In Reynolds v. Ætna Life Insurance Co. (160 N.Y. 635, 648) the court, speaking of the rights of the plaintiff therein, a receiver in supplementary proceedings, says: "What the plaintiff acquired was the legal title to the policies and all the rights of the judgment debtor under them at the time of the plaintiff's appointment."Summary of this case from Collins v. Connelly
Argued October 18, 1899
Decided November 21, 1899
James M. Fisk for appellant Little. William C. Davis for Margaret Worthington, appellant.
Frederic A. Ward for Reynolds, respondent. William S. Bennet for insurance company, respondent.
That the defendant Little, as receiver of the Worthington Company, acquired no title to the policies in question, or to the money, due or paid thereon by virtue of his appointment, has already been decided. ( Little v. Garabrant, 90 Hun, 404; affirmed, 153 N.Y. 661; Bulkley v. Little, 154 N.Y. 742; 9 App. Div. 627.)
Therefore, if he possessed any right to the money due or paid under the policies, it was acquired from and through the assignment by Richard Worthington to the defendant Doman, the assignment by Doman to Margaret Worthington, and the assignment by Margaret to him. But as these assignments have been found to be fraudulent as to the creditors of Richard Worthington, it is obvious that Little obtained no title under them as against the plaintiff. It must, therefore, be assumed, in the further discussion of the questions involved, that Little, as receiver, had no title to the policies in question or the money paid thereon, which could be defended as against the plaintiff, or which entitled him to enforce them against the insurance company in defiance or in diminution of the plaintiff's rights.
The plaintiff having been duly appointed as receiver of the property of Richard Worthington in proceedings supplementary to execution long before Little's appointment and while the judgment debtor was the owner of the policies, his title was superior to any right or interest Little may have obtained by virtue of the assignments by which it was sought to transfer the policies to him. Upon the plaintiff's appointment as receiver, the property of the judgment debtor vested in him from the time of filing the order appointing him. (Code of Civil Procedure, § 2468.) By virtue of his appointment he represented the judgment debtor, and could bring any action relating to the property rights thus acquired. He also represented the judgment creditors to an extent necessary to bring actions in the nature of a creditor's bill to set aside fraudulent transfers. ( Porter v. Williams, 9 N.Y. 142, 149; Underwood v. Sutcliffe, 77 N.Y. 58; Mandeville v. Avery, 124 N.Y. 376, 385; Ward v. Petrie, 157 N.Y. 301, 307.)
As between the parties the plaintiff not only acquired the legal title to all the personal property of the debtor which was then in his possession, but also to all his personal property which was in the possession of others at the time of the service of the order in supplementary proceedings. Thus, when Little was appointed, and also when he took the assignment of these policies, the plaintiff held the legal title to them, although their existence was unknown to him and they were not in his possession.
The appellants contend that upon the death of Richard Worthington the amount which became payable upon these policies passed to his legal representative, and the plaintiff's right to recover it was thus extinguished. The lien upon equitable assets, acquired by the commencement of an action in the nature of a creditor's bill, is not extinguished by the death of the defendant, even before the appointment of a receiver, but it survives his death and is a lien upon such assets in the hands of his administrator. ( Brown v. Nichols, 42 N.Y. 26; First Nat. Bank v. Shuler, 153 N.Y. 171.) The provisions of the Code relating to proceedings supplementary to execution furnish a substitute for the creditor's bill as formerly used, and the service of the order under those provisions takes the place of the commencement of a suit under the old system, and gives the judgment creditor the priority of a vigilant creditor and a lien upon the equitable assets of the debtor. ( Lynch v. Johnson, 48 N.Y. 27; Duffy v. Dawson, 22 C.P.R. 235.) In this case a receiver was appointed anterior to the death of the insured, and hence it is manifest that the title remained in the plaintiff and was not divested or affected by his death.
A further contention is that the plaintiff acquired only the surrender value of the policies, and at most can recover but the surrender value at the time of his appointment. We think this contention cannot be sustained. What the plaintiff acquired was the legal title to the policies and all the rights of the judgment debtor under them at the time of the plaintiff's appointment. While the insured had the right to discontinue the payment of the premiums upon the policies as they became due and thus let them lapse, still he was not required to do so. He also had the right to continue paying the premiums and thus keep the policies in force until their maturity. Having kept them in force, the plaintiff, in whom the title rested, was entitled to the amount due upon them, not exceeding the amount of the debt he represented. He could not have delivered the policies to the company and accepted their surrender value, as the knowledge of their existence had been kept from him by the judgment debtor, who voluntarily continued to pay the premiums and thus kept them in force. Under these circumstances, the title continued in the plaintiff, and he was entitled to receive the full amount which should become due upon the policies, either by expiration of the term of twenty years, or by the death of the insured, so far as the amount was necessary to pay the judgment he represented. After the appointment of the plaintiff the judgment debtor held the possession of these policies subject to the plaintiff's title, and had no right to transfer or appropriate them to his own use. He was at most a mere bailee or trustee of them for the plaintiff, and as such he could not have legally collected the amount due if he had lived until the time the policies became payable. He had no title, and, consequently, would have had no right to recover thereon. The sale or transfer by him amounted to a conversion of the property for which he was liable to the plaintiff for its value at the time of the conversion, including any increased value that had arisen after the plaintiff obtained his title. The rule that a trustee or bailee is liable to the owner for property in his hands or wrongfully transferred by him, is based upon a rule of property, and the title not being affected by such increase the owner may claim it, and its increased value as well. ( Silsbury v. McCoon, 3 N.Y. 379; Newton v. Porter, 69 N.Y. 133; Kinsey v. Leggett, 71 N.Y. 387, 395; Guckenheimer v. Angevine, 81 N.Y. 394, 396; Matter of Cavin v. Gleason, 105 N.Y. 261.)
