
    The People ex rel. Joseph Cauffman et al., Resp’ts, v. John Van Buren et al., App’lts.
    
    
      (Court of Appeals,
    
    
      Filed December 20, 1892.)
    
    1. Contempt—Injunction.
    Plaintiffs were attachment creditors and the defendants are the attorneys for other creditors and the sheriff who made the levy on the debtors’ property prior to the levy of the attachment. The debtors were insolvent and had confessed judgment to the other creditors. Plaintiffs began suit and issued a warrant of attachment, on the ground of fraud, and procured from the county judge of Monroe county an injunction to restrain the sale of the property by tlíe sheriff. Defendant Hopkins, as attorney for one of the other creditors, procured from the special surrogate of Oswego county an order ex parte setting aside the injunction, and purchased the property at the sale for the amount of the judgment. The only paper presented to the county judge was an affidavit entitled in the action setting forth the fraud; that an attachment had been issued, etc. The action had not been commenced or the attachment in fact served. Held, that defendants were guilty of contempt in disobeying the injunction, as the order was not void upon its face for an utter lack of jurisdiction on the part of the judge who granted it.
    2. Same.
    The county judge did not fail 1 o obtain juri- diction by reason of the summons not having been served when the order was signed.
    (Earl, Oh. J., Pinch and Peckham, JJ., dissenting.)
    Appeal from judgment of the supreme court, general term, fifth department, affirming order of special term adjudging defendants guilty of a contempt of court in violating an injunction order.
    
      M. M. Waters, for app’lts; Wm. F. Cogswell, for resp’ts.
    
      
       Affirming 44 St. Rep., 820.
    
   Maynard, J.

The defendants were properly adjudged guilty of contempt in disobeying the preliminary injunction order granted by the county judge of Monroe county, unless'the order was void upon its face for an utter lack of jurisdiction on the part of the judge who granted it. People v. Sturtevant, 9 N.Y., 263.

No matter how erroneous the action of the court may have been in taking cognizance of the suit and awarding a mandatory process, unless there was an entire absence of judicial authority to act in the premises, it was the duty of the defendants to obey its commands until they had been revoked by an order made in the action in which they had been issued either upon motion or appeal, or by some other method of direct review. It is not denied that the court acquired jurisdiction of the person of the defendants in this case, and its power to act was unquestionable, provided it had jurisdiction of the subject matter of the action.

For the purpose of determining this question, all the averments contained in the complaint and in the plaintiffs’ moving papers upon the application for the injunction order must be taken as unqualifiedly true. The plaintiffs were creditors at large of the defendants Klock & Tiffany, who a few days before the commencement of this action, it is alleged, fraudulently confessed judgments to three of the defendants to the amount of $17,000, and about the same time fraudulently mortgaged or conveyed their real property to two of the other defendants. The defendant debtors were insolvent when these transactions occurred, and, as it must be assumed upon this appeal, they were entered into by the various parties to them with the intent and for the purpose of defrauding the other creditors of Klock & Tiffany, and in order to secure preferences to themselves not obtainable under the general assignment laws of the state. Immediately upon the ■confession of these judgments executions were issued to the sheriff of Oswego county, where the debtors resided, and a levy was made by him upon all their tangible property, and, it is to he inferred, upon all the property which they then owned which was subject to seizure, and the sheriff had advertised the property to be sold to satisfy the executions. Upon the discovery of these facts the plaintiffs at once began suit against their debtors to recover the amount of their debt and obtained and issued a warrant of attachment upon the ground that their debtors had assigned or disposed of, or were about to assign, or dispose of, their property with intent to defraud creditors. It does not appear whether the attachment was delivered to the sheriff or the coroner, and it is perhaps immaterial, but it is claimed it was levied on the same property upon which the sheriff had levied under the executions issued upon the fraudulent judgments. But such levy would, prima facie, be subject to the levy made under the prior executions, and the proceeds of the personal property if sold by the officer, must be first applied to the satisfaction of the elder process. This, we think, correctly states the legal relations of the parties to this property when the present action was commenced upon the equity side of the court, to which the fraudulent judgment creditors and grantees, the sheriff and the defendants in the .attachment suit, were made defendants, and the plaintiffs demand as a part of the relief to which they claim to be entitled that the lien of the fraudulent judgment creditors under the excutions which they have procured to be issued upon their judgments shall be postponed to the lien which the plaintiffs have acquired by virtue of their attachment.

