Court Opinion

ID: 5468417
Source: CourtListenerOpinion
Date Created: 2022-01-09 20:11:33.71478+00
Date Added: 2024-06-11T08:33:12.319637
License: Public Domain

Roosevelt, Justice.
This action, in one of its aspects, is of a novel character. It proceeds upon the assumption, that a creditor, before resorting to, and exhausting, the ordinary remedy by judgment and execution, may interfere with and arrest the disposal of his debtor’s property, and call them to account— and with them their assignees—for any alleged fraud or illegality in its transfer. The demand of the plaintiffs, it is true, is not disputed. It is an ordinary case of goods sold, and promissory notes. Still, for aught it appears, the amount might have been collected by an ordinary execution. What ground is there then, it may be asked, for a complaint in the nature of a bill in equity 1 The defendants insist that there is none ; and that the demurrer which they have interposed aught, therefore, to be allowed, and the complaint dismissed.
The firm of Dunn & Doremus, it appears, after contracting the debts in question, became insolvent, and was dissolved by a transfer from Doremus to Dunn of all his interest in the partnership effects. Whereupon Dunn, signing both his individual name, and that of Dunn & Co., a few weeks after, on the 18th of May last, made an assignment to Baker & Dim-mock, of all the assets of the firm, in trust to convert the same forthwith into money, and pay the creditors according to the order of preferences prescribed in the instrument.
This assignment, the plaintiffs aver, was made to delay, hinder and defraud the creditors; and they insist that, as against *231the creditors of the firm, it is void. They accordingly demand, first, a judgment for their debt; secondly, a judicial determination of the invalidity of the assignment; thirdly, the appointment of a receiver; fourthly, an order to compel the assignees to render an account; and lastly, that the plaintiffs may be paid the full amount of their debt and costs out of the assets or their proceeds.
On the face of the assignment, no invalidity appears. This position seems to be conceded. The mere creation of preferences, however objectionable as a matter of sound policy, is not illegal. But, in this case, is there not more 1 The actual “ purpose” of making the instrument, it is averred, and by the demurrer it is admitted, was “ fraudulent;” and the statute declares that every transfer made with such a purpose, as against the parties injured, shall be adjudged void. It may be that the charge on this point, as matter of pleading, should have been made more specific. That is a defect, however, if it exist, which, under the Code, is to be corrected by amendment, and not to be visited with dismissal. A summary application, and not a formal demurrer, is the remedy prescribed.
Assuming, then, the assignment to have been fraudulent, not in law merely, but in actual intent, the question is, and it is the only question, can a partnership creditor, upon the mere admission of his debt, in a case of conceded insolvency, file a bill at one and the same time judicially to establish his claim, and to set aside as fraudulent the debtor’s dispositions of his property —in other words, is one suit, as the law now stands, admissible, instead of the two which were formerly supposed to be necessary 1
Cheapness and dispatch are obviously in favor of the prac tice—and simplicity and common sense would seem also to re commend it. Why, it may be said, resort to the idle ceremony of a preliminary judgment and execution, in a case where nulla bona must be the inevitable return. Insolvency, it will be recollected,- is admitted—insolvency not only of the firm, but of “ each and all its members.” In the case of limited partnerships, the practice has been repeatedly allowed—even before *232the Code—a statute passed^ it should be borne in mind, under an express constitutional mandate, making it the duty of the legislature “ to revise, reform, simplify, and abridge the rules and practice, pleadings, forms, and proceedings of the courts of record of this state,” and to be interpreted, therefore, as its title also imports, in the spirit of that mandate. It would consequently be no great stretch of remedial justice—and certainly no violation of principle—since the Code, to extend the practice, if not to general, at least to quad limited partnerships, such as that of Dunn & Co. became, after the assumption by Dunn of all the liabilities, and with them all the assets of the firm.
There is, moreover, an express provision, (the last clause of section 219,) which would seem to warrant a suit embracing the two objects in one proceeding. It declares that “where, during the pendency of an action, it shall appear by affidavit, (a sworn complaint, is an affidavit,) that the defendant threatens, or is about, to remove or dispose of his property with intent to defraud his creditors, a temporary injunction may be granted to restrain such removal or disposition,”—an injunction, as I read it, not only in favor of a judgment creditor, but in favor of any creditor who may be, and in the opinion of the court upon the facts stated, will be injured by the fraud.
Now, as to their creditors, Dunn & Co. are still the owners " of the property, and any disposition by the assignees, with their assent, will be a disposition by them. And assuming, as wfe must, the truth of the allegations in the complaint, it will be a fraudulent disposition. It is a disposition, moreover, which the contents of the assignment clearly show that “ the defendants threaten or are about” to make. Why then may they not be enjoined 1 And how can the debtors (the Code says defendants,) be effectually enjoined, unless their assignees are also made parties'? If not parties, and given an opportunity to be heard, the assignees would not be bound by the order of the court. The injunction in that case would operate only on the debtors. In effect, it would be a brutum fulmen. What right then have the assignees to demur 1 the assignors make no *233objection that they are made parties to a suit in which they are so clearly entitled to be heard. What right have they to object that the plaintiffs have not first exhausted their ordinary common law remedies against their debtors, when their debtors make no such objection themselves 1 And that, under a system of procedure which “ abolishes the forms of the common law,” and all “ distinction between legal an equitable remedies;” and whose sole and avowed object is “ to simplify and abridge the practice, pleadings and proceedings—as contradistinguished from the strengthening and perpetuating of the idle ceremonials —of the courts of this state V’
Upon the whole, my conclusion is that, where the debt is not disputed, and where a preliminary judgment and execution would be of no use, it is competent to the creditor, as the law now stands, in cases of a fraud or contemplated fraud, to apply at once for an injunction and receiver, and have his demand liquidated and paid in one proceeding.
Demurrer overruled, and judgment for plaintiffs with costs, unless the defendants, in twenty days, put in an answer, and pay the costs of the demurrer.