Opinion
April, 1908.
William B. Wright, for demurrer.
Wallace Thayer, for plaintiff.
This action comes before this court upon the argument of a demurrer interposed by the defendant Edward J. Maytham, individually and as trustee, and by the defendants Clara L. Maytham, Dorothy Maytham and Donald Maytham.
The complaint alleges that the Imperial Shale Brick Company, on June 13, 1898, recovered a certain judgment against the plaintiff, Erastus C. Knight and all the other defendants named in this action except the defendants Clara L. Maytham, Dorothy and Donald Maytham; that these judgments were against the judgment debtors as members of a Lloyds insurance company; that, on February 13, 1902, the plaintiff, Edgar B. Jewett, and Erastus C. Knight paid the judgment and all costs, amounting to the sum of $3,004.91; that Jewett and Knight also paid and expended $253.55 for defending said action, under and pursuant to an agreement among all parties to contribute for moneys so expended. The complaint alleges that Knight has sold and assigned to the plaintiff all his right to contribution from his fellow joint debtors, and that none of the defendants have contributed their quota. The complaint also alleges that five of the defendants are nonresidents of the State, and that one of them has been relieved of liability to contribute by proceedings in bankruptcy. The complaint further alleges that the defendant Edward H. Maytham, prior to the recovery of the Imperial Shale Brick Company judgment, for the purpose of defrauding creditors, made a transfer of all his property to his wife, the defendant Clara L. Maytham; that thereupon the said Clara L. Maytham, without consideration, transferred the same property to one Joseph B. Rogers, as trustee for herself and her children, the defendants Dorothy and Donald Maytham, and that subsequently the said Rogers resigned as trustee and the said Edward H. Maytham was substituted as trustee in the place of said Rogers. The complaint alleges that the defendant Edward H. Maytham has no property out of which to pay the plaintiff's claim except the property fraudulently transferred. The plaintiff asks that the defendants against whom the Imperial Shale Brick Company judgment was recovered be compelled to contribute to the plaintiff their proportionate shares of the amounts which the plaintiff has been compelled to pay, including the amount of the judgment and the costs of defending the action. The plaintiff also demands that the conveyance made by said Edward H. Maytham to his wife, Clara L. Maytham, and by her to Rogers as trustee and now held by the defendant Edward H. Maytham may be declared fraudulent and void and set aside, and that he account for all property so recovered, and that the same be applied to the payment of such claim as may be found due the plaintiff by the said defendant Edward H. Maytham.
In short, this action combines a cause of action for contribution with one in the nature of a judgment creditor's bill to set aside an alleged fraudulent conveyance made by one of the defendants.
The defendant Edward H. Maytham, individually, demurs on the ground that different causes of action have been improperly united. As trustee he interposes a separate demurrer on the same ground and on the further ground that the complaint does not set forth facts sufficient to constitute a cause of action. The defendant Clara L. Maytham also demurs on the same grounds as those set up by Edward H. Maytham as trustee.
The demurrers on the ground that the complaint fails to set forth a cause of action against the Maythams to set aside the alleged fraudulent conveyance, in our opinion, are well taken, for the reason that the complaint does not allege that the plaintiff has exhausted his remedy against Edward H. Maytham by the recovery of a judgment and the return of an execution unsatisfied. This concededly has never been done.
It is the general rule that a creditor's bill cannot be maintained until an execution has been issued and returned unsatisfied. N.T. Bank v. Wetmore, 124 N.Y. 248; Code Civ. Pro., § 1871.
And it has become the settled rule in this State not to dispense with these preliminaries, although it may be made to appear by evidence that no benefit could result to the creditors from them. National Tradesmen's Bank v. Wetmore, 124 N.Y. 248; Estes v. Wilcox, 67 id. 264; Adsit v. Butler, 87 id. 585.
Plaintiff's counsel, however, contends that the rule is not without exceptions and that this case presents such an exception. The argument is made that, upon the payment of the Imperial Shale Brick Company judgment, the plaintiff became subrogated to the rights of the judgment creditor; that, having been paid, it was extinguished and could not be kept alive, even by assignment, so as to enable plaintiff to issue execution upon it against the other codefendants. Harbeck v. Vanderbilt, 20 N.Y. 395-397; Booth v. Farmers M. Natl. Bank, 74 id. 228-232; Bank of Salina v. Abbot, 3 Den. 181.
Consequently, as it became impossible to issue execution and have it returned against Maytham, that requirement is dispensed with on the general theory that the law does not require the performance of the impossible; that this action is prosecuted for the benefit of each of all the judgment debtors against whom the Imperial Shale Brick Company judgment was recovered, and all are, therefore, interested in the success of the effort to set aside the alleged fraudulent conveyance; that, inasmuch as the other portion of the relief asked is for a contribution, and equitable in its nature, inasmuch as execution upon the shale brick company judgment has become impossible, it is not necessary in law or equity to allege the recovery of a judgment for contribution against Maytham and the return of execution. The plaintiff cites, in support of his contention, the cases of National Tradesmen's Bank v. Wetmore, 124 N.Y. 241-248; Lefevre v. Phillips, 81 Hun, 232; Patchen v. Rofkar, 12 A.D. 475; Patchen v. Rofkar, 52 id. 367-370; Bateman v. Hunt, 46 Misc. Rep. 346-350.
The error in the argument of plaintiff's counsel begins in his assumption that the plaintiff is subrogated in equity to the rights of the Imperial Shale Brick Company in the judgment recovered by it against the plaintiff and his associate defendants in that action. The brick company had the right to enforce its judgment against any or all of the defendants in that case. When the plaintiff paid that judgment the judgment was satisfied and extinguished. The right to enforce it was forever gone. The plaintiff did not, by payment, acquire any right to enforce it in law or equity against any one. All the rights the plaintiff acquired by payment of this judgment is the right of contribution from his codefendants. It appears there were some eighteen judgment debtors; and of course his claim against each, assuming all were solvent, would be the right to recover one-eighteenth of the judgment paid. This equitable right for contribution is a very different thing from the right to enforce the judgment itself and stands on very different grounds. If there were any equitable subrogation to the rights of the brick company, then the plaintiff's rights would extend to its enforcement for the full amount of the judgment against each or any of the codefendants, which is not the case. All equity gives the plaintiff is the right to contribution for each defendant's just proportion. Until that amount has been determined by judgment in the plaintiff's favor and execution has been issued and returned unsatisfied on such judgment, the plaintiff is in no position to maintain a judgment creditor's action to set aside the alleged fraudulent conveyance.
This action, therefore, is premature in so far as its judgment creditor's features are concerned.
The cases cited by the plaintiff's counsel do not sustain the position taken. In each of the cases cited it appeared that the defendants charged with making fraudulent conveyances sought to be impeached were nonresidents, without the jurisdiction of the court; so that it became impossible to obtain judgment and return of execution unsatisfied against them. In such cases the courts held that a creditor's action may be maintained without first obtaining a judgment against the debtor.
In the case at bar, however, it appears that Maytham lives here and there is no such impossibility of obtaining a judgment against him and the return of an execution.
I am, therefore, of the opinion the demurrer should be sustained on the ground that the complaint fails to state a sufficient cause of action against Edward H. Maytham as trustee and Clara L. Maytham.
It follows, too, that the demurrer should be sustained on the second ground of the improper joinder of alleged causes of action.
The plaintiff should be permitted to amend his complaint, upon the payment of costs of this demurrer, within twenty days after service of the interlocutory judgment to be entered hereon.
Demurrer sustained.