The question whether the facts alleged constitute a cause of action and afford sufficient grounds for the equitable interference of the supreme court, is one which has never been authoritatively determined by this court, and the decisions in the courts below have been far from harmonious upon the subject. There has also been a great diversity of judicial opinion upon this point in other states, and it is stated in the American and English Encyclopedia of Law (vol. 4, p. 575) that “ whether an equitable suit analogous to the creditor’s suit will be allowed in aid of the lien created by an attachment, before the recovery of judgment, is a question to which the American courts have given directly conflicting answers.”

In the cases of Hall v. Stryker, 27 N. Y., 596, and Rinchey v. Stryker, 28 id., 45, it was held that under a warrant of attachment any property of the debtor, transferred in fraud of his creditors, could be seized, and that after service of the warrant the party procuring it is no longer to be deemed a creditor at large, but a creditor having a specific lien upon the goods attached, and that, for the purpose of upholding the attachment and the lien acquired under it, the decision of the judge granting the warrant is to be deemed an adjudication of the existence of the debt, which is conclusive upon the fraudulent transferee of the debtor’s property. In both cases suit was brought against the attaching creditor by a party claiming title from the debtor by a transfer anterjor to the attachment, and the creditorwas permitted to show by way of defense to the action that the alleged transfer was fraudulent and, hence, void as to him. It has, therefore, been contended, and perhaps correctly, that they are not authority for the proposition that a party suing out an attachment can take affirmative action before the recovery of judgment to set aside a fraudulent conveyance of his debtor’s property. He may use_ his process, it is claimed, for defensive purposes, but not for offensive warfare. Still the cases may be regarded as decisive of the general question that an attaching creditor ceases to occupy the defenseless position of a creditor at large, and becomes, in a certain-sense, invested with the privileges of a creditor whose debt has. been adjudged valid, and who finds himself embarrassed in its collection by the fraudulent conduct of the debtor.

In Hall v. Stryker, Chief Judge Denio, at page 601, says:. “ When the creditor has procured legal process, such as the law allows a creditor to have against the property of his debtor, he has acquired the standing of a creditor in respect to all the property of his debtor, and that which he has conveyed with the intent forbidden by the law, the conveyance being void, is as much his in the judgment of the law and as fully subject to the process as if the conveyance had not been made. Under certain circumstances the law has, upon motives of policy, allowed an ex partedetermination as to the existence of the debt, and permitted process to issue against the debtor’s property upon such determinatian, providing, however, for sufficient security to the debtor if upon a regular trial the alleged creditor shall fail to establish the existence of the demand.”

These cases 'were followed in Frost v. Mott, 34 N. Y., 253, where Porter, J., states the doctrine without qualification that “ a creditor, by attaching property in the possession of his debtor, acquires a specific lien upon his interest, and is entitled, like a judgment creditor, to impeach the colorable title of a fraudulent mortgagee.’’ But this was also a case where the attaching creditor had been made a defendant in an action of trespass for the taking of the property, and nothing was, therefore, necessarily decided, except that, under such circumstances, he could defend his possession by showing the fraud which would defeat the claimant’s title.

In Thurber v. Blanck, 50 N. Y, 80, it was held that an attaching creditor had no standing in court to reach equitable assets until his remedy at law was exhausted, nor to attack a fraudulent transfer of the property of his debtor until after judgment, and in the Mechanics & Traders' Bank v. Dakin, 51 N. Y, 519, the commission of appeals held that an attaching creditor after the recovery of judgment and the issuing of execution may maintain an equitable action in his own name to set aside a fraudulent transfer of the property which had been seized under the attachment. The impression seems to have prevailed that there was an irreconcilable conflict between these two cases, and the reporter in a foot note in the 51 N. Y., says: “ This case, it will be perceived, was argued prior to the decision of the case of Thurber v. Blanck. 50 N. Y., 80, with which it is in conflict That case had not been brought to the attention of the commission at the time of the decision herein.” But we fail to discover any real ground of antagonism between them.

