TANNENBAUM v. ROSSWOG

TANNENBAUM v. ROSSWOG. N. Y. Supreme Court, First District, Chambers; February, 1889. 1. Fraudulent judgments; remedy of attaching creditors.] An attaching creditor, whose attachment has been levied upon tangible-property, or several such creditors together, can maintain an action to enjoin fraudulent transferees, and judgment creditors claiming under judgments fraudulently obtained by confession or offer,, from obtaining the assets until the plaintiffs can obtain judgment. 2. Forms.] Form of complaint in such an action. Motion to continue injunction pendente lite. Lippman Tannenbaum, and twelve others, as attaching creditors of 0. Rosswog & Company, brought this action against Constantine Rosswog - and Hypolite C. Rosswog comprising the firm of 0. Bosswog & Company, Magdalena E. Bosswog, a judgment creditor of C. Bosswog & Company and James A. Flack, sheriff of the city and county of New York, to restrain the defendants from disposing, etc., of the proceeds of a judgment in favor of Magdalena E. Bosswog against C. Bosswog & Company,, until such time as the plaintiffs obtained judgments in actions brought by them against the firm of C. Bosswog & Company, and in order to determine the validity of the judgment in favor of Magdalena E. Bosswog. The plaintiffs obtained a preliminary injunction against the defendants and now moved to continue the same pendente lite. Franldim Bien, for the plaintiff. A. J. Dittenhoefer for the defendants. The allegations of complaint after alleging the co-partnerships of the all but one of the plaintiffs, and that the defendant Flaclc, was and still is the sheriff of the city and county of New York, are as follows: VI. That on or about the 18th day of January, 1889, the defendants [debtors] were indebted to the plaintiffs [naming some of them,] in the sum of $ , and said plaintiffs did on said day.commence an action in the court of common pleas, in and for the city and county of New York, against the said defendants [debtors], to recover said sum. [Sere follows the statement of six other indebtednesses amd commencements of actions therefor by the rest of the plaintiffs.] VIII. That all of said actions are still pending and none of the amounts aforesaid have been paid. IX. That in the said several actions aforesaid, on application of the plaintiffs therein, and upon affidavits duly presented, showing to the satisfaction of the judge to whom the application was made, that the said defendants [debtors] had removed or disposed of their property with intent to defraud their creditors, including these plaintiffs, and upon undertakings duly given and approved as provided by the Code, the Hon. Richard L. Larremore. chief judge of the said court of common pleas in and for the city and county of New York, the Hon. Henry W. Bookstaver, one of the judges of said court of common pleas, granted attachments in said actions brought in said court as aforesaid, on the 18th and 19th days of January, 1889; and the Hon. Edward Browne and the Hon. Simon M. Ehrlich, justices of the city court'of New York, duly issued and granted attachments in each of the actions brought in said court on the 18th and 19th days of January, 1889, wherein and whereby the sheriff of the city and county of New York was directed and commanded to attach and keep so much of the property within his county which the defendants [debtors] had and which they may have at any time before final judgment in said actions, as will satisfy the said several plaintiffs’ claims and demands therein, with costs and expenses. X. That the said attachments were duly delivered to the sheriff of the city and county of New York, on the said days, on which they were severally issued, and in pursuance thereof the said sheriff did forthwith attach a large amount of the property belonging to the defendants [debtors], consisting of their stock in trade, and duly served copies of warrants and affidavits upon which the same were granted upon the person found in possession of said property, and the liens of the said several attachments having been preserved, and the said sheriff was and now is in possession of the said property by virtue of the said warrants of attachment. XL That the defendants [debtors], acting in collusion with the defendant [name], the said defendant [name], being the wife of [debtor] and the mother of [debtor], procured a judgment against the said defendants [debtors] on offer, and said judgment was duly entered in the office of the clerk of the city and county of New York, on the 17th day of January, 1889; said action in which said judgment was entered being brought in the supreme court of the State of New York, in and for the city and county of New York, a copy of which is hereto annexed, marked “ Exhibit A.” ' XII. These plaintiffs further say, that immediately after the entry of the judgment aforesaid, an execution was issued thereon to the sheriff of the city and county of New York, who seized the property thereunder, and said property is just about sufficient to cover said judgment, which amounts to about $16.000, and these plaintiffs further' allege