Donovan v. Finn

| New York Court of Chancery | Nov 11, 1823

The Chancellor.

The objection of the defendants, that the judgment of the supreme court was wrongful or unjust, can not be allowed ; since that objection arises entirely, from matters which were used, or might have been offered, as a defence in the suit at law.

The judgment obtained by the complainant against James Finn, is therefore not open to examination; and it must be here regarded as just.

The complainant having obtained this judgment against James Finn, issued an execution against his property; upon which, the sheriff returned, that he found no property from which he could levy the debt. A legacy of an amount much larger than this judgment, has been bequeathed to the defendant James Finn, by Robert Finn deceased; the three other defendants in this suit, are executors of the will of Robert Finn; they have in their hands as executors, funds amply sufficient to discharge the legacy to James Finn; and the object of this suit, is to obtain satisfaction of the judgment against James Finn, by compelling the executors of the will of Robert Finn, to pay to the complainant so much of the legacy bequeathed to James Finn, as shall be sufficient to discharge the judgment.

The case of a legacy presents some peculiar considerations; but the opinion which I have formed in this cause, will render it unnecessary to discuss them, or to consider this legacy, as different from any other debt to James Finn. If an ordinary and acknowledged debt to a defendant, against whom judgment has been obtained by his creditor, can not be converted to the satisfaction of the judgment, by this court; it is clear, that a legacy, of which the payment may depend upon many conditions, can not be so applied. It is also proper, to decide the more general question which the cause presents ; as that question is depending in many other suits in this court, and is of most extensive application in the concerns of creditors and debtors. For the purpose of this inquiry, I shall therefore consider the legacy as a mere debt, absolutely due and payable to James Finn.

The cause thus considered, presents these facts. A creditor has obtained judgment against his debtor, in a court of law; an execution has been issued against the property of the debtor; and the sheriff has returned that none is found. The debtor has property, consisting in a debt due to him; and the creditor by judgment, now asks this court, to compel the debtor of his debtor to make payment to him, in satisfaction of the judgment.

Has this court jurisdiction in such a case, or power to give such relief? To apply existing laws to new cases, is the duty of courts' of justice, and is not an encroachment: and the application of established principles of equity, to new cases, in this court, is not an extension of its jurisdiction. But this court has no power, to assume any jurisdiction, really new, and extending beyond the limits of its established authority.

It is apparent, that this case does not belong to any general head of equitable jurisdiction; such as frauds, trusts, accidents, mistakes, accounts, or the specific performance of contracts. Here is neither fraud, nor trust, nor accident, nor any other ingredient of equitable jurisdiction. It is the simple case of two debtors and two creditors; of whom one is both debtor and creditor; a case in which, the rights and the remedies of the respective parties, have hitherto been enforced exclusively in the courts of law.

The English cases which are cited, as applicable to this question, have been fully examined by the late chancellor, in cases before him; and they were also reviewed by judge Wood-worth, in the case of Hadden v. Spader, 20 Johns. 562. It is not shown, by any one of those cases, that the English chancery ever touched an ordinary debt due to the judgment debtor, for the purpose of applying it to the satisfaction of the judgment. The English books, are therefore by their silence authority to show, that no such doctrine was ever entertained in the English courts of equity. The English cases cited, proceeded, as I conceive, not upon the ground of subjecting the credits of the judgment debtor, to the payment of his debts, but upon some ground of equitable jurisdiction, as fraud, or trust, existing in each case. The case of Taylor v. Jones, 2 Atk. 600. ; was a case of fraud and trust. But I forbear to enter into a particular examination ' of those cases; because, they by no means embrace the extent of the present question; and because, so far as they extend, I concur with judge Platt, 20 John. 575, in thinking, that they present such a contrariety of decisions and loose expressions, that we are at liberty to decide the question upon principles.

