108 N.Y.S. 385 | N.Y. App. Div. | 1908
Lead Opinion
. This is ,an appeal.from a final judgment'sustaining defendant’s demurrer and dismissing the complaint, with costs.’
The action was brought by plaintiff, as trustee in. bankruptcy of John T. Lee, to recover from defendant as surety on the bond of' George Buckmaster, as assignee under a. general assignment for the benefit of creditors of. .said Lee, $4^3.66,64;, with interest,, beiiig. the-amount of a judgment recovered by plaintiff against said Buck-, master, as such assignee,- founded upon a final, order or'judgment, in accounting proceedings, instituted by said Buckmaster in the United States District Court for the Southern District of New York, praying that his ..accounts as such assignee--be taken, stated and allowed.
The complaint alleges tile filing of a - petition in-, bankruptcy by Lee on August ' 27, 1901, and' adjudication .on. .September ;23, 1901,- and the appointment, and qualification of .the plaintiff' as trustee; that on May 9, 1901, said Lee made- and delivered ail-assignment for the. benefit. of his creditors of all his property to. George Buck-master, then and since a non-resident of Dew York, and a resident of New Jersey,,who accepted the. trust, and s.ucli assignment was duly, filed and recorded in tlie office of the" clerk of the ■ county of. New York; that the time' for filing the, schedules was extended from time- to time,, and the schedules were, filed on August'7, 1901'-; and thereupon, the amount' of - the -bond to .he filed by him was 'fixed at $7,-()00.; that on August 14,1901, Buckmaster as principal, and defendant, as surety,-made and delivered tlieir- bond dated August 13, 1901, whereby they bound themselves jointly and severally to the People of the State of New York in the penal sum' of. $7,Q00, with the condition that if said George Buckmaster should faithfully - execute and discharge, the duties of . such-assignee, and -duly account, for ,all' moneys received by him as such, assignee, then, tlie obligation ,to, be void, else to remain, in full force and virtue, which ' bond was duly
The defendant demurred, first, because it appeared upon the face of the complaint that the plaintiff had no legal capacity to sue; second, because it appeared upon the face of the complaint that it did not contain facts sufficient to constitute a cause of action. The Special Term sustained the demurrer upon both grounds and dismissed the complaint.. .
There is no merit in the objection that the plaintiff had no legal capacity to sue. He had legal capacity to sue, because he had been appointed trustee in bankruptcy by the United States District Court, and as such stood in the shoes of the. creditors, and as such was entitled to take all legal and equitable steps to reduce to possession the estate of the bankrupt.- The difference
As to the second ground, of demurrer, that the complaint did not state a cause of "action, the respondent claims that the trustee-in bankruptcy is a person occupying ,'a position in. hostility to the assignment under bankruptcy proceedings which have destroyed -. the assignment; that the surety,-therefore, is not bound to respond to any orders or judgments against the assignee recovered by- the trustee in such hostile proceedings;. that it was not within tlie contempla- • tion of the surety when the bond was signed that it would be hablé unless appropriate proceedings were takéii under the assignment . law fixing liability upon the assignee. ;
The respondent relies upon People v. Chalmers (60 N. Y. 154). In that casé the question as stated by the court was, whether a surety' upon a bond given by an assignee Under a. voluntary assign-: ment for the benefit Off creditors in pursuance Of the statute (Laws of 1860, -chap. 348) is" liable for the default of the : principal to account for'assets in his hands upon judgments in' favor of certain-creditors declaring the assignment void as to them and directing the assignee to pay over the funds in liis hands to apply on the same. . The court pointed out that section 4" of tli'e act referred to provides" for an accounting before .the county judge, and section' 5' provides when the-bond may be prosecuted and said :'“ This, language clearly, refers to the order or decree provided for in the fourth section fib be made by the county judge on accounting, or by. aii appellate court- upon the appeal from- such order or decree.”. .
