien attach to and follow the proceeds of the said leviable property which has come into the possession of the said *Page 400 
defendant Garver; (2) that the defendant Garver account for and deliver and pay over to the sheriff of the county of New York all said leviable property or its proceeds as may be sufficient to satisfy the said executions upon the judgments recovered by the plaintiff against J.B. Brewster  Company hereinbefore set forth; (3) for further relief.
The action was carried through the courts with this result: The Special Term dismissed the complaint; the Appellate Division and this court affirmed the judgment. (172 N.Y. 632, without opinion.)
The facts of this case thus disclose that the judgment creditors, throughout all of these litigations, were confined simply to their remedy to reach leviable assets; that they failed to properly pursue it and neglected to lay hold of such assets in the possession of the permanent receiver and the assignee when no obstacles stood in their way of enforcing the executions in the hands of the sheriff. It remains to consider whether on this state of facts, these judgment creditors are estopped, by years of wasting litigation, from proving their debts as general creditors in the assignment proceedings.
It has been frequently held that a creditor who receives any benefit under a general assignment cannot afterwards attack it. It would seem, from parity of reasoning, that a creditor who has successfully attacked the assignment and other transfers and had them set aside as fraudulent as to him; who has had the way opened to him to enforce his executions at law, and who has failed to realize valuable assets because he did not avail himself of the remedy at law placed in his hands, should also be estopped.
It is apparent that the technical rule as to election of remedy, illustrated by a long line of decisions, has no application to the present case. I refer to those authorities which deal with parties between whom existed a relation created by contract, and in some of which the plaintiff rescinded the contract and brought replevin for goods procured by fraud and in others stood upon the contract. (Morris v. Rexford, 18 N.Y. 552;Kinney v. Kiernan, 49 N.Y. 164; Moller v. *Page 401 Tuska, 87 N.Y. 166; Rodermund v. Clark, 46 N.Y. 354, and many other cases.)
In the case before us the relation between the parties is not contractual, but is created by law — by the statute which provides for the execution of general assignments for the benefit of creditors and the distribution of estates thereunder.
This court has held (Mills v. Parkhurst, 126 N.Y. 89) that it should be open to any creditor to attack the general assignment on the ground of fraud, and if he fails he may, notwithstanding this futile effort, prove his debt in the assignment proceeding.
This decision obviously rests on considerations of public policy which permit the attack and the further fact that the attacking creditor had not disturbed the assignee in the custody and management of the estate, as he was defeated.
In such a case there is no election of remedy by the mere beginning of the action, as the rights of the creditor are determined by the result of the action. If he fails he may still prove his debt under the general assignment. If the creditor succeeds in his action and enters final judgment, what is the logical, legal result? In beginning his action, as we have seen, he is not held to the strict rule of election of remedy, but he must abide the result.
In the case before us the plaintiff is confronted by its own final judgment securing to it the relief for which it sued, to wit, the removal of obstructions to its execution in the hands of the sheriff and permitting that officer to levy on all personal property subject thereto. The plaintiff is thereby estopped by the doctrine of res adjudicata; it is not a question of election of remedy, but a remedy exhausted, pursued to a final judgment of record, declaring the general assignment void as to it and granting the relief for which it prayed. A judgment bars any action or proceeding inconsistent with its provisions. (Steinbach v. Relief Fire Ins. Co., 77 N.Y. 498; Fields v.Bland, 81 N.Y. 239.)
In the case 77 N.Y. 498 (supra) it was held that when a party has elected to sue upon a written contract and has been *Page 402 
defeated, he cannot thereafter bring an action to reform the contract. Judge EARL said (p. 502): "This is a case, it seems to me, where the doctrine of res adjudicata must apply, and bar a recovery, unless plain principles of law, which have always been regarded as important in the administration of justice, are disregarded."
In the case at bar the plaintiff came into court and said, in substance, it had a judgment at law, with execution in the hands of the sheriff; the general assignment was an obstacle to a levy; its removal was asked. The court by judgment granted this relief, and must not the doctrine of res adjudicata be applied, unless plain principles of law are disregarded? The uncontradicted facts of this case, already recited, show that for a long period of time the plaintiff failed to levy on personal property when it might have done so, every obstacle having been removed by the decision and judgment of the court.
No case has been called to my attention in this court holding that where a creditor has proceeded to final judgment and succeeded in having a general assignment declared fraudulent as to him, he having received substantial benefits under his judgment, or was entitled to the same, that nevertheless he could come in as a creditor and prove his claim thereunder.
Two cases in this court were cited by the courts below in favor of the plaintiff. In the case of Mills v. Parkhurst (126 N.Y. 89) a creditor sought to prove his claim after having failed in his attack upon the assignment. All that was actually decided, or could be determined, was that such a creditor might prove his claim, notwithstanding his unsuccessful suit. The court said (p. 95): "A creditor's only alternative, if he is not content to take what would thus come to him, is to endeavor to set aside the deed or assignment if he deems himself possessed of the requisite evidence of its invalidity at law. If there is any election for him to make it can only be with respect to what remedies may be available to him in order to right himself upon his judgment against the assignee and to avoid the assignment. * * * It in no wise militated against the right of the appellant, if defeated *Page 403 
upon that issue, to share in the assigned estate on the basis of the distribution provided in the debtor's deed to his assignee."
The reasoning of this opinion clearly recognizes the possibility of a situation where a creditor, succeeding in his attack upon the assignment, may place himself in a position which would preclude him from proving his claim.
The case of Groves v. Rice (148 N.Y. 227) is distinguishable in its facts from the case before us. In that case the creditor was held to have so recognized the assignment, for the purpose of gaining an advantage thereunder, that he was estopped from attacking it. It is a case where the doctrine of estoppel was applied in order to protect the assignee and creditors.
In the case before us the doctrine of res adjudicata
controls.
I am of opinion that the fund now in the hands of the assignee is only a small residue, preserved to the estate, notwithstanding the litigations of the judgment creditors, by the persistent efforts of the assignee to save something for the general creditors after the unwarranted and unnecessary receiverships, accountings and unauthorized actions had run their asset-wasting course.
The orders of the Special Term and Appellate Division should be reversed and the claims of the respondents disallowed, with costs.
O'BRIEN, MARTIN, CULLEN and WERNER, JJ., concur with PARKER, Ch. J.; VANN, J., concurs with BARTLETT, J.
Order affirmed.