The cases adjudged by our own courts, have proceeded, I conceive, not upon the doctrine, that this court has power to attach a debt due to the judgment debtor, and to apply it to the satisfaction of the judgment creditor; but upon some fact or ingredient of equitable cognizance in each case, which gave jurisdiction to this court. The case of Bayard v. Hoffman, 4 Johns. ch. 450, was not the case of a judgment creditor ; but the object of the suit, was to annul an assignment in trust, made by a debtor without consideration. The assignor was insolvent, when the assignment was made; that fact not being then known, no actual fraud was intended; but the assignment had all the pperation of fraud, against the creditors of the insolvent debtor. Fraud, trust, and a conveyance without consideration, where the characteristics of the case ; and for these reasons, the case was of equitable jurisdiction.

In the case of Mc Dermut v. Strong, 4 John. ch. 687., an assignment by an insolvent debtor, in trust for certain objects, was declared to be incompatible with the rights of a judg- < ment creditor. The property assigned was a ship ; an execution at the suit of the judgment creditor, could not be levied upon the ship, by reason of the assignment; and the object of the suit, was in effect to vacate the assignment, as an impediment to the due effect of the execution. This court gave reliefj and the effect of its decision was, to remove the assignment which stood as a special obstacle to the due course of law.

The case of Hadden v. Spader, 5 John. ch. 280. and 20 Johns. 554" court="None" date_filed="1822-11-15" href="https://app.midpage.ai/document/hadden-v-spader-6145240?utm_source=webapp" opinion_id="6145240">20 John. 554., was also a case of an assignment by an insolvent debtor, of property upon various trusts. It was clearly a case of trust; the assignment was charged to have been made by fraud; and though the answers denied that fraud was intended, the facts exhibited a case of fraud. The effect of the assignment, if it had prevailed, would have been to withdraw and screen from execution the property of the debtor; the assignment was held to be void; and the judgment creditor had relief.

These are the principal cases, which have been adjudged in this court; and in all of them, some acknowledged ground of equitable jurisdiction, existed. In general, they were suits to set aside conveyances, which prevented the seizure of property by the sheriff; and the conveyances have been considered frauds, either actual or constructive. They have been cases in which the property assigned, would have been subject to the execution of the judgment creditor, if the assignment had not been made; and the assignment has been impeached, upon some ground, which gave cognizance of the case, to this court. In giving relief in such cases, this court does not proceed upon the idea of giving execution against a species of property, which is exempt from execution at law; but it acts upon some of the most ancient grounds of its jurisdiction, which enable it to give relief in cases of fraud and trust, either to a judgment creditor, or to any other person whose just rights may be destroyed or impeded, by such a cause.

The case of Hadden v. Spader, was finally decided by the court of errors; and the decree of this court was atfirmed. I consider the decision of the court of errors, in that case, as establishing precisely, what the late chancellor had before decided, by his decree in the same cause, and nothing more : and I fully concur with judge Platt, in his opinion given in that case, and in his view of the powers and jurisdiction of this court, in respect to the rights and remedies of creditors.

Where the subject of suit is exclusively legal, equity has no jurisdiction to enforce or to give a better remedy. There must be some foundation for equitable interference, such as trust, fraud, &c.

The case now to be decided, has not one feature of equitable jurisdiction. In it, there is neither fraud nor trust nor conveyance of property, nor any interruption of the effect of an execution, or the due course of justice, at law. It is the case, so common in the transactions of society, in which a person, being the debtor of one man, is at the same time, the creditor of another, without fraud or trust; the several parties standing merely in the general relation of debtors and creditors. In such a case, this court has no power to compel C, who is indebted to B, who is the debtor of A, to make pajrment to A ; and this court is equally destitute of jurisdiction, to compel such a payment, whether A has obtained judgment against B, or not.

According to our distribution of jurisdictions, suits for the ° J recovery of ordinary debts, are appropriated to the courts of common law j and the proceedings for enforcing the judgmenis rendered in such suits, are alike allotted to those courts. any suc^ case> where the subject of the suit, is exclusively of legal cognizance, a court of equity has no jurisdiction to enforce the judgment, by its own methods of proceeding, or to give a better remedy than the law gives. If the remedies of the law are imperfect, equity, as has been often said in the English chancery, has no jurisdiction to give execution, in aid of the infirmity of the law. When any fact giving equitable jurisdiction, intervenes in the transactions between creditor and debtor, such a fact becomes a foundation of relief in this court; but in any ordinary case free from fraud or injustice, the execution of the judgment, and the methods of compelling satisfaction, are confined to the courts of law. When a creditor comes to this court for relief, he must come, not merely to obtain.judgment or satisfaction of a judgment, must present facts, which form a case of equitable j lirisdiction. He must show, that the debtor has made some _ _ ’ fraudulent disposition of his property, or that the case stands infected with some trust, collusion or injustice, against which it is the province of this court to give relief. In such cases, this court has jurisdiction, not for the purpose of giving a species of execution, which the courts of law do not afford ; but for the purpose of giving relief in the particular cases allotted to its jurisdiction; and when the cause, by reason of such facts, is properly here, the court proceeds, upon all the circumstances of the case, to give final and effectual relief.

