
    National Broadway Bank v. Yuengling et al.
    
    
      (Supreme Court, General Term, First Department.
    
    December 31,1890.)
    Action to Set Aside Fraudulent Conveyance—Parties.
    In a suit to set aside conveyances as fraudulent it appeared that such conveyances were executed under an agreement by which Y. individually, and the firm of Y., Limited, conveyed all of their property to the Y. B. Co., a corporation, the firm receiving therefor capital stock of the corporation, secured by mortgage bonds, the-corporation to assume payment by means of its mortgage bonds, of all the creditors of the Y. firm, and of Y. individually, who should accept the provisions of the-agreement. Said agreement further provided that the Y. B. Co. should execute a. mortgage to a trust company to secure the payment of the bonds, and that the firm of Y. should assign the capital stock received by it to trustees for the same purpose, and that said firm and the N. Y. & S. I. B. Co. should cause the stock of the latter to be assigned to the same trustees for the same purpose, whose creditors should be paid in the same manner as those of the Y. firm, and of Y. individually. All of the parties to this agreement, which was carried out, except the N. Y. & S. I. Bi Co., and the creditors accepting its terms, were made parties defendant by plaintiff. Held, that the N. Y. & S. I. B. Co. and the aforesaid creditors, being parties to such agreement, were necessary parties to any suit to annul the same, and that the latter were not sufficiently represented by the trust company, as to any rights acquired by them directly under the agreement, to obviate the necessity of making them parties to the suit.
    Action by the National Broadway Bank against David G. Yuengling, Jr., and others to set aside conveyances as fraudulent.
    Appeal from interlocutory judgment entered at special term upon an order overruling a demurrer to the complaint interposed by the defendant David G. Y uengling, Jr., on the ground that there was a defect of parties defendant.
    Argued before Van Brunt, P. J., and Barrett and Bartlett, JJ.
    
      Moses Weinman, for appellants. Charles A. Deshon, for respondent.
   Bartlett, J.

The National Broadway Bank is a judgment creditor of the defendant David G. Yuengling, Jr., having recovered 20 judgments against him as the general partner in a limited copartnership doing business under the firm name and style of D. G. Yuengling, Jr., the special partner being the defendant William Belden. The present suit is brought by the bank to-set aside certain conveyances, transfers, and assignments made by this firm of D. G. Yuengiing, Jr., and by the defendants Yuengling and Belden, to a. corporation known as the “D. G. Yuengling, Jr., Brewing Company, ” and also to have certain mortgages adjudged fraudulent which had been executed by the said corporation to the ¡Farmers’ Loan & Trust Company as trustee, in so far as the same cover property against which the plaintiff’s claims would, be enforceable if still in the hands of the limited partnership or of the members of that firm. The transfer and mortgage thus attacked were made under and pursuant to an agreement between David G. Yuengling, Jr., and William Belden, composing the firm already mentioned; David G. Yuengling, Jr., individually; the New York & Staten Island Brewing Company; such creditors of the three parties already mentioned as actually signed the instrument; and Conrad H. Jordan, George H. Hard, and Gusta vi us D. Baldwin, as trustees. This agreement recited that the firm, the defendant Yuengling individually, and the Hew York & Staten Island Brewing Company had incurred obligations which they were unable to meet at maturity, but that they claimed to have assets, respectively, more than sufficient to discharge their respective •obligations if the same were properly administered in connection with the brewing business of said firm and company. To this end it went on to provide that the defendants Yuengling and Belden should procure the formation of a corporation to be known as the “D. G. Yuengling, Jr., Brewing Company,” with a capital stock of two millions, to which should be transferred the property of the limited copartnership and of the defendant Yuengling individually, in return for which the corporation thus organized should issue its capital stock to the firm, and would assume payment, by means of its mortgage bonds, of all the indebtedness owing to such creditors of the firm and of the defendant Yuengling individually and of the Hew York & Staten Island Brewing Company as should sign the agreement, such indebtedness not to exceed $1,500,-000, in the aggregate. It further provided that the new corporation should execute a mortgage to the Farmers’ Loan & Trust Company upon the property thus transferred to it to secure payment of the bonds which were to be issued to the creditors who signed the instrument; that the limited copartnership should assign to Messrs. Jordan, Hard, and Baldwin, as trustees, all the capital stock in the new corporation, to be held by them as security for the payment of the mortgage bonds, and the copartnership and the Hew York & Staten Island Brewing Company should also procure all the capital stock of the latter corporation to be assigned to the same trustees as like security; and that the creditors of°the firm and of the defendant Yuengling individually and of the Hew York & Staten Island Brewing Company who signed should accept the mortgage bonds of the new corporation in full release, satisfaction, and discharge of their several claims. The complaint alleges, in substance, that this agreement was carried out, but that the conveyances and transfers thereunder were made by the defendant Yuengling and his firm, and accepted by the D. G. Yuengling, Jr., Brewing Company, with the intent and for the purpose of hindering, delaying, and defrauding their creditors. The Hew York & Staten Island Brewing Company was not made a defendant in the present suit, nor was any one of the creditors who signed the agreement; and the defendant Yuengling demurred to the complaint on the ground that both the brewing company and these creditors were necessary parties to the action. His demurrer was overruled at the special term and lie has appealed to this court.

• We think the demurrer ought to have been sustained. The complaint does not merely attack the transfers and conveyances of the judgment debtors’ property which were made pursuant to the agreement that has been mentioned, but it assails the agreement itself. In the fifth subdivision of the complaint is an express averment that “the said agreement was made by the said firm of D. G. Yuengling, Jr., and the said David G. Yuengling, Jr., witli intent to hinder, delay, and defraud their creditors, and, among them, this plaintiff;” and further, that all the parties to the agreement had notice at the time it it was executed of such intent to hinder, delay, and defraud; and in the demand for judgment the first prayer for relief is that the said agreement of October 22, 1887, be declared in all respects null and void as against the plaintiff. The averments of the complaint, as already set forth, suffice to show the existence of an interest on the part of the Hew York & Staten Island Brewing Company and the signing creditors in opposition to any judicial action which might invalidate the agreement even as to a third party, like the present plaintiff; and we do not see how the court could properly adjudicate that this corporation and these creditors entered into the agreement knowing it to be fraudulent, as the complaint charges that they did, without affording them an opportunity to be heard on that subject. They are parties to the agreement, and they must be parties to any suit in which the agreement is annulled. A different question would be presented if the plaintiff had made no reference in his complaint to the agreement, but had attacked only the subsequent transfers and conveyances. It was the opinion of the learned judge at special term that the creditors were sufficiently represented by the Farmers’ Loan & Trust Company, which lias been made a defendant. That corporation, however, is not a trustee for these creditors as to any rights which they have acquired directly under the agreement; nor does it appear to have been in any sense the representative of the creditors in entering into the agreement. It is merely their trustee under the subsequent mortgage, and this relation does not make it an adequate representative of the creditors in an action to set the agreement aside. The interlocutory judgment should be reversed, with costs, but with leave to the plaintiff to amend the summons and complaint upon the payment of such costs.

Van. Brunt, P. J. I concur in result.

Barrett, J. I concur.  