Spear v. . Wardell , 1 N.Y. 144 ( 1848 )

The first question is, whether the assignment which a debtor executes under the non-imprisonment law, (Stat. 1831, p. 400, § 16-17) is for the benefit of all his creditors; or whether the assigned property goes exclusively to the creditor who instituted the proceedings. The Chancellor had considered this as an open question; but as I understand the authorities, it had been settled, so far as the Supreme Court could settle it, that the property goes to the particular creditor who compelled the assignment, to the exclusion of all others, until his debt is paid. The proceeding is nothing more than a statute execution which reaches property not subject to seizure by fieri facias, and such as, through the fraud of the debtor, either has been, or is in danger of being placed beyond the reach of ordinary process. The question was considered inThe People vs. Abel, (3 Hill 109,) and though not then decided, I well recollect that there was no diversity of opinion among the Judges on the subject. And in Bartholomew vs.Betts, (4 Hill 577,) the point was necessarily decided; for if the act of 1831 is an insolvent law, its operation was suspended by the bankrupt act at the time the creditor in that case instituted proceedings to compel an assignment; and it clearly is an insolvent law, if an assignment under it is made for the benefit of all the creditors. It was therefore necessary to decide the question; and the Court held, that the act of 1831 was not an insolvent law, but only a new remedy in favor of a creditor who had commenced a suit, or recovered a judgment against the debtor. Moak vs. De Forrest, (5 Hill 605,) holds the same doctrine. And so far as I have been able to learn, the non-imprisonment law has uniformly received this construction among those who have administered it, from the time of its enactment in 1831, down to the time this case was decided in August last. I do not think it necessary to add any thing on this branch of the case further than to say, that the high respect which I always feel for the opinions of the Chancellor has induced a careful re-consideration of the question, which has resulted in confirming my former opinion.

The defendants, in the judgment were arrested on the warrant and taken before the Circuit Judge on the fifth of November; and after several adjournments, the Judge, on the 28th day of that month, decided that the allegations of the complainants were substantiated; that the defendant had rights in action and evidences of debt which they had unjustly refused to apply to the payment of the judgment, and that a commitment must issue in pursuance of the 9th section of the act. Pending the proceedings, and on the 21st day of the month, the defendants in the judgment made a voluntary assignment of all their property to the defendant Henry B. Wardell, the son of the defendant Charles Wardell, in trust, to apply the avails of the property, after satisfying the expenses of executing the trust, for the benefit of all the creditors, without any preference. The value of the property thus assigned greatly exceeded the debt of the complainants; but was not enough to pay all the creditors: and in consequence of this assignment the defendants in the judgment had no estate to insert in their inventory when they afterwards applied to the Judge for a discharge under the act, for the purpose of preventing the commitment which had previously been ordered. Now although the complainants acquired no lien upon the property by commencing proceedings under the act, they acquired the right to a preference over the other creditors, which could not be defeated by a voluntary assignment; and the transfer of the property to Henry B. Wardell was a fraud upon the law, and the complainants, which a Court of equity should not permit to succeed. (Wood vs. Bolard, 8 Paige 556, matter of Hurst, 7 Wend. 239; Hadden vs. Spader, 20 John. 554; McDermutt vs. Strong, 4 John Ch. 687.) The Chancellor would, I presume, have felt no difficulty in granting relief, if he had not come to the conclusion that the assignment under the statute was for the benefit of all the creditors.

If the complainants had obtained a lien on the property by commencing proceedings under the statute and the title had vested in Nash the statute assignee, he would then have been a necessary party to the bill. But as their was no lien, the legal title to the property passed to the defendant Henry B. Wardell under the voluntary assignment; and so long as that assignment stands, Nash has no interest which can make it necessary for him to join with the complainants in a bill for the assertion of their rights. If we should set aside the voluntary assignment, and thus subject the property to the operation of the statute assignment, then Nash might be a necessary party. But there is no occasion for setting aside the voluntary assignment. It covers a large amount of property beyond what is necessary to pay the debt of the complainants, and they are the only creditors who are entitled to a preference. The proper course, having regard to the rights and interests of all the creditors, will be, to declare that Henry B. Wardell holds the assigned property as a trustee for the complainants to the extent of their debt, and make a decree that he pay the same. In this view of the case Nash has no interest, and the objection that he should have been made a party must be overruled.

I am of opinion that the decree of the Court of Chancery should be reversed; and that a decree should be entered in favor of the complainants, as above suggested. They should also have costs in the Court of Chancery.

Decree accordingly.