Reilly v. Krause

68 N.Y.S. 265, 57 A.D. 408

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: January 25, 1901
• Status: Published

Opinion

PATTERSON, J.

The plaintiff, trustee in bankruptcy of Rosenberg & Krause, brought this action against the bankrupts and three other persons, seeking to have set aside and declared void various assignments and transfers of goods, wares, and merchandise, book accounts, bills receivable, and other instruments for the payment of money. He claimed that some of such transfers or assignments were made to each of the defendants, other than the bankrupts, and specific allegations of the nature of the assignments and transfers, and the time at which they were made, are contained in the complaint. All of the assignments and transfers are alleged to have been fraudulent, and made as the result of a conspiracy to defraud the creditors of the bankrupts, and that the transactions' in which such assignments were made were merely sham transactions, intended to cheat and defraud the creditors of the bankrupts, and in violation of the bankruptcy law. All of the assignments and transfers were made before the adjudication in bankruptcy. After the commencement of this action, the defendant Krause (one of the bankrupts) and Friedenberg (one of the alleged fraudulent transferees) procured an ex parte order requiring the plaintiff to give security for costs, and staying all proceedings until that order was complied with, except to review or vacate it. Thereupon the plaintiff moved to vacate the order, and, that motion duly coming on to be heard, the order requiring security for costs to be given was vacated, and from that order the defendants Krause and Friedenberg now appeal. They insist that they were entitled to the order as a matter of right, under section 3268 of the Code of Civil Procedure, which, among other things, provides, in substance, that a defendant, in an action brought in a court of record, may require security for costs to be given where the plaintiff was, when the action was commenced, an assignee in bankruptcy, where the action is brought upon a cause of action arising before the adjudication in bankruptcy. The mandatory requirement of that section applies only to a case in which the cause of action sought to be enforced by a plaintiff arose prior to the adjudication in bankruptcy. This requirement does not necessarily mean only that the facts out of which an action may arise shall exist before the adjudication in bankruptcy. The words “cause of action” are sometimes obscurely used in legislation. As was remarked in Veeder v. Baker, 83 N. Y. 160: “Jurists have found much difficulty in precisely defining a cause of action. Pom. Rem. § 452. It may be said to be composed of the right of the plaintiff, and the obligation, duty, or wrong of the defendant, and these combined, it is sufficiently accurate to say, constitute the cause of action.” Before the .adjudication in bankruptcy involved in this case was made, the right ■to avoid the fraudulent transfers, and recover the value of the property thus fraudulently transferred, was certainly not in the bankrupts. Nor does it appear that there were any judgment creditors who could attack those transfers. There was therefore no cause of action,. of the character set out in the complaint in this action, inhering in anybody until after the adjudication and the appointment of the plaintiff as trustee in bankruptcy. For that reason, section 3268 would not apply.

The power to compel the plaintiff to give security for costs in this case,. we think, falls under section 3271 of the Code of Civil Procedure. The plaintiff was a trustee of an express trust, and under •such circumstances the court may, in its discretion, require the plaintiff to give security for costs. In vacating the ex parte order, the court exercised,its discretion adversely to requiring the plaintiff to give security, and, on the record before us, we are certainly not disposed to interfere with its exercise of that discretion.

The order should be affirmed, with $10 costs and disbursements. All concur.