on information and belief, that the defendants [debtors] have no other property out of which the plaintiffs’ claims can be satisfied. These plaintiffs further allege, that the judgment and execution aforesaid in favor of the defendants [name] constitute an incumbrance on the part of the defendants in preventing the plaintiffs from forcing their attachments herein and they prejudice the liens of the plaintiffs on said several judgments. XIII. That the said sheriff, the defendant [name] herein, by virtue of said incumbrance, consisting of the judgment and execution aforesaid, refusing to recognize the liens of the plaintiffs’ attachments herein, they are subject to said judgment and execution aforesaid. XIV. These plaintiffs further allege that said judgment and execution aforesaid in favor of the defendant [name] is fraudulent and void as against the creditors of the defendants [debtors], in that the defendants [debtors], were not indebted to the defendant [name], in any sum whatsoever, but that they entered into the conspiracy in order to defeat the claims of the plaintiffs herein as well as their other creditors. XV. That the defendants [debtors], as these plaintiffs are informed and believe, were not indebted on January 17, 1889, to the defendant [name], in the amount for which the said judgment was entered, nor in any other sum whatsoever. t XVI. These plaintiffs further allege, that prior to January 16, 1889, the defendants [debtors], were engaged in the diamond business' in the city of New York under the firm name of [name], and in order to induce these plaintiffs and other creditors to give them credit and deliver them merchandise, stated to various parties, including plaintiffs, herein, that they were amply solvent and responsible, were worth dollars over and above all debts and liabilities, were amply able to pay their debts in full; said statement being made on or about July, 1888. XVII. These plaintiffs further allege upon information and belief, that the defendants [debtors], knowing that these plaintiffs or a majority of them, as well as their other creditors, would enquire of each other as to any statement that they might make to any of them and which they knew would be circulated among the plaintiffs as well as their other creditors, made a statement to one T. , on or about July 9, 1888, and which after giving their general condition, made the statement that the defendants [debtors], were not indebted to any persons whatsoever for any borrowed money. XVIII. That the complaint upon which the judgment, exhibit “A” hereto annexed, was entered, recites the fact that the said defendant [name], loaned said sum of dollars to the defendants [debtors], at a day prior to the making of the statement to said T. , aforesaid. XIX. The plaintiffs further allege upon information and belief, that the defendants [debtors], are irresponsible and of insufficient means to satisfy any of the judgments which the plaintiffs may obtain in this action. XX. Plaintiffs further allege on information and belief, that the defendants [debtors], entered into a conspiracy, resulting in the aforesaid judgment and execution to the defendant [name] by which they intended to allow the defendant [name] to realize the entire assets of the said defendants [debtors], by reason of the judgment and execution, for the future use and benefit of the defendants [debtors], and by that means to defraud these plaintiffs as well as their other creditors of their just claims and prevent them in securing any of the property of the defendants [debtors], by means of attachments, which were thereafter issued as aforesaid. XXI. That the defendant [name], as sheriff of the city and county of New York, is about to sell the property of the defendants [debtors], under the' execution in his hand, issued on the aforesaid fraudulent judgment in favor of the defendant [name], and unless prevented by this honorable court from paying over the proceeds to the defendant [name], upon the said execution issued on said judgment aforesaid, he will be obliged to satisfy the said execution out of the proceeds of the sale of said property, and these plaintiffs will be remediless as the same will not be sufficient to pay the fraudulent claim of the defendant [name], and satisfy the demands of the plaintiffs. xxn. That the plaintiffs are thus hindered and delayed from enforcing their claims under attachments and liens thereunder, and in consequence of the said fraudulent judgment and the execution issued therein, the said attachments are of no pecuniary benefit, unless the aforesaid judgment and the execution issued thereon are removed as obstructions. That the plaintiffs herein are prosecuting their several actions in which attachments were issued as aforesaid with all due diligence and without delay. XXIII. That the plaintiffs herein are unable to attack the validity of'the said judgment aforesaid and the execution issued thereon in favor of the defendant [name], without having a judgment, and that the plaintiffs herein are uhable to obtain their judgments in order to attack the validity of said confessed