Canton Brick Co. v. . Howlett , 169 N.Y. 293 ( 1901 )

The plaintiff, a judgment creditor of the firm of Homer Company, after the return of an execution unsatisfied, brought this action against the members of the firm and the defendant, Alfred A. Howlett, to have an assignment made by said firm to said Howlett of three contracts for the repaving of streets in the city of Syracuse declared fraudulent and void as against its judgment. It further asked that the defendant Howlett be restrained from the further performance of the contracts and be directed to account for all moneys received thereunder. Howlett answered denying all fraud. The assignment provided that the assignee, after reimbursing himself for all outlays made in the performance of the work, should, out of the net proceeds thereof, pay three debts from the assignors to certain corporations in which the assignee was interested, and then pay the surplus, if any, over to the assignors or into any court of competent jurisdiction. Howlett performed the work, but at the time this action was begun had received nothing from the city of Syracuse in payment therefor. Subsequently, and after giving a bond in the sum of $25,000 to keep the streets in repair during the period of ten years as required by the contract, he was paid in full. The issue of fraud was tried before the referee, who found that while the intent of the assignors was to hinder and delay their creditors, the assignee, Howlett, acted in good faith, in ignorance of such intent on the part of his assignors and for the sole purpose of securing the payment of the claims specified in the assignment. The referee, however, further found that there remained in the hands of the defendant, Howlett, out of the moneys received by him on the contract, a surplus over and above the amount necessary for the payment of his disbursements and the secured claims in excess of the sum due to the plaintiff. He directed judgment that the defendant pay the plaintiff's judgment with the costs of the action and that he credit himself with the amount of such payments as against his assignors, Homer Company. From that judgment the defendant Howlett appealed to the Appellate Division, where the decree below was affirmed by a divided court.

The plaintiff as a judgment creditor of Homer could doubtless have maintained an action to reach any surplus proceeds of the contract in the hands of Howlett, as such surplus would be an equitable asset of the firm. If such an action had been brought, the referee's decision would have been justified. But the present action was not of that character. Its object was to declare the assignment fraudulent and void, while the judgment recovered has proceeded on an affirmance of the assignment. A party must recover secundum allegata et probata, not only according to his proofs, but according to his allegations. (Stevens v. Mayor,etc., of N.Y., 84 N.Y. 296; Clark v. Post, 113 N.Y. 17.) It may be that the complaint could have been framed with a double aspect, that is to say, the plaintiff might have also asked that in case the assignment should be held valid an account be taken of the expense of the performance of the work, and that any surplus after the payment of the secured claims should be applied on his judgment. No such relief was asked for. It may also be that the referee might have granted an amendment to the complaint so as to enable the plaintiff to obtain full relief, but amendment was neither sought nor granted. The result of this course of procedure is that the appellant has been held liable for a surplus which he contends does not exist and as to the issue of the existence of which he has never had his day in court. Some evidence was taken as to the cost of the performance of the contract, but of the most general character. This evidence was admitted against the appellant's objection and exception. We think it was properly admitted, for it bore on the question of whether the assignment was fraudulent. But we look in vain through this record to find anything either in the claims of the plaintiff's counsel or the rulings of the referee that should have apprised the appellant that the existence and the amount of a surplus were being litigated. It is true that the referee might have proceeded to take the account and was not obliged to render an interlocutory judgment directing an accounting. (Russell v.McCall, 141 N.Y. 437.) But if we concede that the defendant was required to take the risk of such a course on the part of the referee, though no notice thereof had been given him, and was, therefore, bound to produce his proof as to the state of the account on the trial of the main issue, that concession does not dispose of the present case. The amount of the secured claims exceeded twelve thousand dollars. If the assignment had been declared fraudulent, the preference of these claims would have fallen. The defendant might be perfectly willing to concede that the excess of the contract price over the cost of performance was sufficient to pay the plaintiff's claim. But whether there would have been a surplus after also paying the preferred claims was a very different question. That issue has never fairly been presented to the appellant for litigation.

The judgment appealed from should be reversed and a new trial granted, costs to abide the event.

PARKER, Ch. J., GRAY and HAIGHT, JJ., concur; O'BRIEN, LANDON and WERNER, JJ., dissent.

Judgment reversed, etc.