
    KESSELL v. DRUCKER.
    N. Y. Supreme Court, First District; Special Term,
    
      June, 1889.
    1. Assignments for benefit of creditors; extrinsic preferences.] The rule in Riessner & Co. v. Cohn, 22 Abb. N. 0. 312, that transfers, and confessions of judgment in anticipation of making a general, assignment, and intended to evade the statutory limit upon preferences, are void,—reiterated.
    
    2. The same; creditor without judgment may sue.} If the assigneefails in his duty to sue to set aside such preferences, a creditor,; though without judgment, may do so.
    Trial by the court.
    
      Blumenstiel & Hirsch, for plaintiffs.
    
      S. D. Levy, for the defendants.
    
      
       See the next case and note on fraudulent preferences in 22 Abb. N. C. 312.
    
   Patterson, J.

This cause comes within the rule declared in Riessner v. Cohn, 22 Abb. N. C. 312, etc., and other cases decided at the Special Term of this court, which hold that voluntary transfers of property and confessions of judgment made contemporaneously with a general assignment for benefit of creditors are to be regarded as part of the act of assignment, and as being intended to make a disposition of property nominally and in form independent of the assignment, but virtually connected with it. Particularly as to confessions of judgment upon which executions may at once issue, and levy and sale be made, they are to be regarded as a method of securing creditors who are to be favored contrary to the provisions or policy of the law respecting preferences in assignments for the benefit of creditors. Following the ruling of Judges Lawrence and Andrews in similar cases in this judicial district, I have heretofore held that such confessions of judgment may be set aside by the assignee for the benefit of creditors, and this view has been fully sustained by the supreme court of the United States in White <o. Coltzhausen, 129 U. S. 329 ; and where the assignee refuses to bring the proper action á creditor may bring it in aid of the assignment, for the action is not adverse to the assignment, and no exclusive right is acquired by the creditor suing, and hence there is no need that he should be a judgment creditor with his remedy at law exhausted. The fruits of the recovery do not inure to .him—they are to be distributed under the assignment or according to law.

It appears in this action that the plaintiff requested the assignee to bring an action to set aside the confessions of judgment and to recover from the sheriff the moneys that officer had realized on the executions, and it further appears by sufficient proof, frima facie, that the preferences given by the confessions of judgment amount to more than one-third of the assets of the assigned estate. That is to say, in the figures as given in the testimony some thousands of dollars in value, of goods were sold under the executions, and only a few hundred dollars in all of assets have been realized by the assignee, and that amount in book accounts seems to be all that was left after the judgments were enforced.

Judgment is directed for the plaintiff. Findings may be ¿landed in and the form of decree presented for settlement •on two days’ notice to defendant’s attorney. The notice may be given for June 10, at 10.30 A. M.

Note Upon Assignee’s Acton to Establish an Assignment.

In Newcombe e. Irving National Bank, 51 Sun, 220, the court held that an action lies by an assignee for benefit of creditors against the sheriff holding numerous executions against the assignors and being indemnified for seizing the assets in disregard of the assignment—to •establish the validity of the assignment and enjoin the sales.

The ground of the decision was that since the amendment of Code Civ. Pro. § 1419, by L. 1888, c. 98, makes it imperative upon the court to substitute indemnitors as defendants in an action against the sheriff for trespass in seizing property under an execution, such action no longer affords an adequate remedy in a case of seizures under several executions, as the several indemnitors are only liable for the levy made •under their particular execution, rendering it impossible in many cases for the plaintiff to know to whom to look for satisfaction. A prelimin•,ary injunction was therefore sustained in an action brought by an .assignee for creditors to restrain sales of the assigned estate under several executions against the assignors, and to adjudge the validity of the assignment and" the title of the plaintiff as assignee.

The complaint in that action, which may be a useful precedent, was as follows:

“ The complaint of the plaintiff respectfully shows to this honorable •court that the defendant is a corporation created and existing under the laws of the United States, having its principal office, and conducting a banking business in the City of New York, in the State of. New York.

“ That on the second day of July, 1888, Isaac J. Seligman, Charles M. May and Isaac N. Stern, then composing the firm of Seligman, May .& Co., of the City of New York, executed and delivered to Richard S. Newcombe a general assignment for the benefit of creditors, and said Richard S. Newcombe duly accepted the trust therein contained, which said assignment was thereafter and on the same day duly filed in the office of the Clerk of the County of New York, a copy of which is hereto annexed.

“ That said plaintiff thereupon, and on said 2d day of July, 1888, duly took possession of the estate so assigned, consisting among other things of a stock of clothing at 649 and 651 Broadway, in the City of New York, of the value of upwards of two hundred and fifty thousand •dollars.

“That thereafter, and on the 18th day of July, 1888, said Isaac J. .Seligman, Charles M. May and Isaac N. Stern, duly filed in the office of. the clerk of the court of common pleas in and for the City and County of New York, schedules of their assets and liabilities.

“ That said schedules stated the nature of the business carried on by said assignors, the place where the same was carried on, and the residences and occupation of the said assignors and said assignee in the following manner : The names of the debtors, their occupations, places of residence and places of business, are as follows : [stating them,.]

“ The name and place of residence of the assignee, Richard S. Newcombe, residing in the city of New York.

“ That said schedules, when filed, became part of said deed of assignment.

“That, by an order duly made and entered by Hon. Morgan J. O’Brien, one of the justices of this court, on the 18th day of July, 18SS,. said plaintiff was required to give security as such assignee in the sum $250,000, and on the 20th day of July, 1888, said plaintiff duly gaye-such bond, which was thereupon duly approved by said Hon. Morgan J. O’Brien, and thereupon duly filed in the office of the said clerk of the said court of common pleas.

