69 N.Y.S. 708 | N.Y. App. Div. | 1901
Lead Opinion
This action is brought to obtain a judgment establishing certain alleged claims, against the defendants the Count and Countess de Castellane, and applying in payment thereof a portion of the surplus income arising from a trust estate created by the will and codicils thereto of the late Jay Gould in favor of his daughter Anna Gould, the Countess de Castellane. The plaintiff, according to the allegations of the amended complaint, is the assignor of one Asher Wertheimer, of London, England, who, it is alleged, sold and delivered, prior to the commencement of the action, to the Count and Countess de Castellane, at Paris, France, personal property of large value, in payment of which they accepted drafts (copies of which are set out in the amended complaint), and, payment having been refused, the same were assigned to the plaintiff in this action; that since the maturity of the drafts the defendants Castellane have been, and now are, at Paris, France, where they expect to remain,
“Sec. 38. Whenever an execution against the property of a defendant shall have been issued on a judgment at law and shall have been returned unsatisfied, in whole or in part, the party suing out such execution may file a bill in chancery against such defendant and any other person to compel the discovery of any property or thing in action belonging to the defendant, and of any property, money or thing in action due to him, or held in trust for him; and to prevent the transfer of any such property, money, or thing in action, "or the payment or delivery thereof to the defendant, except where such trust has been created by, or the fund so held in trust has proceeded from some person other than the defendant himself.
“Sec. 39. The court shall have the power to compel such discovery and to prevent such transfer, payment or delivery and to decree satisfaction of the sum remaining due on such judgment out of any personal property, money or things in action belonging to the defendant, or held in trust for him, with the exception above stated, which shall be discovered by the proceedings in chancery, whether the same were originally liable to be taken in execution at law or not.”
Both of these provisions of the statute were embodied in and superseded by sections 1871-1879 of the Code of Civil Procedure, under which it will be observed that the right to maintain a creditors’ action does not depend in any respect upon the question of fraud, but solely upon the plaintiff’s complying with the statute, which alone confers power upon the court to act. It is absolutely necessary, therefore, before an action can be maintained under these sections, that a judgment shall be recovered by the plaintiff, and an execution issued thereon, and returned wholly or partly unsatisfied, unless there be appropriate allegations inserted in the complaint, to the effect that a trust has been created or property transferred in fraud of creditors, in which case the court has inherent jurisdiction, which in no way depends upon the power conferred upon it by, and which it exercises independent of, the statute. Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548; Patchen v. Rofkar, 12 App. Div. 475, 42 N. Y. Supp. 35; Id., 52 App. Div. 369, 65 N. Y. Supp. 122. The séctions of the Code referred to do not give the right to a creditor to maintain an action to reach the avails of a trust estate created by any one other than the defendant. This right, however, is given by the Revised Statutes (1 Rev. St. p. 729, § 57). This section of the Revised Statutes provides that:
“Sec. 57. Where a trust is created to receive the rents and profits of land and no valid direction for accumulation is given, the surplus of such rents and profits, beyond the sum. which may be necessary for the education and support of the person for whose benefit the trust is created, shall be liable in*711 equity to the claims o£ the creditors of such person, in the same manner as other personal property which cannot he reached hy an execution at law."
