
    Gibson v. Haggerty et al.
      
    
    
      Supplementary proceedings.
    
    An order in supplementary proceedings, under $ 294 of the Code, on a debtor of the defendant, to pay the amount of his debt to the plaintiff, is a complete protection to the party paying, though no notice were given to the defendant; and it will protect him against an assignee who had given no notice of his assignment.
    
    Gibson v. Haggarty, 23 How. Pr. 260, s. c. 15 Abb, Pr. 406, reversed.
    Appeal from the general term of the Supreme Court, in the first district, where a judgment rendered in favor of the defendants, in a case tried before the court, without a jury, had been reversed, and a new trial awarded; the defendants stipulating for judgment absolute, in case of affirmance. (Reported below, 23 How. Pr. 260, and 15 Abb. Pr. 406.)
    This was an action by James Gibson, assignee of Hugh McCrossan, against William C. Haggerty and others, composing the firm of Haggerty & Co., to recover a sum of $105.46, the balance of the proceeds of a promissory note which McCrossan had transferred to the defendants, as collateral security for an indebtedness to them.
    It was shown on the trial, that in July 1859, William Sturgis and others recovered a judgment against Mc-Crossan, and an execution issued thereon was returned unsatisfied. In November 1859, on a proper affidavit, Judge Roosevelt made an order, under § 294 of the Code, requiring the present defendants to appear and answer concerning any property in their hands belonging to McCrossan, the judgment-debtor. The order did not require notice to be given to McCrossan. One of the defendants, examined under this order, on the 5th December 1859, testified, that there was in the hands of the firm of Haggerty & Co. a sum of $105.46, belonging to McCrossan; whereupon, Clerke, J., made an order requiring them to pay this amount to the judgment-creditors; which was done, accordingly, on the same day.
    The plaintiff, Gibson, alleged that McCrossan had in fact, on the 27th April 1859, assigned the claim in question to him; but it was admitted, that the defendants had no notice of the assignment, at the time they made the payment under the order.
    learned judge held and decided as matter of law, that the defendants were protected by their payment in pursuance of the order; and directed a judgment against the plaintiffs, for costs. The judgment so entered was, however, reversed at general term, and a new trial awarded; whereupon, the defendants appealed to this court, giving the usual stipulation.
    
      Taft, for the appellants.
    
      Dimmick, for the respondent.
    
      
       Also reported in 5 Trans. App. 143.
    
    
      
       Ward v. Beebe, 15 Abb. Pr. 372; s. c. 17 Ibid. 1.
    
   Woodruff, J.

(after stating the case.)—I think, the plaintiff cannot maintain this action. He claims to be entitled to certain moneys once due from the defendants to his assignor, McCrossan. Sturgis and others, judgment-creditors of McCrossan, have collected those moneys, in right of McCrossan, and by virtue of proceedings which gave to them all the authority, as against these defendants, which McCrossan himself would have had, if he had called on the defendants and received the money. The defendants having no notice of any assignment to the plaintiff, a payment to Mc-Crossan would have operated effectually to discharge them, and the plaintiff’s remedy for the collection of what was due to him would have been an action or proceeding against McCrossan for so much money had and received. That this would have been the relative position of the plaintiff and the defendants, had the latter paid the money to McCrossan, is clear, beyond controversy or discussion.

If, then, the proposition above stated be correct, viz., that the supplementary proceedings and order of the judge, in question in this action, gave to the judgment-creditors of McCrossan an authority to collect the money from the defendants, as available to the latter for their protection, as the authority, or rather the power, of McCrossan himself, then the defendants are protected by the payment..

To the suggestion, that the plaintiff cannot be deprived of his property, without due process of law, it must be answered, that the law protects the defendants in paying their debt to *their creditor, or to any one who comes clothed with such authoity as the creditor can confer, notwithstanding such payment would operate to deprive the assignee of the responsibility of the original debtor. The title of the assignee was but an equitable title, and if he would protect it, he must use the means the laws require for its protection. The grantee of land may lose his title, if he do not record his deed, and the assignee of a chose in action (not negotiable) may lose his- equitable right to proceed against the debtor, if he gives no notice of the assignment. The plaintiff has no reasonable or equitable complaint to make, that notice of the proceedings was not given to him, when he had given no notice apprising the defendants that he had any interest.

It is suggested, that notice might have been and ought to have been given to the judgment-debtor, McCrossan. I think, it ought always to be given (when notice can be served on him), before an order is made requiring the .parties examined to pay over. But the statute makes it discretionary with the judge; his omission to do so, does not change or affect the legal proceedings. And, as respects this plaintiff, it would not affect his position; McCrossan might not have regarded the notice.

The case stands (in reference to the argument that the section does not authorize the payment of the money to the judgment-creditor because, having been assigned, it was not due to the judgment-debtor ”) just as it would, on the appointment, of a receiver, and an action by him against the defendants, recovery and payment by them to the receiver. There is no room to doubt that such payment would be a full defence. If, before the Code, or now, a creditor’s bill were filed and a receiver appointed, and such receiver had brought an action against the defendants and recovered the money, it cannot be questioned, that payment on such a judgment would protect the defendants against the plaintiff, the assignee, of whom they never heard. And it is no less *clear, that a payment by them to such receiver, without suit, would have the same effect, and yet, in either case, it might be said, with the same propriety as in the present, that the plaintiff was deprived of his property without due process of law.