In Thurber v. Blanck, the court was dealing with an attempt on the part of an attaching creditor to reach equitable assets, which it has been uniformly held can not be done until judgment has been recovered, execution issued and returned unsatisfied, and an action or proceeding in the nature of a creditor’s bill instituted.

The provisions of the Revised Statutes (now §§ 1871-9 of the Code) which authorized a judgment creditor’s action imperatively required the recovery of a judgment and the issue and return of an execution unsatisfied as an indispensable condition of the creditor’s right to bring the action.

In Bank v. Dakin, the attaching creditor had, by the recovery of judgment, and the issue of execution, acquired the right to have the attached property applied to the satisfaction of the execution, but in the assertion of this right he found the way obstructed by the interposition of a conveyance of the property by his debtor, which was apparently valid, but which was in fact void. In such cases it has always been held that while the process for the collection of the debt was outstanding, the equitable jurisdiction of the court could be invoked to remove the fraudulent obstruction to the legal process, and permit it to be effectually enforced. The subsequent decisions bearing upon the question in this court have all been in line with the principles enunciated in these two typical cases, but none of them involved the point here presented of the right of an attaching creditor to prevent the application of the attached property to the payment of a prior lien. It must be apparent that unless such a right exists, the remedy by attachment will be lost in many cases. The sheriff must sell the property under the prior executions and apply the proceeds to their payment, and the plaintiff would be in no better condition than if his attachment had not issued.

It would seem to be illogical to accord to the plaintiff the right to attach property fraudulently transferred, as he concededly may, under the decisions in Hall v. Stryker, and the other cases cited above, and yet deny him the right to have the lien preserved until he can merge his claim in a judgment and issue final process for its collection. No adequate remedy at law can be suggested in such a case. The jurisdiction of a court of equity to reach the property of a debtor justly applicable to the payment of his debts, even where there is no specific lien, is undoubted. It is a very ancient jurisdiction, but will be exercised only when special circumstances exist requiring the interposition of the court to obtain possession of and apply the property. Such circumstances, we think, are shown to exist here. The case would be different if executions had not been issued upon the fraudulent judgments. The mere existence of a fraudulent transfer would not be sufficient to authorize a court of equity to entertain an action at the suit of an attaching creditor to set it aside. But when it is sought to make use of such a transfer for the purpose of removing the attached property from the jurisdiction of the officer who has it in his custody, it is evident that nothing but the equitable arm of the court can prevent the consummation of the wrong.

In the case of Falconer v. Freeman, 4 Sand. Ch., 565, the precise point here involved was decided in favor of the plaintiff’s contention, and the vice-chancellor held that a court of chancery will aid an attaching creditor to enforce the lien of the attachment by injunction and otherwise, on the same principle that it aids an execution creditor similarly obstructed. There are some cases in the supreme court to the same effect. Bates v. Plonsky, 28 Hun, 112; Keller v. Payne, 22 Abb. N. C., 352; 16 St. Rep., 245; Tannenbaum v. Rosswog, 22 Abb. N. C., 352.

The objection is urged that the creditor may be unsuccessful in establishing Ms debt in the attachment suit, and it thus may be found that there was no basis for the equitable action. But such a risk attends all litigation, and provision for full indemnity is made in the requirements of the statute for security, both upon the issue of the attachment and the granting of the preliminary injunction. Both actions are pending in the same tribunal, which can control the order in which they shall be tried, and if issue is joined in the action at law, the determination of the equitable action may be postponed until the former has been finally disposed of. The measure of relief to be granted in the equitable action is also discretionary with the court, and might be limited to a iecree enjoining interference with the attached property until the plaintiff’s right to follow the attachment with an execution has been adjudged.

The court, therefore, had jurisdiction of the action in which the injunction order was granted, and the violation of its provisions by the "defendants was inexcusable.

