Field v. Chapman

Allen, J. —The plaintiffs, are creditors of Isaac 1. Hunt & Co., a firm composed of the defendants Isaac L. Hunt and Julia — 325 — A. Chapman, and in these actions seek to reach the dioses in action, and equitable interests of that firm, and property alleged to have been transferred, in fraud of their rights as creditors, to the defendant George M. Chapman. In a word, these actions are creditors’ suits, and are governed by the same rules which governed creditors’ bills in the late Court of Chancery. Had the objection been urged that sixty days had not elapsed between the issuing of the executions upon the judgments at law, and the commencement of these actions, I should have felt constrained to hold the objection well taken, following the decision at general term in the Fifth District, and the construction given by the chancellor to the statute regulating this equitable remedy. (Cassidy a. Meacham, 3 Paige, 311 ; Strang a. Longley, 3 Barb. Ch., 650.) But as it was not relied upon, but simply suggested by the defendants, the motion will be decided without further reference to it. A more important objection to the plaintiffs’ proceeding and action is, that there has not been a substantial exhausting of the legal remedy against the debtors. A creditor at large cannot resort to a court of equity to reach, the choses in action of his debtor, or to set aside a fraudulent sale or conveyance of property; neither can a creditor at large, of a partnership, come into a court of equity to marshal the. partnership assets, and compel their application to the payment of partnership debts, either ratably or with preferences. (Hastings a. Belknap, 1 Den., 190 ; Andrews a. Durant, 18 N. Y., 496 ; Reubens a. Joel, 3 Kern., 488 ; Crippen a. Hudson, Ib., 161 ; Greenwood a. Broadhead, 8 Barb., 593 ; Kirby a. Schoonmaker, 3 Barb. Ch., 46.) But one of the debtors was served with process in the action at law ; and although the judgment is in form against both, it is not so for any purpose, except to subject the property which she owns jointly with the other defendants to the execution upon the judgment or judgments against her. (Oakley a. Aspinwall, 4 Comst., 573 ; 3 Kern., 500; Code, §§ 376 et seq.) All defences are open to her in proceeding to enforce it against her; and her individual property cannot be reached, or at all affected by the judgment. The statute is, that “ whenever an execution against the property of a defendant shall have been issued on a judgment at law, — 326 — and shall have been returned unsatisfied, in whole or in part, the party suing out such execution may file-a bill in chancery against such defendant,” &c. (2 Rev. Stat., 173, § 38) Ho judgment at law has been recovered against Julia Ann Chapman, and no execution has been issued against her upon any such judgment; and against her, therefore, within the letter of the statute, a creditors’ bill will not lie; and yet, without her, as a party, such a suit would be defective. But, aside from this literal reading of the statute, it requires a bona-fide attempt to collect the debt, by execution at law, before the equitable powers of the court can be invoked, in aid of the judgment at law. The creditor must have pursued his legal remedy to. every available extent, before he can resort to equity for relief. This was the established rule in chancery before the Revised Statutes, and the rule thus became a part of the positive law of the State. (Brinkerhoff a. Brown, 4 Johns. Ch., 671 ; Hendricks a. Robinson, 2 Ib., 283 ; Wiggins a. Armstrong, Ib., 144 ; Crippen a. Hudson, and Reubens a. Joel, supra.) Where there are two or more joint-debtors, the remedy at law must be exhausted against all, before the statute requiring a bona-fide attempt to collect the debt can be said to have been made. It is only on a failure of the legal remedy that equity lends its aid in the collection of a legal debt. ■- If there is any excuse for not proceeding to final execution ■against one or more joint-debtors,—as that he is out of the jurisdiction of the court, a bankrupt, or a surety, or the like,—the facts relied upon should be stated in the complaint in the equitable action. - Where the judgment is against several, the creditor must exhaust his remedy by execution against all before he can come into a court of equity for relief. (Child a. Bean, 4 Paige, 309.) The reasoning of Yice-chaneellor Gardiner, fully approved by the chancellor, is entirely applicable to the case of joint-debtors, when all had not been served with process, or so proceeded against as to subject their individual property tó an"execution at-law, which is this case. For, if having a judgment; it is necessary to resort to execution against all, a fortiori, it is necessary that the demand" should be established by a judgment at law as a valid demand against all. — 327 — It would be a palpable evasion of the statute to permit a creditor to obtain a judgment against joint-debtors, by service upon one, and upon the return of an execution resort to equity; and great abuse not only might but almost inevitably would result from such practice. The best firms in New York city might find themselves defendants in a creditors’ suit, upon the return of an execution, upon such á judgment by the sheriff of the county of Kings or Westchester, where the party sued might' chance to reside, and the courts would be flooded with litigation entirely unnecessary. Judge Gardiner says: “The necessity contemplated by the decision upon the subject should exist and be established before resort to this court. Sound policy requires thisand again: “ The only way to guard this court from an influx of business that will be overwhelming, and to save debtors from an expense equally destructive to their interests and the interests of their creditors, is