Chautauque County Bank v. White

Chautauque County Bank v. White. Creditor’s bill. — Assignment to receiver. — Fraud.—Estoppel. On a creditor’s bill to set aside a fraudulent conveyance, the court has power to direct a conveyance to the receiver, and a sale of the land by the latter. After a conveyance to the receiver, a judgment obtained against the debtor does not bind the land. An assignment to a receiver, of all the debtor’s real and personal estate, conveys his lands in this state, without any specific description of them. A person is not estopped by erroneous statements made by him, without fraud, if not made to the party asserting the estoppel, and his conduct was not influenced thereby. Chautauque County Bank v. White, 6 Barb. 589, reversed. * Appeal from the general term of the Su- .. ... preme Court, in the third district, where a decree *- of the late vice-chancellor of the third circuit had been reversed. (Reported below, 6 Barb. 589.) This was a bill in equity filed in the late court of chancery, by the Chautauque County Bank, purchasers of land under a judgment obtained against one John Z. Saxton, against the defendant, White, who had purchased the same premises from a receiver, appointed in a creditor’s suit, to establish the complainants’ title to the property. On the 19th September 1837, John Z. Saxton, who had been extensively engaged in mercantile pursuits, having become insolvent, made a general assignment of his property to Pearson Crosby and John Crane, in trust for the benefit of his creditors, with certain preferences, among which was the claim of the Chautauque County Bank. And on the 1st October 1837, the assignor conveyed to his assignees, all his real estate, in trust for the purposes declared in the assignment. On the 4th November 1837, Webb & Douglass obtained a judgment against Saxton for $646.32; and on the 28th September 1838, after the return of an execu- ^ 1 tian *unsatisfied, they filed a bill against Saxton -* and his assignees, to reach the equitable assets of the judgment-debtor, and to set aside the assignment as fraudulent. The bill having been taken pro confessa, a decree was made, on the 1st November 1838, declaring the assignment fraudulent, and void; directing the appointment of a receiver “with the usual powers and authority;” that the defendant, Saxton, assign, transfer and deliver over, on oath, to such receiver, all the money, equitable interests, property, things in action, rents, real estate" and effects, which were in his possession, custody or control, at the time of the service of the injunction upon him, except such property as was by law exempt from execution; and also, that the defendants, Crosby and Crane, assign, transfer and deliver over to the receiver, all the money, equitable interests, things in action, rents, real estate and effects held by them, under any assignment or deed of trust executed to them by Saxton; and that the receiver, out of the moneys he should receive, should pay the amount of the judgment, and the complainants’ costs. On the 19th of December 1838, the decree was opened as to the assignees, Crane and Crosby, and they were let in to defend the suit. Ebenezer A. Lester was appointed receiver, under the decree; and on the 5th of January 1839, Saxton, the judgment-debtor, pursuant to the decree, executed to the receiver an assignment of all the property and interests mentioned in the decree “ to have and to hold the same, and every part thereof, to the said receiver, according to the said decree and order, and the laws of this state.’.’ *On the 7th January 1839, two days after the * ^ J conveyance by Saxton to the receiver, the Chautauque County Bank recovered a judgment against Saxton, for $2236.67. On the 2d June 1838, Charles Baker obtained a judgment against Saxton and others for $557.12; and on a creditor’s bill filed by him, a similar decree was made, as in the suit brought by Webb & Douglass. On the 6th May 1839, five other judgments were obtained against Saxton, aggregating $3323.71; and in a joint suit by the five judgment-creditors, a similar decree was made. The defendant, White, was the solicitor for the complainants in all the bills filed against Saxton and his assignees, and attorney for the plaintiffs in all the judgments, except that of Webb & Douglass. • On the 19th June 1839, an order was made directing John Crane, one of the assignees, to transfer to the receiver all the property and effects in his hands, as assignee; in pursuance of which, on the 9th September 1839, he executed to the receiver an assignment of all the property claimed by him, under the assignment and the deed of trust. Crane put in an answer, and the bill was again taken pro confessa against the defendant, Crosby, who had removed from the state. The cause came on to be heard before vice-chancellor Cushman, and on the 29th February 1840, a decree was made declaring the assignment and deed of trust fraudulent and void, and directing the receiver to “advertise and sell for cash, at public auction, the real estate conveyed or assigned to him under said orders, subject to the liens and incumbrances thereon, at the risk of the purchaser, on giving six weeks’ notice,” &c., and that the receiver convert the personal