Opinion
May Term, 1897.
Alexander S. Bacon, for the appellant.
Ira Leo Bamberger, for the respondents.
On December 4, 1895, Emma F. Harding, then doing business on Grand street, Brooklyn, made an assignment for the benefit of creditors to J. Frank Greene, the appellant, and on the same day Emma F. Harding, Robert H. Harding and Abby H. Harding, who carried on business on Fulton street, Brooklyn, under the firm name of Harding Co., made a similar assignment to Greene. The assignee received no assets under the assignment of Mrs. Harding except ten or fifteen dollars. On December twenty-seventh the goods of Harding Co. were sold by the assignee at auction. On the previous day the First National Bank of Brooklyn commenced an action against Harding Co., and obtained an attachment under which a levy was made upon the goods. It was agreed between the attorneys for the bank and for the assignee that the levy should be released in order to permit a sale of the goods, and that the levy should attach to the proceeds which were to be deposited in the Hamilton Trust Company in an amount sufficient to discharge the bank's judgment. An order was subsequently obtained directing the trust company to pay the bank's judgment, and thereupon the assignee commenced an action against the bank for the conversion of these funds.
On January 2, 1896, these two actions were commenced by A.J. Bates Co., the one being against Emma F. Harding on a note of $722.17, and the other against the firm of Harding Co. on a note of $1,165.69, and attachments were issued in each case, but the warrants were never delivered to the sheriff. On January 16, 1897, the attorneys for Bates Co., the defendants in the two actions, and for the assignee, entered into the following stipulation in the two actions:
"The plaintiffs above named having obtained attachments against the property of the above-named defendants, and having levied upon moneys now deposited in the Hamilton Trust Company, of Brooklyn, to the credit of J. Frank Greene, as general assignee of defendants, said money having been received from and upon the sale at auction of the stock of goods of the defendants Harding Co., and the parties hereto wishing to avoid all possible expense pending litigation to determine the respective claims to said moneys, it is consented that the Hamilton Trust Company reserve and hold said deposit to the amount of $2,300.00 subject to the determination of the above-entitled actions or such other actions as may be instituted to determine the title thereto. Nothing in this stipulation shall be construed to abridge the rights of any of the parties in any actions that may be commenced by either of them, it being the intent of this stipulation merely to give to the above-named plaintiffs a lien, under their attachments, upon the said money with the same effect as if the levy under their said attachments had been made by the sheriff upon the property of the defendants above mentioned.
"An order may be entered herein directing the Hamilton Trust Company to reserve and separate $2,300.00 to the credit of the above-entitled actions and subject to the stipulation hereinbefore mentioned."
On January 17, 1897, an ex parte order was obtained by the attorneys of Bates Co. directing the trust company, out of the moneys deposited with it to the credit of the assignee, to forthwith separate $2,300 to the credit of the above actions and subject to the stipulation aforesaid; and on the same day an order was obtained directing the assignee and the trust company to show cause why the company should not pay out of the specified moneys deposited with it for that purpose the judgments in these actions, and why the sheriff should not levy the executions upon such moneys.
The judgments in these actions were not entered until the twenty-third of January, and on January thirtieth, after hearing counsel for both parties, an order was entered that the moneys deposited in the trust company were applicable to the payment of the judgments, "only in the event of the general assignments made by the above-named defendants on December 4th, 1895, to J. Frank Greene, being declared and adjudged to have been made for the purpose of hindering, delaying and defrauding creditors, in which event the moneys deposited in the Hamilton Trust Company shall and will be applied to the payment of the said judgments and each of them," and referring the matter to a referee to take proof and report to the court whether the general assignments were made for the purpose of hindering, delaying and defrauding creditors. It is from this last order that the present appeal is taken.
We think the fair construction of this stipulation is, that the parties intended thereby to save the expense and loss which would result from a levy upon the stock of goods and consequent prevention or postponement of the sale, and to have the rights of the plaintiffs, if they had any, transferred from the goods to the fund resulting from their sale, and not to pass finally upon and decide the rights of the parties; that there should be a subsequent action to determine their rights, until which time the money was to remain in the hands of the trust company, and that the stipulation did not contemplate a summary disposition of the rights of the parties upon a motion of this character.
Another substantial objection to the stipulation arises from the fact that the effect of it, as claimed by Bates Co., would be to apply the property of Harding Co., or its assignee, to the payment of the judgment against Mrs. Harding, the absurdity of which is apparent from the statement. The only property received by the assignee from the estate of Mrs. Harding was ten or fifteen dollars, yet the effect of the arrangement, if carried out, would be to pay a debt of Mrs. Harding's with the property of Harding Co.
Still another objection arises from the fact that the validity of the assignment cannot be summarily disposed of upon a motion of this character. The creditors have the right, through the assignee, to contest, in an action instituted for that purpose, the question of the validity of the assignment, and whether it was made with intent to hinder, delay and defraud creditors, but this question cannot be litigated in the present action.
It is not necessary to express an opinion as to the power of the court to order a compulsory reference under section 1015 of the Civil Code.
The orders must be reversed, with ten dollars costs and disbursements in each action.
All concurred.
Orders reversed, with ten dollars costs and disbursements in each action.