Wheeler v. Wheedon

9 How. Pr. 293

Opinion

By the Court—C. L. Allen, Justice.

The plaintiffs in the Spelman judgment filed their complaint in the nature of a credit- or’s bill against the Wheedons and William Gearn, in Jan. 1852, to reach the effects of the Wheedons, who were the judgment debtors, and a debt supposed to be due from Gearn to them, and to reach funds received by him as a preferred creditor in an assignment before then, executed by the Wheedons, to Gearn and others who were not made parties. The plaintiffs in the two actions herein entitled on the 13th day of May, 1852, each filed complaints against the three Wheedons, and also William C. Wheedon, and others judgment debtors, and Gearn; and included in their suit Asa Ingerson and William Prior, who, with Gearn, were the assignees in the assignment alluded to; claiming not only to reach the effects of the Wheedons, as judgment debtors, but also alleging that the assignment was fraudulent and void as to creditors, and praying that it might be set aside. In point of- time, then, the plaintiffs in the Spelman suit filed their complaint first, and under ordinary circumstances would be entitled to a priority as to the equitable interests of- the judgment debtors, even' although their judgment might be junior to the judgments of the plaintiffs who filed their bills last. This, however, is not the case here. The lien is acquired by the filing of the complaint. It operates as an attachment of property which cannot be levied on at law. It gives to the vigilant creditor a right to a priority in payment, and the creditor filing a second complaint will have the second lien. (2 Hoff. Pr. 116; Corning agt. White, 2 Paige, 567.)

If an assignment is made after the commencement of the suit it gives to the assignees a right to the surplus after payment of the plaintiffs’ debt. The plaintiffs- in the Spelman suit sought to affirm the assignment, which bears date the 25th of March, 1850, and is executed by Royal C. Wheedon and James W. Wheedon; =as co-partners, to Prior, Ingerson, and Gearn, and assigns and conveys real as well as personal estate. It creates Gearn the principal preferred creditor and places him in the first class, and also prefers Coggshall Wheedon, for certain amounts, and places him among others in the second class. The plaintiffs complaint sought to reach; among other things, Coggshall Wheeddn’s preferred interest in the assignment. The co-assignees of Gearn were not made parties to that suit.

If the assignment was a valid one, it passed all the property of the assignors, subject to the liens on the real estate acquired by the several judgments previous to its execution, to be distributed according to its directions. Having been attacked, however, in the Wheeler and Dunning suits, a trial was had before a referee, who has decided it to be fraudulent and void as against the creditors of the assignors ; and Judge Bockes was duly appointed receiver in those two suits. The assignment being set aside, so far as the real estate is concerned, the creditors would perhaps be placed upon their original footing, and the oldest judgment would be entitled to have the preference, (4 Paige, 42,) unless the oldest had dispensed with their liens by affirming, or agreeing to affirm, the assignment, their judgment having been recovered after its execution and delivery.

The receiver in the Spelman suit was appointed in March, 1852, and having removed to the state of Illinois, the petitioner was appointed in his place and duly qualified. When his appointment was completed, the whole of the equitable interests and effects of the defendants in that suit was vested in him, subject to the order, without an assignment; and so far as the personal property was concerned, he could have maintained an action for the property belonging to them, without showing an assignment. Wilson agt. Allen, (6 Barb. 542.) And if he is entitled by priority, or if thé plaintiffs in the Spelman judgment are entitled by priority, to have their debt first paid out of the funds in the hands of Judge Bockes, who was afterward appointed receiver in the other suits, he can apply by proper petition to the court for an order for that purpose, without the necessity and expense of being brought in as a party to those suits, and interposing a defence there. The decrees in these suits require Bockes to pay according to the rights and priorities of all creditors. The words are, “that he will pay-and satisfy the Wheeler and Dunning demands,” subject to “ the equitable rights of the creditors of said Royal and James Wheedon, who have commenced creditor’s suits.” This view would dispose of the present motion, leaving the petitioner to make the proper application to the court; but the petitioner asks for general relief, and perhaps a further consideration of the questions presented may save the necessity of another motion. What defence then I ask would the petitioner be entitled to, or does he seek to set up there, which the assignees have not already made, and which has been overruled1? I do not understand that it was necessary for Wheeler and Dunning to have made the plaintiffs in the Spelman suit parties to their suit, where they claimed in hostility to the assignment. A defence by the assignees in such a case is a defence by the cestui que trust.

