« ForrigeFortsett »
fact that the affirmation of the judgment was based upon other considerations. Nevertheless, in March, 1858, in Edmonston v. McCloud, 16 N. Y. 543, when the court of appeals was first required to pass upon the question, it followed Porter v. Williams without any discussion, and without referring to Voorhees v. Seymour (which seems not to have been cited in the briefs, perhaps because then so recently announced), it apparently being assumed that the affirmance of the former case involved the adoption of all the views there expressed. It is therefore obvious that the construction placed upon the statute by an inferior court through a misapprehension, and without independent examination by the highest court, to be vested, by virtue of his appointment, with the title to property fraudulently conveyed by the judgment debtor. The court which appoints him cannot, as we have seen, put him in possession of such property. It will not authorize his meddling with it, nor protect him if he do so."
quoted, which was entirely ignored. In Oc-in principle, attention being called to the tober, 1857, the question again arose, this time before the supreme court for the fifth judicial district. Voorhees v. Seymour, 26 Barb. 569. In the first paragraph of the syllabus (one judge out of four dissenting) it was held: "A judgment creditor, by commencing supplementary proceedings against the judgment debtor under § 292 of the Code, and obtaining an order for the examination of the debtor, does not acquire a prior right to, or lien upon, the equitable assets of the debtor." The opinion presents the fullest discussion of the question under consideration to be found in any of the reports. The earlier case, so far as it bore upon this matter, is there disapproved, branded as dictum, and held to be unsound order into effect. Such orders would have had the effect to devest the debtor of his interest in the property, and to vest it in the receiver for the benefit of the plaintiff. Porter v. Williams, 5 How. Pr. 441, on Appeal, 9 N. Y. 142, 59 Am. Dec. 519. I think, too, that these proceedings might have been had, notwithstanding the failure of the judgment debtor to appear in obedience to the requirements of the order served upon him."
The court of appeals, in Becker v. Torrance, 31 N. Y. 631, expressly held that the issuance and service of an order instituting supplementary proceedings created no lien as against other creditors who, in the meantime, had levied upon property subject to execution. The court considered the amendment of 1862, which provided for vesting the title in the receiver from the time of the filing and recording of the order for his appointment, and held that this provision fixed the time the lien attached.
In Bevans v. Pierce, 1 N. Y. City Ct. Rep. 259, the service of an order for examination, with the usual injunction contained in such orders, was held to create a lien in favor of the plaintiff, which was not displaced by an order subsequently served by other plaintiffs, although their order was obtained first. The court said: "There is no lis pendens as to a supplementary order and injunction until due service is made of a copy thereof; certainly not until actual notice in some form." In this case neither the Code of Procedure nor the Code of Civil Procedure was referred to, although the decision was after the change in the Code. The case does not show how long it was pending, but the case of Voorhees v. Seymour, 26 Barb. 569, was followed.
Under these Code provisions, a receiver in supplementary proceedings, who did not bring suit to set aside a fraudulent assignment until after bankruptcy proceedings were taken, was held to have no title to the property superior to the assignee in bankruptcy. Olney v. Tanner, 10 Fed. 101. The court said: "From this examination, it seems clear that a receiver appointed in supplementary proceedings cannot be held
But some cases held that the service of the order for examination in supplementary proceedings gave the creditor a lien, as in Porter v. Williams, supra, where it was said: "The Code is silent as to the time when the judgment creditor shall be deemed to have acquired a lien upon his debtor's equitable effects, but I think the order for his examination, made under the 292d section, should be construed to give the creditor the same lien which he acquired under the former practice, by the commencement of a suit by creditor's bill."
This case was distinguished in Becker v. Torrance, supra, the court saying: when the case was before the supreme court, Judge Harris, by whom the opinion was prepared, expressed an opinion that the order for the examination of the debtor created a lien upon his property which he could not devest by the instrument executed to the assignee, even if it had been otherwise effectual; and there is an expression to the same effect in the opinion of Judge Willard when the case came here. After stating his opinion that, by the original assignment, the debtor had devested himself of all control over his property, and that he could neither revoke nor alter it, he adds: 'And certainly not to the prejudice of a creditor whose lien on the property had attached by the institution of supplementary proceedings under the Code.' But I am confident that this court did not intend to pass upon the effect of the order for the examination of the debtor; for we were all perfectly confident that the instrument by which it was intended to correct and validate the assignment was ineffectual. The case, as it was disposed of here, is more fully reported in 12 How. Pr. 107, under the name of Porter v. Clark. An opinion is there printed which does not appear in Mr. Selden's reports, in which the judgment is placed wholly on the invalid
became the settled law of the state. In view of this situation, it is probable that the question might thereafter have received further investigation upon its merits by the New York court of appeals, except for the new condition affecting the matter, arising from subsequent legislation. In fact, a doubt of the soundness of the accepted doctrine was expressed in Becker v. Torrance, 31 N. Y. 631. But in 1862 it was decided in Van Alstyne v. Cook, 25 N. Y. 489, that by the service of an order for the examination of a judgment defendant in supplementary proceedings no lien was acquired upon such personal property of the defendant as was subject to execution, the question as to the effect upon other personal property being explicitly left for future determination. In |
ity of the subsequent instrument, and on the power of a receiver after he was appointed, without any suggestion that a retrospective effect could be given to the appointment so as to create a lien from the time the first order was made."
