Beck v. Burdett

1 Paige Ch. 305, 1829 N.Y. LEXIS 329, 1829 N.Y. Misc. LEXIS 59

• Court: New York Court of Chancery
• Decided: January 7, 1829
• Status: Published

Opinion

*The Ghaucelloe:—The defendants deny all actual fraud in relation to the assignment, and there is no evidence from which it can be inferred; therefore, the only questions of any importance in this case are as to the right of the complainant to commence proceedings here, before the execution was returned by the sheriff; and whether the assignment is void, in consequence of the reservation of the surplus to the assignor, without making any provision for the payment of the complainant’s debt.

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There are two classes of cases where a plaintiff is permitted to come into this court for relief, after he has proceeded to judgment and execution at law without obtaining satisfaction of his debt. In one case the issuing of the execution gives to the plaintiff a lien upon the property, but he is compelled to come here for the purpose of removing some obstruction, fraudulently or inequitably interposed to prevent a sale on the execution. In the other, the plaintiff comes here to obtain satisfaction of his debt out of property of the defendant, which cannot be reached by execution at law. In the latter case, his right to relief here depends upon the fact of his having exhausted his legal remedies, without being able to obtain satisfaction of his judgment. In the first case, the plaintiff may come into this court for relief, immediately after he has obtained a lien upon the property by the issuing of an execution to the sheriff of the county where the same is situated; and the obstruction being removed, he may proceed to enforce the execution by a sale of the property, although an actual levy is probably necessary to enable him to hold the property against other execution creditors on bona, fide purchasers. Angel v. Draper, (1 Vern. 399,) and Shirley v. Watts, (3 Atk. 200,) are cases of this description. In the first, a fraudulent assignment was interposed to prevent a sale of the defendant’s property on execution; and in the last case it became necessary to redeem a term for years in a leasehold property, from a lien of a prior mortgage. In both these cases the plaintiffs were allowed to come into equity for relief, before the executions were returned unsatisfied. McDermut v. Strong, (4 John. Ch. R. 687,) belongs to the other class of cases; for although an attempt was made to *levy the execution upon the defendant’s interest in the vessel assigned, it is clear he had no interest which was a proper subject of seizure and sale on the execution. The issuing of an execution, or even a formal levy, can create no lien upon a chose in action, or a mere equitable interest in personal property, which is not liable to be sold on execution. In such cases, the actual return of the execution unsatisfied, is necessary to give this court jurisdiction to decree satisfaction out of the equitable property of the defendant. Such is the construction recently adopted by the legislature in such cases. (R. S. part 3, ch. 1, tit. 2, sec. 38.) And a similar principle is adopted in that part of the Revised Statutes which enables creditors to reach the equitable interest of persons holding lands under contracts for the purchase thereof. (R. S. part 2, ch. 1, tit. 4, sec. 4.) In all these cases, where the property is not liable to an executian at law, the plaintiff obtains no lien upon the property or fund, by the issuing or return of the execution. But it is the filing of the bill in equity, after the return of the execution at law, which gives to the plaintiff a specific lien. (Per Lord Hardwicke in Edgell v. Haywood, 3 Atk. Rep. 357.)

The bill in this case contains the proper allegation that the execution had been returned unsatisfied. That fact is denied by the answer; and the evidence in the case supports that denial. The bill, therefore, was prematurely filed, and ho relief can be granted thereon, except as to the goods which remained unsold at the time the execution issued. If the assignment was fraudulent, they are hable to be seized and sold on the execution. J. Burdett has since sold those goods; and if he improperly covered them from a levy and sale by the sheriff, he must account to the plaintiff for their value. It, therefore, becomes necessary for the court to examine the other question in this cause.

If a debtor in failing circumstances makes an assignment of his property for the benefit of part of his creditors only, and the value of the property assigned is more than the parties could have reasonably supposed necessary to satisfy the claims of those creditors, fraud may be inferred from that *circumstance alone, unless a satisfactory excuse is shown for the transfer of the excess. But in this case it was, at the time of the assignment, and still is doubtful, whether the property assigned was sufficient to satisfy the claims of the creditors for whose benefit the assignment was made. Their debts were rising of $26,000, and the whole nominal amount of property and demands assigned, including $21,000 of outstanding claims, is short of $34,000. It was therefore not probable there would be any excess, after making due allowance for bad debts, and deducting the expenses of collection, and of executing the trust.

Does then a mere hypothetical reservation of the surplus, if any there should be, to the assignor, vitiate the assignment ? It certainly does not alter the legal liability of the assignee, because, without that provision, he would inequity be compelled to account for the surplus. In Wilkes & Fontaine v. Ferris, (5 John. Rep. 335,) it was settled, that am implied reservation of the residue to the assignor did not render the assignment void; and in Stevens and others v. Bell, (6 Mass. Rep. 339,) and in Passmore v. Eldridge, (12 Serg. & Rawle, 198,) although express reservations of the surplus were made to the assignors, the assignments were sustained.

The case of Mackie v. Cairns, (5 Cowen, 547,) establishes the principle that an insolvent cannot legally make a provision for himself or family, even for a limited period, out of the property which belongs to his creditors; and that such a provision) contained in a general assignment of his property, rendered the assignment void as against creditors who had not assented thereto. But on a careful review of the cases on this subject, I am satisfied that the assignment complained of in this case was a valid instrument, and that it does not come within the principle of the decision in Mackie v. Cairns.

The bill in this cause being prematurely filed, the complainant is not in this suit entitled to an account and satisfaction of his debt, out of the surplus of the assigned property, if any there should be. His bill must therefore be dismissed with costs.

It has been repeatedly held, that an assignment of part, or all the debtor’s estate, providing for only a part of the creditors, and, without making provision for the rest, directing the assignee to pay back or re-assign to the assignor the surplus remaining after satisfying the debts provided for, is fraudulent and void. Goodrich v. Downs, 6 Hill, 438; Strong v. Skinner, 4 Barb. S. C. R. 546; Lansing v. Woodworth, 1 Sanf. Ch. 43; Barny v. Griffin, 4 id. 552; S. C., 2 Comst. 365; Leitch v. Hollister, 4 id. 211. The same principle prevails in Ohio. Suydam v. Martin, Wright Ch. R. 698.