Spellman v. Freedman

• Decision Date: 20 January 1892
• Citation: 29 N.E. 765,130 N.Y. 421
• Parties: SPELLMAN et al. v. FREEDMAN et al.
• Court: New York Court of Appeals Court of Appeals

130 N.Y. 421

29 N.E. 765

SPELLMAN et al.

v.FREEDMAN et al.

Court of Appeals of New York,

Second Division.

Jan. 20, 1892.

Appeal from supreme court, general term, first department.

Action by Timothy M. Spellman and others against Moritz Freedman and others. From a judgment of the general term affirming an interlocutory judgment of the special term overruling demurrers to the complaint, defendants appeal. Affirmed.

The other facts fully appear in the following statement by VANN, J.

This action was brought by the plaintiffs, as general creditors of the defendant Josephine M. Soussman, to set aside three judgments confessed by her in favor of certain of the other defendants, together with the executions issued thereon, and levies made thereunder, as in violation of the statute restricting preferences in general assignments for the benefit of creditors. Laws 1887, c. 503. Several of the judgment creditors demurred upon the ground that the complaint did not state facts sufficient to constitute a cause of action. The general term affirmed the interlocutory judgment of the special term overruling such demurrers, but certified that the question involved was of sufficient importance to render a decision by this court desirable before proceeding further. Code Civil Proc. § 190, par. 4. The facts appear in the opinion.

Alex Blumenstiel, for appellants.

John W. Boothby, for respondents.

VANN, J., ( after stating the facts.)

The plaintiffs were general creditors of the defendant Soussman on the 14th of May, 1888, when she made a general assignment of all her property for the benefit of her creditors to the defendant Phillips, who accepted the same; and it was thereupon recorded in the office of the clerk of the city and county of New York, at a quarter past 12 in the afternoon of that day. A few hours before, Mrs. Soussman, being insolvent, confessed a judgment in favor of the defendants Jaffrey and others for the sum of $2,110.80; a second, in favor of the defendant Sigisman, for $2,056.38; and a third, in favor of the defendants Freedman, for $2,802.27,-and the respective judgment rolls were filed in said clerk's office at 7, 8, and 9 minutes past 10 in the forenoon of the day on which said assignment was made and recorded. Immediately after the entry of said judgments, executions were issued thereon against the property of Mrs. Soussman to the defendant Grant, as sheriff, who by virtue thereof, just before the delivery of said assignment, levied upon all her property, which was not worth three times the amount of said judgments. After setting forth the foregoing facts the complaint further alleged ‘that the said judgments were confessed, and the said executions issued and levies made, in contemplation of the said assignment, and for the purpose of preferring the said persons in whose favor the said judgments were confessed out of the property of the said defendant Soussman, in fraud of the said assignment, for more than one-third of the net assets of the said defendant Soussman, and to prevent the said assets from going into the hands of the defendant Phillips, as such assignee, and being distributed to the plaintiffs and the other creditors of the said defendant Soussman, pursuant to the statute in such cases made and provided, and pursuant to the provisions of the said assignment, and are fraudulent and void as against the defendant Phillips, as assignee.’ It was futher alleged that the assignee, after due notice of the facts, refused to bring an action to set aside said judgments, executions, and levies, although requested by the plaintiffs so to do. The relief demanded was that the judgments, executions, and levies be declared void as to the assignee; that the sheriff be directed to turn over the property levied upon by him to the assignee; that the proceeds thereof be applied pursuant to the terms and conditions of said assignment; and that all of the defendants, except the assignee, be restrained from disposing of or interfering with the property so levied upon. A copy of the assignment and of the several rolls of the confessed judgments were annexed to and made a part of the complaint, from which it appeared that the debts for which such judgments were recovered were preferred in the assignment, and that they were the only preferences therein, except wages and salaries actually owing to the employes of the assignor.

In support of their demurrer, the defendants contend that, as the plaintiffs are not judgment creditors of the assignor, they have no standing to maintain an action of this character. If this were an ordinary creditors' suit, brought to set aside the assignment as a fraudulent obstruction to the rights of the plaintiffs, it would be necessary for them to allege that they had exhausted their remedy at law. It is well settled that a simple contract creditor cannot attack, as fraudulent, the transfer by his debtor of property applicable to the payment of the debt, until after the recovery of judgment, the issue and levy of an execution, or its return unsatisfied. Dunlevy v. Tallmadge, 32 N. Y. 457;Adee v. Bigler, 81 N. Y. 349;Adsit v. Butler, 87 N. Y. 585; Wait, Fraud. Conv. 106; Code Civil Proc. § 1871; 2 Rev. St. 173. The plaintiffs, however, do not attack the assignment, but seek to uphold and enforce it. Their theory is that it is a valid instrument, and that it vested in the assignee the legal title to all the property of the assignor. They rest upon the assignment, making their action subsidiary and not hostile thereto, and aim to protect the property in the hands of the assignee, as they claim he should have protected it, to the end that its proceeds may be distributed by him according to the provisions of the assignment. As beneficiaries under the trust, they are trying to have it enforced, through the assignee, by taking such action as they allege he should have taken, not for their exclusive advantage, but for the benefit of all similarly situated. They do not seek to discover assets, or to obtain a lien, but to cause certain effects in which they have an interest to be administered and distributed according to the assignment without spoliation or waste. A cestui que trust is not required to establish his debt by an action at law in order to compel an enforcement of the trust, or to protect the trust property from unlawful interference. As the plaintiffs acknowledge the validity of the assignment, and come in under it, what use could they make of a judgment, if they had one? If they were in a situation to issue an execution, it would be improper for them to levy upon the assigned property. What could they do in aid of the assignment with, that they cannot as well do without, a judgment recovered and execution returned? Their ultimate right to share in the assets, and the refusal of the assignee to bring an action that is necessary for the protection of the assets, gives them the right to bring it as auxiliary to the trust. His...