Stephens v. Meriden Britannia Co.

• Decision Date: 03 October 1899
• Citation: 54 N.E. 781,160 N.Y. 178
• Parties: STEPHENS v. MERIDEN BRITANNIA CO. et al.
• Court: New York Court of Appeals Court of Appeals

160 N.Y. 178

54 N.E. 781

STEPHENS

v.MERIDEN BRITANNIA CO. et al.

Court of Appeals of New York.

Oct. 3, 1899.

Appeal from supreme court, appellate division, First department.

Action by George W. Stephens, as receiver of the McCall Publishing Company, against the Meriden Britannia Company, impleaded with others, for conversion. From a judgment of the appellate division affirming a judgment entered on a verdict directed in favor of plaintiff (43 N. Y. Supp. 226), the defendant company appeals. Reversed, and new trial granted.

Bartlett and Gray, JJ., dissenting.

George S. Daniels, for appellant.

George W. Stephens, for respondent.

VANN, J.

On the 19th of November, 1892, a foreign corporation, known as the McCall Publishing Company, gave to the Meriden Britannia Company, another foreign corporation, a bill of sale of certain printing machinery and materials to it belonging, for the purpose of securing the payment of $900, then owing by the former to the latter for rent past due and unpaid. This instrument, which, in legal effect, was a chattel mortgage, was not filed until December 7, 1892, owing to the request of the mortgagor and the promise of the managing agent of the mortgagee that he would withhold it from record ‘if it did not conflict with the security.’ The property remained in the possession of the mortgagor until the 9th of January, 1893, when the mortgagee took possession of it by virtue of the mortgage, and 12 days later sold it to the firm of Page & Ringot for the sum of $900, its fair value. When the mortgage was given, the McCall Publishing Company was owing one Walter Logan about $1,700, and on the 8th of February, 1893, he recovered judgment for the amount of his claim. Upon the basis of this judgment the plaintiff was appointed receiver of the property of the judgment debtor in proceedings supplementary to execution, instituted about the 20th of February, 1893, and on the 6th of May following he commenced this action against the Meriden Britannia Company and the persons composing the firm of Page & Ringot, to recover damages for the conversion of said property by them on the 9th of January preceding. Upon the trial of the action the foregoing facts, among others, appeared, and at the close of the evidence for the plaintiff, as well as at the close of the entire evidence, the defendant's counsel moved to dismiss the complaint upon the ground ‘that an action for conversion will not lie under the proof adduced, and that the plaintiff has mistaken his remedy.’ This motion was denied, and the court directed a verdict in favor of the plaintiff for the sum of $900, with interest for three years, amounting in all to $1,062, the defendants duly excepting. Upon appeal to the appellate division, that court reversed the judgment, and granted a new trial as to the defendants Page & Ringot, but affirmed it as to the Meriden Britannia Company, which now comes here.

As the mortgage was neither filed as required by law nor accompanied by an immediate delivery, followed by an actual and continued change of possession of the property mortgaged, it was void as against judgment creditors of the mortgagor. Laws 1833, c. 279; Stephens v. Perrine, 143 N. Y. 476, 39 N. E. 11;Sullivan v. Miller, 106 N. Y. 635, 13 N. E. 772;Jones v. Graham, 77 N. Y. 628. It was not, however, absolutely void, for it was good as between the parties thereto and as against creditors at large. It was only void as to judgment creditors, or creditors armed with some legal process authorizing the seizure of property. Button v. Rathbone, Sard & Co., 126 N. Y. 187, 27 N. E. 266. It was not void as malum in se, but as malum prohibitum. It was valid as to all the world until attacked by a creditor standing upon an attachment or judgment. When the Meriden Britannia Company took possession of the property, and sold it to Page & Ringot, the McCall Company could not have maintained trover or conversion, because it had transferred the property by an instrument which authorized the sale, and was conclusive, so far as that company was concerned. Mr. Logan, the creditor now represented by the plaintiff, could not, at that time, have questioned the transfer in any way, because he was not then a judgment creditor, and no attachment had been issued in his favor. Neither the giving of the chattel mortgage, nor the taking of possession by virtue thereof and the transfer to third parties, conferred, at the date of such transfer, any right of action upon the McCall Publishing Company or upon Mr. Logan. Upon the recovery of judgment and the return of execution unsatisfied, Mr. Logan was still without power to maintain an action at law, but he could then have upheld a suit in equity to set aside the transfer, so far as it was an obstruction to the collection of his debt.