strictly to adhere to the wholesome rule, that, before relief can be had here, the remedy at law must be, not in name only, but in fact, exhausted.” The chancellor in the same case says, “ that where there are several defendants in a judgment, who are jointly holden for the payment of the plaintiff’s debt, he should exhaust his legal remedy, by execution against the property of all, before he applies to this court for relief.” Host certainly, the legal remedy cannot be exhausted, when not only no execution has been issued but no j udgment has been obtained against all. Both judgment and execution against all are necessary to entitle the creditors to this equitable relief. The same principle was reaffirmed in Howard a. Sheldon (11 Paige, 558) ; and this case is not distinguished from that, by the fact that, in that there was a former judgment against all the defendants for the same debt. Here there ought to have been one. It is unjust to all the joint-debtors, as well those served as those not served, to subject them arid their joint property to the costs of this expensive remedy before the cheap remedy at law has been fairly and fully tried. It is especially unjust to the party not served, because he is made to bear a part of these unnecessary costs without notice of any attempt to collect the debt at law, or any opportunity to prevent the expense by paying the debt. It is unj ust to him upon another ground for he is a ne — 328 — cessary party to the «’editors’ suit, not to protect his interest in the partnership effects, for he could not be heard, or object to ■the validity or regularity of the judgment; but that he may be charged with contribution to his co-defendants, whose property may be appropriated to the payment of this joint debt. (Commercial Bank a. Meach, 7 Paige, 448.) It is but just he should have the opportunity to contest his liability in an action at law, before he should be compelled in equity to contribute to the payment of the demand. A greater effect is claimed for the judgment against joint-debtors, after service of process upon one, other than the stat- ■ ute contemplates. The statute only undertakes to declare the mode and manner of executing such judgment by legal process. It does not purport to declare what shall be an exhausting of the legal remedy, so as to entitle the plaintiff to equitable relief, or to say what effect shall be given to the j udgment, except as it authorizes process in a prescribed form upon it, and ulterior or supplemental proceedings in the nature of an action founded upon it to charge the defendants not originally served with process. The statute authorizes judgment in form against all, and the execution necessarily follows the judgment; but it directs an indorsement upon the execution of the names of the defendants not served with process, and only permits it to be levied of the individual property of the defendants served with process, and the personal property of such defendants, owned by them as partners with the other defendants, or any of them. (2 Rev. Stat., 377.) The Code (§ 136), substantially re-enacts this provision. The judgment is no lien upon the real estate of the defendants not served, or upon any which he owns as tenant in common with his co-defendant. The Joint-Debtor Act never contemplated giving the judgment authorized by it any other or greater effect than that declared by the act itself; and it would be unjust to give it all the effect of judgment, after service upon all the defendants, for the purposes of this equitable action. I am of opinion that'the remedy at law has not been exhausted, and that the motion for a receiver should be denied, and the injunction in the Askham suit be dissolved. There was no express trust created for the payment of the firm debts upon the occasion of the transfer by Hunt to Julia — 329 — Ann Chapman, and the equity of copartnership creditors to be paid out of the copartnership property js subordinate to the right of the partners to dispose of the effects as they shall see fit, until a foundation is laid for equitable .interference. This ground can only exist after the legal remedies are exhausted, or upon the insolvency or bankruptcy of - the partners. There is no allegation of the insolvency of the firm, or that Julia Ann Chapman is not abundantly able to respond to all the claims against the partnership. This could hardly be alleged in the face of the standing offer to give security for the payments of all judgments that shall be recovered against her. The rights of the plaintiffs are not in jeopardy so as to call for and authorize the interference of the court in the marshalling the assets for their benefit. In the action at the suit of Field and others, there is a difficulty in the way of considering, the motion to dissolve the injunction. The defendant George M. Chapman, is charged with contempt of court in the violation of the injunction, and an attachment is asked against him upon affidavits making a jorimafaoie case against him. TJpon the affidavits, as well on behalf of the defendant as the plaintiff, it is very evident that there has been a breach of the injunction-order. It is not denied that some of the goods which were of the stock of Isaac L. Hunt & Co., and which have come to the possession of George M. Chapman, have been sold and disposed of by him or by his clerks and agents by his authority. This authority was not conferred in words or expressly given, but he made the clerks in his store his agents for the sale of his goods, and kept these goods commingled with the goods which he had acquired from other sources, and made no effort to separate the goods and enable his clerks to observe the injunction. He was and is responsible in this proceeding for the acts of his agents and servants, and it is no answer