I am not able to perceive the foice of the suggestion, that an order under § 292 must be first obtained, before the judge can obtain jurisdiction to make the order for the examination of a debtor of the judgment-debtor and direct the payment ,of what he owes toward the judgment debt. The terms of § 294 authorize a proceeding thereunder, whether the execution has been returned or only issued. It expressly leaves it in the discretion of the judge, to cause notice to be given, or to suffer the proceeding to be had, without the presence of the party to the action. At a time when proceedings could only be taken, under § 292 (then § 247, Laws of 1848, p. 543), after an execution had been returned, the subsequent section (§ 248) provided, that after the issuing of an execution, a person indebted might pay to the sheriff. And (§ 249) upon an affidavit that a person is indebted to the judgment-debtor, the judge might require him to appear and be examined, and (§ 252) the judge might order the property due to the debtor to be applied on the judgment.

I concur fully in the observations made in Sherwood v. Buffalo & New York City Railroad Co. (12 How. Pr. 138, and cases cited), that to permit a proceeding under § 294, without any notice to the defendant, and so without giving him an opportunity to appear and assert his rights, opens the door to injustice and fraud. The judgment, as there suggested, may have been paid, or there may be other equitable, and even legal reasons why it should not be enforced by the plaintiff These are considerations, however, which are addressed to the judge who has the discretion to exercise, or to the legislature which has conferred that discretion. It is, however, pertinent to say, that notice to the judgment-debtor would not have been of any service to the present plaintiff, as he had voluntarily neglected to give the notice *of assignment which would have enabled and made it the duty of the defendants to resist the order made upon them.

The order granting a new trial must be reversed, and the judgment of the special term affirmed.

Bacon, J.

(Dissenting.)—By the stipulation in the case, the only question presented for adjudication is the validity and legality of the order made under the 294th section of the Code. If a literal and narrow construction should be given to the stipulation, it would only raise the question w'hether it is competent to make such an order, as an independent proceeding, and disconnected with any order under the 292d section, requiring the judgment-debtor first to appear and be examined. If this were all the point presented, the result would, I think, be very clear, that the defendants would be entitled to judgment.

It has, indeed, been a mooted point, whether proceedings under § 294 can be taken in any other way than as connected with and auxiliary to a proceeding against the judgment-debtor under the 292d section. Decisions can be found at general and special terms in the supreme court on both sides of this question. If it is necessary, to set the question at rest, for this court to decide it, I am clearly of opinion, that these two sections are susceptible of, if indeed they were not intended to have, an operation independently of each other. They have no necessary connection in terms, nor is the issuing of an order under § 294 made dependent upon an order being first issued against the judgment-debtor; and, indeed, if this were not so, cases would every day arise where no proceeding whatever could be taken under § 294. If the judgment-debtor should abscond, after judgment and before execution, or the judgment should be rendered against a corporation, there would be no possibility of reaching a claim due the judgment-debtor, in the hands of a third party, under this section, since no order under § 292 could be issued in such a case.

To obviate the objection that in this way an order may be made transferring the debt, without the creditor having an -^opportunity to be heard, it is provided by § 294, that the judge issuing the order may require notice of the proceeding to be given, in his discretion, to any party to the action. This will, in practice, usually, and, we think, always should, be done, unless, for reasons that commend themselves to the judge, it is deemed best to omit it, and affords a sufficient safeguard to the rights of judgment-debtors. Cases may be easily conceived, where such notice would not be expedient; and the fact that provision is made for it, is a strong implication that the true construction of the two sections is, that they operate, and may be availed of, entirely independently of each other, and that, consequently, in this case, so far as this question is concerned, the order under the 294th section of the Code was valid and legal.

But this does not end this case; for, I think, the stipulation has a broader meaning, and involves the inquiry, whether the order, and the payment made under it, were valid as against the plaintiff in this suit, who became the owner of the claim, before the order was made, or the money was parted with by the defendants. It was so treated by the counsel on both sides, and the judgment of the supreme court proceeds on that assumption. So treating it, I think, the judgment of the supreme court was right, in holding that, to take the property of a party, by an order granted ex fmte, and without any opportunity of being heard, is to deprive one of his property without due process of law. It is property belonging to the judgment-debtor which the order under § 294 professes to reach, and which only it can reach; and this money, at the time the order was issued and the payment was made, was not the property of the judgment-debtor, but of the plaintiff. This fact is conceded in the case; and it can, with no show of reason, be claimed, that, by virtue of an order, without a hearing of the party most interested in the question, his rights have been judicially determined, and his property has been passed from his hands into another’s, without any day in court given him to assert his claims. This cannot be done, without disregarding and practically subverting a fundamental maxim of the law, as *we^ as a ^titutmnal immunity provided for the owner of property. It would, indeed, be a novel proposition, that, in a proceeding between A. and B., which does not rise to the dignity of a law-suit even, but is entirely amicable, and perhaps pre-arranged, the property of C. can, without his knowledge or consent, be taken from him, and bestowed upon one of the parties to such a procedure.

It is said, in the dissenting opinion at the general term, that the assignee (the plaintiff) was guilty of negligence in not giving notice of the assignment. It would, doubtless, have been a prudent proceeding on his part; but I know of no rule of law which requires this to be done, under the penalty of a forfeiture of all his right and interest in the property, on a failure to give such notice. To whom should the notice be given, in order to protect either party from- loss? A notice to the original debtor would, of course, have been unavailable. There is no proof that the plaintiff knew that the debt of Martin & Go. had been transferred to the defendants, nor on what terms they held the balance of the fund, and he surely could not be chargeable with knowledge or notice that Sturgis & Co." were about to take a proceeding that would seize the fund, and dispose of it, without an opportunity to the plaintiff to interpose any objection or assert his claim.

The order appealed from should be affirmed, and judgment rendered for the plaintiff, pursuant to the stipulation, for the sum of $105, with interest from January 13th, 1860, together with costs.

Order reversed, and judgment of the special term affirmed.  