judgment, in time to prevent the distribution by said sheriff of the property sold by the sheriff under the fraudulent judgment, unless restrained by this honorable court. Wherefore plaintiffs demand judgment. I. That the defendants herein, as well, as each of them and their servants, agents and attorneys, be restrained and enjoined from receiving, and the defendant [sheriff] be restrained and enjoined from paying out any of the proceeds realized from the sale of the said property, to the defendants [names], or any or cither of them, and that such proceeds, which the said [name] would be entitled to, were her claim valid and lawful, and said proceeds be held by the defendant [name], as the sheriff of the city and county of New York, or be deposited with the chamberlain of the city and county of New York, until the plaintiffs herein are able to obtain judgments on their actions, brought by them, in which attachments were issued as aforesaid, in order to determine the validity of the judgment upon which the judgment was issued in -favor of the defendant [name], as aforesaid. II. That the plaintiffs herein have a reasonable time, to be determined by this honorable court, in which to procure their said several judgments in the actions brought by them in which the attachments were -issued as aforesaid, provided that the defendants [names], will not unnecessarily delay the same. III. That the plaintiffs may have such other and further relief as may be just and proper, and that the plaintiffs have the costs of their action. [Signature of attorney,] [MAJORITY — O’Brien, J.] O’Brien, J. This is an action by attaching creditors to' obtain judgment—First. That the sheriff retain or deposit with the chamberlain the proceeds of the sale of property of the defendants Constantine and Hypolite Eosswog, levied upon and sold under a judgment obtained in favor of Magdalena E. Rosswog, until the plaintiffs in this action are able to obtain judgments in the actions brought by them ... to determine the validity of the said judgment. Second. That the plaintiffs have reasonable time to procure their several judgments, and that plaintiffs have such further relief, etc. The substantial question in this case is whether or not such an action is maintainable. To obtain the relief sought the complaint and affidavits show that some of the plaintiffs obtained attachments'against certain of the defendants in the city court, and certain other plaintiffs obtained attachments in the court of common pleas. Then, joining forces, they all united in this action prior to obtaining judgments. All the earlier authorities are seemingly against the right to maintain such an action. In Adsit v. Butler (87 N. Y. 585), which is an authority for the position that the judgment creditor alone has a standing in court to attach a prior incumbrance as fraudulent, the court says that, “ It is essential that the plaintiff be a judgment creditor.” This rule is likewise held in federal courts, wherein it is said that “ Equity will not assume jurisdiction to reach the debtor’s property on the application of a creditor, unless his debt is. either admitted or merged into a judgment, and there are special circumstances rendering the aid of a court of equity necessary ”• (Public Works v. Columbia College, 17 Wall. 521; Smith v. R. R. Co., 99 U. S. 398). The authorities cited as establishing the right to maintain an action of this character are the cases of Bates v. Plonsky (28 Hun, 112), Keller v. Payne, Bowe v. Arnold (31 Hun, 256). In Bates v. Plonsky the attachments were levied upon the stock in trade, and the execution upon confessed judgments were levied upon the same property. These latter, and the assignment made by the defendant,, were attacked by attaching creditors as having been fraudulent -and void, and made and entered into with intent to. hinder, delay or defraud creditors, and the plaintiff, therefore, claiming priority over the general assignee and the creditors in the judgments confessed, although their attachments were in point of time subsequent. It is therein said, “ It is entirely clear that no such suit can be maintained for the vindication and establishment of the rights of the attaching creditors, if the property seized under the attachments had not been of a tangible nature.” Upon this latter ground —that the property to be reached was not tangible and was not of a nature to be levied upon by attachment—the case of Bowe v. Arnold seemingly turned, and it was therein held upon the facts of that case, the action could not be maintained. In the case of Smith v. Payne (Sup. Ct. Gen. Term ; not reported) it was held that because the assignee was not made a party the action was not maintainable. The case of Keller v. Payne reasserted the doctrine laid down in the case of Bates v. Plonsky and is an authority for the-maintenance of this action. Without, therefore, expressing any opinion upon the -question, which in the absence of the cases cited would seem doubtful, I am controlled by these authorities. It should be noticed that while the facts here are alleged with a view to maintain an action in