Heye v. Bolles

By the Court.—Daly, F. J. This is not an action brought by a creditor to enforce the collection of a judgment after he has exhausted his remedy at law, and in which the return of an execution unsatisfied is indispensable before he can invoke the equitable aid of the court; but it is an action by creditors who, in a suit brought by them to recover their debt, obtained an attachment against their debtor for fraudulently assigning his property, and who, having recovered judgment in that action, and issued execution upon it, bring the present action to set aside the fraudulent assignment, which is an obstruction to their collecting their judgment by a levy and sale of the debt- or’s property under the execution. By the issuing of the attachment, the plaintiffs acquired a lien upon the property of the debtor (Falconer v. Freeman, 4 Sand. Ch. R. 565; Rinchey v. Stryker, 26 N. Y. 75); and this lien, after the plaintiffs have recovered a judgment, entitles them to the equitable intervention of the court to set aside a fraudulent transfer of the property upon which the lien has attached, or any fraudulent obstacle in the way of enforcing the lien (Greenleaf v. Mumford, 30 How. Pr. 30); it being the design of the Oode that the attachment should be a security for the satisfaction of the [235] judgment, if the plaintiff recovers one (§ 227). To maintain such an action, it is not necessary that the execution should be returned, for, as was said by Chief Justice Nelson, in McElwain v. Willis (5 Wend. 561), it is not only not essential, but it would be fatal to the relief sought; and as was said by Senator Tracy in the same case, the execution may be the very instrument by which, when the court has removed the impediment to its operation, the judgment creditor will obtain the perfect satisfaction of his rights. Where a judgment creditor brings an action to set aside a fraudulent conveyance of real estate, which is an impediment to his obtaining a satisfaction of his judgment, an execution must have been issued (North American Fire Ins. Co. v. Graham, 5 Sandf. 200; McCollough v. Colby, 5 Bosw. 477), because the sheriff is not to proceed against the real estate if sufficient goods and chattels can be found to satisfy the execution—a fact which cannot be known until an execution is placed in the hands of the sheriff". In this case, however, an execution was not only issued, but the assignment covered all of the personal property of the debtor, and the equitable aid of the court is sought to remove the impediment created by the conveyance, that the personal property may be sold to satisfy the execution. The next question is, whether the finding of the judge, that the assignment was not made with a fraudulent intent, can be sustained. The denial in the answer, for want “ of knowledge sufficient to form a belief,” of the allegation in the complaint, that the firms of Howlett & Cook and of Twining & Cook were insolvent when the joint property belonging to each of these firms was sold to Cook, is not in the form prescribed by the Code. The denial must be of any knowledge or information sufficient to form a belief (Edwards v. Lent, 8 How. Pr. 28; Blake v. Eldred, 18 Id. 241; Elton v. Markham, 20 Barb. 349; Hackett v. Richards, 3 E. D. Smith, 13), and this fact, not being properly denied, is admitted. Treating this material fact then as admitted, it appears that Cook became the purchaser of the whole of the property of each of these firms, he at the time of the purchase being a partner in each firm. In his hands, the property thus acquired should have [236] been applied to the payment of the partnership debts, instead of which he afterward made a general assignment for the benefit of creditors, in which he directed his assignee, the defendant Bolles, first to pay out of the proceeds of the property assigned certain debts owing by him- individually, which was a diversion of the property to the payment of his individual debts, in fraud of the rights of the creditors of the firms of Howlett & Cook and Twining & Cook. Such an assignment is fraudulent (Burtus v. Tisdall, 4 Barb. 571; Wilson v. Robertson, 21 N. Y. 587; Wakeman v. Grover, 11 Wend. 187; Anderson v. Mattby, 2 Ves. Jr. 255; 4 Kent’s Com. 64). The plaintiffs were creditors of the firm of Howlett & Cook, and the validity of their debt being established by a judgment, they were entitled to have this fraudulent assignment set aside, that they might have their judgment satisfied out of the property covered by the assignment; for when this impediment is removed, this property, whether regarded as partnership property, which the partnership creditors may reach, as primarily liable in the hands of Cook to the payment of partnership debts (Story’s Eq. Jur. § 1253), or as the individual property of Cook, under the transfers made to him, it is equally liable to be levied upon and sold to satisfy their judgment. The plaintiffs having shown that they were entitled to the equitable.relief which they sought, the decision of the judge at the special term was erroneous, and the judgment must be reversed. Judgment reversed.