309 N.Y. 436 | NY | 1956
Lead Opinion
The complaint before us, predicated on section 273 of the Debtor and Creditor Law, charges that defendant Jacob Glassman transferred a sum of money to the New York State Employees’ Retirement System, also named as a defendant, with intent to defraud plaintiff, his wife, and to prevent her from collecting certain amounts due her on judgments which she had previously obtained against him. In this suit, brought in the Supreme Court, she seeks a judgment setting aside that transfer as fraudulent and void as to her so that she may receive from the fund transferred the amount of her judgments. Upon motion by the Retirement System, the court at Special Term dismissed the complaint as to that defendant, on the ground that the System, exercising a governmental function of the state, is immune from suit in the Supreme Court, and the Appellate Division unanimously affirmed.
The appeal is here by our leave to permit decision of a question, a very narrow and limited one, never before considered or passed upon by this court.
The complaint then goes on to allege, first, that the transfer was fraudulent and void as to plaintiff, that it was made by Glassman “ without any consideration and with the sole intent to hinder the plaintiff in collecting the judgments heretofore obtained against * * * Glassman ’ ’ and, second, that Glass-man was insolvent or on the brink of insolvency and that ‘ ‘ the transfer of the funds ”, constituting his only tangible assets, “ was made with the intent and for the sole purpose of making it impossible for this plaintiff to collect the amount due her and to prevent and delay * * * [her] from collecting the judgments ” previously obtained.
The relief prayed is that the transfer to the Retirement System be declared fraudulent and a nullity as to plaintiff; that the funds be declared the property of Glassman and that the Retirement System act as trustee; and that Glassman and the Retirement System ‘ ‘ be directed to turn over ’ ’ to plaintiff the sum of $1,000.50, the amount of the aforesaid judgments in favor of plaintiff against her husband.
Section 273 of the Debtor and Creditor Law provides that “ Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.” Apart from the problem as to the court’s jurisdiction, there is no doubt that the complaint states a good cause of action to set aside and annul the conveyance, at least to the extent necessary to satisfy plaintiff’s claim. (Debtor and Creditor Law, § 278; see Hearn 45 St. Corp. v. Jano, 283 N. Y.
The doctrine of sovereign immunity from suit, rooted in the ancient common law, was originally based on the monarchical, semireligious tenet that “ the King can do no wrong ”. (See Borchard, Government Liability in Tort, 34 Yale L. J. 1, 2; Borchard, Governmental Responsibility in Tort, 36 Yale L. J. 1,17-41.) In modern times, it is more often explained as a rule of social policy, which protects the state against burdensome interference with the performance of its governmental functions and preserves its control over state funds, property and instrumentalities. (See United States v. Lee, 106 U. S. 196, 206; see, also, Block, Suits against Public Officers and the Sovereign Immunity Doctrine, 59 Harv. L. Rev. 1060, 1061.) The immunity extends as well to officers and agencies of the state engaged in carrying on its governmental functions, and a suit against such an officer or agency is regarded as one against the state itself. (See, e.g., Psaty v. Duryea, 306 N. Y. 413; Breen v. Mortgage Comm., 285 N. Y. 425, 429-430; Volk v. City of New York, 284 N. Y. 279, 285-287.) Most states today provide some remedy whereby individuals with claims against the government may seek redress (see Claims against the State in Minnesota: Report of the Subcommittee on Immunity of the State from Suit, 32 Minn. L. Rev. 539, 545-556) and, in New York, the method has taken the form of a legislative waiver of the state’s “ immunity from liability” in section 8 of the Court of Claims Act. The suits to which the state has thereby consented, however, must be brought in the Court of Claims and in accordance with the procedure outlined in the Act governing that court.