It is insisted that the attachment had not been levied when the injunction was obtained, and that it was, therefore, prematurely issued. That may be so. There is some ambiguity in the moving papers, and some expressions which may support such a finding, while the opposing affidavits upon this motion positively affirm that it was not served until the next day after the injunction order was made. The fact is not material here. If it possessed any weight, it did not affect the jurisdiction of the county judge. It may have tended to show that he had acted erroneously, and might have been available upon a motion to set aside his order, but it cannot be used for the purpose of impeaching its validity collaterally.

It is urged that the county judge had no jurisdiction, because the summons had not been served when the order was signed.

Section 608 expressly provides that the order may be granted to accompany the summons. This section cannot be construed to refer solely to an injunction granted Under § 603. It is not limited in terms. It is a substitute for that part of § 220 of the old Code, which provided that the injunction might be granted at the time of commencing the action, which was also held to apply to all kinds of preliminary injunction orders. This language was much more restrictive than in the present Code, and yet it was held that the order might be granted before the commencement of the action; but would not become operative until the service of the summons, which might be made at the same time with the order. Leffingwell v. Chave, 10 Abb., 472. In this case, Woodruff, J., says: “It imports that the injunction may be obtained so that it shall operate at the time when, and as soon as, the action is commenced, and not alone after it is commenced. This accords with good sense. It meets a very large class of cases, in which it is of vital importance to the plaintiff to enjoin the defendant at the very instant he is apprised that an action is commenced, and in which the defendant would, but for such injunction, defeat the very object of the suit. The section which declares that the court is deemed to have acquired jurisdiction in a civil action from the time of the allowance of a provisional remedy, is in harmony with this construction and sustains it.”

It is not seen how any different meaning can be attached to the phrase “during the pendency of the action,” when it occurs in § 604 than when used in § 603. It both cases it relates to the time when the threatened injury is likely to take place, and not to the time when the injunction order may be granted; and in order to judicially satisfy the judge that the defendant threatens to do some act during the pendency of the action that will impair or defeat the plaintiff’s remedy, it is not necessary to show that the action has been actually commenced. It is enough, if it appears that there is a cause of action which the plaintiff is about to prosecute and that defendant threatens to do an act which will render the judgment ineffectual, to confer jurisdiction upon the judge to grant the injunction, which, however, will not become operative unless served with or after the summons.

The amount of the fine was correctly fixed. When the order was made the plaintiffs’ debt in the attachment suit had become merged in a judgment, as appears from the record here. They had a valid lien by attachment upon property sufficient to secure its payment. That lien was destroyed by a sale which the injunction order prohibited. Presumably, the plaintiffs’ loss was the amount of their claim, as it is conceded the judgment debtors are insolvent.

The defendants made no proof in reduction of damages, and under the mandatory provision of § 2284 we do not think the special term had any discretion; but was required to fix the amount at the sum named.

The order must be affirmed, with costs.

Earl, Ch. J.

(dissenting.) — In the latter part of December, 1890, Hiram Klock and Edgar A. Tiffany confessed three judgments ; one to the First National Bank of Oswego for $2,525, another to the same bank for $131.56, and one to Jacob M. Mertens and Alexander Dissell for $14,296.33. The judgments were entered and docketed in Oswego county, and executions thereon were issued to the sheriff of that county and by him immediately levied upon the property of the defendants in that county. The sheriff advertised the property for sale on the 2d day of January, 1891, at ten o’clock A. M. On the 1st day of January, 1891, the above named respondents, constituting the firm of Cauffman, Dinklespiel & Có., doing business in Rochester, presented to the county judge of Monroe county an affidavit of Oauffman entitled in an action by the respondents against all the parties to. the judgments confessed, John Yan Burén, sheriff, and two other persons, and applied to him for an injunction against the defendants. The affidavit stated that in August, September and October, 1890, Klock & Tiffany purchased of the plaintiffs in that action merchandise at the agreed price oí $1,346.75, which they had not paid; that at the time of such purchases they made certain false and fraudulent representations as to their financial ability; that the judgments above specified were fraudulently confessed, and were irregular, fraudulent and void, as w'ere also the executions issued thereon; that on the 31st day of December, 1890, in an action brought by the plaintiffs against Klock & Tiffany, for the recovery of the purchase price of the goods sold to them, “ a warrant of attachment was duly granted and issued, which has been, or will be, levied upon tangible property of said defendants, Klock A Tiffany;’’ that the action in which the affidavit was made was, brought for the purpose of obtaining the judgment of the court, that the judgments by confession were void; that the plaintiff’s lien under the attachment was superior to the lien of the judgments ; that they were entitled to an injunction restraining the defendants from any interference with the property of Klock & Tiffany, and restraining all proceedings under the judgments and executions; that the defendants threatened and intended to sell the property levied upon on the 2d day of January, unless restrained, and that' if the sale took place great and irreparable damage would be done to the plaintiffs, and their attachment would be unavailing, and their claim against Klock & Tiffany would be lost and useless. No other papers were presented to the county judge. Upon this affidavit he granted to the plaintiffs an injunction order restraining the defendants - from interfering with or selling any of the property of Klock & Tiffany. At the time of granting the injunction, the action had not been commenced, and the attachment had not in fact been served.

