103 N.Y.S. 681 | N.Y. App. Div. | 1907
The plaintiff is a judgment- creditor of August Belmont Purdy, and brings this action in behalf of himself and all other creditors, if any there be, of said Purdy entitled to share in certain moneys and property assigned and transferred by Purdy to the defendant Lord, as trustee, by a deed of trust made, executed and - delivered on the 17th day of March, 1892, upon trust “ to pay any just debts which I may now owe,” and after the payment of such debts to invest the residue of the money or. property, and to receive the interest and income and apply the same to the use of the grantor’s wife, Bertha Gr. Purdy, during her life, and upon her death to divide the property then remaining among the then living issue of the grantor in equal shares, per stirpes. The property assigned and transferred to Lord by the deed of trust was the debtor’s interest under the will of his grandaunt, Abby Gr. Spring, which consisted of an undivided fifth interest in her residuary estate, and an undivided fifth interest in a specific legacy, which were subject, however, to the life estate of Purdy’s mother, who died in 1904. The evidence tends.to show that the value of the estate assigned and transferred to the trustee is about $48,000, consisting of one-
he learned counsel for the trustee and for the other appellants, •who are the wife and only child of Purdy, contend that plaintiff’s judgment against Purdy is no proof as against them of the indebtedness. The plaintiff and Purdy, the judgment debtor, had been copartners in business as wholesale liquor dealers since 18115, at times alone and at times with another, under the firm name of “ Purdy &■ Nicholas.” On the 1st day of September, 1888, they were the sole members of the copartnership, and previously entered into an agreement in writing-for the dissolution thereof, to take effect on that day, under which the firm’s business was liquidated by plaintiff, and for that purpose Purdy assigned his interest in the “stock of. merchandise, office and other furniture, fixtures, machinery, tackle, horses, harness and trucks, bills receivable, promissory notes, drafts, bills of exchange and accounts (excepting only such -bad or doubtful accounts) at the aggregate of the valuations,” to ■ be stated in an inventory to be made pursuant to the agreement. On or about May 1, 1882, when the plaintiff and Purdy were the sole members of the firm, they occupied premises No. 43 Beaver street under a lease. , At this time the premises were conveyed to the plaintiff, who executed a .lease thereof to the firm, and the firm continued to occupy the premises under alease from the plaintiff until its dissolution as aforesaid. The dissolution agreement, in addition to providing that an inventory should be taken of the assets of the firm, excepting the claim of the firm against Purdy on his personal, account, and all accounts of money due or to grow due classified
It appears that plaintiff continued business on his own account at the same, place and collected the accounts, sending Purdy two statements thereof, one. in 1890. and another in October, 1891, when the accounts had been collected so far as they were deemed to have any value. On the 27th day of July, 1894, plaintiff brought- an action in the Supreme Court against Purdy on the dissolution agreement for the balance due to him from Purdy thereunder or for permission to account thereunder, alleging the material facts, including'the agreement with respect to the Beaver street' property, as set forth in the dissolution agreement,' and demanding judgment for $22,582.61, with interest thereon from the date of dissolution, less the sum of $11,087.65, together with interest theréon, for which it was conceded the defendant was entitled to credit. The defendant defaulted and the plaintiff recovered judgment against him for the sum of $16,562.64 upon the report of a referee appointed by the .court to take and state the account Under the liquidation agreement, which was confirmed by the court.
