103 N.Y.S. 312 | N.Y. App. Div. | 1907
This is an action by a judgment creditor to establish a lien upon property of the judgment debtor in the hands of a second assignee thereof.
On the 28tli day of December, 1891, a certificate of incorporation incorporating the “ John J. Hayes Machine Company ” as a domestic corporation was duly filed. The certificate stated that it was to be formed “ to manufacture and sell machines of iron, steel, or other metals, and to carry on a general machine shop business,” and that its business was to be located in Brooklyn. The capital stock aggregated $10,000, consisting of 100 shares of the par value • of $100 each. The corporation duly organized and thereafter carried on business at Hos. 108 to 118 West street, Brooklyn, under the name “ Hayes Machine Company,” for many years prior to the . year 1903; and the name printed and used on its letter-heads, instead of conforming to its certificate of incorporation, was “■ Hayes Machine Co.,” and it caused a sign giving the same name to be conspicuously attached to the exterior of its plant. Such were the facts when, on the 21st day of April, 1903, the plaintiff delivered to the company, at its said plant, a “Johnson Automatic Press, ’ of the value of $1,200, to be altered and repaired
“Whereas, John J. Hayes has assumed the payment of all outstanding accounts.
''Resolved, that all assets of this Company, including H. S. patents, but excluding the accounts due to the company, prior to' April 3rd, 1904, be sold to Samuel W. Low for One Dollar.”
At the same meeting a resolution was offered and adopted as follows: “ That this company discontinue business and go into liquidation as soon as possible.” On the eleventh day' of May
The respondent contends that the plaintiff had not exhausted his remedy against the old company and, therefore, could not maintain the action. The basis of this claim is that plaintiff did not show that he obtained a judgment against the old company and that execution had been duly issued and returned unsatisfied thereon prior to the commencement of the action. The respondent invokes the rule, well established by authority, that equitable assets can only be reached after the remedy at law has been exhausted, which can only be shown by the return of an execution unsatisfied. (Harv0ey v. Brisbin, 143 N. Y. 151; Kerr v. Bildine, 60 Hun, 316 ; Adee v. Bigler, 81 N. Y. 349 ; Beardsley Scythe Co. v. Foster, 36 id. 561; Dunlevy v. Tallmadge, 32 id. 457; McCullough v. Colby, 5 Bosw. 477.) This principle is so well established that it is not open to question. It does not follow, however, that the judgment was not a judgment against the corporation merely, because there was an error in the corporate name, nor that the execution should not be deemed an execution against the corporation. If the defendant had defaulted in appearing or answering then the plaintiff would justly beheld to strict'practice and the judgment could only be entered and execution issued against the party defendant designated in the summons and satisfied out of its property (Schoellkopf v. Ohmeis, 11 Misc. Rep. 253; Fischer v. Hetherington, Id. 515 ; Durst
It is further claimed that Low, individually,.is a necessary, party to the action, but I am of opinion that this contention is also erroneous. ■ It is not sought in this action to set aside the respective trans
I am of opinion that the finding of the trial court that Low was an innocent purchaser for value is against the weight of evidence, and that in any view of the evidence, even though there was no actual fraud, the transfer of the property constituted a constructive fraud upon the creditors of the company and is void as against . them. It is not necessary to decide whether the evidence would have warranted a finding of actual fraud on the part of Low, who is in reality the new company, for in any view of the evidence there was constructive fraud which is sufficient to subject the property transferred to the lien of plaintiff’s judgment. Low knew that the old company was going out of business, for he took all of its property, with the exception of some past-due accounts, and he took possession of its plant; and the resolution of the company, with knowledge of which he is, in the circumstances, chargeable, showed that it intended to discontinue business and terminate its career. The evidence showed that he stated that the value of the property on the 1st of May, 1904, four days after he purchased it, without any evidence of a change of circumstances, was twice the consideration paid by him therefor.- At most, he blindly assumed that the president of the old company, to whom he paid the entire consideration, excepting the nominal consideration of one dollar, and who owned less than two-thirds of the stock of the old company, was to pay its debts, and he made no definite inquiry with respect to the extent of its indebtedness or as to whom its creditors were. His attention was drawn to the plaintiff’s press, and it was specifically stated that title
It follows, therefore, that the judgment should be reversed and a new trial granted, with costs to appellant to abide the event.
Patterson, P. J., Houghton and Lambert, JJ., concurred; Scott, J., concurred in result.
Judgment reversed, new trial ordered, costs to appellant to abide event. Order filed.