Opinion
April 8, 1910.
Sol. J. Freudenheim, for the appellants.
Saul S. Myers, for the respondent.
On the 4th day of June, 1909, the Rutaced Company made a general assignment for the benefit of its creditors to one Wolf after the appellants recovered the judgment against it in the City Court, on which their proceedings supplementary to execution have been stayed by the order now under review. The order for the examination of the assignor in proceedings supplementary to execution was served on the 24th day of September, 1909. It thereupon applied to the Special Term setting forth merely the general assignment; that schedules had been duly filed and claims advertised for; that the assignee had duly qualified, and the order and the affidavit upon which it was granted. No other basis was shown for the order from which the appeal is taken.
A general assignment neither stays nor suspends the remedies of creditors of the assignor. It does not appear that the appellants have waived their right to the remedy afforded by the statute to examine the judgment debtor in proceedings supplementary to execution. Counsel for the respondent contends in support of the order that the only right which the appellants now have to examine the assignor is under section 22 of the Debtor and Creditor Law (Consol. Laws, chap. 12; Laws of 1909, chap. 17). The provisions of that section were taken from section 21 of chapter 466 of the Laws of 1877, known as the General Assignment Act, and it was well settled that the examination thereby authorized was only in aid and furtherance of the assignment, and that while, as an incident to such examination duly authorized to ascertain the property subject to distribution and the creditors to whom distribution should be made, evidence might be adduced tending to show that the assignment was made in fraud of the rights of creditors, still the examination could not be had for that purpose. ( Matter of Holbrook, 99 N.Y. 539, 546; Matter of Sickle, 52 Hun, 527; Matter of Workingmen's Pub. Assn., 62 App. Div. 604; Matter of Goldsmith, 10 Daly, 112; Matter of Wilkinson, 36 Hun, 134.) And if a creditor came in and participated in the assignment proceedings and pursued any remedy thereunder, he waived or ran a serious risk of waiving any right to attack the assignment for fraud. ( Matter of Holbrook, supra; Mills v. Parkhurst, 126 N.Y. 89, 93.) The same rules of construction still obtain. The assignment is wholly voluntary. The law permits it as a means for a distribution of the property of an insolvent debtor among his creditors, and if the assignment be made in conformity with the statute and without fraud on the part of the assignor, it will be sustained, but if it be made by the assignor in fraud of the rights of creditors or in violation of the statute, then a creditor may, in disregard of the assignment, pursue his legal remedies against the property thus assigned, or may bring a suit in equity to set the assignment aside. ( Mills v. Parkhurst, supra; Austin v. Bell, 20 Johns. 442; McConnell v. Sherwood, 84 N.Y. 522; Clark v. Taylor, 22 Wkly. Dig. 295; Ocean National Bank v. Olcott, 46 N.Y. 12; Matter of Kapelovich, 22 Wkly. Dig. 13; Bishop Insolv. Debt. §§ 203, 204, 206, 223.) The appellants were, therefore, at liberty, notwithstanding the assignment, to discover by examination on the proceedings supplementary to execution, any property of the judgment debtor, and the circumstances under which he had transferred his property, including the general assignment thereof. ( Matter of Sickle, supra; Seligman v. Wallach, 16 N.C. 317; Schneider v. Altman, Id. 312; Matter of Rindskopf, Id. 316, note. See, also, Lathrop v. Clapp, 40 N.Y. 328.) And if the remedies specially available to him as a judgment creditor prove fruitless and the assignment be not set aside he may ultimately come into the assignment proceeding and participate with other creditors in the distribution of the assigned estate. ( Mills v. Parkhurst, supra.)
It follows that the order should be reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.
INGRAHAM, P.J., CLARKE, SCOTT and MILLER, JJ., concurred.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.