It is undisputed that the attachment was served in the forenoon of January 2d, and the summons and injunction in the equitable action were served together in the afternoon of the same day. After the service of the attachment and injunction the sale under the executions was postponed until January 3d, when the sheriff sold the property to Frank Hopkins, one of these appellants, who was at the time one of the attorneys for the sheriff and some of the other defendants in the equitable action. Thereafter the plaintiffs in the equitable action, these respondents, instituted this proceeding to punish these appellants, the sheriff and his attorney, for contempt in violating the injunction. The proceeding was instituted by a petition of the respondents addressed to the supreme court, verified on the 21st day of January, 1891. Upon the presentation of the petition to a judge of the supreme court he made an order requiring these appellants to show cause at a special term of the court to be held in Rochester on the 28th day-of January, 1891, why they should not be punished for the alleged contempt. Such proceedings were taken upon that order that the court adjudged these appellants to be guilty of contempt, and it fined them for the purpose of indemnifying the respondents for the loss occasioned to them by the disregard of the injunction-the sum of $1,470.32, the full amount of the claim of the respondents against Klock & Tiffany. The order imposing the fine is brought under review by this appeal.

If the county judge had jurisdiction upon the facts presented to him to grant the injunction,-the defendants in the action were bound to obey it, although the exercise of the jurisdiction was plainly erroneous. Erie Railway Company v. Ramsey, 45 N. Y., 637. If, however, it was granted without jurisdiction, it was a nullity and bound no one. I propose now to confine my attention to the question of jurisdiction.

There is no general power in the equity courts of this state to grant injunctions. They have only such powers in that respect as are given to them by the Code, and to its provisions we must look for its jurisdiction. Spears v. Mathews, 66 N. Y, 127. Section 603 of the Code provides that “ where it appears from the complaint that the plaintiff demands and is entitled to a judgment against the defendant restraining the commission or continuance of an act, the commission or continuance of which during the pendency of the action would produce injury to the plaintiff, an injunction order may be granted to restrain it.” The right of a plaintiff to an injunction order under this section depends upon the nature of the action as disclosed by the complaint; and the facts authorizing the injunction must exist at and before the commencement of the action, and relief by injunction must be demanded in the complaint. That section provides for every case where the plaintiff is entitled to an injunction on account of facts existing at and prior to the commencement of his action. Under that section the injunction may be granted to accompany the summons and complaint, and tobe served with them and at the same time ; and it may also be granted and served at any time after the commencement of the action. If properly granted under that section it may even be served before the commencement of the action, and the party against whom it was granted would be bound to obey it, as he might also be bound to obey an injunction before it has been served upon him, if he has notice that it had been granted. Daly v. Amberg, 126 N. Y., 490; 38 St. Rep., 513. This is so because the court or officer having jurisdiction to grant the injunction, it became a valid, binding process.

This injunction was not granted, and could not have been granted under that section, because at the time it was granted there was no complaint in the action, and none came into existence until February 11, 1892, more than two weeks after this proceeding was instituted. And further, if we look at the complaint, we find that it contains no demand for relief by injunction, and no mention whatever of an injunction or any restraint.

