Ryttenberg v. Keels

The opinion of the court was delivered by Mr. Chief Justice McIver. It appears from the pleadings and other proceedings in this case that the two first named defendants, composing the firm of Keels, Nelson & Co. at the time (another member of the firm having previously withdrawn), on the day of January, 1892, executed a deed of assignment for the benefit of their creditors to the defendant, B. B. Clarke, who, in pursuance of the statute, called the creditors together on the 8th of February, 1892, for the purpose of appointing an agent of the creditors. The only persons who attended that meeting were Marcus G. Ryttenberg, one of the members of the plaintiff firm, who represented the claim of the plaintiffs, as well as that of Frank & Adler, and the defendant, C. L. Winkler, who, as attorney at law, represented the claims of Wilbur & Son and Olaussen & Co. At that meeting the defendant, C. L. Winkler, was, on motion of said Marcus G. Ryttenberg, appointed agent. On that day, after the meeting had adjourned, the creditors thus represented, not being satisfied with the showing made, agreed not to accept the terms of the assignment, and Ryttenberg proposed to write to the other creditors so soon as he could obtain a list of them from the assignee, informing them of their agreement and advising them not to accept; but Ryttenberg, failing to obtain a list of the creditors from the assignee, did not carry out his proposition. It turned out, however, that none of the creditors accepted the terms of the assignment. On the 16th or 17th of February, 1892, the stock of goods, constituting the principal portion of the assigned estate, was sold by the assignee and agent, and the proceeds deposited to their joint credit in one of the Camden banks. Subsequently — 211 — thereto, one of the claims of Wilbur & Sou was put in judgment before a trial justice, a transcript of which was duly filed in the cleric’s office on the 9th of March, 1892, and subsequently thereto, to wit: on or about the 17th of March, 1892, judgments were duly recovered in the Court of Common Pleas on the other claim of Wilbur & Son, as well as on the claims of Claussen & Co. and the plaintiffs, but when the actions were commenced in which these several judgments were recovered does not appear. No executions were issued to enforce the judgments recovered by Wilbur & Son and Claussen & Co., but the plaintiffs did issue execution upon their judgment and the same was returned nulla bona on the 18th of March, 1892, and thereupon the present action was commenced on the 22d of March, 1892. The object of the action is, first, to set aside the assignment, and, second, to have the property purporting to be transferred thereby, or the proceeds of such as has been sold, applied to the payment of the judgment in favor of the plaintiffs. The Circuit Judge in his decree (which should be incorporated in the report of this case) rendered judgment setting aside the assignment as null and void, but denied plaintiffs’ right to have the proceeds of the assigned property applied, first, to the plaintiffs’ judgment, and, on the contrary, directed that such proceeds be applied pro rata to the payment of the judgments of plaintiffs, Wilbur & Son and Claussen & Co. From this judgment plaintiffs appeal upon the following grounds, substantially: 1st. Because of error “in requiring the fund in question to be pro rated among the judgments of the plaintiffs, T. A. Wilbur & Son and J. C. H. Claussen & Co., the plaintiffs claiming the entire fund on the ground that they were the only judgment creditors who issued execution and moved to set aside the deed.” 2d. “Because neither the said Wilbur & Son nor Claussen & Co. were before the court.” 1 Taking up these grounds in their inverse order, it will be observed that neither Wilbur & Son nor Claussen & Co. were made parties to this action, nor does it appear that any effort was made to bring them in as parties; and, therefore, we are at a loss to conceive how any judgment — 212 — could be rendered either for or against them in an action to which they were not parties. Surely the fact that the defendant, Winkler, who was made a party simply as agent of the creditors, under the alleged deed of assignment, undertook to represent them in his professional capacity as an attorney at law in a case to which they were never made parties in any of the modes recognized by law, cannot have the effect of bringing them before the court and rendering them amenable to the jurisdiction of the court. They would not be bound by, and, therefore, can claim no benefit from any judgment rendered in a case to which they were not properly made parties. The conclusive test of this is that if the Circuit Judge had undertaken to decide adversely to their rights or claims, that would have been no bar to another action instituted by them to assert such rights or claims, for the simple reason that .they were not parties to the action in which such adverse judgment was rendered. But in addition to this the alleged j udgments in favor of Wilbur & Son and Claussen & Co. were never established in this case, and, therefore, for that reason, if there were no other, it was error to order any portion of the fund in question to be applied towards their payment. For, although the defendant, Winkler, did in his answer undertake, without any legal authority so far as we can perceive, to set up these judgments, yet they were never offered in evidence and never established as still subsisting demands against the alleged judgment debtors, Keels, Kelson & Co., in any of the modes recognized by law. The plaintiffs, however, not only allege in their complaint the recovery of their judgment, but they also allege that no part thereof has been paid; and these allegations not being denied by the judgment debtors, and practically admitted by the answer of the assignee, must be taken to be true. 2 It seems to us clear, therefore, that the plaintiffs, being the only parties before the court who have shown any right to the fund in question, it was error to adjudge that any portion of said fund, shown to be insufficient to satisfy plaintiffs’ judgment, should be applied towards the payment of other claims, which, while it is quite possible may be valid demands against the persons whose property produced the — 213 — fund, have never yet been shown so to be. When it was adjudged that the assignment should be set aside as null and void, it is the same as if it had never existed (Gracey v. Davis, 3 Strob. Eq., 58), and hence the defendants, Clarke and Winkler, in this case, stand practically before the court as individuals who are found in possession of property of Keels, Nelson & Co. which they acquired illegally, and which, therefore, is liable in their hands to be subjected to the payment of the debts of Keels, Nelson & Co.; and as the plaintiffs are the only creditors who have taken the proper steps to subject such property, or rather the proceeds of its sale, to the payment of debts, they were entitled to a judgment that the same be paid to them. Of course, in using the term “illegally” in the foregoing sentence, it is not to be understood as implying even the slightest imputation upon either Mr. Clarke or Mr. Winkler, but simply to indicate that the assignment under which they acquired the possession of the property having been adjudged to be a nullity, they acquired no legal rights under that instrument, and are, therefore, in possession without the authority of law. It seems to us, therefore, that, under this view of the case, the judgment below was erroneous, and should be reversed. 