In Voorhees v. Seymour, supra, the case of Porter v. Williams, supra, was distinguished, on the ground that the statement of Harris, J.: "But I think the order for his examination, made under the 292d section, should be construed to give the creditor the same lien which he acquired under the former practice by the commencement of a suit by creditor's bill," was only a dictum.
view of this decision, the legislature in the same year amended the statute by adding provisions giving in express terms a lien, defining its extent, and specifying the time when it should take effect. In consequence of this amendment, it became unnecessary to make any further judicial inquiry concerning the interpretation of the law as it was originally enacted.
A precedent so established has little force as an authority, and, unless justified by sound logic, it ought not to be followed. The argument offered in its support is this: The filing of a creditors' bill gave the judg ment creditor a lien upon the equitable assets of his debtor, and, inasmuch as the statutory remedy is a substitute for that in equity, the commencement of proceedings priority and a lien upon the equitable assets of his debtor. In this case the proceeding was commenced by service of the order on the debtor of the judgment debtor, and the court said that all notice of the proceedings to the judgment debtor could have been omitted. This was an action by an assignee of a claim against a third party. The defense was that such third party had been ordered in supplementary proceedings to pay the amount due the assignor to the plaintiff in supplementary proceedings. There was such doubt as to plaintiff's title that the question of priority of lien hardly entered into the case. Two of the commissioners held that plaintiff had no title to In Campbell v. Genet, 2 Hilt. 290, it was maintain this action, and four of the comsaid: "The question was not whether the missioners held that the plaintiff was not defendant received the money after the pro- a bona fide purchaser of the claim for value. ceedings were commenced, and before the This decision evidently overlooked the cases order appointing the receiver was made, but of Becker v. Torrance and Voorhees v. Seywhether the money received by the defend-mour, supra, as neither of these cases was ant, at any time before the commencement referred to in the opinion. of this action, belonged to Miss Foster at In Billings v. Stewart, 4 Dem. 265, it was the time the supplementary proceedings said: "In Lynch v. Johnson, supra, the were commenced. The view thus expressed commission of appeals held that the comon the second objection is predicated of the mencement of a proceeding under § 294 of proposition that the receiver acquires title the former Code gave a creditor an immeonly to the property belonging to the judg-diate lien, and was to be regarded as an ment debtor at the time the proceedings supplementary are commenced against him. Judge Ingraham, in Stewart v. Foster, 1 Hilt. 505, stated that proceedings supplementary were limited to reaching the defendant's property in his possession, or in the possession of others and conceded to belong to him when the order is obtained;' and this principle was also applicable to creditors' bills prior to the Code."
In Lynch v. Johnson, 48 N. Y. 27, Affirming 46 Barb. 56, it was held that proceedings under §§ 292 and 294 of the Code of Procedure were a substitute for the creditor's bill as formerly used in chancery, and that the commencement of a creditor's suit in chancery gave the creditor at once a lien upon the equitable assets of the judgment debtor. Under these sections, the service of the order took the place of the commencement of a suit under the old system, and was held to give the judgment creditor a
actual levy upon the equitable assets of the debtor.' It is clear, upon reference to the opinion of Earl, C., that he did not intend by this language to assert any broader doctrine than had already been pronounced in Storm v. Waddell, 2 Sandf. Ch. 494, and in Brown v. Nichols, 42 N. Y. 26, the two cases cited in its support."
These two latter cases were of creditors' bills.
In Deposit Nat. Bank v. Wickham, 44 How. Pr. 421, it was held that the service of an order for examination, under Code Proc. §§ 292-294, gave the judgment creditor a lien upon the property of the debtor, and such a lien was prior to that of an attorney who took a watch in payment for services to be rendered.