This provision, in terms, relates only to real estate, but it has been held to apply equally to personal property. Williams v. Thorn, 70 N. Y. 270; Tolles v. Wood, 99 N. Y. 616, 1 N. E. 251; Wetmore v. Wetmore, 149 N. Y. 520, 44 N. E. 169, 33 L. R. A. 708. The words “in the same manner as other personal property which cannot be reached by an execution” obviously refer to the provisions of the Revised Statutes above quoted, and which were embodied in and now form the sections of the Code (sections 1871-1879) hereinbefore referred to. In what manner, then, can other personal property be applied to the payment of a debt which cannot be reached by an execution at law? The answer to this question is found in those sections, and it is only where a judgment has been recovered against a debtor, and an execution thereon has been issued and returned wholly or partly unsatisfied. The recovery of a judgment and the issue and return of an execution are absolutely necessary, before a creditor has any standing in court. Until that has been done the court has no jurisdiction to grant any relief whatever. The plaintiff here has not brought himself within the provisions of the statute. Indeed, it is conceded by his counsel, in the brief submitted upon the argument before us, that the action is not brought under the statute; but it is insisted, inasmuch as the defendants Castellane are outside of the jurisdiction of the court, and for that reason it is impossible to obtain a judgment against them upon the alleged claims, that the court has inherent jurisdiction to grant the relief asked, and in this connection our attention is called to a line of authorities in which compliance with the statute has been excused: Shellington v. Howland, 53 N. Y. 371; Hirshfeld v. Bopp, 145 N. Y. 84, 39 N. E. 817; Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548; Lefevre v. Phillips, 81 Hun, 233, 30 N. Y. Supp. 709; Patchen v. Rofkar, 12 App. Div. 475, 42 N. Y. Supp. 35; Id., 52 App. Div. 369, 65 N. Y. Supp. 122. These cases are not in point. The decision in each of them was placed upon the ground either that in actions to hold the defendants liable, under the statute, as stockholders or directors of a corporation, for the debts of a corporation, where the performance of certain conditions becomes impossible by reason of the operation and effect of a statute, or becomes illegal, performance is excused, and the rights of the parties will be preserved (Shellington v. Howland, supra; Hirshfeld v. Bopp, supra); or where there has been a fraudulent disposition or transfer of property, in which case the court has inherent jurisdiction (Bank v. Wetmore, supra; Patchen v. Rofkar, supra; Lefevre v. Phillips, supra). The case before us obviously does not fall within either class. The trust was -not created, in fraud of creditors. It was created long before the plaintiff’s claim came into existence, and, so far as appears, before the Countess de Castellane had any creditors whatever. The court therefore has no inherent jurisdiction, and not a suggestion is made showing why the plaintiff should nqt comply with the statute, except that service of process cannot be made upon the defendants Castellane, inasmuch as they are outside of the jurisdic
“A party cannot be deprived of property without due process of law, and that term, in its application to judicial proceedings, means a course of legal proceedings according to' those rules and principles which have been established by our jurisprudence for the protection and enforcement of private rights. If the proceedings involve the determination of the personal liability of the defendant, he must be brought within the jurisdiction by service of process within the' state or voluntary appearance. If it be a proceeding in rem, the res must have been seized or attached, or at least must be within the jurisdiction. * * * The action was in the nature of a creditors’ suit, —by a creditor at large against the debtor and such third parties as had in their hands rights, credits, or equities applicable to the payment of the claim. The debt against the principal defendant, and the fact that the other parties held some property in trust for - him, were, by the scheme of this suit, to be established in the same action. The initiatory step was1 to prove the debt and establish it by the judgment of the court, and, unless jurisdiction was obtained for that purpose of the necessary parties, the subsequent steps for its collection cannot stan'd.”
Bank v. Parent, supra, is also in point. There the action was in the nature of a creditors’ bill upon a judgment recovered against a nonresident defendant, who had been served by publication. A warrant of attachment had been issued, and a levy under it was alleged to have been made. It appeared, however, on the trial, that the levy was not in fact made, or, if made, that it was thereafter abandoned. This fact having been made to appear, the court held that the action could not be maintained; that the service of the summons by publication did not give the court jurisdiction of the person of the debtor, and the failure to levy under the attachment deprived the court of jurisdiction to enforce any judgment there obtained against the debtor’s property. Here the plaintiff, as already indicated, seeks to have the indebtedness, of the Countess de Castellano to him or his assignor first judicially determined, with
It follows from what has been said that the order appealed from must be reversed, with $10 costs and disbursements, and the motion to continue the injunction denied, with $10 costs.
RUMSEY, J., concurs.
