Williams v. Brown

4 Johns. Ch. 682 | New York Court of Chancery | 1820

The Chancellor.

The' plaintiff files his bill as a simple contract creditor of the Genesee Manufacturing Com- ■ 2any, to question the validity of the judgment confessed by the company to the defendant Huntington, and the sale of the personal estate under that judgment; to stay the suit of Francis Brown if Co. against the company, and to stay the company from confessing anyjudgment to Francis Brown & Co. and that his debt may be decreed to be paid» This case falls within the decision just made in the suit of Brinkerhoff v. Brown, inasmuch as the plaintiff had not obtained judgment and execution at law, before he applied to this Court to assist him in that suit. It does, indeed, appear in proof, that since issue has been joined in the cause, the plaintiff, who continued the prosecution of his suit at law pending this bill, has obtained judgment upon one of his promissory notes. But if the judgment had been obtained in season before filing his bill, he would not have been in a condition to pursue the personal property which had been purchased in by two of the defendants who were trustees, upon the execution under Huntington’s judgment, without showing that he had also taken out execution, and endeavoured to satisfy his debt under it. This point was so fully discussed in the case of Brinkerhoff v. Brown, that it is sufficient to refer to that decision. And if the plaintiff was now in a condition (and he is not, for the cause is to be determined upon the rights of the parties as they stood, if not before, at least, when issue was joined) to question the validity of the judgment confessed in favour of Huntington, I should say he has entirely failed to impeach it. It was given for a debt justly due, founded upon a sale of cotton, for the use of the company, and which was purchased [by one of. the trustees of the company, who was specially authorized to buy for the company, and under a promise by the trustees to be responsible, as trustees, as well as in their individual capacities. It is impossible to imagine a debt more justly due from the company; and they had a right to give a preference and to confess judgment to such a creditor. If the execution under that judgment was abused by the trustees in the sale and purchase by them of the corporate property, they .are responsible for that abuse, not the creditor who had no knowledge of it. Such conduct had no retrospective effect upon the validity of the judgment; and Huntington was clearly entitled to retain the proceeds of the execution which has been paid to him.

Courts of equity, as well as Courts of law, allow a debt- or to give a preference to one creditor over another. In Small v. Oudley, (2 P. Wms. 427.) a debtor in insolvent circumstances, assigned personal property to a particular creditor to secure his debt; and this was done without his privity,;or knowledge; but as it was for a just debt, the Master of the Rolls gave effect to the assignment. Other cases to the same point were referred to in Hendricks v. Robinson ; (2 Johns: Ch. Rep. 308.) and unless we were to overturn a series of authorities, we could not question the right of the debtor to confess a judgment in favour of a particular creditor, for an honest debt then due, and that such judgment will hold its priority. We have, indeed, often occasion to observe, with regret, that the race of legal diligence between creditors, and the right of the debtor to pay, or secure one creditor in preference to another, gives occasion to the most unequal distribution of an insolvent’s estate ; but in cases not provided for by statute, the proceeding cannot ordinarily be controlled. This Court does secure ■ an equitable distribution of the real and personal assets of the deceased debtor, upon the terms, and under the limitations explained at large in the late case of Thompson v. Brown and others.^* But the doctrine in that case does not apply to the estates of debtors in full life, for there is no equitable trust created and attached to the distribution of the effects in the latter case.

There are items that went to constitute a considerable part of the judgment confessed by the trustees in favour of Francis Brown Sf Company, that may well give ground for discussion, at the instance of creditors; and if the plaintiff had come here as a judgment creditor, he would have been entitled to have opened an inquiry into the consideration of that judgment. But I cannot admit him to that inquiry upon a bill filed by him as a simple contract debtor, merely because he puts in, as an exhibit, in the mass of proof, the record of a judgment at law obtained since the pleadings were closed. The cause must be decided upon the allegations in the pleadings, and the proofs in relation to them. Whether the prior, and still unsatisfied judgment of Huntington, and (if we may allude to a fact in the preceding cause) the prior judgment of Brinkerhoff, would render such an inquiry expedient on the part of this plaintiff, it is not for me to say. He was premature with his bill in, this suit, for such a purpose, and for the reason assigned in Wiggins v. Armstrong. (2 Johns. Ch. Rep. 144.)

All I can say is, that when a plaintiff shall appear with a proper title to such relief, I should be strongly inclined, upon a case like this, to institute an inquiry, by reference, into the charges constituting the consideration of the judgment confessed by the company to F. Brown and others; and also to give to the execution creditor who might apply, a remedy against the personal property purchased in by the trustees, by allowing it to be redeemed, and by having it re-sold for the benefit of such creditor, as to any surplus price beyond what the trustees bid and paid.

I shall, therefore, dismiss this bill as against the defendant Huntington, with costs, but without costs, and without prejudice, as against the other defendants.

Decree accordingly.^(a)

* Ante, p. 619.

(a) Vide Brinkerhoff v. Brown, ante, p. 671. and M‘Dermutt v. Strong, post.