Upon the trial óf this action plaintiff introduced in evidence the judgment roll in his action against Purdy. Owing to the fact that the final figures of the judgment recovered by him against Purdy did not represent the indebtedness existing at the time of the execution of the trust deed to Lord, he has not recovered in the action the total amount of the judgmént recovered by him in his action against Purdy, but he recovered the amount of the indebtedness owing to him by Purdy at the time of. the execution of the trust deed, as shown by the findings of the referee contained in the judgment roll in the action against Purdy,' which specified the amount of the indebtedness from Purdy to the plaintiff on the 1st day of September, 1888, and interest was allowed thereon to the date of the execution of the trust deed, and from the total was deducted the amount to which .the referee found Purdy was entitled to credit,
The first point to be considered is the contention of the appellants that it was incumbent upon the plaintiff to show Purdy’s indebtedness to him by other evidence than the judgment roll in the action brought by him against Purdy, which was commenced long after the execution of the deed of trust. The only consideration recited in the deed of trust is the nominal consideration of one dollar, and no other consideration was shown. Purdy’s indebtedness to the plaintiff had accrued prior to the execution of the deed of trust. As already observed, however, in view of the form of the action, we are not concerned with the question as to plaintiff’s right as a creditor of Purdy to follow his property in the hands of one who lias, acquired the same without consideration or with knowledge of the facts. Defendant Lord, by accepting the trust, has stepped into the shoes of Purdy with respect to the claims existing against him at the time of the execution of the deed of trust, to the extent of the property transferred thereunder. It is his duty as such trustee, both to Purdy and the other creditors, to apply the property only in payment of legal claims; but the validity of a claim existing at the time of the execution of the deed of trust could be established in an action subsequently brought, and without making the trustee, who would be a proper but not a necessary party, a party defendant, and the judgment would be binding and conclusive on the trustee, even though not a party, in the absence of fraud or collusion, which it would be incumbent upon him to show. (Candee v. Lord, 2 N. Y. 269; Merchants' Nat. Bank v. Hagemeyer, 4 App. Div. 52; Matter of Roberts, 98 id. 155 ; Burgess v. Simonson, 45 N. Y. 225; Ledoux v. Bank of America, 24 App. Div. 123; Pringle v. Woolworth, 90 N. Y. 502; Decker v. Decker, 108 id. 128; Swihart v. Shawm, 24 Ohio St. 432.) No evidence was offered by the appellants tending to impeach the judgment for fraud or collusion. There is no merit in the further claim that since the judgment was not binding upon the trustee as to the total amount of the recovery
The appellants further contend that the court erred in excluding evidence, offered by them with a view to showing that the property No. 43 Beaver street, already referred to, was copartnership property, and that plaintiff had never accounted to Purdy for his interest therein. The appellants, under their plea that Nicholas and Purdy had on the 5th day of May, 1902, compromised, settled and adjusted all claims between them, were permitted to show that in 1901 Purdy brought an action against the. plaintiff, alleging that the premises No. 43 Beaver street were purchased under a contract made by the firm, and that the title was taken in the name of Nicholas for the firm by consent, bub upon the agreement and under landing that it should be held and deemed to be a partner-' ship asset and so carried on the books of said firm, and credited with rent and other income, and charged with taxes, repairs, interest and capital invested therein and other expenses incidental to carrying the same; that he never accounted for the rents, issues or profits, and demanding that the premises, be declared a copartnership asset; that an accounting be had of the rents, issues ■ and profits and expenses ; that the property be sold, and that one-third of the surplus income over expenses and proceeds of sale, less tne judgment recovered by Nicholas against Purdy, be paid to the plaintiff therein; that Nicholas answered, admitting that the firm entered into a contract for the purchase of the premises, but alleging that before the time for consummation thereof Purdy sold and assigned his interest under the contract to Nicholas, who thereupon purchased and took title on his own account, paying the entire consideration individually, securing at. first part of the purchase price
This was a case in which the court might in its discretion grant
These views would lead to an affirmance, were it not for the fact that there has been no proof on the question as to the existence of other claims, and the trustee pleads that he has no knowledge on the subject. The action being a representative one, I am of the opinion, therefore, that the protection of the .rights of other creditors and of the trustee requires that there should he a reference, and notice given and opportunity afforded to other creditors to become parties to the action and to present and prove their claims according to the practice prescribed in analogous cases, to the end that the judgment may be binding upon other creditors, if any there be, and may protect the trustee. (Kerr v. Blodgett, 48 N. Y. 62; Matter of Ziegler, 98 App. Div. 117; Hirshfeld v. Fitzgerald, 157 N. Y. 166, 180; Wilder v. Keeler, 3 Paige, 164.) The findings are sufficient with respect to the plaintiff’s rights, and as a basis for an interlocutory judgment for an accounting by the trustee, and appointing a referee to advertise for, and take and report proof of claims of other creditors.
It follows, therefore, that the judgment should he modified, with costs in this court to all parties appearing separately, payable out of the trust property, by making it an interlocutory judgment authorizing other creditors to become parties and prove their claims according to the usual practice in analogous cases, and appointing a referee to take and state the account of the trustee and to advertise for and take proof of claims and report thereon, and for final judgment upon the coming in of the referee’s report in accordance with this opinion and with the trust deed.
Patterson, P. J., Houghton and Lambert, JJ., concurred; Scott, J., concurred, except as to costs.
Judgment modified as directed in opinion, with costs to all parties separately appearing, payable out of the trust fund. Settle order on notice.