property into money, and apply the proceeds of the said real and personal estate “ to the satisfaction of the decrees of the respective complainants, according to the priority of the filing of their respective bills, in suits in which he had been, or should : 240 ] be, appointed receiver.” *In April 1840, final decrees were entered in favor of the complainants, in the several creditors’ suits. On the 25th March 1840, the receiver advertised the lands for sale, pursuant to the order of court. And on the 7th May 1840, he sold the same, subject to liens and. incumbrances, at the risk of the purchaser, when they were bid off by the defendant, at a sum greatly below their value over and above the liens, which had attached prior to Saxton’s conveyance to the receiver; and the latter executed to him a deed for the property. On the 18th July 1840, the Chautauque County Bank caused the same property to be sold by the sheriff, under, an execution issued on their judgment, and became the. purchasers thereof at such sale, and received a deed from the sheriff, on the 14th May 1842. They then commenced this suit, claiming that their judgment was a lien from the time it was docketed, and that they acquired a title paramount to that of the defendant, arid praying that a decree might be made to that effect, and-directing the defendant to surrender the possession, and, to account for the rents and profits. It was charged in the bill, that the defendant pretended, that by reason of Saxton’s assignment to the receiver, on the 5th January 1839, the lien of the judgment did not attach; and that the receiver held the title, subject only to prior existing liens. It was also averred and proved, that some time prior to the receiver’s sale, the defendant, by whose direction it was made, wrote to the receiver, giving Crane’s sworn valuation of- the property at $4600; and stating that if that valuation was, as he believed it to be, correct, the sale would be a mere form, as the land was worth nothing above the judgments which were liens thereon, beyond the value-of its rise for one year, as the purchaser could hold it * 241 1 °n^ aS aS ®ax*on cou-id, after a *sale on. -* execution. It also appeared, that a conversation to the like effect was had between the defendant and the receiver, at the sale. There was no averment in the bill of fraud or bad faith, on the part of the defendant or the receiver. No one attended the sale, on behalf of the plaintiffs; and there was no bid, except that of the defendant. It was alleged and proved, that the receiver, prior to the sale, had in his hands funds derived from the sale of the personal property more than sufficient to satisfy the claim of Webb & Douglass, but not enough to satisfy the other decrees. ■ The defendant, by his answer, claimed that the plaintiffs’ judgment never was a lien upon the premises; and that they acquired no title by the sale under their execution ; and he insisted, that, if they had any lien or claim, they had a perfect remedy at law; he also alleged, that there was a defect of parties. On a hearing of the cause before the vice-chancellor of the third circuit, a decree was made, dismissing the plaintiffs’ bill, with costs; this, however, was reversed by the supreme court, on appeal, and a decree made in accordance with the prayer of the bill; whereupon, the defendant appealed to this court. Noyes, for the appellant. Tucker, for the respondents. [MAJORITY — *Gardiner, J. Gridley, J.] *Gardiner, J. (after stating the facts.) — The ^ important question in the cause is, whether the *- conveyance by Saxton to the receiver, on the 5th of January 1839, divested the grantor of his interest in the real estate in question, so that no lien was acquired by the plaintiffs under their judgment subsequently docketed. Were it not for the elaborate opinion of the learned judge, who delivered the judgment of the supreme court, I should deem the interrogatory satisfactorily answered, in the affirmative, by the preceding statement of facts. The statute, declares, “that a judgment of a court of record shall bind the real estate of the debtor, which he * 250 1 ma^ ^ave *a* time of the docketing of the judg- ■ -* ment.” In this case, the assignment of Saxton, the debtor, of all his real estate, was made to the receiver, on the 5th of January 1839, and the question is, what he had remaining to subject to a lien of the plaintiffs’ judgment, obtained two days afterwards. If the assignment and trust-deed to Crane and Crosby ■ were operative, the legal title was in them as assignees. If fraudulent, and consequently void, as the plaintiffs assume, and as the court of chancery had decreed, when they directed the appointment of a receiver, then the conveyance by Saxton to the latter, under the order óf the court, divested him of all his property (except that exempted from execution), the premises in question inclusive. The power of the court to make the order of November 1838, is not questioned. The supreme court admit that the conveyance to the receiver is, in form, sufficient to transfer the title, and that, in terms, it is in conformity with the order. It is said, that Lester was a common-law receiver; but such a receiver may be, and in this case, was, specially