Albany City Bank v. Schermerhorn

| New York Court of Chancery | Sep 15, 1840

The Vice Chancellor.

The sheriffs or judgment creditor insist upon three points in this cause and upon this motion :

1. That the judgment debtor has not assigned or executed an assignment of his property to the receiver.

2.. That the receiver has not served upon the tenants copies of the order appointing him receiver.

8. That the tenants have not, in point of fact, atiorned to the receiver.

These points make it necessary to consider and decide the nature and effect of creditor’s bills.

The preliminary argument of the counsel for the defendant, is sound.

A bill may be filed to remove obstructions upon real or personal estate. But the filing of such a bill creates no hen. The lien, m such case, is created by the judgment or execution as the case may be, depending upon the fact whether the property is real or personal. When a creditor issues an execution and it is returned unsatisfied, he may file a bill to reach the choses in action and equitable assets of the judgment debtor. The mere filing of a bill creates a lien upon such assets. But such is not its operation upon personal property tangible by execution. Indeed, by one of the rules of this court, an injunction issued upon such a bill, shall not be construed to prevent another judgment creditor who has a judgment against the defendant, from levying upon any property which his execution can reach or which may be discovered by him. So that if a creditor’s bill is filed, its operation by the filing is simply a lien upon the equitable assets of the judgment debtor. Another judgment creditor may levy upon and sell any personal property of the debtor .which he can find, and that, notwithstanding the filing of the creditor’s bill. This is true until a receiver is appointed upon the creditor’s bill. After a receiver is appointed upon a creditor’s bill, and after his appointment becomes perfect by giving security, and he has thus become legally entitled to the possession of the debtor’s property, it may be a question whether another judgment creditor of the defendant can interfere with the property of the debtor. That is the question presented here. The counsel for the defendant insists t^iat unt^ there is an assignment by the judgment debtor to the receiver, (an assignment which can be compelí^) the property of the debtor is not divested does not pass to the receiver. These creditor’s , A bills are the creatures oí our statute. Iheyarein some sense new to our laws, though carrying out a previous equitable principle. I apprehend, with the counsel for the defendant, that they create no lien by the filing thereof, upon any personal property of the judgment debtor which can be reached by a judgment at law ; but I apprehend that when the bill is so far matured as to authorise the appointment of a receiver, and that appointment has in fact been perfected, that such appointment in and of itself vests the property of the judgment debtor in the receiver. It is true that an actual assignment may sometimes be wanted and which can always be enforced, to enable the receiver to recover property in the hands of third persons. But with this no stranger to the suit has any thing to do. The receiver, by virtue of the appointment, has a right to the possession of the property. He may require an assignment to exercise his rights, but the order gives him the right. As against other persons he has the right of possession. It is in his custody as an officer of the court; and if any stranger interferes, he will be restrained, nay, attached by this court as for a contempt. An actual assignment by the judgment debtor is not necessary. It cannot always be enforced. The judgment debtor may abscond, or remove from the state and beyond the reach of the process of its courts, and then the complainant would be remediless. This cannot be tolerated. At least the order for the appointment of a receiver, and its perfection by the receiver’s giving security, is so far operative that it prevents, after that event, any person’s taking the property or interfering with the property so declared to be in the possession of the receiver. After such an event, the property is in the custody of the court, through one of its officers and by virtue of an order of the court; and an assignment by the judgment debtor cannot be necessary to transfer the title to the receiver. Besides, there is another rule of the court of Chancery which may have an operative influence here, viz. that what is agreed to be done or ordered to be done, shall be considered as done. If this rule was not applicable here, there are many cases in which a vigilant judgment creditor would be deprived of the fruits of his vigilance, which it seems to me to be the intent and policy of the statute to give him.

This disposes of the first question.

The second question or point may be dismissed with a single remark. A service of a copy of the order of appointment of receiver upon the tenants, can be only necessary as between them and the receiver, to enable the receiver to bring the tenants in contempt if they do not obey it. No third person can reasonably set up this objection, as it is a matter with which a third person has nothing to do ; and a service is unnecessary as between the tenant and receiver, even when the tenant' acknowledges the authority of the receiver, and agrees to pay to him.

Neither do I apprehend that in a controversy between the receiver and a third person, it is necessary for the receiver to show an actual attornment of the tenants to him. There are many cases where it may be necessary and proper to insist upon such attornas between the receiver and tenant, or to preTent t^ie tenant from paying or doing any act to the injury of the receiver, or to enable the receiver to enforce ^g payment of rent as against the tenant; but aPPrehend a third party cannot object to the title of the receiver simply for the want of an attornment tQ py the tenants.

This is a case where a third party, a judgment creditor of the debtor in the creditor’s bill, claims to have acquired a lien upon the property of the judgment debtor by a levy upon it after a receiver had been appointed under the creditor’s bill. It is a contest between two creditors. From the foregoing intimations it will be perceived that the opinion of the court is, that the complainants in these suits, by the filing of their bills and the appointment of a receiver under them, have acquired a priority as against other judgment creditors, so far as choses in action and personal property is concerned. By the appointment of the receiver and perfection of the appointment, the property passes under the control of the court; and the receiver, as its officer, must, by virtue of such appointment, be deemed to be in rightful possession of the property of the judgment debtor, at least as against other judgment creditors. Being in such possession, no other person can interfere with it without a contempt of this court. If any other- person has a just and valid claim, he can obtain the fruits of it by applying to this court by petition. The claim of the subsequent judgment creditor here, can in that way be decided; but the validity of his claim is not, on this7 motion, presented to the court in a proper shape. When it is so presented, it will be time enough to decide it. The sheriffs of the counties of Monroe and Orleans have been guilty of a contempt. Attachments must issue against them, upon which they are to be holden to bail in $1,000 each, unless they shall, within twenty days after service of such order and a copy of the taxed bill of costs of this motion, restore the property levied upon by them, to the receiver, and pay such costs.