Little argument is required to demonstrate that the Retirement System is the kind of state instrumentality that is clothed with the sovereign immunity of the state. It is engaged in an important governmental function, and providing retirement pensions, annuities and other employment benefits for its personnel, comparable to those received by the employees of private
Indeed, plaintiff’s brief presents no direct challenge to the System’s status as a state agency. Instead, she urges that immunity should be denied the System because, first, she has no other remedy, since the Court of Claims would have no jurisdiction over either an equitable action of this kind (cf. Psaty v. Duryea, supra, 306 N. Y. 413, 416-417) or the person of the individual defendant and, second, the System enjoys the powers and privileges of a corporation and, therefore, “ must also accept the responsibilities of a corporation ” and be amenable to the jurisdiction of a court of equity. In our view, neither of these contentions can assist plaintiff; the immunity of a state agency is in no way affected by the lack of any other remedy (see Psaty v. Duryea, supra, 306 N. Y. 413, 419-420; Buckles v. State of New York, 221 N. Y. 418, 423-424) or by the fact that the agency is endowed with the powers and privileges of a corporation. (See, e.g., Breen v. Mortgage Comm., supra, 285 N. Y. 425, 430; Matter of Hicka, 180 Misc. 173, 175-176; Arkansas v. Texas, 346 U. S. 368, 370.)
Consequently, if the status of the Retirement System as an agency of the state, clothed with its sovereign immunity, were the only question in the case, an affirmance would necessarily follow. The conclusion that it is such an agency, however, only equates its position with that of the state, so that a suit against it would be deemed one against the state. The question still remains whether the present suit is one against the agency, and, by that token, against the state. The answer must be in the negative.
The Retirement System, then, is not in any sense the real or primary defendant; it is in the case solely because the procedure for setting aside the fraudulent transfer requires that it be joined as a necessary party. The real defendant, the only one against whom an obligation is asserted by reason of alleged wrongful acts or conduct, is plaintiff’s husband.
Moreover, the only parties who stand to lose or gain anything as a result of the litigation are plaintiff and defendant Classman. If she prevails, she will be able to satisfy her judgments out of the assets of her husband; if not, they will remain secure in his account with the Retirement System, to be returned to him some day in the form of retirement benefits. In a sense, the System is in a position not unlike that of an innocent stakeholder, with nothing to lose or gain. Although the purpose of the transfer does not appear from the complaint, such a lump sum deposit as the husband made may be used only to obtain additional credit for prior service in certain specified employments (§ 60) or to secure additional benefits under the 55-year-old retirement plan (§86). If the System retains the funds, it is obligated for their eventual return to defendant, or the return of an equivalent sum, in one or another of these forms; if it “ loses ” those funds in this action, it is relieved of that obligation.
Whether a suit is against the state is not determined solely by looking at the parties named, but depends also upon the nature of the litigation, the relief sought and the way in which it affects the state. “It is well settled”, it has been said (Ex Parte Fitzpatrick, 171 Ind. 557, 560), “ that not every suit against an officer of the State is a suit against the State. A suit against an officer in which the State has no pecuniary interest, or substantive right to protect, is not a suit against the State.” In order for the doctrine to apply and immunity to attach, ‘ ‘ ‘ the relief asked must involve some direct or substantial interest of the state ’ ”. (Lefebvre v. Somersworth Shoe Co., 93 N. H. 354, 357; see Morrill v. American Reserve Bond Co., 151 F. 305, 308-310; Ex Parte State, 245 Ala. 193; Fidelity & Deposit Co. v. Shaid, 103 W. Va. 432; cf. Commercial Union Ins. Co. v. Connolly, 183 Minn. 1.) Thus, even though the doctrine of sovereign immunity bars suits against the state and its agencies alike, that doctrine will not be applied where the state or governmental unit, although named as a defendant, is not an actual or interested adverse party.
In Fidelity & Deposit Co. v. Shaid (supra, 103 W. Va. 432), for instance, one Shaid wrongfully converted certain construction materials and equipment which the State Road Commission had previously appropriated under the terms of a contractor’s bond. According to those provisions, the appropriated property was to be used by the Commission to reduce the liability of the surety on the bond, the Fidelity & Deposit Co. The latter instituted suit against both the State Commission and Shaid, requesting that the suit threatened by the Commission be stayed until plaintiff’s equities be ascertained, that Shaid be required to account for the material taken by him and that the value thereof
And in Morrill v. American Reserve Bond Co. (supra, 151 F. 305), the defendant corporation had deposited various bonds and mortgages with the state treasurer of Missouri pursuant to a statute requiring such a deposit as security for repayment of the bondholders of the corporation. Upon the corporation’s insolvency, some of its bondholders brought an action to have these securities turned over to the receiver of the corporation, to be applied to the satisfaction of their claims. The state treasurer, joined as a defendant, opposed the proceeding on the ground that it was a suit against the state, prohibited by the Eleventh Amendment to the Federal Constitution. The court held that the suit was not against the state and directed that the securities be delivered to the receiver. “ Neither the state nor the State Treasurer ”, wrote the court, “ has any interest in the trust property or in the event of this proceeding. No disposition of it can entail either loss or gain upon the state or upon any of its officers. The only parties to it who have any right to or interest in the suit itself, or in the trust property which is its subject, are the defendant corporations and their creditors. * * * It is not, therefore, a suit against the state, and it falls far without the ban of article 11 of the amendments to the Constitution ” (p. 310).