“ That the stock of goods so assigned as aforesaid was manufactured! for a particular line of customers who had purchased from said assignors-for many years last past, and as said plaintiff is informed and believes,, is particularly suitable for that particular trade.

11 That prior to the 27th day of July, 1888, said plaintiff had sold, but not delivered, goods of the value of about |>35,000, at a profit of nearly nine per cent, above cost, for cash, and has had applications for other goods out of which he can realize, in cash on delivery, nearly $150,000 in addition.

“That on the 27th day of July, 1888, the defendant, who prior thereto had received from said assignors three confessions of judgment, as follows : One on the 13th day of July, 1888, for $3,881.96, and one-on the 25th day of July, 1838, for $8,631.03, and another on same day for $20,000, but of which latter amount only $12,512.99 was due on said 27th day of July, 1888, issued executions to the sheriff of the city and county of New York, as follows : One for $3,881.95, and one for $8,631.03, and instructed him to collect out of said assigned estate the: sum of $12,512.99, and indemnified said sheriff against the claim of said plaintiff.

“ That if said assigned estate is sold by said sheriff under executions-the same will not, as plaintiff is informed and believes, realize more than: $125,000, and if the same is sold said plaintiff cannot recover adequate damages against the sheriff or his indemnitors, if it is ultimately determined that he was entitled to hold said assigned estate.

“ That said plaintiff is advised and believes that said defendant’s rights can be amply protected by setting aside the proceeds of so much of said assigned estate as may be necessary for the purpose of paying to it the amount due under said judgments, provided it shall ultimately be determined that said defendant is entitled thereto.

“ That after said defendant indemnified said sheriff other judgment creditors also indemnified him against said plaintiff’s claim to the amount of about $140,000.

“ That as said plaintiff is informed and believes it is claimed by the defendant that, by reason of some formal omission in said assignment the same is void, but that plaintiff insists that the said assignment is a valid one, and that all the assigned estate is lawfully in his possession by virtue thereof.

“ Wherefore, said plaintiff demands judgment, that upon his depositing, under the direction of this court, the sums of $3,881.96 and $8,631.03, or such other sums as the court may direct to remain on deposit, subject to a final determination as to whether or not the said assignment is void, said defendant may be enjoined and restrained from ■enforcing the executions in the complaint mentioned, and from selling or procuring to be sold the property therein mentioned for the purpose of satisfying said executions, or either of them, that a temporary injunction to this effect may be granted, and that by this action said assignmen t shall be declared to be a valid, legal assignment, and that plaintiff is entitled to hold the assigned estate, and apply the same to the purpose declared in the assignment, and that said plaintiff may have such other or further relief as may seem proper.

The following affidavit was submitted in opposition to the motion for an injunction.

John £. Sexton, being duly sworn, says : I am under-sheriff of this county and have been such since January 1, 1886, and am entirely familiar with all matters relating to the sheriff’s office. I have had, as such under-sheriff, the control and management of all sheriff’s sales. Whenever the sheriff has sold property under a number of executions against the same defendant it has always been and still is his custom to proceed to sell under the executions according to their priority, selling goods item by item from a catalogue until he has realized sufficient to satisfy the first execution, and then an announcement is made to the bidders that he now proceeds to sell under the next execution in order, which he does, item by item, as before, and so on throughout the sale. After the sale is completed there is filed an “Account Sale” showing, among other things, the particular goods sold under each execution which facts also appear upon the books of Messrs. Wm. Topping & Oo.r who have been the sheriff’s auctioneers throughout the present term.

“ If a sale is made by the sheriff under the executions against Seligman, May & Co., the same course will be pursued as that above-stated, and thus no confusion can arise as to the liability of each particular set of indemnitors.”

The order entered and affirmed on appeal was as follows:

“ Ordered, that the defendant be and it hereby is enjoined and1 restrained from selling or causing to be sold any of the property described in the complaint herein, under either of the executions therein described, pending the trial and determination of this action, or the further order of this court in the premises, on condition, however, that within five days after the service of a copy hereof on the plaintiff or his attorneys, the plaintiff shall file and serve on the defendant’s attorneys an undertaking executed by two or more good and sufficient sureties, to be approved by a justice of this court (such sureties to-attend before this court and justify if their sufficiency be excepted to-by the defendant) said undertaking to provide that the plaintiff will pay to the Irving National Bank any damage or loss it may sustain by reason or means of said injunction, not exceeding the sum of $12,512.99,. with interest from July 25th, 1888.

“ And it is further ordered, that if the plaintiff shall fail to file or serve said undertaking within the time above specified, or if the sureties thereupon shall fail to attend and justify if excepted to, then the defendant shall be entitled to enter an order herein denying plaintiff’s-said motion in all respects, with $10 costs.

“ And it is further ordered, that if the defendant shall appeal to-the General Term of this court herefrom and shall bring on such appeal for argument at the Term thereof to be held in October next, that such-appeal shall be argued and submitted at such Term unless the defendant consent to a postponement thereof, and that in default of such argument and submission the injunction herein shall be vacated with $10 costs.

“ Nothing contained in this order shall be construed to affect the-defendant’s right to apply to vacate the injunction if the sheriff of the-city and county of New York sells or undertakes to sell the property levied upon under any other process in his hands.”

For the principles upon which an assignee.for benefit of creditors,, like any other trustee, can maintain an action to obtain the instructions of the court as to his duty in reference to the trust, see 5 Abb. K. G. 84fi.

For a precedent of a proceeding by which the sheriff may enjoin the ‘ enforcement of a return of conflicting executions until the various claims to priority have been determined upon motion, see 2 Abb. New Pr. & Forms, 1081.  