Concurrence Opinion
I concur in the opinion of Hr. Justice MCLAUGHLIN, but, in view of the dissenting opinion of Mr. Justice O’BRIEN, it seems to me that it may be proper to call attention in greater detail to the peculiar features of the authorities upon which he relies; and I think it will be seen that where language is quoted a meaning has been imputed to it which was far from the intention of the writer, and that isolated paragraphs are pressed into service without any consideration either of their context or of the subject in respect to which they were written. This is strikingly illustrated in the use attempted to be made of the case of Hirshfeld v. Bopp, 145 N. Y. 84, 39 N. E. 817. That was an action brought by a creditor of the Madison Square Bank, an insolvent banking corporation organized under the banking laws of this state, in the hands of a receiver, to enforce an alleged liability of the defendants, stockholders of said bank at the time of the appointment of the receiver, to the creditors of the corporation, under section 52 of the banking law (chapter 689, Laws 1892). The complaint alleged that the Madison Square Bank was a domestic banking corporation, but did not allege when it was organized. It alleged that on the 1st of August, 1893, the people commenced an action in the supreme court against the bank for its dissolution on the ground, among others, of insolvency, and that on November 24, 1893, judgment was entered thereon dissolving the corporation and forfeiting its corporate franchises, and providing for the distribution of its assets among its creditors, and restraining its several creditors from instituting any action against it, and appointing a receiver, etc. The complaint further contained an allegation in respect to the amount of the capital stock, and then alleged that at the time of the commencement of the people’s action and the rendition of the judgment the defendants were stockholders, holding, respectively, the number of shares set forth in the complaint. There was no allegation as to the time when the several defendants became stockholders, or whether they were stockholders at or prior to the enactment of the banking law of 1892. It further alleged that prior to the commencement of the people’s action the plaintiff had deposited with the bank moneys belonging to him, for which the bank was indebted to him on that day, and that, .although payment had often
The case of Hunting v. Blun, 143 N. Y. 511, 38 N. E. 200, was an action, under the general manufacturing act, to enforce the liability imposed by the act upon the stockholders of an insolvent corporation; and it appearing that an action had been brought by a creditor of the corporation to sequestrate its property and for the appointment of a receiver, and that judgment had been rendered granting that relief, and forbidding creditors from suing the company or interfering with its assets, and that this injunction, being the act of the court, had rendered the performance of the condition precedent practically impossible, such fact excused the omission to obtain a judgment and issue an execution as required by the statute. Similar to this was the adjudication in Hardman v. Sage, 124 N. Y. 32, 26 N. E. 354, where by the same operation of law the creditor had been unable to comply with the statute, and that was held to be an excuse. The same view was intimated in the case of Shellington v. Howland, 53 N. Y. 375; the whole basis of these adjudications being that, as the court had prevented the obtaining of the judgment and the issuing of the execution, the party seeking relief could not be held precluded by the terms of the statute. How these cases can be any authority for a deviation from the acknowledged rule requiring a judgment and an execution returned unsatisfied as the foundation of equitable interference in favor of creditors against equitable assets, it seems difficult to imagine.
It is next necessary to consider the case of Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548, which is the sole authority upon which all the subsequent cases cited depend, holding that in actions to reach equitable assets it is not necessary that the remedy at law should be exhausted. This was an action brought to set aside, as fraudulent, a deed from Abner 0. Wetmore, through a third person, to his wife, the defendant in the action, and for a sale of the land described therein, in order to pay a debt due to the plaintiff from said Wetmore. Objection was taken to the complaint upon the ground that it did not allege the recovery of a judgment and the return of an execution unsatisfied; and the court held, citing certain authorities which will be examined hereafter, that, courts of equity having inherent jurisdiction to reach assets which had been fraudulently transferred, the exhaustion of the remedy at law was not in such cases prerequisite, where some excuse was given for not having done so. In the opinion it is recognized that it has become the settled rule in this state not to dispense with those preliminary proceedings at law (referring to the recovery of a judgment and the return of an execution), although it may be made to appear by evidence that no benefit could result to a creditor from them; and the cases of Estes v. Wilcox, 67 N. Y. 264, and Adsit v. Butler, 87 N. Y. 585, are cited. The learned judge then goes on to say:
“This is not founded upon any purpose of the statute to repeal or curtail the common-law equity powers of the court, not, inconsistent with the stat*716 ■ute, to investigate the conduct of debtors in respect to their property in fraud of creditors, and to grant relief.”
And that is the sole ground upon which the learned judge founded the right of the court to entertain jurisdiction in such a case. He says:
“The subjects of fraud and trusts are peculiarly matters oí equity jurisdiction, which is very comprehensive where the other tribunals cannot afford relief, and its want of it is not to be inferred from the novelty of questions presented,”—citing the case of Hadden v. Spader, 20 Johns. 554, as an authority for the above proposition.
