Opinion
03-19-1896
VAN STEENBERG v. E. R. PARSIL BUTTON CO.
Mr. Denman, for Meyer & Co. Mr. Depue, for Faitoute. Coal Co. J. E. Howell, for receiver.
Bill by William Van Steenberg against the E. R. Parsil Button Company. On application of George A. Meyer and others for restitution of property, etc.
Mr. Denman, for Meyer & Co.
Mr. Depue, for Faitoute.
Coal Co. J. E. Howell, for receiver.
EMERY, V. C. The question on this proceeding is whether the petitioners, who are judgment creditors of the insolvent corporation defendant, were, at the time of the commencement of the proceedings of insolvency, entitled to a security or lien on the debts due to the corporation to the amount of their respective judgments. The judgments were recovered, and executions thereon were issued and delivered to the officers, prior to the insolvency proceedings. If the judgment creditors had then acquired any lien or security on these debts, the receiver holds the property subject to the judgment creditors' rights, and they are to be preferred to that extent. Doane v. Insurance Co. (1889; Err. & App.) 45 N. J. Eq. 274, 17 Atl. 625. In the case of Meyer & Co.'s judgment, execution was delivered to the sheriff on December 29, 1894, and on the same day the sheriff, claiming to proceed under section 67 of the corporation act, by notice in writing signed by him declared that he held the execution, and was unable to find property of the corporation liable to execution whereon to levy, and thereby declared his election to satisfy the execution from any debts due said corporation, and accordingly demanded the delivery of the evidence of the debts to him for the use of the execution creditor, and a transfer of the same to him in writing. The demand was signed by the sheriff, and served upon the proper officer of the company on the same day. The company, by its attorneys, acknowledged the demand, requested a few days' delay to prepare the transfer, and on January 2, 1895, about 10 o'clock in the morning, the written transfer was received by the execution creditors' attorney. On the same day the bill in this cause was filed, and an adjudication of insolvency was made, and a receiver appointed under the statute. The hour of the day at which the bill was filed does not appear. Between 5 and 6 o'clock on the afternoon of the same day notices to the debtors of the corporation were mailed by the plaintiff's attorney, to whom the books of account and evidences of debt had been delivered. He collected some of the debts, and then, upon a demand of the receiver, delivered the moneys collected and all the books and evidences of debt to the receiver, saving their rights, and the receiver has since collected some of the accounts, saving to the petitioners their rights to the proceeds of the collection. The receiver's counsel contends that under the statute the lien of the execution creditors was not perfected at the time of the decree of insolvency, and that they were not entitled to preference. The reasons alleged are: First, that the statute authorizes the proceedings to apply debts to the satisfaction of the execution only in case the officer holding an execution "shall be unable to find other property belonging to such corporation liable to execution," and that here the officer made no attempt to levy on other property. It is admitted that no such attempt was made, and the reason given by the officer is that they had had other executions, and knew they could not make anything by levying on the personal property. The property of the company was. in fact, so incumbered by mortgages that it was insufficient to pay these mortgages and the rent due ($1,700), for which the landlord had a claim upon all the goods and chattels. As matter of fact it is established in the case that at the time of the making of the election to apply debts there was no property of the defendant applicable to the payment of the execution. There is no ground to attack the good faith of the sheriff in making the election, and, under the authority of Waterman v. Merrill (1869; Sup. Ct.) 33 N. J. Law, 378, 384, it must be held that, if the sheriff in good faith believed that there was not sufficient other property to satisfy the execution, he had the right to elect to apply the debts, and the election is valid. The second contention is that the lien of the judgment creditor under the statute is not perfected until after notice is actually given to the debtors, and that until such notice is received by the debtors the inchoate right of the creditor must yield to the right of the receiver representing the general creditors. The statute (section 67) provides that the delivery to the officer of the evidences of debt, "with a transfer to the officer in writing for the use of the creditor and notice to the debtor, shall be a valid assignment thereof; and such creditor may sue for and collect the same in the name of such corporation. * * *" I am inclined to think that, so far as any debtor of the corporation is concerned, the lien or title of the execution creditor is not perfected until notice is given to such debtor; and that the receiver's counsel's position is well taken to this extent. But the real question is whether, after the creditor or officer has duly elected to apply the debts, the corporation, or any one claiming under it, as assignee of the debts, otherwise than as a bona fidepurchaser, can prevent the creditor from perfecting his rights under the statute. My opinion is that they cannot, and that in this respect the rights of the execution creditor to apply the debts are analogous to, and are to be governed by, the same principles as those relating to the perfecting of the rights against goods and chattels by the delivery of the execution to the officer. Our statute of executions, which in this respect was a copy of the English statute, provides that the goods shall be bound from the time of the delivery of the writ to the officer. At common law they were bound from the issue of the writ. But by the delivery or by the issue of the writ no actual lien or title was obtained, but only the right to perfect a lien or title by actual seizure, which right of seizure exists against the judgment debtor and every person to whom he may transfer it. other than a bona fide purchaser. In Van Waggoner v. Moses (1857) 26 N. J. Law, 570, it was held by the court of errors and appeals that an assignee for the benefit of creditors was not a bona fide purchaser under the statute, and a levy upon property assigned, made after the assignment under an execution issued before the assignment, was therefore valid. The same principle has been applied by the English courts under their similar statute. In Woodland v. Puller, 11 Adol. & El. 859, 39 E. C. L. 454, it was held that under a writ delivered to the sheriff's officer before proceedings in insolvency a levy might be made, after the order of insolvency vesting the debtor's property in assignees, upon the property assigned to assignees. A receiver of a corporation in insolvency proceedings seems to me to stand in the same situation, so far as relates to the right to prevent the creditor from perfecting the statutory rights under the execution. So far as the corporation and its receiver are concerned, the debts are bound for the application to the execution creditor's debt by the service upon the corporation of the notice of the election. The statute relating to insolvent corporations contains no provisions impairing any existing rights of creditors to a lien, whether such rights are inchoate or perfected; and in Doane v. Insurance Co., 45 N. J. Eq. 274, 283, 17 Atl. 625, Mr. Justice Dixon expressly declares as the opinion of the court that, if personal property has been bound by delivery of an execution to the sheriff, or if the judgment creditor has elected to satisfy his execution by any debts due the corporation under section 67, the rights thus created shall not be disturbed. My opinion, therefore, is that the petitioners Meyer & Co. are entitled to have the debts of the corporation and the proceeds of their collection by the receiver applied to the payment of their judgment.
The Faitoute Coal Company issued an alias execution on their judgment on December 24, 1894, which was returnable with in 30 days. On the same day (December 24, 1894) the officer holding this execution elected to apply the debts of the corporation to the satisfaction of the judgment, and served notice on the corporation in writing. On this demand a transfer in writing and a delivery of some of the books containing the evidences of the debts was made by the officer of the corporation having their custody, to the constable, on January 1st, and before the expiration of the writ the proceedings in insolvency were commenced. No question as to the priority of the Faitoute Company has been raised by the Meyer Company, and, as the priority between these creditors must, prima facie, at least, be determined by the date of election under the statute, and no circumstances have been called to my attention which would alter this priority, the payment to the Faitoute Company will be first made, and of the proceeds of the debts collected subsequent to their demand. Form of order to be settled.