John Davenport, as Receiver of Heubach & Co., Appellant v. John Kelly, late Sheriff of the City and County of New York, Respondent

John Davenport, as Receiver of Heubach & Co., Appellant v. John Kelly, late Sheriff of the City and County of New York, Respondent. A judgment creditor acquires no preference, by the commencement of an action in the nature of a creditor’s bill, until the appointment of a receiver therein, over a junior judgment, as to personal property which is the subject of levy and sale on execution. A. and B. each recovered a judgment against H. & Co. The debtor’s property being in the hands of an assignee, executions on both judgments were returned unsatisfied. A. commenced an action by creditor’s bill, and procured the appointment of a receiver, who took possession of the property. Subsequently, B. commenced a like action, in which the same receiver, was finally appointed. After the commencement of B.’s action, ' but before the appointment of a receiver therein, an order was made, in the action brought by A., directing the receiver to sell enough of the property to' pay A.’s debt, and that the residue n be exempted from the further operations of the receivership in this action.” Before the receiver had made sale, pursuant to said order, A. recovered other judgments at law against H. & Co., and issued executions thereon to the sheriff. The receiver having completed sufficient sales to realize the amount specified, gave notice thereof to B. and to the sheriff. The sheriff thereupon, being indemnified by A., sold the residue of the property under the executions last mentioned. The sheriff paid to A. the amount of his executions, and returned the same satisfied. ,B. procured the appointment of-a receiver in his action, a few days after the sale, and prosecuted the samé to judgment. The receiver then brought this action against the sheriff. A complaint alleging these fact's, and that the property of H. & Co. unsold, was insufficient to pay B.’s claim, and asking judgment against the sheriff for the sums which B. was entitled to receive by the judgment on his creditor’s bill", was demurred to, on the ground that it did hot state facts sufficient to constitute a cause of action. Held, that judgment wás properly rendered id favor of the defendant upon the "demurrer, dismissing the complaint with costs. (Submitted January, 1870; decided March, 19th, 1870.) This is an appeal from a judgment of the General Term of th¿ Supreme Court, in the first district, afíirmíng a judgment of the Special Term, sustaining a demurrer to the complaint. The plaintiff seeks to recover of the sheriff the amount of three judgments recovered by Edward Bingel against Victor Heubach & Co. He claims under an appointment as receiver, made March 26,1861. Prior to 31st July, 1860, Victor Heubach & Co., were a mercantile firm in New York, having a large stock of goods, and owing debts to various persons, among whom were Billhofer & Arnold, and one Edward Ririgel. Victor Heubach & Co., Jiily 31st, 1860, made a fraudulent sale or assignment of all théir property to Henry Hen bach, and absconded. In September, 1860, Billhofer & Arnold recovered a judgment at law for part of their debt against Victor Heubach & Co:, and issued an execution thereon; and on the 15th of September; upon the return of this execution; commenced ah action in this court against the judgment debtors and their assignee, in the form of What was heretofore called a judgment creditors’ bill, filing their complaint oh the 19th of that month: The relief asked in that action was a judgment declaring this assignment and transfer void, and directing tliat the . assigned property he applied in payment of the debts described ih that complaint, in the usual form in such cases. At thé tíme óf commencing tliis equity suit; Billhofer" & Arnold obtained ah injunction, arid gave notice of motion for a receiver; and upon such motion an order was made in that action, on thé 11th of October, 1860, appointing the plaintiff:1, Davenport, such receiver, and he at once took into his possession all the property in question; On the 2d of October, after thé service of the injunction and notice of motion for a receiver by Billhofer & Arnold, a judgment at law was recovered by Ringel against Victor Hetibach & Go., and an execution issued thereon, which the sheriff returned nullá boná, on the 4th of Octobér. October 26th, Ringel commenced'in this court ah equity suit against the judgment debtors and their assignee, similar in character and asking similar relief to that of the Billhofer suit. An order Was madé on the samé day, in the Ringel equity suit, enjoining the defendants and directing them to show cause Why a receiver should not be appointed therein. The summons, complaint and order were personally served upon the defendants, October 26th. The motion for a receiver in thé Ringel Suit was not made until the 26th of hlarcli, 1861, when an order was made appointing Davenport recéiver in the Ringel suit, and he thereupon became and remain's suéh 'recéiver. When Davéiiport was appointed receive!