In Hadden v. Spader the question before the court was whether, in a case- where one John Davis, being largely indebted, and being possessed of a large stock in trade, and having debts due to him tor a large amount, for the purpose of defrauding his creditors combined with one Hadden to conceal the property so as to retain it for his own use, and delivered the same to Hadden, who still retained the same, or the proceeds thereof, with a view of concealing or disposing thereof to prevent the same from being levied on by execution on any judgment which might be obtained against Davis, Had-den could be compelled to pay that money to the judgment and execution creditors of Davis; and that was the case in which the language was used,—quoting Mr. Haddock (1 Madd. Ch. Prac. 8):
“In cases of trust and. fraud, courts of equity seem unwilling to set bounds to their jurisdiction and say how far they will go, evidently because fraud -and trust are peculiarly of chancery jurisdiction, and consequently its powers ought to be so exercised that no subtlety or cunning shall be able to prevent the detection of fraud or cause the failure of justice; that a trustee while acting fairly and honestly shall be sure of the protection of the court, but never be permitted to become the instrument of wrong."
This case affords no foundation whatever for the doctrine which it was cited to support. It is perfectly apparent from this language that it was never intended to intimate that a court of equity had any jurisdiction in cases of trusts, except to enforce a trust or to grant some relief to parties who were beneficiaries of the trust, or in cases of fraud, except under the circumstances which existed in the case, from which the language is quoted, namely, the case of a creditor who has obtained a judgment, and an execution returned unsatisfied.
In Bank v. Wetmore the learned judge further says:
“In some of the states the issue and return of execution preliminary to the action in equity is not required when it clearly appears that it would be utterly fruitless, and the same doctrine has been declared in the United States ■supreme court,”—citing the case of Case v. Beauregard, 101 U. S. 690, 25 L. Ed. 1004.
Notwithstanding the fact that there was much discussion as to the rights of a creditor at large in that case, all that was decided was that whenever a creditor has a trust in his favor, or a lien upon property for a debt due to him, he may come into equity without exhausting his remedy at law. It further states (citing cases in other jurisdictions) that a creditor, without having first obtained a judgment at law, may come into a court of equity to set aside fraudulent conveyances of his debtor made for the purpose of hindering and delaying creditors, and subject the property to the payment of the
Another case cited by the learned judge who wrote the opinion in Bank v. Wetmore is McDermutt v. Strong, 4 Johns. Ch. 687. There it was held that the court of chancery had power to assist a judgment creditor to discover and reach the property of a debtor which was beyond the reach of an execution at law; that to get possession of the equitable assets of the debtor, as a resulting trust in goods and chattels, a judgment creditor must come into that court, and before a judgment creditor can be entitled to the aid of the court against goods and chattels of his debtor, or against any equitable interest of a debtor, he must first have taken out an execution at law, and have caused it to be levied and returned, so-as to show a failure of his remedy at law. This case does not seem to sustain the proposition in support of which it is cited.
In the case of Wiggins v. Armstrong, 2 Johns. Ch. 144, it was-held that a creditor at large, or before judgment, was not entitled to the interference of the court of chancery by injunction to prevent a debtor from disposing of his property in fraud of such creditor. The learned chancellor says:
“This is the case of a creditor on simple contract, after an action commenced at law, and before judgment, seeking to control the disposition of the property of his debtor, under judgments and executions, upon the ground off fraud. My first impression was in favor of the plaintiffs; but upon examination of the cases I am satisfied that a creditor at large, and before judgment and execution, cannot be entitled to the interference which has been granted in this case. In Angell v. Draper, 1 Vern. 399, and Shirley v. Watts, 3 Atk. 200, it was held that the creditor must have completed his title at. law, by judgment and execution, before he can question the disposition of the debtor’s property; and in Bennet v. Musgrove, 2 Ves. Sr. 51, and in a case before Lord Nottingham, cited in Balch v. Westall, 1 P. Wms. 445, the- , same doctrine was declared, and so it was understood by the elementary writ'ers. Mitf. Eq. Pl. 115; Cooper, Eq. Pl. 149. The reason of the rule seems-to be that until the creditor has established his title he has no right to interfere, and it would lead to an unnecessary, and perhaps a fruitless and oppressive, interruption of the exercise of the debtor’s rights. Unless he has-a certain claim upon the property of the debtor, he has no concern with his-frauds.”
