West Side Bank v. Foehrenbach

Leventritt, J. On June 2, 1898, the respondent, West Side Bank, recovered judgment against Michel Foehrenbach, and on the same day caused the transcript to be filed, the judgment to bp docketed and the execution thereon to be issued. On October 28, 1898, the appellant, Pennsylvania Glass Company, recovered judgment against Michel Foehrenbach, and on the same day caused the transcript to be filed, the judgment to be docketed and the execution thereon to be issued. No further step was taken by either party until November 11, 1898, when both the bank and the Glass company, each without knowledge of the other, drew affidavits to examine Michel Foehrenbach as a judgment debtor. On the same day — November 11th — the bank obtained an order requiring Foehrenbach to appear in court on November 16th, for examination. He having been theretofore duly served, appeared in court on November 16th; the proceedings were regularly adjourned from time to time, until the morning of November 30th, when his examination was had, and immediately upon its conclusion,, one Albert L. Phillips was appointed receiver. The Glass company delayed obtaining an order for Foehrenbach’s examination until November 14th; this order was made returnable on November 30th, and was served on November 25th. The examination was had on the return day, when it was disclosed that on the same morning the judgment debtor had made oath concerning his property, at the instance of the bank, and that Albert L. Phillips had been appointed receiver. This appointment having been made without notice to it, the Glass company, on December 2d, obtained an order to show cause why a receiver should not be appointed, and on December 3d, obtained a further order to show cause why the appointment of Phillips should not be vacated and set aside. Both were made returnable on December 5th. Immediately after service on it of the order to show cause, obtained by the Glass company on December 2d, the bank procured and duly served an order to show cause on its part, returnable December 5th, why Albert L. Phillips [132] should not he appointed or continued receiver of the property of Michel Foehrenhach, judgment debtor. On the return day of the last-mentioned order, the court adjourned the hearing of the motion to the following day so that all the applications might be heard at the same time. On that day, December 6, 1898, the various motions were argued. The appointment of Phillips was vacated forthwith, and the court, having taken the other applications under advisement, on December 8th made two several orders, by the first of which it granted the motion of the West Side Bank for the appointment of a receiver, but named one William E. Wyatt, and by the second of which it denied the motion of the Pennsylvania Glass Company, with leave, however, to have the receivership extended for it's benefit. From the affirmance of these orders by the General Term, the Pennsylvania Glass Company has carried its .appeals to this court. We are called upon to determine the right of priority of the contesting judgment creditors to the application of the property of Michel Foehrenhach to the satisfaction of their respective judgments. It is to be observed that the statutory provisions with regard to supplementary proceedings are intended as a simple substitute for the creditor’s bill usual in chancery practice. Lynch v. Johnson, 48 N. Y. 27. In chancery, priority of right to the debtor’s property was declared to be in that creditor who had first effected service of his subpoena, or made a bona fide attempt to serve it on the debtor. Fitch v. Smith, 10 Paige, 9. Similarly, under the Code the date of the first actual service on the judgment debtor of an order for his examination determines the creditor’s prior right to the fund. Riddle & Bullard on Supplementary Proceedings, 429; Guggenheimer v. Stevens, 26 N. Y. St. Repr. 245. Under the old Code, by the provisions of which the receiver was vested with the property and effects of the judgment debtor only from the time of the filing and recording of the order appointing him (Oode of Pro. § 298), it was held that mere service of the order for the examination of the debtor, even though accompanied by an injunction clause, did not give such priority as would defeat a levy under execution on the part of any other judgment creditor, intermediate the commencement of the supplementary proceedings and the appointment of a receiver therein. Becker v. Torrance, 31 N. Y. 631. [133] The new Code changed this rule. Now, the receiver’s title, though vesting only from the time of the filing of the order, extends back for the benefit of the judgment creditor in whose behalf the proceeding was instituted so as to include the personal property of the judgment debtor at the time of the service of the order requiring him to attend and be examined. Code of Civ. Pro., §§ 2468, 2469, subd. 1. So, that now the commencement of the proceedings gives the judgment creditor an equitable lien on the debtor’s property, which, on the appointment of a receiver, becomes a legal title in the latter as of the date of the service of the order for examination. McCorkle v. Herrman, 117 N. Y. 297. In the case at bar priority was with the West Side Bank. Its order was served at least nine days before that of the Pennsylvania Glass Company. The date of the service of the order summoning the debtor for examination, with the accompanying injunction restraining the transfer of property, is the controlling factor in determining the priority of the various judgment creditors. Tlio bank, in procuring its order on November 11th, was more diligent than the Glass company, whose order followed on the 14th. But even had the Glass company preceded the bank in that particular, priority would still have been with the latter by reason of the prior service of its order. It was the diligence of the bank which prevented any dissipation of Eoehrenbach’s property between November 16th and November 25th. After the service on him of the injunction order, it became immaterial who succeeded in securing the appointment of a receiver, inasmuch as he was prevented from 'transferring his property until the order of the court directed him to turn it over to the receiver, Wyatt. Had Mr. Wyatt or any other receiver been appointed at the instance of the Glass company, he would not have held the property transferred to him as its property, but for all the judgment creditors according to their respective priorities. It would have been in custodia legis, awaiting the determination of those priorities. Banks v. Potter, 21 How. Pr. 469. While a creditor may lose his precedence by sleeping on his rights for too great a period of time after service of his order (Myrick v. Selden, 36 Barb. 15), that question is not here involved because the West Side Bank was duly diligent. It secured the appointment of Mr. Phillips, as receiver, on the day that it had the judgment debtor examined. As soon as apprised of the irregu [134] larity in the appointment in that no notice had been given to the Glass company, whose proceeding was pending,— which irregularity as disclosed by the record was due rather to a misleading answer of the debtor than to an omission on its part,— the bank promptly moved to have the error rectified. The vacatur of the order designating Phillips does not affect the right of the parties. The priority of the West Side Bank was established when the Pennsylvania Glass Company entered the judgment creditor’s race. The orders must be affirmed. Eeeedman, P. J., and MacLean, J., concur. Orders affirmed, with costs to the respondent.