Opinion
December Term, 1853
M. Pechtel for the appellants.
John H. Reynolds for the respondent.
The first question is whether a receiver, appointed by a justice of the supreme court under supplementary proceedings instituted by a judgment creditor, upon the return of executions unsatisfied, in pursuance of the provisions of the Code of 1849, §§ 292 to 298, can, after perfecting his appointment, maintain an action in his own name to set aside an assignment of real and personal property made by the judgment debtor, on the ground of fraud, without having first received from such debtor an assignment to himself as such receiver.
By § 298 of the Code of 1849 the receiver appointed under supplementary proceedings possesses the like authority as if the appointment were made by the court according to § 244. By the last named section the court are authorized to appoint receivers and grant the other provisional remedies, according to the then prevalent practice. The act of April 28th, 1845 ( Laws, 90, 91), enacts that any receiver appointed by virtue of an order or decree of the court of chancery may take and hold real estate upon such trusts and for such purposes as the court may direct, subject to the further order or direction of the court; and the second section empowers receivers so appointed by an order or decree of the court of chancery to sue in their own name for any debt, claim or demand transferred to them, or to the possession or control of which they are entitled as such receivers. The chancellor, in Wilson v. Wilson (1 Barb. Ch. R., 594), thought the act of 1845 was not broad enough to transfer the title of real estate to the receiver, by the mere order of the court and without an actual conveyance from the party to the suit in whom such legal title was vested. But I think that since the Code no such conveyance is necessary to vest the legal title in the receiver, and that real and personal property are in this respect placed upon the same footing. The sections before cited provide for the appointment of receivers of the property of the judgment debtor, c. Sec. 464 enacts that the term "property" as used in the Code shall include "property real and personal," and §§ 462 and 463 define what is meant by "real property" and by "personal property." The first is declared to be coextensive with lands, tenements and hereditaments, and the other to include money, goods, chattels, things in action and evidences of debt.
Before the Code, it was settled that the order appointing a receiver, when the appointment was completed, vested in him all the property and effects of the debtor, subject to the order, without an assignment. ( Mann v. Pentz, 2 Sandf. Ch. R., 257; Wilson v. Allen, 6 Barb., 542.) These cases speak only of personal property; and doubtless the real property did not before the Code pass by such order, and was only directed to be conveyed under peculiar circumstances. ( Scouton v. Bender, 3 How. Pr. R., 185; 6 Barb., 602, per HARRIS, J.) But since the Code, I think the order has the like effect upon the debtor's real estate as upon his personal estate, and that the whole by force of the order becomes vested in the receiver when the appointment is completed. The language of the Code effectually removes the difficulty which the chancellor suggested in Wilson v. Wilson ( supra). It puts real and personal property in the same category. The statute of frauds affords no objection to this view. It is there enacted (2 R.S., 134, § 6) that no estate or interest in lands, c., shall hereafter be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by deed or conveyance in writing, subscribed by the party, c., or by his agent, c. It was competent for the legislature to remove that impediment to conveyances, or to declare what act or operation of law should work a transfer of title. They seem to have done so by giving a legislative definition to the word "property," so as to embrace real as well as personal property.
The receiver appointed under supplementary proceedings does not stand merely in the place of the debtor, but represents the creditors, and can thus impeach the fraudulent sales of the debtor. The assignment sought to be set aside in this case was good between the parties. The fraudulent grantor could not impeach his own grant. ( Osborne v. Moss, 7 John., 161; Jackson v. Garnsey, 16 John., 189; Jackson v. Cadwell, 1 Cow., 622; Leach v. Kelsey, 7 Barb., 466; Jewett v. Palmer, 7 John. Ch. Rep., 65; Padgett v. Lawrence, 10 Paige, 170; De Mott v. Starkey, 3 Barb. Ch. Rep., 403.) But the receiver, succeeding to the rights of the debtor, represents other interests than those of the debtor. He comes in by the act of the law and not by the act of the party. Before the Revised Statutes it was held, in Osborn v. Moss ( supra), that the personal representatives of the fraudulent grantor could not invalidate the grant; and the reason was, that the statute renders the sale void only as against creditors and purchasers, and leaves it valid between the parties and their representatives. But now, as remarked by SAVAGE, Ch. J., in Dox v. Backenstose (12 Wend., 543), under our statute, executors and administrators have a new character, and stand in a different relation from what they formerly did to the creditors of the deceased persons with whose estates they are entrusted. They are not now the mere representatives of their testator or intestate. They are constituted trustees, and the property in their hands is a fund to be disposed of in the best manner for the benefit of creditors. ( See 2 R.S., 78, § 8; ib., 449, § 17, c.) The same doctrine was affirmed in Babcock v. Booth (2 Hill, 181), and was approved by the chancellor, in Brownell v. Curtis (10 Paige, 210-218). Since executors and administrators have come to represent the rights of the creditors generally, they have been allowed to impeach the conveyances of their testator or intestate, when fraudulent against creditors.