The case of Bank v. White, 6 N. Y. 236, is also cited as an authority, but it in fact established the contrary proposition. In that case it was a judgment creditor who was seeking to enforce his rights, and in the discussion which arose upon the rights of this-judgment creditor the court, in reference to the provisions of 2 Rev. tit. p. 174, §§ 38, 39, say:
“The common-law powers of the court in reference to fraudulent trusts and-conveyances are not touched by these provisions. Fraud and trust were-familiar heads of equity jurisdiction, independent of the statute. The creditor invoking the aid of the court must establish his title to its interposition by alleging a lien or quasi lien upon the real or personal property which was the subject of the trust; and he would then be entitled to relief, notwithstanding he had a remedy at law, by levy and sale upon execution. In-all cases of fraudulent trusts the court may, in its discretion, direct a sale-by a master, and compel the debtor and trustee to unite in the conveyance-to the purchaser,” etc.
The case of Patchen v. Rofkar rests entirely upon the authority, of Bank v. Wetmore; and, as already stated, even those cases only claim that the prerequisites of a judgment and execution returned unsatisfied do not apply to a case where equitable interference is asked for upon the ground of fraud perpetrated upon the creditor.
Mr. Justice O’BBIEISi, in referring to the case of Russell v. Clark, 7 Cranch, 89, 3 L. Ed. 271, quotes certain language as supporting the contention of the respondent in this case. The language is:
“If a claim is to be satisfied out of a fund which is accessible only by the aid of a court of chancery, application may be made in the first instance to that court, which will not require that the claim should be first established in a court of law.”
It is perfectly apparent that this language refers to a case where a fund has been created for the purpose of satisfying the claim, to enforce which the intervention of the court of chancery is sought; and that was the question which was being considered by the court in Russell v. Clark.
It is thus seen how inapplicable the authorities cited in Bank v. Wetmore and Patchen v. Bofkar are to sustain even the limited proposition laid down in those cases. The cases are (I had almost said) innumerable which hold that in no case can a creditor reach property not liable to be levied upon by 'execution in an action in equity unless he is a judgment creditor, with an execution returned unsatisfied, or files his bill in aid of an outstanding execution. In addition to the cases to which attention has heretofore been called, we might cite McElwain v. Willis, 9 Wend. 549, in which it is held that, to entitle a judgment creditor at law to the aid of a court of chancery to obtain satisfaction of his judgment against the defendant out of property not liable to be levied upon by execution, he must show not only an execution issued, but returned nulla bona, and no state of facts will excuse such return, and that a bill in chancery may be filed to remove a fraudulent or inequitable obstruction or embarrassment to the satisfaction of a judgment by execution; but the bill in such case must distinctly and specifically allege that there is real estate which is subject to the judgment, or personal property liable to the execution. In Allyn v. Thurston, 53 N. Y. 622, and Estes v. Wilcox, 67 N. Y. 264, it was held that a creditor at large could not maintain an action to enforce a resulting trust in land purchased and paid for by Ms debtor, and by Ms direction conveyed to another person. In the case of Adee v. Bigler, 81 N. Y. 349, it was held that, to entitle a creditor to the aid of a court of equity in reaching assets, there must be a judgment, an execution issued thereon, and a return thereof unsatisfied; and the fact that the debtor is an insolvent corporation, and has conveyed its property in contravention of the statute, does not authorize a resort to equity until the remedy at law has been thus exhausted; nor can
There seems to be another objection which in an action like the present is fatal to the right of the plaintiff to maintain the same; and that is the constitutional right of certain of the defendants to a trial by jury as to the validity of the claim which has been presented against them, and for the payment of which property to which they are entitled is to be appropriated. In an action in equity a defendant cannot claim a trial by jury as matter of right upon any issues except such as are directed by positive statutes to be thus tried. It is because of this direction in the statute prior to the adoption of the constitution in 1822 that the right to a trial by jury of the issue of adultery in an action for divorce became fixed. When actions of this kind were tried in the ecclesiastical courts, all the is-sues were tried without a jury. When the court of chancery was given jurisdiction to try actions for divorce upon the ground of adultery, there was a positive enactment that the chancellor should frame a feigned issue upon the question of adultery, and have the same submitted to a jury. And this was the condition of the law at the time of the adoption of the constitution of 1822, which provided that trial by jury in all cases which have been heretofore used shall remain inviolate forever; and, as this language has been continued substantially in all