And in Duffy v. Dawson, 2 Misc. 401, 21 N. Y. Supp. 978, it was said that §§ 292 and 294 of the Code of Procedure are similar in all respects to §§ 2441, 2446, and 2447 of
under it should be given the same effect., filed. It has been said with much plausiThat such a lien results from the beginning bility that, in order for a creditor's bill to of a creditor's suit is well settled. 12 Cyc. give a lien, it must point out specific propLaw & Proc. p. 61. It may also be granted erty sought to be reached (12 Cyc. Law & that the statutory proceeding, although not Proc. p. 64, E); and a distinction might be a complete substitute for the equitable rem- made in this regard in the case at bar. edy in the sense of precluding resort to the But a more obvious consideration invites latter, is so nearly akin to it that it should attention. The statute, while in a sense by analogy be governed by the same rules, providing a substitute for the suit in chanexcept where a special reason to the con- cery, purports to afford a complete remedy trary exists. The reasons for the enforce- in itself. One of its provisions (§ 491, ment of the lien in the equity practice are Code) is that "the judge may also by order that the superior diligence of the creditor forbid a transfer or other disposition of who first takes steps to enforce his demand the property of the judgment debtor not out of the debtor's intangible assets should exempt by law, and any interference therebe rewarded by securing to him the fruits with." Now, this right to an order which of his own efforts, and that the doctrine of must have the effect of preserving the stalis pendens applies from the time a bill is tus of the defendant's property is not an outthe Code of Civil Procedure, and that, un- 371, it was held that an assignment by the der §§ 292 and 294, the service of the order judgment debtors to a third party in good took the place of the commencement of the faith and for value before the receiver was suit under the old system in chancery, and appointed came within the exception clause should give the creditor priority and a lien. (N. Y. Code Civ. Proc. § 2469) protecting a In Myrick v. Selden, 36 Barb. 15, the lien holder in good faith for value. It was said acquired in supplemental proceedings was that, although the assignment was made held prior to that acquired by previous suit after the service of the order in supplemenin equity by service of summons and injunc- tary proceedings, upon a third party, this tion, which created a lis pendens and a lien did not affect the rights of the assignee. on the equitable property of the defendant. The lien of the previous suit was lost by being allowed to lie dormant for nearly eight years.
c. Bona fide purchasers.
The lien does not attach in supplementary proceedings where the party acquiring property brings himself within the exceptional clause of § 2469, N. Y. Code Civ. Proc., protecting purchasers in good faith.
So, under the proviso of that section, that "this section does not affect the title of a purchaser in good faith, without notice, and for a valuable consideration," it was held in Re Clover, 154 N. Y. 443, 48 N. E. 892, that the purchaser of an overdue note from the debtor in another county, a few days after the order forbidding the transfer in supplementary proceedings was served on the debtor and the obligors of the note and their assignees for creditors, had a title superior to that of the receiver.
So it was held in Droege v. Baxter, 69 App. Div. 58, 74 N. Y. Supp. 585, Affirmed in 171 N. Y. 654, 63 N. E. 1116, that a receiver in supplementary proceedings could not recover from a junior judgment creditor the proceeds of an execution sale which took place prior to the appointment of a receiver, although the order in supplementary proceedings was served upon the judgment debtor prior to the levy and sale, but the judgment creditor had no knowledge of the supplementary proceedings. It was held that they were protected by the provisions of $2469, referring to the payment of a debt in good faith without notice.
In Dienst v. Gustaveson, 85 N. Y. Supp.
A supplementary proceeding subsequent to an assignment cannot affect the right of the assignee. Watrous v. Lathrop, 4 Sandf. 700. This was a proceeding under the Code of Procedure, and the court said that the plaintiff might have levied his execution notwithstanding the assignment, but, having had his execution returned unsatisfied, the lien was lost, and the execution could not be made to affect a lien by relation.
The title of a bona fide assignee of a judgment debtor's property was held not affected by an order under § 294 of the Code of Procedure, made after the assignment, where the assignee had no notice of the proceedings. Gibson v. Haggerty, 15 Abb.
d. Real estate.
Under Code Proc. §§ 292, 298, amended in 1863, providing that, when a receiver is appointed for a judgment debtor, the order shall be filed in the county where the judg ment roll is filed, and a certified copy shall be filed with the clerk of the county in which the real estate is situated and also where the judgment debtor resides, it was held that a receiver in supplementary proceedings could not maintain an action of partition where there was no allegation that the judgment roll was filed in the county where the order appointing was filed, or that the judgment debtor resided in that county. The complaint was also defective in not alleging that this real estate was owned by the debtor at the time of the commencement of the supplementary proceedings. Dubois v. Cassidy, 75 N. Y. 298.