equity for an injunction until judgments can be obtained for the purpose of setting aside the Rosswog judgment, the.prayer does not ask in terms, for any such relief in this action. It should also be noticed in this case that the affidavits raise a question as to whether the claims of the several attaching creditors are due. These objections are met by the suggestion that under the Code the plaintiffs, in order to vacate the judgment charged to he fraudulent, must be judgment creditors, and -that the rule laid down in Bates v. Plonsky and Keller v. Payne permits the bringing of this action to obtain the equitable relief of keeping the fund intact by means of an ¡injunction in the action until the plaintiffs can become judg-.ment creditors. And that if plaintiffs make out such a case, -which (if they were judgment creditors) would enable them to set aside the judgment, they will in an action of this character be entitled to a judgment for an injunction. However, if the action itself upon the facts is maintainable, the prayer of the complaint is not controlling, and if not broad enough the court, in a proper case, has power to -enlarge it. Concluding, therefore, that there is authority to ,sustain the bringing of this action, it is proper to say that mpon the facts presented, the plaintiffs show ample :grounds for believing a fraud was attempted. The question raised as to the invalidity of the attachments can be disposed of in the language of the learned judge writing the opinion in Keller v. Payne, who says : “ I think there was enough in the papers to give jurisdiction to the officer who granted the warrant.” Hence it cannot be deemed invalid, and, so long as the attachment remains in force, it suffices to give the plaintiffs the standing of attachment creditors in the present action. For the reasons stated the motion to continue the injunction should be granted. To the same effect is Throop Grain Cleaner Co. v. Smith, 110 N. Y. 83. The case of Keller v. Payne (above cited), which came up on an appeal from an injunction order, was as follows : Bartlett, J. —The plaintiffs are attachment creditors of the firm of Payne, Steck & Co., consisting of the defendants, William H. Payne- and Frederick D. Steck, dealers in diamonds and gold jewelry in the city of New York. In November and December, 1887, according to the affidavit of the plaintiffs, the defendants’ firm made unusually large purchases on credit, and on December 28, in the same year, the members thereof confessed judgments aggregating over §80,000 in favor of four of the defendants herein, May L. Payne, Augusta L. Bamber, William Bamber and Louise Nellis. May L. Payne is the wife of the defendant, William H. Payne, and Augusta Bamber is his mother-in-law. Subsequently the partners made a general assignment for the benefit of creditors, which was recorded on the following day. Executions-were issued upon the confessed judgments, before the plaintiffs-obtained their attachment-, and the sheriff took possession of the goods in the store of Payne, Steck & Co. under these executions. The plaintiffs nevertheless claim a lien upon these goods, by virtue of their attachment, superior to that of the execution creditors, alleging that-the judgments were fraudulently confessed for the purpose of hindering, delaying and defrauding the honest creditors of the firm of Payne, Steck & Co. They have brought this suit to have the confessed judgments and the assignment declared void ; to enforce the priority of their own claims; to compel the sheriff to retain out of the proceeds of the sale of the goods of defendants’ firm, an amount sufficient to pay their demand ; and to enjoin him from paying over, or the execution creditors from receiving, this amount. A preliminary injunction was granted, and was continued by the special term. The order also fixed the amount of the plaintiffs’ claim at §5,200, and directed the sheriff to deposit that sum, out of the proceeds of the sale, with the United States Trust Company, to the credit of this action. The defendants now appeal. I think the order appealed from may be sustained upon the authority of Bates v. Plonsky (28 Hun, 112), even as limited by the subsequent case of Bowe v. Arnold (31 Hun, 256). There, upon facts very similar to those presented here, although hardly bearing as strongly against the defendants, it was held “ that the plaintiffs were entitled to enjoin the disposition of the proceeds, until the action could be tried, for the purpose of determining the rights of the different parties to such proceeds.” See 31 Hun, 257. If it was right to continue the injunction in Bates v. Plonsky, it was right to continue the-injunction in this suit. As to the alleged invalidity of the attachment, I think there was •enough in the papers to give jurisdiction to the officer who granted •the warrant. Hence, it cannot be deemed invalid, and so long as the attachment remains in force, it suffices to give the plaintiffs the standing of attachment creditors in the present action. The order appealed from should be affirmed with costs. 'Yan Brunt, P. J., and Macomber, J., concur.