In Rogers agt. Rogers, (3 Paige, 379,) the chancellor said, “ as a general rule, the cestui que trust, as well as the trustee, must be parties, especially where the object is to enforce a claim consistent with the validity of the trust; but where the complainant claims in opposition to the assignment or deed of trust, and seeks to set the same aside on the ground that it is fraudulent and void, he is at liberty to proceed against the fraudulent assignee or trustee, who is the holder of the legal estate in the property without joining the cestui que trust,” (and see 4 Paige, 23.)

In Russell agt. Losher, (4 Barb. 232,) these cases were cited and approved, and the court said that where a defence was interposed by the assignees, it was a defence by all the creditors, whether parties or not, who are to be regarded as represented by their trustees, and in privity with them. They are only bound, however, by the bona fide acts of the assignees; and a creditor not made a party, may be allowed to impeach a decree if he offers to prove and can prove that it was fraudulently obtained. But unless he can show that he is not a stranger to the decree, it may be used as evidence against him, and until he proves that it was improperly obtained, it is as conclusive upon him as upon the parties before the court when it was pronounced.

It is not pretended here but that the decree was fairly obtained, nor but that the assignees defended in good faith, and protected as far as they could the rights of all the creditors interested in the assignment. No appeal has been taken from the judgment of the referee, and by that judgment the assignment has been set aside as fraudulent and void. The only ground on which this motion is based, as I understand it is, that the plaintiffs in the Spelman judgment have prior equities to the plaintiffs in these two causes, and are entitled to be first paid out of the fund in the hands of the receiver in those suits.

What good reason, therefore, is there for opening the decree and for letting in the petitioner as receiver in the Spelman suit % Does he ask to defend on the ground that the decree was improperly obtained 1 No such pretense is set up in his petition. He does indeed proceed upon the assumption that the assignment was valid, and seeks to affirm it. This, on the part of the plaintiffs in the Spelman judgment he has a right to do, and as to affirming creditors, the assignment may be good. (5 Paige, 15; 6 id. 577; 13 Wend. 240.) But what right, as affirming creditors, have they more than the assignor himself to funds acquired under a decree pronouncing that assignment void, and directing the funds in the hands of the assignees, to the amount of $592.64, to be paid over into the hands of the plaintiffs’ receiver. True, the decree declares the assignment to be void as against the creditors of Royal and James Whee-don ; that the cases cited show that an assignment thus declared void, is not so as to creditors assenting to and affirming it by their acts or consent; they are then estopped from alleging any fraud, when, with a full knowledge of the facts, they have assented to it. In this case, the plaintiffs in the Spelman suit set up the assignment in their suit as a valid one, and seek to enforce payment of their debt out of funds secured to Coggshall Wheedon as a preferred creditor, and out of funds in part in the hands of Gearn, or paid into his hands as a preferred creditor by his co-assignees. The assignees were not made parties to the Spelman suit, nor is there any allegation or pretense that the assignment was fraudulent. True, Gearn, one of the assignees, was brought in, but not as an assignee. The claim was against him individually, to reach a fund which it was alleged he had received for the purpose of paying the Spelman debt, and which he had promised to pay on that consideration.

