Home Bank v. J. B. Brewster & Co. , 53 N.Y.S. 867 ( 1898 )

Van Brunt, P. J.:

The defendant J. B. Brewster & Co., a domestic corporation engaged in the manufacture and sale of carriages, with its factory, warerooms and offices in the city of New York, and having on hand a large quantity of carriages, machinery and other personal property capable of sale and levy under execution, made a general assignment for the benefit of creditors to the defendant John A. Garver on 'October 11, 1895, and immediately prior to said assignment transferred considerable of its property to the other defendants herein. The plaintiffs brought actions upon claims which they had against the corporation of J. B. Brewster & Co., obtained judgments and issued executions thereon to the sheriff of the city and county of New York. The sheriff attempted to make levy under said executions upon the properties above mentioned, but was unable to do so on account .of the transfers, and general assignment heretofore referred to. The plaintiffs then, as judgment creditors, on or about the 18th of Hovember, 1895, brought actions in aid of their outstanding executions to set aside said transfers by the corporation of J. B. Brewster & Co. as contrary to statute, fraudulent, and made with- intent to hinder, delay and defraud creditors, in order that the plaintiffs could then proceed to levy their executions upon the property, and sell and apply the same for the satisfaction of their judgments.

On the comnrencement of these actions motions were made for the appointment' of a temporary receiver, which motions, were granted and a temporary receiver was appointed, who duly qualified and took possession of the property then in the hands of the assignee, consisting, of a small deposit in a trust company, and certain property consisting of carriages, lumber and other raw materials used in the manufacture of carriages,, all of which was subject to levy and sale under execution. The most of this property was sold by the receiver, with the consent and under the direction of the plaintiffs in these actions, and the receiver received the proceeds of such sale.

Among the assets of the corporation of J. B. Brewster & Co. was a policy of insurance upon the life of J. B. Brewster for $50,000, payable to J. B. Brewster & Co.,, their successors or assigns. . On the 7th of June, 1895, J. B. Brewster & Co. had obtained thereon a loan for one year of $16,000 at six per cent interest from the American Deposit and Loan' Company, just prior to the general assignment, J. B. Brewster & Co. made an assignment of the said policy to the defendant Cone, subject to the said loan. At the time of the general assignment and the issue of the plaintiffs’ executions, the said policy was held by the American Deposit and Loan Company as collateral security. After the receiver had been appointed the said loan' became due and was demanded, and upon a petition made by the temporary receiver and the defendant Grarver, assignee ' for the defendant J. B. Brewster & Co., an order of this court was obtained and entered herein -on the '8th of July, 1896, directing the said temporary receiver, from and out of the. moneys in his hands as such receiver, to pay to the said American Deposit and Loan Company the sum of $5,000, and that they, the said temporary receiver and John A. Garver, should hold the said policy pending the determination of the actions. Pursuant to said, order the said temporary receiver paid to said deposit company the sum of $5,000, and Garver also paid from money in his hands, as assignee, the sum of $12,048, and the policy was thereupon handed over and delivered to the said temporary receiver.

The defendants in the action to set aside the various transfers having answered denying the fraud, the actions came on for trial at Special Term and resulted in a judgment in favor of the plaintiffs, and the court appointed the temporary receiver as permanent receiver. The temporary receiver thereupon duly rendered his account to the court, crediting himself with the payment of said sum of $5,000 to the American Deposit and Loan Company. The account was duly allowed and the temporary receiver was thereafter discharged, and the property in his hands as such was delivered to the permanent receiver, who subsequently advanced the sum of $1,872.25 as a premium, in order .to preserve and keep said policy alive, and the assignee, Garver, also advanced, for a like purpose, the sum of $3,662.76. The defendants appealed from the judgment; and all that part of the judgment whereby the court attempted to appoint a receiver was reversed, the court- holding that, in this form of action, all that the plaintiffs were entitled to was a levy under their executions upon the property upon which they were liens, unobstructed by the fraudulent transfers, and that, as to all other parties and all other property, the transfers and assignment were valid and could not be interfered with.