3 There is, also, another view which confirms that conclusion. The plaintiffs being the only creditors who had sued out execution upon their judgment, and had the same returned nulla bona, were the only creditors who were in a position to institute an action like this. Hendricks v. Robinson, 2 Johns. Ch., 283; McDermutt v. Strong, 4 Id., 687; Day v. Washburn, 24 How., 352; and especially the case of The Freedmans Saving & Trust Co. v. Earle, 110 U. S., 710, where the whole subject is elaborately considered. Our own cases of Rhodes v. Casey, 20 S. C., 491, Claflin v. Iseman, 23 Id., 416, and Curlee v. Rembert, 37 Id., 214, while not exactly in point, tend to support this view. But we need not go into any extended observations to support this view, for two reasons: First, because we think our conclusion can be fully sustained upon the ground first considered; and second, because the opinion of Mr. Justice Matthews in the case of the Freedman's Saving & Trust Co. v. Earle, supra, is so full and satisfactory that we need only to — 214 — refer to that case as containing the argument and authorities upon which we rely. 4 It is, however, earnestly urged by the counsel for respondents that the plaintiffs are estopped from taking this position by the understanding between the plaintiffs and Mr. Winkler as the representative of the other creditors, Wilbur & Son and Olaussen & Co., who had failed to sue out executions on their judgment, as set forth in the decree of the Circuit Judge. While it may be possible, though we are not to be understood as so holding, that such understanding might have been sufficient to estop the plaintiffs from proceeding to set aside the assignment, we are unable to understand how it could have any effect in estopping the plaintiffs from using the advantage which they had acquired by reason of their superior diligence in suing out their execution and instituting this action for their own benefit. But the Circuit Judge having held that the plaintiffs were not estopped from bringing this action to set aside the assignment, and there being no exception to, or appeal from, such holding, that matter must be regarded as finally concluded, so far, at least, as the parties to this case are concerned. 5 It only remains, therefore, to consider whether such understanding could operate so as to estop the plaintiffs from using their advantage acquired as above stated. The understanding, as stated in Mr. Winkler’s answer, was as follows : That after the meeting of creditors, called for the purpose of appointing an agent to represent them, had adjourned, M. G. Byttenberg, one of the plaintiffs, representing their claim, “proposed to this defendant that, as the assigned estate was small, if the said Wilbur & Son and Olaussen & Co. would not execute releases, he would not release his claim against the said assigned firm, and that he would write to all the other creditors, advising them not to release their claims; so that, if no creditor released, the assets of the assigned estate, after paying the costs and expenses of the assignment, could be pro rated among all the creditors, who could then get judgment against the assignors for the balance of their demands, the said Byttenberg stating that he would put the matter in the hands — 215 — of his attorneys, Messrs. Lee & Moise, of Sumter, and instruct them to act in accordance with said proposition, viz: to abide by the assignment if no creditor should release; that this defendant agreed to said proposition, and he did, upon the faith that the plaintiffs would perform their part of said agreement, refuse for said creditors represented by him to release their said claims, and he advised other creditors to do likewise.” Now while this arrangement as thus stated does look very much like an agreement that the assignment should be allowed to stand, in which event the assets of the assigned estate would be pro rated amongst all the creditors, of whom there appears to have been several others besides the plaintiffs and those represented by Mr. Winkler, we see nothing in it which even intimates any understanding as to what was to be done in the event, which did occur, of setting aside the assignment. Manifestly the arrangement, did not and could not have contemplated any such event as that which actually did occur, as that would be contemplating an event not only inconsistent but entirely at variance with the manifest purpose of the arrangement. When, therefore, the attack, which proved to be successful, was commenced against the assignment, the previous arrangement was necessarily abrogated, and each party was left to pursue his' own course. Indeed, it would seem as-if both parties disregarded the arrangement, in one respect at least — for the understanding, as stated, was that the assignment was to be allowed to stand, and the assets derived therefrom to be pro rated amongst all of the creditors, and then the creditors could obtain judgment for the balance remaining unpaid by the assigned assets; and yet both the plaintiffs and the creditors represented by Mr. Winlder, before any distribution of such assets, proceeded to obtain judgments for the whole amount due them. We do not see anything in the understanding between the parties which could have the effect of estopping the plaintiffs from claiming the advantage acquired by their superior diligence. 6 The judgment of this court is, that the judgment of the Circuit Court be so modified as to conform to the views herein announced, and that the case be remanded to that court for such further proceedings as may be necessary to carry — 216 — out such views. Of course, this judgment cannot affect the right of any of the other creditors who are not parties to this action to institute such proceedings as they may be advised to assert and protect their rights.