authorized to receive what the judgment-debtor was directed to transfer and assign. The subject of the transfer was “all the property, rents and real estate” of Saxton, as provided by the decree, and enumerated in the assignment. We are told, “that the effect of the words assign and transfer, depends upon the intent; and the intent was, to convey to the receiver just interest enough in the property to enable him to protect it, and receive the rents and profits.” This is the view taken by the court below, We are not informed, what would be the nature of that partial interest, which, when ' conveyed, would enable the receiver to acquire possession of and protect the real estate, and yet leave a residuum. in the grantor, upon which the judgment of the plaintiff would be a lien. The adjudication of the court, and the intention of the chancellor, is to be ascertained from the record; and on examining the decree, we find no allusion to an undefined interest, which is not a legal one, but which will, notwithstanding, give the possession of the lands, and a title to receive the profits, and guard *both against all persons whatsoever; but it is ^gp there “adjudged and decreed, that the defendant, *- Saxton, shall assign, transfer and set over, all the things in action, equitable interests, rents and real estate, which were in his possession, custody or control, at the time of the service of the injunction.” As against the complainants in that suit, the debtor had neither parted with the possession, title nor control of any of his property, by the fraudulent assignment. The decree places all of it— things in action and real estate — upon the same footing, as to the quantity of interest to be conveyed; and a limitation as to one,- in this respect, is applicable to both, or neither. The assignees are also required to convey to the same person, obviously manifesting the intention of the court, that the receiver should be clothed, not only with the substantial, but also with the formal title, to the entire property. If this is the true construction of the decree, it disposes of this controversy. The ■ lien of the plaintiffs’ judgment never attached upon the premises; the subsequent sale was inoperative, and conferred no title upon them as purchasers. To this result, it is immaterial, whether the object of the assignment to the receiver was merely to protect the property and collect the rents, since the court has determined that the transfer of the whole interest was necessary to enable the officer to discharge those duties. That decision cannot be reviewed nere, and is conclusive in this case. Nor is it material, whether chancery could decree a satisfaction of the demands of judgment-creditors out of the real estate. If the chancellor, in this particular, exceeded his jurisdiction, the sale might be void; but the title of the receiver, under the assignment, would not be affected. The case made by the plaintiffs, assumes the validity of that transfer; and predicates their title to relief, upon the sole ground of a legal lien, and sale by virtue of their judgment. The difference between the parties to this suit, is not as to the jurisdiction of chancery, to make the order of November 1838, but as to its construction. The bill, in its frame and parties, can be sustained upon no other ground. * 252 I the second place, the court 'of chan- -* eery had authority, under the circumstances of this case, to decree a sale of the real estate. The provisions of 2 R. S. 174, §§ 38, 39, apply to creditors’ bills, strictly so called, where the only claim to relief is, that the remedy of the creditor is exhausted at law. In those cases, an execution must be returned unsatisfied, and this alone confers jurisdiction upon the court, to compel a discovery, and afford the relief mentioned in the 39th section. The common-law powers of the court, in reference to fraudulent trusts and conveyances, are not touched by these provisions. Fraud and trust were familiar heads of equity jurisdiction, independently of . the statute. The creditor, invoking the aid of the court, must establish his title to its interposition, by alleging a lien, or quasi lien, upon the real or personal property, which was the subject of the trust; and he would then be entitled to relief, notwithstanding he had a remedy at law, by levy and sale upon execution. In all cases of fraudulent trust, the court may, in its discretion, direct a sale by a master, and compel the debtor and trustee to unite in the conveyance to the purchaser; or it may order an assignment to a receiver, as was done in this case, to the end that the property may be disposed of under the special instruction of the chancellor; or, the' fraudulent conveyance may be annulled, and the creditor permitted to proceed to a sale upon his execution. (9 Wend. 561; 3 Johns. Ch. 507; 2 Atk. 477 ; 3 Id. 357; 1 Paige 642; 3 Id. 235, 237.) The authorities cited by the plaintiffs assert, or imply, these principles. Indeed, their counsel was understood as conceding, substantially, the jurisdiction of the court, by the common law; but claimed that it had been limited to sales of personal property, in satisfaction of the judgment, in all cases, by statute. In this, I think, he .is mistaken; and