The receivership having thus been terminated by the decree of the Appellate Division, the permanent receiver presented his account and moved the court for his discharge, and, under said judgments as amended, to pay and deliver over the money and property in his hands to the sheriff. An order of reference was made to take and state the account of the receiver, and to ascertain and report as to the disposition of the assets, money and property in the custody of the receiver, and the nature and amount of any and all liens thereon, and'the extent and proportion to which said assets, money and property were liable and applicable to the satisfaction and discharge of such liens. On the accounting it was admitted that the receiver had received the funds and property as set forth in his account, and also had paid out the moneys as stated in the account, and for the purposes as stated in the account. There was no dispute over the accounts, the only question being as to the disposition of the money and property in' the hands of the receiver. The referee reported that the plaintiffs had no lien on the moneys in the hands of the receiver, or upon the life insurance policy in his hands, for the $6,272.25 paid thereon, and directed that the receiver should deliver over to the defendant Garver, as assignee, all the property in his hands. No exceptions were'filed to the report by or on behalf of any' defendant, and the appellant Garver moved to confirm the report. The court thereupon made an order that the money be paid over to the sheriff ; that the property be delivered to the sheriff, and that the assignee should repay the $6,272.25 advanced for and on account of the life insurance policy. From these portions of the said order this appeal is taken.

The court, upon the appeal from the judgment appointing the ’ receiver, virtually held that in this form of action interference with the manual possession of the transferred property by order of the court was improper and unauthorized; that the only judgment that the scope of the action justified was the removal of the incumbrances which prevented the sheriff from making an actual levy upon the property upon which the executions issued to him were liens. The court thereupon, while affirming the judgment so far as it declared the transfers of these properties to be fraudulent, reversed so much • of the judgment as attempted to take such property into the custody' of. the court; and struck from the judgment all provisions in ■ regard to the receivership, This, left the plaintiffs to whatever relief they could obtain by means of their executions. The sheriff, if the executions had not become dormant, could go on and levy upon whatever property there might be subject to levy and realize thereon and make his executions if there was sufficient property, This was all that could be done. The court having by its order improperly interfered with the possession of- the property, it necessarily fell back into the custody from which it had been taken, subject to the right of the sheriff to levy upon it, such right being unaffected by the transfers which had been declared to be fraudulent. The persons entitled to the possession of that property had the right to raise any question'as to the regularity of those executions and to the.regularity of such a levy as they might be advised; and this court could not prejudge those questions by directing the delivery of the property over to the sheriff, upon which he had never made a levy.

It is to be observed that if the character of this property has been changed, it is expressly stipulated that it was done by the consent and under the direction of the plaintiffs. There was no provision or consent that these moneys should be held subject to the same conditions as the property, the proceeds of sale of which they were. All that the sheriff can do under his executions, if they still have validity, is to levy, take into his possession the leviable property, and sell and realize upon the same for the benefit of the said executions. The action which resulted in the judgment in which the receiver was appointed was not a creditor’s action, after return of execution unsatisfied, for general relief. It was an action brought for special relief, to set aside impediments which prevented the sheriff from levying his execution upon property which was the subject of levy. There may be a question as to whether some of this property that has been directed to be delivered over to the sheriff was ever the subject of levy, but it is not necessary to discuss such a proposition now. The court, having wrongfully taken the property out of the possession of certain parties by means of its receivership, was bound to restore it to their possession upon the .adjudication of a want of authority so to act. The sheriff then can proceed under his executions in the same manner as though no temporary receiver had ever been appointed.

We think, therefore, that the order was erroneous in directing the handing over of this money to the sheriff, and that the referee’s report should be confirmed. The order appealed from should be reversed, with ten dollars costs and disbursements, and the motion to confirm the referee’s report granted, with ten dollars costs.

Barrett, Rumsey and McLaughlin, JJ., concurred; Ingraham, J., dissented.