Choses in action are not liable to exetution, either in law, or in equity.

When, upon an execution, the sheriff returns, that no property of the debtor is found in his county, the return is evidence of the fact stated; but neither the return, nor the fact returned, gives any jurisdiction to this court. If the same fact were returned from every county of the state, these remedies at law would be exhausted; but equity would have no jurisdiction, upon the mere ground that no property had been found by the sheriffs. But when equity has jurisdiction, by reason of some disposition of the debtor’s property, made in fraud of the creditor, and when in such a case, the sheriff of the county in which the property is situated, returns upon the execution that no property is found, the return is important evidence to show, that the fraudulent disposition has had effect, by preventing the service of the execution.

By the existing law, the property of a debtor, consisting of things in action, held by him, without fraud, is not subject to the effect of any execution issued against his property ; and while a court of law does not reach these things, by its cution, a court of equity does not reach them, by its execution, for the purpose of satisfying either judgments at law or decrees in equity. To subject these things to the satisfaction of a judgment, by seizing and selling them, like goods in possession, would be to alter the established law of the laud; and this court has no power to make such an alteration, in the name of equity. The maxims, that every right has a remedy, and that where the law does not give redress, equity will afford relief, however just in theory, are subordinate to positive institutions, and can not be applied, either to subvert established rules of law, or to give to this court, a jurisdiction hitherto unknown.

When it is said, that a debtor max' now, convert all his effects into stocks, credits, or other things in action, and may in his own name, or the name of a friend, hold his property in these forms, in defiance of his creditors ; our laws are reproached by a vague assertion, which is partly true, and is to a much greater extent, erroneous. All conveyances made to defraud creditors, are void, both in law and equity. When the fraud appears to a court of law, the conveyance is there, adjudged void. When such a fraud is presented to this court, it is of equitable jurisdiction; and the property of the debtor, fraudulently transferred, is subjected to the satisfaction of his debts, in favor of a creditor complaining of the fraud. Does an insolvent debtor transfer his property to another person, in trust for himself, or in such manner as to defeat the effect of a judgment and an execution ? This is the frequent case ; it is a case of both fraud and trust; and it is of equitable jurisdiction. It was the case of Mc Dermut v. Strong, and of Hadden v. Spader. In all such cases this court vacates the fraud, sets aside the conveyance in trust; and acting both upon the debtor and his trustee, it does complete justice to the creditor. Thus, the jurisdiction of this court, reaches and reaches effectually, those cases of fraudulent conveyances and assignments in trust, which form the great and most vexatious impediment, in the course of justice between creditor and debtor. Bills for discovery, where no relief is sought, also afford important aid to creditors against their debtors. But this court has no power to cause stocks, credits and rights of action, held by a debtor, without fraud, to be sold, or converted into money, or to be transferred to the creditor, or to be applied to the payment of debts. The English courts of equity, have never exercised any power like that now proposed, over the rights of a debtor; and it is certain, that no such power has ever been exercised by any court in this state.

But it is said, that a failure of justice must take place, if such a jurisdiction should not be exercised by some of our courts of justice. How, it is asked, is all that class of personal effects, consisting in stocks, credits and property in action, in various forms, a class of property which in this community, is very great, to be subjected to the payment of debts ? That such property should be made subject to the payment of the debts of its owner, is not denied. That such property can not be seized or sold by the sheriff, upon an execution, is the existing law of the state. That in the present state of our laws, a debtor sometimes holds and enjoys this species of property, while his debts remain unpaid, may be true. These reasons may show, that the existing laws are imperfect, and that some convenient method of subjecting this class of property to the payment of debts, would be a desirable amendment ; but they do not show that this court, or any other tribunal, has power to make such an amendment. The argument so strongly urged, that justice requires some new remedy in these cases, is an argument to be addressed to the legislature, and not to the courts of either law or equity.