So, in the case before us, “ no disposition of it can entail either loss or gain upon ’ ’ the state agency, since the only parties who have any interest in the suit, or in the property involved, are plaintiff and defendant Classman. The Retirement System holds the funds in a quasi-trust capacity, for section 273 of the Debtor and Creditor Law stamps them funds of the debtor
The judgment of the Appellate Division and the order of Special Term dismissing the complaint should be reversed and the motion to dismiss the complaint denied, with costs in all courts.
Dissenting Opinion
(dissenting). This is a judgment creditor’s action brought in Supreme Court, County of Kings, to set aside as in fraud of plaintiff’s rights, a transfer of money by defendant Glassman to defendant New York State Employees’ Retirement System. The complaint demands that the nullity of that transfer be adjudged and that the Retirement System be ordered to pay plaintiff from the amount so transferred, the amount due on her unsatisfied judgments against defendant Glassman. The courts below have granted the Retirement System’s motion to dismiss the complaint as to it for lack of jurisdiction. That dismissal was correct, since the Retirement System is an agency or instrumentality of the State of New York and the State has not given its consent to be sued in the Supreme Court.
That the State of New York is not suable (except by another State, U. S. Const., art. III, § 2, and 11th Amendt.) without its own express consent is settled (Kursted v. People, 1 Abb. Prac. 385; Lewis v. State of New York, 96 N. Y. 71; Quayle v. State of New York, 192 N. Y. 47; People ex rel. Swift v. Luce, 204 N. Y. 478; Chisholm v. Georgia, 2 Dallas [U. S.] 419). “ It is inherent in the nature of sovereignty, not to be amenable to the suit of an individual without its consent ” (The Federalist, No. 81; see Davison, Claims against the State of New York, § 1.06). Till the State so consents, no suit at all can be brought
Nor can there arise in the present suit any problem as to “ whether the action is against an agency of the State, or whether it is against a public official in his personal capacity ” (Breen v. Mortgage Comm., 285 N. Y. 425, 429, supra; see Erie R. R. Co. v. Sells, 298 N. Y. 58, 62, and cases cited). No persons are here sued, individually or otherwise. The Retirement System is not a board or commission or other body of people. And the charge of this complaint is not of any trespass or usurpation or other wrongdoing on the part of the system or its officials or
It is suggested that there is or should be an exception to all this settled law, in favor of a suit like the present one wherein, it is said, the State is a “ mere stakeholder ” without any “ pecuniary interest ” of its own. It should be a sufficient answer that nowhere in the statutory or case law of New York is such an exception provided. Since the State’s nonsuability is absolute until waived, and since such a waiver requires either constitutional or statutory sanction (Davison, Claims against the State, § 1.07) and since appellant can point to no such constitutional or statutory provision in New York law, her claim of exception cannot be accepted by our courts. We are referred to decisions in other jurisdictions but those cannot be binding or even applicable on the question of whether New York has consented to defend such a suit as this in our Supreme Court. And, indeed, those decisions from other jurisdictions, even if controlling here, would not govern this present situation. The rule they announce is this: 11 A suit against an officer in which the State of New York does have “ a substantive right to protect, is not a suit against the State ’ ’ (Ex Parte Fitzpatrick, 171 Ind. 557, 560, and cases cited thereat). Such a rule (and
The judgment should be affirmed, with costs.
Conway, Oh. J., Froessel and Van Voorhis, JJ., concur with Fuld, J.; Desmond, J., dissents in an opinion in which Burke, J., concurs; Dye, J., taking no part.
Judgment of Appellate Division and order of Special Term reversed and matter remitted to Special Term for further proceedings in accordance with the opinion herein, with costs in all courts.