in Leroy v. Rogers (3 Paige 237), the chancellor seems to have been of the same opinion. It is said, that the defendant is estopped from alleging that the plaintiffs’ judgment is not a lien, because he asserted the contrary, before his purchase at the receiver’s sale. The defendant, in his letter to the receiver of the 4th of April 1840, insisted *that the real ^ estate would be worth nothing above the judg- *- ments that were liens upon it. And he, probably, expressed the same opinion to the receiver, at the sale; but not in the presence of the purchasers. I assume, however, that he informed the receiver, that this judgment was a lien upon the premises. The complainants do not allege, that he was influenced by improper motives in making the declaration, nor that it was not, at the time, the opinion honestly entertained by him. The estoppel, then, consists in the expression of an opinion, upon a question which the complainants will claim, is not free from difficulty, and in subsequently changing it; the opinion not being declared to the complainants, who do not claim in their bill, that they did, or omitted, anything upon the faith of it; nor, indeed, that they knew it was entertained by any one, until subsequently to the disposition of the property in question. An honest, though mistaken opinion of the law, would be a singular estoppel. Even a lawyer may increase his knowledge as to his legal rights, without forfeiting his estate on account of his former ignorance. The decree should be reversed, with costs in the supreme court. Gridley, J. (after stating the facts). — The plaintiffs, by their bill, prayed that their judgment of January 7th, 1839, might be decreed to be a lien on the real estate conveyed by the receiver to the defendant, and that the title claimed under the sheriff’s sale might be decreed to be superior to that claimed under the receiver’s sale, and for such other relief as might be agreeable to equity. The original owner made an assignment to the receiver for the benefit of creditors, on the 5th day of January 1839; and if that conveyance was authorized by the law of the land, and the practice of the court of chancery; and if, upon a just construction, it embraced the premises in question, then the judgment of the plaintiffs was never a lien on those premises. The plaintiffs’ counsel contends, that, neither of these positions is true. I am of the opinion, however, first, that the deed * 254 1 execu1;e^ Saxton, the *judgment-debtor, does -* embrace the real estate in question. The assignment was executed in pursuance of an order of the court of chancery, made on the first day of November 1838, which directed an assignment of all the money, equitable interests, property, things in action, rents, real estate, and effects of the said Saxton, in his possession, or under his control, when the injunction was served. The deed itself purports to convey to the receiver all the money, equitable interest, property, things in action, real estate and effects of the said Saxton, according to said order. This conveyance is adjudged in the final decree, to pass the real estate of said Saxton, and' by that decree, the receiver is directed to sell the same, and to execute a conveyance thereof to the purchaser. The description of the property ii: the assignment is such as is adequate to convey real estate by such an instrument. (Roseboom v. Mosher, 2 Denio 61; Ward v. Van Bokkelen, 2 Paige 297; Bayard v. Hoffman, 4 Johns. Ch. 450.) Now, if this assignment contained adequate and appropriate words to convey the real estate, and the said real estate was so conveyed, in pursuance of an order of the court, and sold by the receiver, under a valid decree of the court of chancery, then, it does not matter, that it was not according to the practice of the court, to order real estate to be conveyed. The order or decree under which this deed was executed, was granted in a suit against Saxton, and the assignees. The assignees in that suit represented the plaintiff, and all other creditors who were preferred in the assignment; and the acquiescence of the defendant, Saxton, and the assignees, in the order and decree in question, is binding equally on them, and on all who claim under or through' them; and although that order may have been too broad and extensive, and, therefore, erroneous or irregular, yet it was not void, and cannot be questioned in a collateral suit. I say, it was not void; because the court had jurisdiction of the parties and of the subject-matter; so that any decree, affecting the real estate, would not be void, though it might be erroneous. My views of the original object of a creditor’s bill, are expressed in the case of Scouton v. Bender *(3 How. Pr. 185). The cases reported in 4 Paige 448, 3 Id. 234, and 2 Hoffm. Pr. 115, are also authorities on the same subject. But it is said in Scouton v. Bender, that “when the judgment-debtor has assigned to a receiver his real, as well as his personal estate, for the benefit of the prosecuting, creditor, and the court has removed the fraudulent deed that covered it, and when all the parties who have acquired any lien upon it are before the court, we can see no objections to a sale by the receiver, and a distribution of the