In People ex rel. Williams v. Hulbert, 5
side matter. To avail himself of it, the plaintiff need not resort to equity, or begin any new action. It is afforded by a part of the very statute under which he is proceeding. He may procure an order for the examination of the defendant with or without the further order forbidding the transfer of any property. If the mere order for such examination operates as a lien on the debtor's assets, it is difficult to see the purpose of the provision for an order against a disposition of his property, or the effect of such an order when made. In Union Bank v. Union Bank, 6 Ohio St. 254 (citing with approval Porter v. Williams, supra), it is said that, where a third person alleged to be indebted to the judgment defendant is served with notice to apHow. Pr. 446, it was held that the Code makes no provision for an assignment, and that, consequently, the judge has no authority to order it; but that an assignment was wholly unnecessary in order to vest the necessary title in the receiver for moneys due. In regard to real estate, it was different.
The court said: "Doubtless the supreme court, by virtue of its original and inherent power and authority, and especially since the accession of equity powers and jurisdiction, may order and compel an assignment without any statutory provisions. Interior officers and tribunals must, how ever, show a warrant in the statute for every step they take affecting the rights of parties before them, or the proceeding will be unauthorized and void. This difficulty is in no wise removed or avoided by the liberal rule of interpretation provided for by 467." This section provides that the rule that statutes in derogation of common law are to be strictly construed does not apply to this act.
In Clan Renald v. Wyckoff, 52 How. Pr. 509, which was a motion to compel the judg ment debtor to transfer letters patent, it was said that in People ex rel. Williams v. Hulburt, supra, it was held that an assignment of personal property could not be compelled; but that in Porter v. Williams, 9 N. Y. 142, 59 Am. Dec. 519, it was held that since the Code the appointment of a receiver had a like effect upon the debtor's real estate and upon his personal estate, and that the whole property vests in the receiver as soon as his appointment is completed; and, since the amendment of § 298 of the Code, in 1863, it is only necessary that a certified copy of the order of appointment be filed in the county where the real estate is situated.
Where a receiver was first appointed in supplementary proceedings, and a judgment creditor subsequently brought suit to set aside a conveyance, and the same receiver was appointed, and the conveyance was set aside, it was held that the judgment prior in time had a prior lien. Phillips v. O'Connor, 1 N. Y. City Ct. Rep. 372. The court said: "The receiver, in his dual capacity,
pear and answer as to such matter, no order forbidding a transfer need be made in order to bind any property in the hands of such third person, who is in effect a garnishee. The conclusion announced was mere dictum, for the court held that no valid notice of any kind had been served. But it would not be difficult to make a distinction between that case and the one at bar. Such a distinction was recognized by the Federal circuit court for the southern district of Ohio in Gregory v. Hewson, 1 Bond, 277, Fed. Cas. No. 5,801, where it is said: "The supreme court of Ohio, in the case of Union Bank v. Union Bank, 6 Ohio St. 256, hold that where, at the instance of a judgment creditor, a third person had been cited to answer as to property and effects held by represented these two equities, and, although put in possession of the fruits of his receivership by the one last in point of time, their distribution must be governed by the maxim, Qui prior est tempore, potior est jure."
After the return of an execution unsatisfied, a receiver was appointed in supplementary proceedings, and a suit was brought to have the judgment declared a lien upon a lot conveyed to the debtor's wife in fraud of creditors. It was held that by the commencement of this action the receiver acquired a lien upon any equitable estate of the debtor in the land in question. Kennedy v. McGuire, 15 Hun, 70.
As between a lien obtained by a judgment creditor in a suit to set aside a conveyance made by the debtor, and a suit by another party in supplementary proceedings, where the same receiver was appointed, it was held that the commencement of the supplementary proceedings did not create any lien on the assigned estate. Field v. Sands, 8 Bosw. 685.
