Barton v. Hosner , 31 N.Y. Sup. Ct. 467 ( 1881 )

Hardin, J.:

Can an administrator maintain an action to set aside a fraudulent conveyance made by the intestate, when it appears there are creditors and no personal estate wherewith to satisfy them, the debts represented by the administrators, and held by the creditors, having been in existence at the time of the fraudulent conveyance, is the question involved here and presented by this appeal. The question seems to have been considered in Livingston v. Livingston (3 Johns. Chy, 148) and resolved adverse to the administrator; also Loomis v. Tifft (16 Barb., 541). Judge AlleN, in that case, said that “the administrator cannot impeach the transfer of his intestate, except in cases allowed by law.” That case was decided in 1853, before the passage of the statute of 1858, upon which the plaintiffs rest their right to maintain this action. It has also been held by us in Richardson v. Root (19 Hun, 413), that a surrogate has no jurisdiction to determine the validity of any such transfer. We find that in 1854 it was held by the Court of Appeals, in Bate v. Graham (1 Kernan, 237), that it was the right and duty of an administrator of a deceased debtor, whose estate is insolvent, to impeach a sale of personal property, made by the deceased with intent to defraud creditors, and recover the same from the fraudulent vendee. And it was there held that ordinarily the creditor cannot maintain such an action, but when the administrator colludes with the fraudulent vendee and refuses to take proceedings to impeach his title and reach the property in his hands a creditor may maintain an action against him and the administrator for such purpose. This doctrine was approved in Sharpe v. Freeman (45 N. Y., 802); Phelps v. Platt (50 Barb., 430). We are brought, therefore, to inquire whether chapter 314 of the Laws of 1858, authorizes such an action as this one. We find no reported case adjudging the right of an administrator to maintain such an action. But we find the statute was considered in Osgood, Receiver, v. Laytin et al. (48 Barb., 463; S. C. affirmed, 5 Abbott [N. S.], 9.) Judge Lstgeaham says in that case, the act of 1858 “ authorizes receivers to treat as void all acts done in fraud, and makes the parties liable to the receivers for the same.”

Judge GeovbR in the same case (in Court of Appeals) says in respect to the act of 1858, “that the receiver of an insolvent corporation may for the benefit of creditors treat as void, and resist all acts done, transfers and agreements made in fraud of the rights of any creditor.”

The statute is, viz.: Section 1. That any executor, administrator, receiver, assignee or other trustee of an estate, or the property and effects of an insolvent estate, corporation, association, partnership or individual, may for the benefit of creditors or others interested in the estate or property so held in trust, disaffirm, treat as void, and resist all acts done, transfers and agreements made in fraud of the rights of any creditor, including themselves and others interested in any estate or property held by, or of right belonging to any such trustee or estate. Section 2. That every person who shall in fraud of the rights of creditors and others, have received, taken, or in any manner interfered with the estate, property or effects of any deceased person or insolvent corporation, association, partnership ovindwidual, shall be liable in the proper action to the executors, administrators, receivers or other trustees of such estate or property for the same, or the value of any property or effects so received or taken, and for all damages caused by such acts to any such trust estate.

The language of the second section seems to impose liability upon any person who shall, in fraud of the rights of creditors of “ the estate, property or effects of any deceased person * * * or insolvent individual,” have received or interfered with such property.

Tbe same section seems to declare that any such person “ shall be liable in the proper action to the executors, administrators, receivers or other trustees of such estate or property for the same, or the value of any property or effects so received or taken.” If the whole value of the property or effects is needed to satisfy creditors, then that may be reached by a recovery of the specific property by removal of the fraudulent obstructions or by a sale thereof, according to the general rules applicable in actions of equity, if only a portion thereof is needed to satisfy the demands of creditors, that would be the measure of the recovery.

If the property has passed from the hands of the fraudulent grantee or transferee to a bona fide purchaser, then a recovery in damages seems to be provided for.

Such an action in the name of an administrator, as the nature of the case requires, enures to the benefit of all creditors of a deceased person who suffer by the fraud. If brought by the administrator it avoids a multiplicity of actions in cases where the creditors are numerous; it accomplishes a fro rata distribution of the debtor’s estate when the sanie is insufficient to pay in full. It thus harmonizes results with general provisions made by law in respect to the distribution of debtors’ estates.

Osgood v. Laytin (5 Abbott [N. S.], 10), Barclay v. Quicksilver Mining Co. (6 Lansing, 31), McLean's Surrogate's Court (p. 414), Henderson v. Brooks (3 Thompson and Cook, 447), contain nothing in conflict with the views above expressed. The learned judge who delivered the opinion of the court in that case did not refer to, nor does it appear that his attention was called to the statute of 1858. He, however, observed, viz.: “ But the executor may doubtless trace the moneys of Erwin into the hands of Brooks, and if transferred to him in fraud of creditors, may recover them for the benefit of the creditors of the estate. I apprehend only so much could be recovered as would be necessary to pay the debts of the deceased.” Doubtless these observations were made in reference to the rule laid down in Bate v. Graham (supra), and were not based upon any consideration of the act of 1858.

We conclude that the Special Term fell into an error in holding that the plaintiffs “are not, in the capacity of administrators of the goods, chattels and effects and .credits of Nicholas Hosner, deceased,” entitled to any relief or recovery in this action upon the facts appearing at the trial.

It is not useful to determine upon this appeal whether the relief should he a removal of the fraudulent obstruction, or a recovery in damages. The doctrine of Allen, J., in Southard v. Benner (72 N. Y., 427), supports the right of the administrator to recover. It is there said that the statute of 1858 {supra), “ gave a new remedy in' favor of creditors at large, by giving to an assignee or trustee for their benefit a statutory right to property conveyed in fraud of creditors, and this statutory right took the place of the specific lien of individual creditors, required by law as a condition of their right to contest the validity of the transfers.”

It supercedes the necessity of a judgment and execution returned unsatisfied, as in case of a suit by a creditor. (Allyn v. Thurston, 53 N. Y., 622). True, in that case, the suit was by an assignee in bankruptcy, and it is declared by statute that such assignment in express terms vests the assignee with all property conveyed or transferred in fraud of creditors. But there, as here in the case of an administrator, the creditors defrauded are represented, and through the instrumentality of their representation are seeking redress for the wrong done them by the fraud complained of.

We are referred to Estes v. Wilcox (67 N. Y., 264), where the general rule in respect to the recovery of a judgment and return of an execution, as a condition precedent to an action by a creditor, is carefully laid down in the opinion of ANdeews, J. The statute of 1858 was not considered in that case, and the opinion has no expression applicable to the question before us.

Nor do the conclusions reached in Chillingworth v. Freeman (67 Barb., 379) conflict, as in that case the question was not raised which was considered in 67 New York (supra.)

In Evans v. Hill (18 Hun, 464) and Genesee River Nat. Bank v. Mead (18 Hun, 303) the general-rule that a simple contract creditor cannot maintain an action to set aside fraudulent conveyances was reasserted, following 67 New York (supra), Adee v. Bigler (81 N Y., 349.)

No allusion was made to the statute now brought in review.

If the views already stated are adopted, it follows that the judgment should be reversed and a new trial ordered, with cost of the appeal to abide the final award of costs.

Judgment reversed and a new trial ordered, with costs of appeal to abide the final award of costs.

Talcott, P. J"., and Smith, J., concurred.

Ordered accordingly.