subsequent constitutions, the right to trial by jury has necessarily been maintained. The act under which it is sought to charge certain of these defendants in this action came into existence in 1826, and the legislature was powerless, after the adoption of the constitution of 1822, if it attempted so to do, to give a court of equity jurisdiction to determine a question of indebtedness between the parties, unless as an adjunct to some branch of equity jurisprudence which had been in existence at the time of the adoption of this constitution. The right of a court of equity to interfere in cases like the one at bar was first created in 1826, as above stated. Consequently, for the purpose of the establishment of the debt, certain of these defendants have a constitutional right to a trial by jury; and, as has already been seen, in equity, unless there is a positive direction in the statute, there is no trial by jury upon any issue as a matter of right. It may be said in answer to this proposition that then in all cases under our lien law a party is entitled to a trial by jury as to the question of the amount which may be due; but it is to be borne in mind that courts of equity have always had jurisdiction of the question of liens and their enforcement', and a lien is nothing more than a statutory mortgage. This was a class of jurisdiction which courts of equity have exercised since their institution. But the jurisdiction which was conferred upon courts of equity by the act under which the plaintiff in this action is seeking to enforce his claim was a new jurisdiction, unheard of prior to the passage of the act of 1826. In the dissenting opinion it is said that if this view is sound it would equally apply to every suit brought by attachment which resulted in a judgment after the
Dissenting Opinion
It is unnecessary to discuss the numerous objections urged by the appellants, and I shall confine myself to the only one deemed worthy of attention by the majority of the court, namely, that the failure to obtain a judgment and issue an execution is fatal to the action. This I do not regard as an open question either in this court or in the court of appeals. It has been twice before us in Patchen v. Rofkar, 12 App. Div. 475, 42 N. Y. Supp. 35; Id., 52 App. Div. 367, 65 N. Y. Supp. 122,—and before the court of appeals in Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548. In the latter case, in referring to the necessity, in all creditors’ actions, of obtaining a judgment and issuing execution, it was said:
“It has become the settled law in this state not to dispense with those preliminary proceedings at law, although it may be made to appear by evidence that no benefit could result to the creditor from them. Estes v. Wilcox, 67 N. Y. 264; Adsit v. Butler, 87 N. Y. 585. This is not founded upon, any purpose of the statute to repeal or curtail the common-law equity powers of the court, not inconsistent with the statute, to investigate the conduct of debtors in respect to their property in fraud of creditors, and to grant relief. The statute did not purport to do that, but provided that ‘the powers-- and jurisdiction of the court of chancery are co-extensive with the powers: and jurisdiction of the court of chancery in England, with the exceptions,, additions and limitations, created and imposed by the constitution and laws of this state.’ 2 Rev. St. p. 173, § 36. In some of the states the issue and return of execution preliminary to the action in equity is not required when it clearly appears that it would be utterly fruitless, and the same doctrine has .been declared in the United States supreme court Case v. Beauregard, 101 U. S. 690, 25 L. Ed. 1004. The rule in this state in some sense limiting the exercise of jurisdiction of the court so as to bring within its application all cases having in their purpose or relief sought, the nature of statutory creditors’ bills does not necessarily rest upon a want of equitable power of the court or its denial, but, rather, is adopted as a rule governing and regulating the exercise by the court of jurisdiction within its equitable powers. It has the merit of uniformity, and in effect relieves a case from any uncertainty as to what would have resulted from the use of an execution if one had been issued. And it is founded upon the doctrine that a court of equity will not take cognizance of a controversy which can be determined at law, and not until the remedy there is exhausted. Such had quite uniformly been the rule of the common law applicable to equitable jurisdictions. McDermutt v. Strong, 4 Johns. Ch. 687; Hadden v. Spader, 20 Johns. 554. But this rule is not so unrelenting as to deny to a party the interposition of the equity powers of the court when the situation is such as' to render impossible the aid of a court of law to there take the preliminary steps and produce what ordinarily may be treated as the condition precedent to the application for equitable relief.”
The rule thus enunciated has been followed not only in this court in the case referred to, but also in the general term, Fifth department, in Lefevre v. Phillips, 81 Hun, 232, 30 N. Y. Supp. 709. It
“If a claim is to be satisfied out of a fund which is accessible only by the "aid of a court of chancery, application may be made in the first instance to that court, which will not require that the claim should be first established in a court of law.”