III. Other states.
In Adams v. Hackett, 7 Cal. 187, under Cal. practice act, §§ 238-241, providing for the examination of a defendant after an execution has been turned unsatisfied on an examination before a referee, and compelling the attendance of witnesses, and directing the application of any property, Burnett, J., held that when the referee had examined the debtor, and made an order for the application of a judgment to the satisfaction of plaintiff's claim, then the property was in the custody of that court; and plaintiffs obtained a lien upon the same to the extent of their judgment. Terry, J., dissented on the ground that the fund was in the custody of the law, there already being a receiver of the firm, who was entitled to this judg ment. Murray, Ch. J., differed from both of these judges on the ground that a judgment was not property.
him belonging to the judgment debtor, the notice operated as lis pendens, and that the party, from the time of the service of the notice, could make no disposition of the property or effects in his hands. But clearly this principle does not apply to the case of a judgment debtor as to whom there has been a mere order for his examination, without an order restraining him from disposing of his property." Cases may be imagined in which the judgment creditor, while desirous of investigating his debtor's real condition, might not wish to tie his hands by impressing a lien upon his assets, and in which the interests of both might be jeopardized if such a result were the necessary consequence of taking the first step toward such an inquiry. Inasmuch as the
The institution of proceedings is held to create a lien in Indiana. In some cases the lien is held to attach from the time of service of process on the debtor.
So, under 2 Ind. Rev. Stat. p. 152, providing for proceedings supplementary to execution, it was held that plaintiffs, by instituting their proceedings to reach funds in the hands of a third party, acquired a lien, and were entitled to have their judgment satisfied first. Butler v. Jaffrey, 12 Ind.
The same rule was followed in Graydon v. Barlow, 15 Ind. 197, the court saying: "It is not there expressly decided at what precise stage of the proceedings such lien will attach, but merely that such proceedings do create a lien; and that the recovery of a judgment, and taking out an execution thereon, do not create a lien upon a fund similar to that here attempted to be made subject to the payment of this debt. Without deciding at what point of the proceedings a lien will attach, we are of opinion that it had so far progressed in the case at bar as to create a lien, which the defendants could not devest by making an assignment."
Creditors who instituted supplementary proceedings were held to acquire a lien upon a claim sought to be reached from the time of the service of process on the defendant; and a subsequent assignment did not affect that lien. Cооке v. Ross, 22 Ind. 157. The proceedings in this case were under 2 Ind. Rev. Stat. p. 260.
But where a third party, owing a judgment debtor, was made a party in supplementary proceedings, and process was served on him, but was not served on the judgment debtor until after an assignment by him in bankruptcy, it was held that no lien attached by virtue of the supplementary proceedings. Hoadley v. Caywood, 40 Ind. 239.
statute by specific provision affords ample means by which the judgment plaintiff may prevent the transfer by the defendant of any property pending an inquiry into his condition, we see no occasion for holding that such a result will follow where this provision is not invoked. Since in this case no order was made or asked against the disposition by defendant of the draft or other property in her possession, we conclude that, notwithstanding the service upon her of the notice requiring her to appear and answer as to her property, she was at liberty to purchase and pay for a homestead, which could not be sold for the satisfaction of the judgment.
A further argument is made that, in view of all the circumstances of the case, irrewho first pursued the property under supplementary proceedings had a prior lien, where other creditors sought a similar lien. Bridgman v. McKissick, 15 Iowa, 260. In this case a creditor's bill was filed against the debtor's wife, alleging that the debtor had paid for the title to the land conveyed to her, that the conveyance to her was made in fraud of creditors, and asking to have the same subjected to the judgment, alleging that a prior judgment creditor had never taken any steps to remove the obstruction, and plaintiff asked priority. The plaintiff filed an amended petition under Iowa Rev. 1860, chap. 127, p. 616, providing for supplemental proceedings in aid of execution, alleging the levy of an attachment. prior judgment creditor answered by cross bill, and claimed that he had ignored the fraudulent conveyance by the levy of his execution and purchase, and asked to have the cloud on the title removed, and for priority; and, by an amendment after plaintiff's claim for relief under the statute, the senior judgment creditor alleged that he had issued an attachment under the act of 1860, and asked for relief.
And where a petition in supplementary proceedings to enforce an attachment, by mistake, described the wrong township, which mistake was also in the decree, it was held that the purchaser at the sale thereunder was not entitled to have the decree corrected as against a judgment creditor who had redeemed from a senior execution sale. Boggs v. Douglass, 89 Iowa, 150, 56 N. W. 412.
In Kentucky the lien will be acquired by the service of summons having the object of the action indorsed thereon, or by an attachment as provided in the Code. there is no attachment, and the petition does not identify the equity sought to be reached, the priority may be lost by an intervening suit in equity.
Ky. Civ. Code Pr. § 439 (474), provides that, after the return of an execution "No
In this state it was held that the party property," the plaintiff may institute an