Wilder v. Fondey

| N.Y. Sup. Ct. | Aug 15, 1826

Curia, per

Savage, Ch. Justice.

It is contended that the judge erred in stating to the jury, that the defendants could commit a fraud upon the creditors of S. Fondey, although their judgment was legal ; and that the statute is applicable to those bonds, judgments, &c. only, which were fraudulent in their original concoction.

I cannot find any adjudged case in this court, where the subject in question has been considered or decided. The English statute of 13 Eliz. ch. 5, is substantially like ours. That act was passed for the avoiding of feigned, covinous, and fraudulent feoffments, gifts, grants, alienations, conveyances, bonds, suits, judgments and executions, devised to the intent to hinder, delay or defraud creditors and others of their just and lawful actions ; and enacts that all and every feoffment, &e. and every bond, suit, judgment and execution, for any intent or purpose before declared, shall be utterly void. It also, like our statute, gives an action qui tam. The same principles must, of course, be applicable to both statutes.

The case of Holbird v. Anderson, (5 T. R. 235,) was not an action for a penalty, but it involved the inquiry as to what acts are void as being fraudulent within the 13 Eliz. The facts were, that one Shepherd had a judgment against Charter, who was also indebted to Holbird, the plaintiff. Charter, knowing that execution was about to issue on Shepherd’s judgment, confessed a judgment to the plaintiff, on which execution was delivered to the sheriff, two hours before Shepherd's. The sheriff levied upon Shepherd's .execution, and returned the plaintiff’s nulla bona ; upon which he brought an action for a false return. It was contended for the defendant, that the warrant of attorney to confess judgment was void by the statute ; being with intent to hinder or delay Shepherd's execution. Lord Kenyon said, there was no fraud in the case. The plaintiff was preferred by his debtor, not to benefit the latter, but to secure the payment of a just debt, in which he could see no illegality or injustice. The warrant of attorney, he adds, was given upon good consideration ; and the words bona fide, in the act, only apply to cases where possession is not delivered, or where it is merely colorable. Butter, J. alluded to the case of executors, who confess judgments to some creditors, after suits against them by others, and which judgments cover all the assets.

It is perfectly well settled in this state, as it is also in England, in cases not coming within the bankrupt acts of that country, that a debtor, in failing circumstances, may prefer one creditor or set of creditors; and this may bte done by assignment, judgment, or otherwise ; and such assignment or judgment is not fraudulent, unless itbeintendr ed, in whole or in part, for the future benefit of the debtor. (5 T. R. 235, 424, 530. 8 id. 528. 2 John. Ch. Rep. 306, 7. 3 id. 446, 453.) In the late case of Mackie & Cairns, (5 Cowen, 547,) in the court for the correction of errors, this doctrine was fully considered and recognized. The authorities cited from the English Term Reports and Johnson’’s Chancery Reports, also shew that a security to indemnify for future advances is valid.

If, therefore, the fact be admitted, that the bond on which the judgment of the defendants was entered, was executed as a collateral security for goods, for liabilities, and for contemplated future advances, surely it was free from any suspicion of fraud. The judgment was entered after the failure of S. Fondey was known ; and the execution was issued purposely to obtain payment in preference to other creditors. Undoubtedly it had the effect to delay or hinder the plaintiffs in the collection of their demand. Every assignment or preference given by a failing debtor, has that effect as to the creditors who are not preferred.

It then becomes necessary to enquire wdiether the issuing of an execution upon a valid judgment, done to defeat other creditors, renders the plaintiffs in the judgment liable to the penalty in the 4lh section of the statute for the prevention of frauds. The case of Meux, qui tam, v. Howell, (4 East, 1,) is full to this point. That was an action on the statute, (13 Eliz. ch. 5, s. 3,) from which our 4th section, (1 R. L. 76,) was in substance taken. Many of the expressions are precisely the same in both. The declaration charged the defendants with putting in use a fraudulent judgment against J. Norton, the plaintiffs being his creditors, contra forrnam statuti. The plaintiffs were landlords of Norton, and had distrained for rent. They had also an account against him for beer. The defendants, being also his creditors, sued him, and he was surrendered by his bail. They finally took from him a judgment for the benefit of all the creditors. Execution was issued, and Notion’s goods sold. A tender was made to the plaintiffs as for their rent; but they would not re-ceiyc it, being less than the rent distrained for. The question upon the argument was, whether the judgment against Norton was not, under these circumstances, fraudulent within the statute. Lord Ellenborough said, “ it is not every feoffment, judgment, &c. which will have the effect of delaying or hindering creditors of their debts, that is, therefore, fraudulent within the statute ; for such is the effect, fro tanto, of every assignment that can be made by any one who has creditors. Every assignment of a man’s property, however good and honest the consideration, must diminish the fund out of which satisfaction is to be made to his creditors. But the feoffment, judgment, &c. must be devised of malice, fraud, &c.” In conclusion, he said, “ unless we were to go the length of saying, that every assignment to a creditor is fraudulent as to the rest of his creditors, and prohibited to be made, this was not fraudulent. It has none of the qualities of fraud within the act, which was meant to prevent deeds, &c. fraudulent in their concoction, and not merely such as in their effect might delay or hinder other creditors.” Grose, J. remarked, if the judgment be given bona fide, and upon good consideration, it is not within the act.

In that case, it was admitted that the distress wras not affected by the execution, and Lord Ellenborough observed, that, as to the plaintiffs’ book debt, they had taken no inchoate steps to recover it. In that respect, the case now before the court, differs from Meux, q. t. v. Howell. So far, the claim of Meux was weaker than that of the present plaintiffs. But, in this very particular, the case of Holbird v. Anderson, was much stronger with the plaintiff than the present.

After a full examination of this case, I am satisfied of the correctness of the general proposition, that if a judgment, &c. be bona fide in its concoction, and upon good consideration, it is not within the act for the prevention of frauds.

We are not called upon to say what remedy the plaintiffs may have against the defendants, for the property or money in their hands belonging to S. Fondey. It is sufficient for us to say, that, in our opinion, the defendants are not liable in this action, if the judgment was bona fide, and uPon good consideration. If the facts stated in the case be undisputed ; that it was given to secure a debt due to the defendants, and to indemnify them against their advances and liabilities, the judgment was not fraudulent. There are good and legal considerations to support it.

I may be allowed to express my regret, with the late chancellor Kent, that such preferences are allowed to failing debtors ; but the law is too well settled to be altered by any thing but legislative enactment.

In my opinion it was incorrect, to leave to the jury to decide upon the intent with which the execution was issued. It must necessarily have been to delay the plaintiffs ; the property not being sufficient to pay both.

A new trial should, therefore, be granted, with costs to abide the event.

New trial granted.