Our ancient law was not destitute of a remedy, in such cases. That law was intended and adapted, to compel the application of all the property of the debtor, to the discharge of judgments against him; and for that purpose different kinds of executions, were provided. • By executions against his property in possession, that species of effects was subjected directly, to the discharge of a judgment; but liis things in action, were reached only by an execution against his person, upon which he was imprisoned, until be should satisfy the judgment. The execution against the person was a method of coercion, intended to bring forth, for the satisfaction of the judgment, all such effects of the debtor, as could not be subjected to other executions; and it was a powerful remedy. That remedy has been gradually relaxed by the legislature, until it has nearly lost its efficacy: and while this great change respecting execution against the person, has been made, the rules concerning executions against property, have remained without alteration. Thus, the imprisonment of the debtor as a remedy, has been in effect, taken away ; no effectual method of execution against his property in action, has been substituted ; and this change in our laws, has been made by the legislature itself.

The legislature has indeed, made some provisions for the benefit of creditors, in these cases. By tile acts' for giving relief in cases of insolvency, now in forcé, an assignment of all the property of a debtor, imprisoned in execution, may be obtained for ¡’the benefit of his creditors, in certain cases, and upon certain conditions. This remedy is tardy, incumbered with conditions, and inadequate to the ends of justice. Still, it is the remedy which the legislature has given, after the legislature itself had, in effect, abolished the coercion of personal imprisonment. Equity, as a system distinct from law, has been raised and matured into its present perfection, not for the purpose of preventing or controlling the operation of statutes ; but in order to supply other defects, and to afford justice where injustice was produced, by severe rules of the common law. The idea that this court has power to provide for all the mischiefs or inconveniences, which may result from the operation of new statutes, is repugnant both^to the established limitations of its jurisdiction, and to the constitutional separation between the legislative power and the power of the courts of justice.

Various laws concerning bankrupts, insolvent debtors, and absent and absconding debtors, make, or have heretofore made, ample provision, that all the rights in action of the debtor, shall be vested in assignees or trustees, for the benefit of all his creditors; and while such laws show, what justice and public policy have been supposed to require, they also show, that the general law on this subject, can be altered only by the legislative power. If such laws, or any of them, are not now in force, it is because the congress of the union, or the legislature of the state, have not passed them, or have repealed or modified those which had been enacted.

It is said, that the court of chancery of England, has never exercised a jurisdiction like that now proposed, because redress to creditors, in these cases, is afforded by the bankrupt laws of that country. This inference is altogether unsound. If the English chancery had ever possessed such a jurisdiction, the fact would appear; and that jurisdiction would have been exercised, in the numerous cases, to which those bankrupt laws do. not extend. The bankruptjlaws of England; were made,'to give redress which the courts and laws of that country,-did not before, afford; and if those bankrupt laws were repealed, it would not follow, that the English chancery would have power to accomplish objects, which, in the opinion and practice of that country, could be effected only, by an entire system of statutory regulations.

If the attempt now made, could prevail, it would be, in effect, nothing less, than to introduce a new law of attachment, for the benefit of particular creditors, through the process of a court of equity.

Our law for relief against absconding and absent debtors is a law of attachment. This special statute, containing a system of provisions in detail, is alone, a sufficient proof, that the proceeding by attachment, can be authorised only by the legislature, and that such a process or power, belongs not to any court of this state, in virtue of its general jurisdiction. The attachment given by this statute, embraces all debts due to the debtor ; is for the benefit of all his creditors; and is authorised only against absent, absconding and concealed debtors. The legislature has not given this remedy against debtors residing or found within the state, and subject to the full operation of its general laws. The attachment now proposed, is against a single debtor of the judgment debtor, for the benefit of the judgment creditor; and all the parties reside in the state. Thus it is proposed, that this court shall institute a new species of attachment against debtors within the state; a new method of justice in favor of creditors, differing greatly, from any attachment or any execution, hitherto known; and which, however it may be recommended, has not yet been adopted by our laws.