The only other section of the Code under which the respondents can claim to uphold the injunction is § 604, which provides as follows : “ In either of the following cases an injunction order may also be granted in an action: 1. When it appears by affidavit that the defendant during the pendency of the action is doing or procuring or suffering to be done, or threatens or is about to do or to procure or suffer to be done, an act in violation of the plaintiff’s rights respecting the subject of the action, and tending to render the judgment ineffectual, an injunction order may be granted to restrain him therefrom. 2. When it appears by affidavit that the defendant during the pendency of the action threatens or is about to remove or dispose of his property with intent to defraud the plaintiff, an injunction order may be granted to restrain the removal or disposition.” Under that section an injunction can be granted only for acts being done or threatened after the action has been commenced and during its pendency ; and unless the action be pending there is no jurisdiction to grant the injunction. Such is the plain language and import of the section; and so the scheme of the Code as to injunctions is complete. The one section provides for the cases where the facts existing at the commencement of the action entitle the plaintiff to relief by injunction, and the other section provides for cases where facts subsequently occurring entitle the plaintiff to such relief, and the two sections provide generally for all the cases.

Here, as I have stated, this injunction was granted under § 604 when no action was pending. There was not, therefore, a case in which an injunction could be granted, and the county judge was absolutely without jurisdiction to grant it There was no evidence before him of any kind that the action was pending or tending in any degree to show that it was pending, and thus there was nothing to call for the exercise of his jurisdiction. It is of no importance that the action was subsequently commenced by the service of the summons, and that the injunction was served at the same time. The validity of the injunction must be tested by the facts existing when it was granted and properly placed before the county judge.

This injunction was, therefore, a nullity, and the appellants could not be legally punished for disobeying it.

I have not overlooked § 608 of the Code, which provides that the injunction order “maybe granted to accompany the summons, or at any time after the commencement of the action and before final judgment.” All these sections must be construed together, and harmonized. Clearly every injunction order cannot accompany the summons into the hands of the person who is to serve them. An injunction order which cannot be granted until after the action has been commenced cannot accompany the summons. Manifestly the provision means that every injunction order which has been validly granted may accompany the summons, not that an injunction older granted without jurisdiction, which is a nullity, may accompany the summons. Any injunction order granted under § 603 may accompany the summons, and never one granted under § 604, which can have no existence until after the action has been commenced.

If these respondents, not being judgment creditors, could, upon any theory, maintain their equitable action to set aside the judgments and executions as fraudulent and void, they could do so only by showing that they had, by the levy of their attachment, obtained a lien upon the property of Klock & Tiffany at the time they applied for the injunction. Such an action, if maintainable, would be in aid of the attachment to remove the fraudulent obstacles and obstructions placed in its way. But here, at the time the injunction was applied for and granted, the attachment had not been levied, and the respondents had no lien upon the property of Klock & Tiffany. There was, therefore, at that time absolutely no ground for the maintenance of the equitable action, or for the granting of the injunction, even if it be assumed that the action had been commenced. The respondents had no right whatever to the injunction, and it was manifestly erroneous to grant it. Although erroneous, we may assume that the injunction was not granted without jurisdiction on the ground here stated, and that the court, to maintain its dignity and authority, could punish the parties enjoined for contempt in violating it by a fine not exceeding $250, under the latter part of § 2284 of the Code. But could the court impose a fine under the earlier part of that section on the parties enjoined lor the purpose of indemnifying the respondents ? Could the respondents wrongfully obtain" an illegal injunction to which, on the papers presented to the county judge, they had no legal right whatever, and thus commit an outrage on the rights of the defendants in the action, and then claim that they were aggrieved by a violation of the injunction, and ask for indemnity on account of such violation? In other words, could they be aggrieved and legally damnified by the violation of an injunction to which they had on the papers presented to the county judge no shadow of right? I leave these questions unanswered. The discussion of them would be quite interesting, but is unnecessary now, as the order imposing the fine must be reversed upon the ground before stated.

The orders of the general and special terms should be reversed, and the petition of the respondents dismissed, with costs in all the courts.

Order affirmed, with costs.

Andrews, Gray and O’Brien, JJ., concur; Earl, Ch. J., reads for reversal; Finoi-i and Beckham, JJ., concur.  