When the receiver was appointed, the property of the judgment debtor became vested in him. He was then in a position to bring any action relating to that property which the judgment debtor or the judgment creditor could have brought, and none other. The judgment debtor, for instance, could have brought an action at law against any one who had taken its property without its consent, while the judgment creditor could have brought an action in equity for taking the property of the judgment debtor, even with its consent, provided such taking was fraudulent as to creditors. The receiver, having the title of the judgment debtor, can maintain any action supported by that title, which the judgment debtor could have brought. Representing the judgment creditor, he can also maintain any action in equity to set aside a fraudulent transfer which the judgment creditor could have brought. As he represents no one except the judgment debtor and the judgment creditor, he can bring no action except such as the one or the other could have brought. Bostwick v. Menck, 40 N. Y. 383;Metcalf v. Del Valle, 64 Hun, 245, 19 N. Y. Supp. 16;Id., 137 N. Y. 545, 33 N. E. 336. As was said by the court in Bostwick v. Menck, supra, ‘the appointment of the plaintiff as receiver of Beiser, made in the supplemental proceedings under the Code, vested in him the legal title to all the personal property of Beiser. Porter v. Williams, 9 N. Y. 142;Becker v. Torrance, 31 N. Y. 631. Such appointment conferred upon him the further right to prosecute such action to set aside all transfers of property made by Beiser to defraud his creditors as the creditors themselves could have maintained. * * * He acquires no right to the property by succession to the rights of the debtor, for the reason that the transfer is valid as against the debtor, and cannot be set aside by him as the debtor's successor. No rights other than those of the debtor are acquired. He does not acquire the legal title to such property by his appointment. That is confined to property then owned by the debtor, and the fraudulent transferee of property acquires a good title thereto as against the debtor and all other persons except the creditors of the transferror. The only right of the receiver is, therefore, as trustee of the creditors. The latter have the right to set aside the transfer, and to recover the property from the traudulent holder; and the receiver is, by law, invested with all the rights of all the creditors represented by him in this respect. It is clear that the right of the receiver representing the creditors, and acting in their behalf, is no greater than that of the creditors. What, then, are the legal and equitable rights of a creditor as to property fraudulentlytransferred? Manifestly only to treat as void and set aside such transfer so far as shall be necessary to satisfy his debt and costs. He has no right to interfere with the transfer beyond this. When his debt and costs are paid, the transfer is as valid as to him as to other persons.’ The receiver cannot bring an action at law for the taking of property formally transferred before the recovery of the judgment, because neither the judgment debtor nor the judgment creditor could have brought it. He can, however, by a bill in equity, remove any obstacle, such as a fraudulent transfer, which, until set aside, would prevent him from taking possession of the property, and thereupon sell it, and apply the proceeds upon the debt which he represents. If the property has been consumed, or for any reason cannot be identified or followed, he can, in the same action, compel those legally responsible to account for it, and pay over the value thereof to the extent necessary to satisfy the debt or debts represented by him, as well as the costs and expenses. He cannot, however, uphold an action at law for the conversion of property transferred, even in fraud of creditors, before he was appointed receiver, because that is not ‘the property of the judgment debtor’ within the meaning of section 2468 of the Code of Civil Procedure, which is the source of his power. Ward v. Petrie, 157 N. Y. 301, 51 N. E. 1002; Pettibone v. Drake ford, 37 Hun, 628.

The title of the plaintiff is not strengthened, nor is his power increased, by the act of 1858 ‘to declare and extend the powers of executors, assignees, receivers, and other trustees.’ Laws 1858, c. 314; Laws 1894, c. 740. While the language of the statute is general in form, it obviously includes only such trustees as take the entire estate for the benefit of all the creditors, whereas a receiver in supplementary proceedings represents simply the creditor who brought about his appointment and such as caused the receivership to be extended to their claims, each of whom is entitled to payment in full in the order of diligence in instituting proceedings. Code Civ. Proc. §§ 2466, 2469. The object of the one statute is to secure distribution of all the effects of an insolvent, without any preference except such as is required by law, and of the other to simply collect the debt of a single creditor in full, and, if there is anything left, another creditor, by...