proceeds among the creditors, according to the priority of their liens. The court of chancery having obtained jurisdiction of the case, and the.subject-matter of it,for one purpose,, may retain it, in order to do full justice to all the parties to the suit. Such a sale, however, cannot affect the rights of a senior judgment-creditor.” We have already seen that the plaintiffs’ title was derived under a judgment junior to the title of the receiver. Now, though we might think, that it was not the original object of a creditor’s bill to reach the real estate of a debtor, and that in a case where a bill is filed to set aside an assignment, or to remove any other fraudulent obstruction, the object of the bill is compassed, when the fraudulent obstruction is removed, so as to leave the property subject to an execution at law; yet, when a court does authorize a receiver to sell real estate that has been assigned to him. under an order of the court, no lawyer will question the power of the court to do this, or dispute the validity of a title derived under such a sale. It has been the practice of the court, to order real estate to be' sold, so long and so extensively, that it seems too late to question the power and jurisdiction of the court to order the sale of real estate, under a creditor^ bill, which also seeks to set aside a fraudulent conveyance, as a part of the complainants’ relief. In England, as well as in this state, the court of chancery has often exercised the power to order real estate to be sold. The following are some of the authorities on this point. (Edgell v. Haywood, 3 Atk. 352; Holme v. Stanley, 8 Ves. 1; 1 Daniel’s Ch. Pr. 411; Stileman v. Ashdown, 2 Atk. 477; O’Gorman v. Comyn, 2 Sch. & Lef. 150; Sands v. Codwise, *4 Johns. 536; Reade v. Livingston, 3 Johns. Ch. 481; Edmeston v. Lyde, 1 Paige 637; Bank U. S. v. Housman, 6 Id. 526, 539; Iddings v. Bruen, 4 Sandf. Ch. 417; Hopk. 239; 2 Barb. Ch. 233.) II. But, suppose that I am wrong in the conclusion that the order of the court authorized, or the language ■of the assignment warranted, the construction which I have assigned to it, and that I have attached too much importance to the final decree, as settling the construction of the conveyance to the receiver, and rendering the sale by him lawful. Suppose, the receiver was only vested with the power of a common-law receiver, and had no control over the -lands of the judgment-debtor, and no right to sell them. Upon what ground, has the plaintiff invoked the aid of this court ? A court of law was just as competent to give a correct construction to. this deed, as the court of chancery. And as no discovery was sought, the remedy was purely legal, and should have been sought in a court of law; and inasmuch as this objection was distinctly taken in the answer, it should now be held fatal. An action of ejectment was the proper mode of determining the construction of the deed to the receiver and the fact, that the .receiver had conveyed to the purchaser, would not entitle the plaintiffs to set aside the deed as a cloud on their title. The power to sell, appears on the face of the deed, and in the decree and order of the court of chancery; and might as well be disposed of in a court of law as chancery. This point was decided in Cox v. Clift (2 N. Y. 118; 3 Barb. 481) and Van Doren v. Mayor of New York (9 Paige 388), where bills were dismissed for a similar reason. III. It is said, that the sale was not authorized, for the reason that the receiver had personal property enough to pay the judgment in favor of Webb & Douglass. I am not certain, that this allegation is true; but if it should be admitted to be so, the receiver held the real estate for the creditors in all the other suits in which he had been appointed, and could sell to satisfy those judgments. IV. It is said, again, that the sale was for a grossly inadequate *price; and was made under fraudu- ^ lent representations of the defendant to the re- *- eeiver; and that the receiver was guilty of collusion and highly improper conduct in the sale. These facts, if admitted, may have furnished good reasons for setting the sale aside, on motion of a proper party; but if a suit could be prosecuted in chancery to effect that object, most clearly the receiver should have been a party defendant. The charge affects him in every aspect of it; and he was entitled to be brought into court, and to have an opportunity to defend himself against these charges. Besides, the plaintiffs do not, in their bill, show that they are entitled to this relief; as they have themselves purchased the property in question at sheriff’s sale, and the gravamen of their bill is, that they have a good title to the premises, and that the defendant has received a deed for the same premises under the receiver’s sale, which the court of chancery was asked to set aside. Besides, it appears, that they were not present at the sale, and could not be damnified by the representations there made. The decree of the supreme court should be reversed, and that of the vice-chancellor affirmed, with costs in the courts below. Decree reversed, and that of the vice-chancellor affirmed, with costs. Payne v. Burnham, 62 N. Y. 69. See Chautauque County Bank v. White, 23 N. Y. 347.