
    Matter of the Proceedings Supplementary to Execution, Patrick J. McMahon, Plaintiff, Judgment Creditor; Charles A. Brady, Receiver, Respondent, v. Adolph J. Shary, Judgment Debtor, Appellant.
    (Supreme Court, Appellate Term,
    February, 1909.)
    Receivers — Administration and management of the property: Au-
    thority and powers in general — Employment of counsel: Actions hy and against receivers — Application by receiver for leave to sue — Notice of application.
    Notice of motion by a receiver in proceedings supplementary to execution for leave to sue a transferee of the judgment debtor should be served upon such transferee which is entitled to show, if it can, that the receiver has no cause of action and that there is no probability of a successful issue.
    Where, on appeal from an order granting to a receiver in proceedings supplementary to execution leave to bring an action to set aside an alleged fraudulent transfer by the judgment debtor to a corporation which consisted solely of himself, his wife and the attorney who represented him on said appeal, the latter, who was also secretary of the corporation, and the judgment debtor, who was also the president and treasurer of the corporation, filed affidavits in opposition to the motion for leave to sue, it cannot fairly be claimed that the corporation did not have actual notice of the motion.
    Where, upon the .receiver’s motion for leave to sue, it appeared that, while the actions brought against the judgment debtor by the judgment creditor were pending, the corporation was organized by the judgment debtor, his wife and the attorney for the judgment debtor; that the judgment debtor transferred to the corporation in consideration of certain shares of its capital stock his business which comprised practically all his property and also the lease of the premises, but that he continued to occupy a portion thereof without paying rent under a verbal agreement with his wife as vice-president of the corporation, and, after the assignment of the lease, continued individually to pay the rent of the premises to the landlord; that, on the day he received the stock, he transferred it to his wife; that, although the judgment debtor claimed, to have executed and filed a bill of sale iby which he transferred to the corporation a claim against another company for work, labor and services performed and materials, furnished, he still had pending in his own name an action to recover such sum; that there never had been any substitution of parties or attorneys and that, notwithstanding the alleged bill of sale, he had moved to place said action on the short cause calendar, the evidence is sufficient to raise a strong presumption of fraud and to warrant the granting of an order for leave to sue.
    A receiver in proceedings supplementary to an execution may employ the attorney of the party for whose benefit the proceedings are instituted.
    Appeal by the judgment debtor from an order of the City Court of the city of Hew York granting permission to Charles A. Brady, receiver, to make application to the Supreme Court, Hew York county, for substitution as plaintiff in the case of Adolph J. Shary, plaintiff,' against the Rainier Motor Car Company and granting permission to the said receiver to bring an action against the judgment debtor and his transferee, the Saratoga Auto Top and Body Company, and others, to set aside a transfer of property made by the judgment debtor as in fraud of his creditors.
    Henry A. Blumenthal, for appellant.
    W. Irving Taylor, for respondent.
   Giegerich, J.

The order appealed from is assailed on the ground that notice of motion was not given to the Sara-toga Auto Top and Body Company, the transferee of the judgment debtor, whom the receiver desires to sue.

In support of such contention it is urged by the judgment debtor that the party to be sued ought to be notified, so that he can. in due time show to the court that the receiver has no cause of action and that there is no probability of a successful issue.

As a general proposition this is undoubtedly true (People v. Life Union, 84 Hun, 560) ; but, in its application to this case, it is merely academic, since it appears from the record that the officers of such company had actual notice of the motion and opposed it.

The record shows that the Saratoga Auto Top andi Body Company is a domestic corporation which consisted solely of the judgment debtor, his wife and the attorney who represents him on this appeal.

The latter, who was also the secretary of the company, and the judgment debtor, who was the president and treasurer of the company, filed affidavits in opposition to the motion. It cannot, therefore, be fairly claimed that the company through their officers did not have actual notice -of the application which they opposed.

The motion papers and especially the proceedings supplementary to execution disclose sufficient evidence to raise a strong presumption of fraud and to warrant the granting of the order.

It appears from those papers that, while the actions brought against the judgment debtor by the judgment creditor were pending in the Municipal Court, the Saratoga Auto Top and Body Company was incorporated by the judgment debtor, his wife and the attorney who represented the judgment debtor on this appeal; and to that company the judgment debtor transferred his business of manufacturing automobile tops and repairing automobiles, situate at Mo. 336 West Seventieth street, Mew York city, which business comprised practically all his property.

The only consideration for such transfer was 200 shares of the capital stock of the company of the par value of twenty-five dollars per share. . All of these 200 shares of stock were transferred by the judgment debtor to his wife on the same day he received them; and, although he stated that he has always been and now is a director of the company and its president and treasurer, he has not, since the day it was organized, owned one share of its corporate stock. Furthermore, on the day of organizing the company he transferred a lease of the premises above mentioned to the company without any other consideration than the stock aforesaid; and, notwithstanding this, he has continued to occupy a portion of the premises as living rooms, without paying rent, under a verbal agreement which, he says, he made with his wife as vice-president of the company.

It also appears that, after the assignment of the lease, he continued, individually, to pay the rent of the entire premises to the landlord thereof.

Jt "¡yas further shown that, although the judgment debtor claims to have executed and filed a bill of sale by which he transferred to the, company a claim of $2,945.90 against the Rainier Motor Oar Company for work, labor and services performed and materials furnished, he still has, pending in his own name in the Supreme Court of this county, an action to recover such sum, and that there has never been any .-ubstitution of parties or attorneys, and that, notwithstanding the alleged bill of sale, he moved to place said action on ■ the short cause calendar. 0

The judgment debtor contends that a receiver in supplementary proceedings cannot employ the attorney of the party for whose benefit the proceedings are instituted and cites the case of Branch v. Harrington, 49 How. Pr. 196, and Cumming v. Egerton, 22 N. Y. Super. Ct. 684, in support of such contention.

These cases, which were decided at Special Term, have been overruled by the case of Baker v. Van Epps, 22 Hun, 160; 60 How. Pr. 79, decided by the General Term of the Fourth Department, which holds directly that it is permisible for the receiver in a case like this to be so represented.,

The order permits the receiver to apply to the Supreme Court, Hew York county, to be substituted as plaintiff in the action brought by the judgment debtor against the said Rainier Motor Car Company, which cause of action, as already shown, was included in the bill of sale given by the former to the said Saratoga Auto Top and Body Company.

Since such permission is useless, unless the receiver succeeds in setting aside the bill of sale as fraudulent, the order should be modified by making the granting of the permission contingent upon the success of the action to set aside the transfer to the Saratoga Auto Top and Body Company, and, as modified, affirmed, without costs.

Gildersleeve and Seabuby, JJ., concur.

Order modified and, as modified, affirmed, without costs.  