Murray v. Gerety

McAdam, C. J. The firm of Gerety & Gildea was, at the time the transfer was made and judgment recovered, insolvent and unable to pay its debts, and this fact was known, not only to the members of the firm, but to Philip and Alice Gerety. Gerety & Gildea had no property excepting the moneys coming ■to them as a firm from the buildings in question, and these moneys were charged with an equity in favor of MeShane & Co. for the amount of materials which they furnished, and which went into the buildings, and created the fund. The assignment made by them was practically a general assignment, in which the sister and brother of Gerety and the father of Gildea were preferred, to the exclusion of McShane & Co. It was practically a general assignment, because it transferred all the property of the firm. Treated as a general assignment, it would be void, because not acknowledged or filed, and because it preferred creditors to an extent beyond one-third of the estate, (Laws 1887, c. 503;) and a general assignment could not cut off the rights of McShane & Co. to file a lien, (Smith v. Baily, 8 Daly, 128; Mandeville v. Reed, 13 Abb. Pr. 173.) Such an assignment, if void because fraudulent as to any part of it, is void in the whole. Burrill, Assignm. § 352 et seq. Treated as an assignment of a demand it is invalid, because made to hinder, delay, and defraud ered; itors, particularly McShane & Co. The judgment recovered by Alice Gerety is invalid as against McShane & Co., if it was procured by fraud or collusion. Acker v. Leland, 109 N. Y. 16, 15 N. E. Rep. 743; Peyser v. Myers, 9 N. Y. Supp. 229. That it was so procured is evident from the following circumstances: (1) Philip Gerety, the brother, who claims to have loaned $250, kept no book or account of his alleged loan's. (2) Alice Gerety, the sister, kept no book or account of her loans. In both cases the loans were claimed -to- have been made in small sums at different times. Neither Philip nor Alice had any money in any depository, and took no receipt or obligation for the money. Gildea knew nothing whatever of the loans, and, if made at all, they were to John B. Gerety individually, and it is a fraud upon firm creditors for partners to prefer individual creditors. Saunders v. Reilly, 105 N. Y. 18, 12 N. E. Rep.. 170; Burhans v. Kelly, 2 N. Y. Supp. 175. (3) The manner of obtaining the judgment was significant, the mode of service on ■John B. Gerety alone, and that in front of her lawyer’s office, and the fact that immediately after the service John B. Gerety employed a lawyer to confess judgment against the firm, without the knowledge or consent of his co-partner. For these, and like reasons, the transfer and the judgment and the proceedings founded upon it, must be held to be no legal impediment to the lien filed by McShane & Co. Meehan v. Williams, 36 How. Pr. 75, 2 Daly, 367; Schaeffer v. Reilly, 50 N. Y. 61. This court has the same power in mechanics’ lien cases that the other courts of record exercise. They proceed alike under the same statute to attain the same end. The defendants plead the transfers in defense, and, like a general release or other document pleaded in bar of a recovery, the court may in a proper case, and even in a common-law action, adjudge such instruments to be void so as to destroy their effect as a defense. The action is to foreclose the lien, and declaring fraudulent a transfer intended to defeat the lien is an incident to the jurisdiction necessary to make it effective. The case of McCorkle v. Herrman, 117 N. Y. 305, 22 N. E. Rep. 948, is inapplicable to ■a case of fraudulent disposition, and applies only to transfers made in good faith. The present action is unlike Geery v. Geery, 63 N. Y. 252, relied on by the defendants. In that case the action was to set aside conveyances alleged 207 to be fraudulent, and the court held that such an action was maintainable only by a judgment creditor who had first exhausted his legal remedies. As remarked before, the transfers in this case were pleaded in defense, and it became necessary for the court to pass on their validity. Indeed, the very nature of the defense called upon the court to adjudicate this question. It follows that the plaintiff is entitled to judgment, the form of which will be settled when the decree is presented.