- in the Billhofer & Arnold suit, he took possession of all of the property in question, and it amounted tó moré than sufficient to satisfy thé judgments of Billhofer; A controversy presently arose between Billhofer & Arnold and Henry Heubach, the assignee, as- to what Should bé done with that portion of the property thus held by the réceiver which would not be required tó satisfy their debt. The matter was brought before the court by a series of motions, and several orders were made therein, the substance of which are as follows : The first of them is the order appointing Davenport receiver, and directing him to take the-whole of the property in question into his custody. Hnder this Order he took possession of the entire property. It was supposed at that time to amount in value to a sum beyond the portion of the debt to Billhofer & Arnold, upon which they brought their equity suit, which was about $3,000. The assignee applied to the court to recover possession of a portion of the property, and on the 14th of November, 1860, an order was made directing a reference to Mr. Marbury, to ascertain and determine how much of this property the receiver should retain in his possession, and directing that the remainder of the property be restored to the assignee. . The order of the 14th of November, fixed the amount of the property which the receiver was to retain and sell at such portion of the whole as would produce the gross sum of $8,500. The language of the order is: “That the receiver shall only, be directed to take possession of property enough, under said order (namely, order of 11th October), to pay the judgments of the plaintiffs set forth in the complaint.” On the 30th of November, .the court made an order modifying the above clause of the order of 14th of November, as follows: Instead of directing the receiver to return this residue to the assignee, the language is, that “ the residue of said property, after the sale (meaning the sale by the receiver of what will bring the gross sum of $8,500), be exempted from the further operations of ike receivership in this action.” After Davenport had been appointed receiver, Billhofer & Arnold recovered two other judgments against Victor Iieubach & Co.; one on the 21st of October, 1860, for $3,687.84, and the other on the 13th of November, 1860, for $2,023.15. The receiver completed his sales to $8,500 on the 13th of March, 1861, and gave notice thereof to all parties; Bingel and the sheriff. The sheriff levied upon the goods and chattels held by the receiver, subject to the receiver’s prior rights; and after the receiver had sold enough to realize $8,500, under the order of November 14th, the sheriff took possession from the receiver of ,the residue, and on the 20th of March, 1861, six days before the motion was made for a receiver by Ringel, the sheriff sold the property under the executions. The order for a receiver in Ringel’s suit was made on the 26th of March. Ringel proceeded to judgment in his creditor’s suit, and obtained his decree on the 23d of Hovember, 1861. . The receiver now sues the sheriff, founding title upon the theory that Ringel obtained a lien upon the goods and chattels of the debtors by commencing his creditor’s suit. The cause was heard at Special Term, in the city of New York, May, 1862, on a demurrer to the complaint, and judgment was rendered dismissing the complaint, from which an appeal was taken. The General Term affirmed the judgment, and the plaintiff' appeals to this court. Luther R. Marsh, for the appellant, cited Murray v. Lylburn (2 John. Ch., 445); Edmonston v. Lyde (1 Paige, 639); Corning v. White (2 Paige, 568); Hammond v. Hudson River I. and M. Co. (20 Barb., 379); Robert v. The Albany and W. S. R. R. (25 Barb., 662); Gillett v. Fairchild (4 Den., 80); 2 Kent, 351; 1 Chitty Gen. P., 99, note p; Toml. Law D., term Chose; The King v. Capper (5 Price, 217); 1 Lilly’s Abr., 378; Myric v. Selden (36 Barb., 15). A. J. Vanderpoel, for the respondent, cited Storm v. Waddell (2 Sandf. Ch., 494); Van Alstyne v. Cook (25 N. Y., 489); Lansing v. Easton (7 Paige, 364); Storm v. Badger, (8 Paige, 130); Rutter v. Tallis (5 Sandf., 610); West v. Fraser (id., 653); Becker v. Torrance (31 N. Y., 631); Chautauqua Bank v. Risley (19 id., 369); Edmonston v. McLowd (16 N. Y., 543); Porter v. Williams (5 Seld., 142); Artisan’s Bank v. Treadwell (34 Barb., 559); Fairfield v. Weston (2 Sim. & Stu., 96); Am. Gutt. Per. Co. Case, 9 Abb., 78; Rich v. Loutrel (9 id., 356). [MAJORITY — Ingalls, J.] Ingalls, J. Although the facts are quite numerous, I am convinced that there is really but one important question involved in the decision of this case, which, is, yvhether Ein? gel, by the commencement of his equity action pgainst Victor Heubach, Alfred Heubach, Augustus, Johnson, and their assignee, Henry Heubach, and the service of an injunction, without a judgment, or the appointment of a receiver, in said action, prior to the sale of the personal property by the sheriff by virtue of the executions issued upon the two judgments which were recovered by Billhofer & Arnold against Victor Heubach, Alfred Heubach and Augustus Johpson, one on the 21st October, 1860, for $3,681.84, the other on the 13th November, 1860, for $2,023.15, acquired such a lien upon said property as created a preference in favor of Eingel, superior to the title acquired by the levy and sale under the Billhofer & Arnold executions. In this controversy, Davenport, the receiver, and Kelly, the sheriff, are, in effect, merely nominal parties, the real parties in interest being Eingel, rep resented by the receiver, and Billhofer & Arnold, represented by the sheriff. Davenport, the receiver, was appointed in the action first commenced by Billhofer & Arnold. By an order of the Supreme Court, made on the 30th day of November, 1860, modifying an order made on {he Mth day of November, I860, in said action, it was provided that the residue of the property in the hands of the receiver, after a sale by him, amounting to the gross sum of $8,5.00, should he exempt from the further operation of the receivership in that action. Such sale was made by the receiver, and the said gross sum was realized. All of the parties had notice ofsuch order .and of the sale. A motion was made by Eingel for. the appointment of a receiver, in his action, but before the picking of said motion, and consequently before the granting of an order for the appointment of a receiver, the sheriff proceeded apd sold the residue of the personal property, under the two executions in favor of Billhofer & Arnold; such sale b.eing made on the 20th day of March, 1861. I am of opinion that the sale of the property by the sheriff was regular and valid, and that Billhofer &' Arnold were entitled to. the proceeds of such sale, in preference to Eingel; that, until the appointment of a receiver, no such lien upon the personal property was acquired as,prevented such levy and sale by virtue of the executions. This was expressly decided in Storm v. Waddell (2 Sandf. Ch. Rep., 494, 516); and to the same effect is the decision in Van Alstyne v. Cook (25 N. Y., 489, 496). In Lansing v. Easton (7 Paige Ch. Rep., 365), the chancellor remarks: “ The ordinary injunction upon a creditor’s bill, which only operates upon the defendant, will not, of course., prevent another creditor from levying upon property of the defendant, which is the proper subject of a levy and sale on execution, before the title of the defendant in such property is equitably divested by an order for a sequestration thereof, or for. the appointment of a receiver.” In Van Alstyne v. Cook, above referred to, Judge Smith remarks: “ When an order is made for the appointment of a receiver of particular property, it amounts to sequestration, by act and operation of law, of such property; • and when the receiver is subsequently appointed, the title' to such property vests by relation from the date of the order, to the same effect as if such receiver was named in and appointed by such order.” See also West v. Fraser (5 Sandford, 653); Edwards on Receivers, 98; Becker v. Torrance (31 N. Y., 634). It is very clear that, as to personal property which is the subject of levy and sale on execution, a creditor, by an equity suit, acquires no preference, as against a judgment creditor of the debtor, until the entry of an order appointing a receiver in such equity suit. The vigilant creditor who, by his execution, seizes and sells the property of Ins debtor, before the appointment of a receiver in an equity action, secures a preference which the law sanctions and protects. Whether the same rule applies in regard to property which is not the subject of levy and sale by execution, we are not required to express an opinion in this case, as it is not involved. The judgment should be affirmed with costs. All concur for affirmance, except Sutherland, J., who did not vot;e. Judgment affirmed.