Wood v. Mitchell

WOOD v. MITCHELL. N. Y. Supreme Court, First District, Special Term ; November, 1890. 1. Confessions of judgment j action to vacate.] An action to set aside confessions of judgment given for honest debts, cannot be sustained merely because they were so given after the plaintiff had extended the debtor’s time to answer in his action then pending against him, although such extension was obtained for the specific purpose of giving such other creditors a preference, if there was no agreement, express or implied, that, pending the extended time, the existing status should not be changed by any act of the defendant. The case of Jacques v. Greenwood, 12 Abb. Pr. 232, distinguished. 2. Assignment; chose in action ; equitable.] The mere verbal promise of a debtor to pay his creditor when in funds from a certain contract under which moneys are coming due to him, unaccompanied by any assignment, pledge or order of or upon the same,, gives such creditor no equitable lien thereon as against other creditors. Trial by the court without a jury. Charles Wood brought this action against William Mitchell and others to establish a lien on certain money due Mitchell and to set aside- as in fraud of the plaintiff’s judgment against Mitchell certain judgment on confession of Mitchell in favor of his co-defendants herein. Mitchell had a contract with the Secretary of the Treasury of the United States for the construction of certain life saving stations on the coast, and the plaintiff sold him certain materials for the work. In plaintiff’s action for the materials sold, Mitchell appeared by attorneys, and obtained a consent to an extension of time to answer for twenty days, and before the extension expired, confessed judgments in favor of the co-defendants in this action, under which a receiver was appointed in supplementary proceedings, and his receivership extended to each of the several judgments so obtained. Plaintiff claimed that a sum of money sufficient to pay his judgment was due Mitchell from the government at the time when he would have obtained judgment but for the extension of time to answer. Plaintiff also claimed an equitable lien upon the moneys due Mitchell under his government contract, upon the ground that he had sold him the material in sole reliance upon his promise to pay for them out of the moneys then due and thereafter to become due under such contract, knowing that Mitchell was financially irresponsible and unable to pay for the materials except out of such moneys. Plaintiff demanded judgment, declaring his judgment an equitable lien upon moneys due or to become •due to Mitchell under his government contract, and to be paid there, and setting aside the several judgments •of his co-defendants as fraudulent and void as against •¿he plaintiff. Bergen & Dykman, for the plaintiff. E. D. Barlow, for the defendant, Mitchell. J. Hampden Dougherty 9Smith & Dougherty, attorneys), for other defendants, I. The promises of Mitchell amount to no more than a personal agreement, and do not amount to an equitable assignment of his claim; see Hosack v. Rogers, 18 Wend. 319 (holding that a covenant by the debtor to pay certain debts owing by him out of a designated fund when the same shall be received by him, cannot be construed into an equitable mortgage of the fund so as to ■ give the creditor a .-specific lien thereon: such covenant is merely personal). Hoyt v. Story, 3 Barb. 262 (holding that in order to constitute an equitable assignment by a ■debtor to his creditor of a sum due or to become due from a third person, there must not only be an agreement to pay the creditor out of the particular fund, but an appropriation of the fund, either by giving ■an order upon it or by transferring it in such manner that the holder would be authorized to pay it to the creditor directly without the further interference of the debtor). Citing Brown v. Carvelho, 4 M. C. 690; Malcolm v. Scott, 3 Hare, 39; Watson v. Duke of Wellington, 1 Russ. &. M. 602 ; Clark v. Mauran, 3 Paige, 273; Bradley v. Root, 5 Id. 632; Williams v. Ingersoll, 89 N. Y. 508 (holding that “whatever may be the law elsewhere, it must be regarded the settled law of this State that an agreement either by parol or in writing to pay a debt out of •a designated fund does not give an equitable lien upon the fund or operate as an equitable assignment thereof ”). In this case the court held there was an ■equitable assignment, there being proof that the plaintiff was to “ receive” the sum recovered and pay the balance to his debtor. (P. 521.) That case was followed and the same rule laid down in Christmas v. Russell, 14 Wall. 69, and Trist v. Child, 21 Wall. 441, :see also Conselyea v. Blanchard, 103 N. Y. 222,234, 235 ; in Christmas v. Russell, the court say: “ A mere promise, though of the clearest and most solemn kind, to pay a debt out of a particular fund, is not an assignment of the fund even in equity. To make an equitable assignment there should be such actual or constructive appropriation of the subject matter as to ■confer a complete and present right on the party meant to be provided for, even where the circumstances do not admit of its immediate exercise. If the holder of the fund retains control over it, as e. g. power on his own account to collect it or to revoke the disposition promised, this is fatal to the thing as an equitable assignment.” See also Wright v. Ellison, 1 Wall. 16; Spain v. Hamilton, 1 Wall. 604. In Fairbanks v. Sargent, 117 N. Y. 320, 330, it is said: “ the test (as to an equitable assignment) is an inquiry whether the debtor would be justified in paying the debt or the portion contracted about, to the .person claiming to be assignee.” ' II. The so-called assignment to Mitchell would be ineffectual for the further reason that section 3477, U. S. R. S. makes an assignment in writing a prerequisite to the establishment of a claim against the Government. Trist v. Child, 21 Wall. 441: Spofford v. Kirk, 97 U. S. 484: St. Paul & Duluth R. R. v. U. S. 112, U. S. 735. See note on fraudulent preferences by judgments etc., in 22 Abb. N. C. 327. [MAJORITY — Barrett, J.] Barrett, J. I cannot accede to the proposition that confessions of judgment, given for honest debts, are to be set aside merely because they were so given after the plaintiff had extended the defendant’s time to answer in the action then pending. Mitchell had a right to prefer these creditors, and so long as they were not parties to a fraud, their vested rights cannot be taken from them. But it was not a fraud, even upon Mitchell’s part, to pay or secure his honest debts, and though he obtained the extension for that specific purpose, the confessions were but the exercise of a legal right. Whether the time necessary to prepare and execute the confessions was obtained by judicial order, by consent or by interposing a frivolous answer, is immaterial. There was here no agreement, express or implied, that, pending the extended time, the- existing status should not be changed by any act of the defendant. The case, therefore, is not analogous to Jacques v. Greenwood (12 Abb, Pr. 232). It is more like Hauselt v. Vilmar (2 Abb. N. C. 222, affi’d 76 N. Y. 630), where Jacques v. Greenwood was. analyzed and shown to rest upon the fact of an express agreement that no assignment would be made pending the stay of proceedings. There, judgment had actually been entered, and, by means of the stay secured upon the agreement that no assignment would be made, the creditor was deprived of the benefit of a levy. The other point made upon the plaintiff’s behalf is even less tenable. There is nothing whatever in the facts testified to by the plaintiff to warrant his claim of an equitable lien .upon or assignment of any portion of what was coming to Mitchell from the United States. There was nothing in the nature of an appropriation of the funds, nothing which would have authorized the United States to pay directly to the plaintiff. There was no assignment, pledge or order. Mitchell merely promised to pay when he was in funds from his contract with the government, and this promise was purely personal. . There should be judgment for the defendants, dismissing the complaint upon the merits, with costs to the defendants Patterson Brothers, Theodore Smith and Henry Smith, jointly, to the defendants Hobby and Doody, and to the defendant E. B. James.