for him to say, that upon being served with the order he informed his clerks of it and left the store to their management, and took no personal part in the sale of goods. Process of this court cannot be disregarded, evaded, set at naught, in this way. There is but little if 'any distinction between violation by others, thus connived at by the defendant, and a wilful violation by the defendant himself. It is well settled that a party in contempt cannot apply to the — 330 — court for a favor. (2 Barb. Ch., 287.) It is said that a party is not considered as actually in contempt until an attachment is sealed. (Ib., 282.) But this seems to be applicable only to technical contempts, or contempts not involving a disregard of any special order of the court, as for not answering, or not paying costs ordered to be paid. (1 Dan. Ch., 556.) In Evans a. Van Hall (Clarke, 22), the defendant was not permitted to move to set aside a writ of ne exeat upon the merits, where the affidavits made a prima-facie case of contempt against him for a violation of an injunction in the same action. A party cannot be heard in a matter which is not a strict right, while he is in contempt. (Johnson a. Pinney, 1 Paige, 646.) He may show that the proceedings against him subsequent to the orden, the violation of which is charged as a contempt, and the order charging him with the contempt, have been irregular (King a. Bryant, 3 M. & C., 191) ; and although a plaintiff is in contempt for non-payment of costs, he may have an attachment against the defendant for not answering, as this is the ordinary process of the court, and Otherwise the suit wumld be absolutely stopped. (Wilson a. Bates, Ib., 197 ; and see Miles a. Young, 9 Ves., 172 ; Anonymous, 15 Ib., 175.) In Odell a. How (1 Molloy, 492), the defendant was allowed to move, by consent, to set' aside the order awarding an attachment against him for irregularity, but the court said that for any- other purpose he must appear in vineulis. Rogers a. Patterson (4 Paige, 450) affirms • the rule that a party in contempt has no right to ask the court for a favor. It is in one sense a favor to ask the court to review its decision and decide anew upon the merits of the application for an injunction. In another sense it is not but a right that a party should be relieved from process inadvertently granted, and should not be subjected without cause to the operation of the extraordinary process of the court. (See 1 Dan., Perkin’s ed., 554 et seq.) Hpon passing upon the question of contempt, the court will not look into the merits of the case. So long as the injunction remains in force, it is the duty of parties to obey it, and the duty of the court to punish every breach thereof; and in the words of the chancellor, “in no case can a defendant be permitted to disobey an injunction regularly issued, whatever may be the final decision of the court upon the merits of the cause.” If — 331 — there is not sufficient equity upon the face of the hill to support the injunction, the proper course is to apply at once for its dissolution. But in the imposition of the fine and the punishment of the contemnor, the court will take into consideration the merits of the action and the right of the party to the writ. (Sullivan a. Judah, 4 Paige, 444.) In this case we have a precedent of a motion entertained and granted dissolving the injunction while the party was in contempt for its violation. There was, as in this case, an application for an attachment for a breach of the injunction, and a cross-motion for a dissolution of the injunction; and the latter application was granted upon the ground that there was no equity in the complainant’s bill entitling him to the writ. Upon the disposition of the motion for an attachment at another day, the chancellor charged the defendant with the payment of the costs of the proceedings for a contempt, and upon payment of those costs dismissed the proceedings. The violation of the injunction was in that case wilful and deliberate; but the chancellor was of opinion that there was no equity in the complainant’s bill, and that therefore he had sustained no damage to which he was entitled upon a breach of the injunction, and the excuse offered he thought sufficient to prevent the imposition of any considerable fine as a punishment for contemning the process of the court. With my view- of the merits of this action, I cannot do better than follow this precedent. If I am right in my conclusion that no case is made by the complainant against the defendants, .Julia and George M. Chapman, the injunction must be dissolved upon the hearing of the action, and the plaintiffs will not be entitled to any benefit from it; but, on the contrary, large damages will have accrued to the defendants by reason of that process, for which the plaintiffs may be liable to respond. It follows, that the plaintiffs not being entitled to the injunction-order, can suffer no legal damages by reason of its disregard by the defendants. But the plaintiffs are entitled to full indemnity for the expenses of proceedings for the violation of the injunction, which I fix at $125.' Upon payment of that sum as and for the •costs and expenses of the application for attachment, the pro-needing for the punishment of the contempt will be dismissed — 332 — and the injunction will be dissolved. If'the defendants do not elect to pay, and pay the said sum within 20 days, then an attachment will issue returnable at sorne term of this court in the first district, with an order indorsed thereon holding the said George M. Chapman to bail in the sum of $1,000, and the motion for the dissolution of the injunction will abide the order of the court upon the return and disposal of the attachment. The costs upon the other motion will abide the event of the action.