The act of 1860 was repealed by chapter- 466 of the Laws of 18,77. Section. 9 of. this chapter provides, simply that an action
In the Chalmers case the court also said that “ the statute was intended to protect the interests of creditors under valid assignments made for their benefit. * * * But it was not intended to secure the payment of assets upon judgments obtained in-hostility to the assignment. The judgments obtained in behalf of the creditors prosecuting the bond declared the assignment void for fraud. As to them, the assignment was a nullity, and the judgments obtained by them are conclusive. It follows that they were not and could not be prejudiced by the assignment. It never for an instant placed the property beyond the, reach of legal process. They might have levied upon it by execution, and the process of injunction and the appointment of a receiver were open to them. The remedies of creditors against a void assignment were ample, and no necessity existed for the intervention of the Legislature for the purpose of adding to them.”
The respondent also cites Matter of Cantor (31 App. Div. 19), where this court lield that moneys collected from a surety of an absconding assignee were not impressed with the lien of a judgment obtained by creditors setting aside the assignment for fraud, and that a substituted assignee who had collected said sums and had paid them over to said-judgment creditors must account for said sum to-the general creditors, and that the bond was.not created for the. benefit of such creditors, but the money collected thereunder must be applied under the assignment in satisfaction of all the debts of the assignor. There again was a case where creditors proceeded against an assignor as for fraud and attempted by their judgment to obtain special advantage' in preference to the rest of the general creditors upon a bond given for the benefit of all the creditors.
It seems to.me that neither of these cases applies to the case at bar. Here there is not a judgment creditor who has procured the setting aside of an assignment upon the ground of fraud, seeking a
In Adams v. Hyams (supra) the assignee for benefit of the
Applying the principle laid down in the foregoing cases to the case at bar, here was an assignment, legal when made, under which the defendant gave a bond that the assignee should faithfully execute and discharge the duties of such assignee and duly account for
'It seems to me, therefore, that the complaint states facts sufficient to constitute a cause of action, and, therefore, that the judgment
Patterson, P. J., and Ingraham, J.,. concurred; Houghton and Scott, JJ., dissented.
Dissenting Opinion
I agree' that, the plaintiff has capacity to sue, and that he has a cause of action as trustee against the defendant as surety for any misappropriation of the assigned estate by the assignee. I do not agree to the proposition that the defendant surety is bound by the decree of the bankruptcy court made upon the voluntary accounting of the assignee in that court.
Very likely the bankruptcy court had sufficient jurisdiction so that an accounting in that court bound the parties who voluntarily appeared and submitted themselves to its jurisdiction. The defendant, however, was not made a legal party to the accounting proceeding. The notice given • was not sufficient to bind it. The complaint herein is not framed as for an' accounting of the funds coming to the hands of the assignee for whom the defendant was surety. Such an action would lie notwithstanding the lack of a decree of any State court. An accounting in a State court and the rendering of a decree therein is not a prerequisite to an action for an accounting against the surety. An accounting could be had in the present action if the complaint were framed upon that theory. It is framed, however, upon the theory that the decree of the bankruptcy court upon the voluntary accounting of the assignee therein, is binding and conclusive upon this defendant as surety. The cause of action set forth is upon the decree alone and the action is in effect a suit upon a judgment.
When the defendant gave its undertaking to answer for the acts of the assignee, I think all it agreed to dó, so far as being conclusively bound by decrees, was to abide, without question, any decree made by any State court having jurisdiction over assignments. These courts were' the Supreme Court and the various County Courts of the State. Assignments for the benefit of creditors were
The real contention in Adams v. Hyams (19 Blatchf. 487) seems to have been that an accounting and decree in a State court was a ■ prerequisite to the maintaining, of an action' against the'-surety. ' To the holding that it was not, I agree,, To the. further discussion and holding that the bankruptcy court could make a decree conclusive and binding upon the''surety, I. do not agree.
Nor' was the judgment obtained', against' the 'assignee in the New Jersey court .binding upon the defendant- The plaintiff - cannot sue the surety upon that judgment as a- binding’ of 'conclusive ' adjudication of the amount due. '
For these reasons, I think- the demurrer to the complaint was properly .sustained and should be .affirmed: -
Judgment reversed', with costs, and- demurrer', overruled, with . costs, with- leave to defendant to withdraw demurrer and to answer . on payment of .costs. ' .