„ The plaintiffs in the Spelman suit by their decree acquired a. lien on the equitable interests of all and each of the defend ants in their suit. Ingerson and Prior, two of the assignees, were not made parties to it, and all the fund received by Bockes came from them. Are they, or rather is the petitioner, then, entitled to claim a fund under an assignment which they seek to affirm, placed in the hands of a receiver in those two suits by a decree declaring that assignment void 1 It appears to me, mat no such claim can be interposed. Suppose, as the petitioner seems to insist, that the assignment so far as the rights of those he represents are concerned should stand affirmed, then the assignees are bound to distribute the funds according to the directions in the assignment, and it does not appear that the plaintiffs in the Spelman suit are entitled to any priority to the fund in the hands of Bockes ; and it would belong to the assignees to distribute according to the assignment. The plaintiffs in the Spelman suit being entitled to a pro rata share with many other creditors named in the second class of the assignment, they would acquire no lien by their suit, the assignment having been made before it was commenced.

It is true, if these creditors were standing in a different relation they would probably have acquired a priority of lien, having filed their complaint in due season. But if they had sought to annul the assignment, and had not taken the proper steps to secure a priority before the plaintiffs acquired their rights by filing their complaint and obtaining their decree, I do not see why they should be entitled to come in at this stage of the proceedings and under the peculiar circumstances in this case, and claim the benefits secured by more vigilant creditors, who have incurred the risk and expense of bringing their suits to a successful termination, and thus profit by the exertions of others. Such was not the decision in Edmeston agt. Lyde, (1 Paige, 637,) nor in any other case since. The chancellor in the case in 1 Paige, said, “ it would be unjust that a creditor who has sustained all the risk and expense of bringing his suit to a successful termination should in the end be obliged to divide the avails .with those who have slept upon their rights.”

It .is true that they filed their complaint first, but it was in affirmance of the assignment. It is also true that the petitioner swears here that he knew nothing of the Wheeler and Dunning suits, until after they obtained their judgments. But it does not appear that Spelman and his co-plaintiffs were ignorant of these proceedings. The same attorney who defended against the Wheeler and Dunning suits prosecuted the Spelman suit, and it has been shown that they were parties, and defended the suits by their assignees. (4 Wend. 272 ; 4 Paige, 23; 6 id. 379.) And they do not pretend now that the decrees were fraudulently or improperly obtained.

But they seek, after having affirmed the assignment'on their part, to avail themselves, of the benefits secured by Wheeler and Dunning; that is, after having defended unsuccessfully by their assignees, in endeavoring to sustain the assignment, against the allegations of the plaintiffs in the suits which claim it to be fraudulent and void, they ask to be substituted in the place of those plaintiffs, and to receive the very fund which they have endeavored to keep from their hands, thus claiming the advantage of. the success of their adversaries. In my judgment, this would not be equity, and would not be protecting the rights of the most vigilant creditors.

The decree in the Spelman suit was, that the defendants assign to the receiver (petitioner) all their interest in the assignment, and the petitioner says the plaintiffs claimed, among other things, the rights secured to Coggshall Wheedon in the assignment as a preferred creditor. But what rights has Coggshall Wheedon as against Wheeler and Dunning, or other creditors, as to whom the assignment has been decreed to be fraudulent and void? And what rights has Gearn, as against whom the plaintiffs had not even a judgment ? Clearly none, as he cannot have acquired any as against their judgment. And what rights has he as against funds derived from Ingerson and Prior, who were not made parties to their suit ? I cannot perceive that he has any. Wheeler and Dunning obtained a priority of lien on the trust funds under a fraudulent deed of trust. (10 Paige, 9; 1 id. 637 ; 2 id. 267.) And by their decrees all other judgment creditors were bound. (4 Barb. 232; 4 Paige, 23 ; 6 How. 379.) The difficulty on the part of the petitioner lies in the fact, that the plaintiffs in the Spelman suit sought to affirm the assignment, and that they do not, therefore, stand in the same relation and are not entitled to the same priority which they would have obtained over Wheeler and Dunning by filing their complaint first, if it had been like theirs in hostility to the assignment. That having chosen to affirm the assignment, they placed themselves, so far as Wheeler and.Dunning are concerned, on a footing with the assignees, and cannot first reap the benefits to which other creditors more vigilant, and who have elected to take a more successful course, have properly secured to themselves.

Motion denied, with $10 costs.