Upon the same principle the receiver of an insolvent corporation is allowed to question the fraudulent and illegal acts of the corporation. He represents both the creditors and the stockholders. ( Gillet v. Moody, 3 Comst., 479; Leavitt v. Palmer, ib., 19; Brouwer v. Hill, 1 Sandf. S.C.R., 629; Hyde v. Lynde, 4 Comst., 392.) The receiver is bound by the legal acts of the corporation. It is only those which are illegal which he can impeach.
The receiver appointed under the Code represents the interests of the creditors as well as those of the debtor. He is a trustee for all parties, and is bound to apply the effects of the debtor faithfully to the payment of the debts, according to their legal or equitable priorities; and if anything remains, to restore it to the debtor or his grantee. He has no power to set aside legal and valid acts of the debtor; but such as are illegal and forbidden by law he can successfully assail. These principles are legitimate deductions from the cases which have been cited, and they are carried out to their consequences in the Code of 1851, § 298, which forbids the appointment of more than one receiver for the same judgment debtor, though there may be separate proceedings in favor of different creditors. It shows that the receiver is a trustee for all.
The act which the receiver seeks to avoid in this case was an illegal act of the debtor. The object of the action is to set aside an assignment made by the debtor with intent, as is alleged, to defraud the creditor under whose judgment and execution the plaintiff was appointed receiver, and the other creditors of the assignor. Such conveyance was void at common law, and is expressly forbidden by the statute. (2 R.S., 137, § 1.) It is void as against the creditors of the party making it, though good as between him and his grantee. The plaintiff, representing the interests of the creditors, has a right to invoke the aid of the court to set aside the assignment. He stands, in this respect, in the same condition as the receiver of an insolvent corporation, or as an executor or administrator, and like them can assail the illegal and fraudulent acts of the debtor whose estate he is appointed to administer.
These views are greatly strengthened by the recent decision of the court of appeals in the case of The Chautauque County Bank v. White (2 Seld., 236). The supreme court in the third district ( see 6 Barb., 589) held in that case, among other things, that a receiver in a creditor's suit could not take such a title in the real estate of the judgment debtor, even under an assignment made by the latter in pursuance of an order of the court, as to authorize the court to direct him to sell such real estate and apply the proceeds to the payment of the creditors having liens thereon, nor so to divest the judgment debtor of his title to the real estate as to prevent a judgment subsequently recovered against him from becoming a lien thereon. The court of appeals held the contrary on both those points. According to the decision of the supreme court the real estate still remained in the debtor, notwithstanding the order appointing a receiver, and notwithstanding an actual conveyance by the debtor to the receiver, in pursuance of the order of the court. This judgment was reversed. The order appointing the receiver in that case was made before the Code. The case is therefore in point to show that under the old practice the title passed to the receiver, under an assignment made in pursuance of an order of the court. The argument in favor of its passing, since the Code, is much stronger than it was before.
The assignment in this case was made by the defendant Williams to the defendant Clark on the 5th of January, 1850, in trust for the payment of the debts of the assignor according to an order of preference therein specified. It embraced all the real and personal property of the assignor, and it authorized the assignee "to sell and dispose of the same either at public or private sale, to such person or persons, for such price or prices, and on such terms and conditions, and either for cash or credit, as in the judgment of the assignee may appear best," c. In Barney v. Griffin (2 Comst., 365), BRONSON, J., in giving the opinion of this court, said that an assignment by an insolvent debtor of his estate is fraudulent and void, when by the terms of the deed the trustees are authorized to sell the property on credit. It does not appear by the report that the whole court acquiesced in that position, and there were other grounds taken by the learned judge, and appearing on the face of that assignment, rendering it void, and upon which the other members of the court may have acted. This has led the superior court of New-York to question the dictum of Judge BRONSON. ( See 4 Sandf. S.C.R., 293.) But I understand this court in a subsequent case affirmed the principle above stated by BRONSON, and that it is no longer an open question in this court. The assignment must therefore be set aside, unless the subsequent assignment made by the assignor on the 30th of March, 1850, cured the defect.
The subsequent assignment was made after the rights of the creditor had attached, and recited the assignment of the 5th of January, and that doubts had arisen whether the authority to sell on credit did not vitiate the assignment, and proceeded to direct that the sale should be for cash only. It is believed that the assignor had divested himself of all control over the property by the assignment of the 5th of January, and that he could neither revoke nor alter it; and certainly not to the prejudice of a creditor whose lien on the property had attached by the institution of supplementary proceedings under the Code.
The judgment of the supreme court must be affirmed.
JOHNSON, J., gave no opinion.
Judgment affirmed.