Bennett v. McGuire , 58 Barb. 625 ( 1871 )

By the Court, Miller, P. J.

This action was brought by a judgment creditor of the defendant Hugh McGuire, to set aside an assignment of a bond and mortgage belonging to said defendant McGuire, and by him assigned to the defendant Armstrong, and by said Armstrong assigned to the wife of McGuire, who is also made a defendant. It is based upon the ground that the assignment was without consideration, and was fraudulent and void as to the plaintiff.

It is insisted by the defendants’ counsel that the action should have been brought in the name of a receiver, under section 299 of the Code, and not in the name of a judgment creditor; and that the court erred in denying the motion made for a nonsuit upon this ground. While it is not denied that a creditor may maintain such an action on the return of an execution unsatisfied, it is claimed that where a party institutes proceedings under the provisions of the Code, he is estopped from abandoning them and bringing an action individually, and can only proceed through the instrumentality of a receiver appointed under the proceedings. Conceding that this may be the case where a receiver has been actually appointed, I think that such is not the rule in all cases. The authorities hold that where it appears in proceedings supplementary to execution, that property of a judgment debtor is in the hands of a third person, who claims title, the judge cannot try the question of title summarily, but a receiver must be appointed to bring an action for that purpose. (Rodman v. Henry, 17 N. Y. 484; Teller v. Randall, 40 Barb. 242.) So also an action to recover a debt due the judgment debtor from a third person must be brought by a receiver appointed under the provisions of the Code. (Sherwood v. Buffalo R. R. Co., 12 How. Pr. 136. Edmonston v. McLoud, 19. Barb. 357. Crounse v. Whipple, 34 How. 333.) The doctrine held in these cases is not in the way of an action in the nature of a creditor’s bill for the purpose of having an assignment or other disposition of property by a judgment debtor declared fraudulent and the property applied to the satisfaction of the judgment. (See Goodyear v. Betts, 7 How. 187.) The right of a judgment creditor to maintain an action of the character of the one at bar has been repeatedly held. In Catlin v. Doughty, (12 How. 457,) it was decided that the former action by judgment credit- or’s bill is still in force, and may be resorted to after execution returned unsatisfied in whole or in part. In Gere v. Dibble, (17 How. 31,) it was held that a creditor’s suit can be maintained by judgment creditors on their own account, after a receiver has been appointed in supplementary proceedings, to set aside as fraudulent,' and declare void, a mortgage previously given by the judgment debtor, upon his real estate, &c., where the judgments were a lien prior to the appointment of a receiver. In Hammond v. The Hudson River Iron and Machine Co., (20 Barb. 378,) it was held that an action will lie to reach property and effects in the hands of parties who, it is alleged, have fraudulently received the same from the judgment debtors, and unjustly assert a claim thereto against the plaintiff’s judgment and execution. The remark of the learned judge who wrote the opinion in the last case cited—that the Code applies to those cases only where proceedings have been instituted—upon which some stress is laid, is undoubtedly true, and applies where a receiver has been appointed ; and although it has been held that a receiver can maintain an action to set aside a fraudulent assignment, (Porter v. Williams, 5 Seld. 148,) yet, as was said in Gere v. Dibble, (supra,) “ it was not decided that a judgment creditor could not, after the appointment of the receiver;” certainly not, that no action could be maintained where a receiver had not been appointed, as is the fact in the case at bar.

It is plain, I think, that the action was properly brought in the plaintiff’s name, and there is no force in the objection taken.

The court committed no error in holding that the assignments were made for the purpose of hindering, delaying and defrauding the plaintiff in the collection of his debt. It appeared that the defendants Armstrong and Bridget McGuire, the wife of the judgment debtor, received the transfers of the bond and mortgage in question upon the same day, without paying or securing, or becoming liable to pay, therefor, any consideration whatever. These were circumstances in connection with the fact that the transfer was formally passed to the wife, and that there was no proof to rebut the presumption of fraudulent intention, when the defendants had full opportunity to present it, from which a fraudulent intent might be presumed; and it might fairly be inferred by the judge, from the facts and circumstances, that Armstrong and the judgment debtor’s wife had full knowledge of the fraudulent intent to prevent the creditor from collecting his demand. (Wood v. Hunt, 38 Barb. 302. Newman v. Cordell, 43 id. 448.) It was quite evident that the bond and mortgage was a gift from the judgment debtor to his wife, after he had become insolvent, and while he had debts unpaid; and the evidence presented a question of fact as to the intent, from which only one inference could be drawn by the court. Even if it be conceded that in some eases fraud will not be inferred from the want of consideration alone, yet the question of fraudulent intent is a question of fact. (Dygert v. Remerschnider, 32 N. Y. 629.) And where there is sufficient evidence to sustain the finding, it cannot be disturbed.

I think that the court properly refused to nonsuit as to the defendant Armstrong. Armstrong took the assignment of the bond and mortgage, and thereby 'made himself a party to its fraudulent transfer. It was quite as essential to set it aside as to him as it was to annul the assignment made by him to the wife of the judgment debtor. Both the assignments were obstacles in the way of collecting the plaintiff’s demand, and all of the defendants had participated in creating them; and therefore Armstrong was properly held as a party to the action.

[Third Department, General Term, at Elmira, April 4, 1871.

It is also objected that the court erred upon the trial in admitting evidence of Hugh McGuire’s testimony taken upon his examination in proceedings supplementary to execution upon the plaintiff’s judgment.

I think the judge erred in the admission of this testimony. In Gillespie v. Walker, (56 Barb. 185,) it was held, in a case bearing a striking similarity to the one now considered, that the examination of the husband was competent evidence against the husband only, and not against the wife. The distinct objection was taken on the trial, in the case at bar, that it was inadmissible for any purpose, against Armstrong and Bridget McGuire, and the testimony admitted generally, without any restriction as to its effect. The testimony therefore may have had an effect upon the mind of the judge, as to these defendants; and where such is the case the judgment cannot stand. That such evidence is inadmissible was also held in Cuyler v. McCartney, (40 N. Y. 221.) It was not competent as declarations made in execution of a common purpose to defraud, as it was only an examination of the defendant in a legal proceeding.

The appointment of a receiver by the judge was in accordance with the settled practice in such cases, and not erroneous.

Although the case was properly tried in other respects, the admission of the improper evidence referred to was a fatal error, and the judgment must be reversed, and a new trial granted, with costs to abide the event.

Hew trial granted.

Miller, P. J., and Potter and Parker, Justices.]