In several of the states of the union, there are laws of attachment, by which a creditor may sequester or attach, for his exclusive benefit, a debt due to his debtor; and it is said, that these laws are useful and efficacious, in promoting the ends of justice. But in all those states, these attachments have been introduced and established by special acts of their legislatures ; this proceeding being unknown equally to the common law and to the equity of England.

But while the attachment of the debt due to a debtor, for the benefit of the creditor instituting the suit, is a proceeding unknown to the general system of English law and equity,, it is fully established in the city of London, under the name of the custom of foreign attachment, and it there takes place in a local court of special jurisdiction. Thus stand, both the generai law, and-the exception to it, in England; and equity has never altered, but has always followed the general law. This court is now, for the first time, asked to do, what, in England, is done, only in London, by a special custom of that city; what in other states of this union is done only under the provisions of special statutes ; and what in this state, has never yet been done or authorised, by any law.

If this court were at liberty, to enlarge its powers, in the manner now proposed, the extent and consequences of so great an innovation, would deserve to be well considered. Is the right to this attachment, to be given to the creditor who institutes a suit ? or to him who has obtained judgment ? or, to him only, who has issued an execution, which proves ineffectual ? When the debtor is insolvent, justice requires that all his property should be distributed ratably, among all his creditors. Is it proposed, that this court shall perform all the various offices, of a law of bankruptcy; shall take upon itself, the administration of the estates of bankrupts ; shall collect all the effects of a debtor, which can not be seized by the sheriff; and make distribution among creditors who shall prove their debts ? To what species of debts or property in action, shall this attachment be applicable ? Is it to extend to all contracts, demands and rights of action, admitted or contested, which the debtor may hold against other persons ? Where the property of a debtor consists in effects, which can not now be sold by the sheriff, is the creditor who has obtained judgment, to find, that a suit in equity, is necessary, in order to obtain the effect of a suit at law ? Is a suit at law, to be the parent of a suit in equity, in the multitude of these cases which always exist ? When A institutes a suit at law, against B., the cause is determined according to the course of the common law: but when A has obtained judgment against B., who has a claim against C., which also belongs to legal jurisdiction, is C to be impleaded in equity by A, and to defend himself there, against A., when if C had been impleaded by his own creditor B, the suit must have been in a court of law ? Is a judgment at law, against the first debtor, indispcnsable, because the case is of legal cognizance; and is it insisted that the case of the second debtor, of the same nature, is not of legal, but is of equitable jurisdiction ? Under the constitution, the course of the common law, the trial by jury, and the system of equity, must all be maintained, in their respective spheres of operation. If the existing difficulty in these cases, arises from the rule of law, that stocks, credits and rights of action, can not be sold by the sheriff; is that rule salutary, since the remedy by imprisonment of the debtor, has been so greatly relaxed ? If some new proceeding, by way of attachment or execution, against the rights in action of a debtor, is requisite, on what courts or officers shall such a power be conferred? and in what cases, and under what regulations shall it be exercised ? But I forbear to pursue these inquiries and reflections; and these are suggested, merely to show the magnitude of the innovation now proposed. Should this court take cognizance of these cases, they would form a chapter of jurisdiction, far more ample than any one which it now possesses; and the assumption would be a bolder stride of power, than was ever made by the English chancery, in any single age. The maxim which teaches, that a judge should amplify his own jurisdiction, has no place in our institutions. The utility of this court, so important in the general structure of our system, will be best consulted and preserved, by preserving its jurisdiction within the limits which are now established. j

This court has no power to compel the debtor of a make payment to the judgment creditor.

My views of this question, terminate in the following results.

1. The cases, of authority, in which relief has been given to judgment creditors, were, in themselves, cases of equitable jurisdiction, involving fraud or trust, or seeking to subject to the satisfaction of a judgment, property in itself, liable to execution, by removing a conveyance, which operated as a fraudident impediment to the execution.

mi . 2. 1 ms court has no power, to compel the debtor of a judgment debtor, to make payment to the judgment creditor, satisfaction of the judgment.

The suit is dismissed, with costs.