Hirshfeld v. Bopp, 145 N. Y. 84, 39 N. E. 817, was an action by a creditor of a domestic banking corporation seeking to charge a stock
“It seems that when an action has been brought by the people against such a corporation, and a judgment has been rendered therein dissolving it, sequestrating its property, appointing a receiver, and restraining creditors from bringing suit against it, this is an excuse for the nonperformance of the condition precedent requiring a judgment against the corporation, and the return of an execution unsatisfied.”
The very distinction here sought to be made was thus referred to in the opinion:
“On the other side it is insisted that, the liability of stockholders being purely statutory, performance is a necessary condition, without which no action can be maintained, and that no disability to sue the corporation, whether arising from the act of the law or from any other cause, can excuse its performance.”
And in disposing of this contention Judge Andrews reviews the decisions, and after concluding that the case of Hunting v. Blun, 143 N. Y. 511, 38 N. E. 200, put the question at rest in that court, continues:
“If it was necessary to find reasons supporting this decision, they are obvious,”—and then he proceeds to give them.
The further contention is made that a judgment entered after personal service upon the trustees only and service by publication on the defendants Castellane is open to constitutional objections, as depriving the latter of their property without due process of law. But this, if sound, would apply equally to actions whether the jurisdiction was inherent or conferred by statute; and equally applicable would it be to every suit brought by attachment which resulted in a judgment after publication of summons against nonresident defendants. The theory in attaching is that it is a proceeding in rem, just as this action, directed against the surplus of the trust fund, is in the nature of an equitable action in rem. Here, if the trustees had held an accumulated income, the plaintiff could have begun an action at law without reducing his claim to judgment, or urging any excuse for not having done so. In such action he would have attached the accumulated fund and published the summons against nonresident defendants, and after judgment the fund could have been seized and applied to the satisfaction of the judgment.
Further discussion of these contentions I deem unnecessary, because they have been disposed of in numberless decisions, and particularly in the case in this court to which I have already referred (Patchen v. Rofkar, 12 App. Div. 476, 42 N. Y. Supp. 35), wherein the reasons why a court of equity may dispense with the conditions precedent are fully stated in the following language:
“It is apparent that the plaintiff could in no way secure a judgment in this state. * * * Moreover, a judgment recovered against the assignor [defendant] in another state, where jurisdiction could be obtained of his person, would have no other validity in this state than a simple-contract claim, and would no more constitute a basis for the ordinary creditors’ action here than the general indebtedness itself. * * * It thus appears conclusively that it is true, as alleged in the complaint, that the plaintiff has no remedy*724 at law which he can pursue or exhaust, and that unless he can maintain! this action in equity he must lose his total indebtedness.”
For the reason, therefore, that I do not regard the question as an open one, I dissent from the conclusion reached by the majority of the court, and think that the order continuing the injunction should be affirmed, with costs.
Concurrence Opinion
I concur with Mr. Justice O’BRIEN. If we were authorized to overrule Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548, the considerations advanced in favor of reversing this order would have weight; but, as we are bound to apply the principle established in that case, I can see no escape from the conclusion that the court has the right to grant relief in this action without requiring that, the remedy at law should be exhausted. The ground of that decision is that “the subjects of fraud and trust are peculiarly matters of equity jurisdiction, which is very comprehensive when the other tribunals cannot afford relief.” In that case it was the fraudulent disposition of property that gave the court jurisdiction. In this case I think it is the trust under which the property is sought to be applied to the payment of the plaintiff’s claim which gives the court jurisdiction. The income from this trust fund, which the statute makes applicable to the payment of the debts of the person entitled to such income, can only be reached upon application to a court of equity. A court of law would have no jurisdiction to compel the trustee to apply any portion of such income to any purpose, and it is the inability of a court of law to reach property held in trust that gives a court of equity the comprehensive jurisdiction over trusts. An action to reach the income of this property could not be maintained under the Code of Civil Procedure, as by section 1879 the provisions in relation to creditors’ actions are expressly held inapplicable to actions to reach property held in trust, when the trust was created by a person other than the debtor. If the debtor is entitled to a trial by jury as to the validity of the claim against her, she can have such a trial in this action. She is a party to the action, and can appear and dispute the plaintiff’s demand, and the court can send the issues as to the validity of such demand to be tried by a jury. Such a case is expressly provided by the Code.