These considerations lead to the conclusion that the plaintiff was entitled to recover of the insurance company the amount due upon the policies, and the proceeds having been received by the other defendants, that he was entitled to recover of them as well.
This conclusion is further controverted by the appellants upon the ground that the orders made on the petition of Little for a settlement with Mrs. Worthington and in the interpleader suit brought by the defendant company, conclusively estopped the court from holding, and the insurance company from claiming, that the other defendants are liable to the plaintiff for the amount due upon the policies, or for sufficient to pay the judgment represented by him. We think this contention should not be sustained. It is manifest from the findings of the trial court that those orders did not affect or bind the plaintiff, who was not a party to that action. Hence, so far as he is concerned, obviously he possesses the right to collect upon the policies in question an amount sufficient to pay the judgment in the action in which he was appointed.
The defendants, other than the insurance company, persistently insist that although the court may have had power to direct a judgment in favor of the plaintiff against the insurance company for the amount due upon the judgment represented by him, it had no authority to modify the judgment appealed from so as to permit or direct that the insurance company, if compelled to pay its policies twice, should recover the amount of the second payment from the other defendants in the action by whom the amount due thereon had been wrongfully received.
It seems clear that the insurance company ought not to be required to pay the amount of its policies twice. It is equally apparent that the defendants Little and Worthington are in possession of money which does not belong to them and which should be applied to the payment of the plaintiff's claim. Therefore, unless the court below was without power or authority to modify the judgment in the manner it did, its decision ought to be sustained. When the order in the interpleader action was made and the money paid to the chamberlain by the attorney for the insurance company, he knew that the plaintiff claimed these policies and the money due thereon. The evidence shows that he did not consent to the order, and tends to show that he protested against it. Moreover, at the time he had no knowledge of the fraud through which the defendants Little and Worthington obtained their pretended title to the policies, and he may well have supposed they were the owners of them. The proof also tends to show that, when the money was paid by the company, its attorney was assured by the defendants Little and Worthington that the plaintiff's claim was invalid.
Under these circumstances, can we say that the Appellate Division, which is authorized to review the facts as well as the law, was not justified in holding that, upon the facts found by the court below, the order of the court in the interpleader action and the payment of the money under it were so far induced by fraud as to justify it in deciding that the insurance company should not, by reason of the order and payment, be compelled to pay the amount of the policies twice, without the right to recover the amount wrongfully and unlawfully received by the defendants Little and Worthington? We think not.
We think it cannot be correctly said that either the order in the interpleader action, or the order approving the settlement between Little and Mrs. Worthington, was an adjudication of the rights of the parties to this suit which barred or concluded the court in determining the equitable and legal rights of the parties. Obviously, the order approving the settlement had no binding effect upon the parties to this action, as it related only to an agreement between Little and Mrs. Worthington.
It must be regarded as the established law of this state that a judgment is not conclusive in a second action unless the same question was at issue in a former suit of which the court had competent jurisdiction, and the subsequent action is between the same parties or their privies. The conclusive character of a judgment as a bar extends only to the identical issues which were tried in the former action. They must be the same in each action, not merely in name, but in fact and in substance, and the party seeking to avail himself of a former judgment as conclusive evidence or as a bar in a subsequent action, must show affirmatively that the question involved in the second was material and determined in the former, as a former judgment would not operate as an estoppel in a subsequent action as to immaterial and unessential facts, even though put in issue and directly decided. It is final only as to facts litigated and decided, which relate to the issue, and the determination of which was necessary to the determination of that issue. ( Palmer v. Hussey, 87 N.Y. 303; Bell v. Merrifield, 109 N.Y. 202; Hymes v. Estey, 116 N.Y. 501; Lewis v. O.N. P. Co., 125 N.Y. 341; Rose v. Hawley, 133 N.Y. 315; House v. Lockwood, 137 N.Y. 259; Ward v. Boyce, 152 N.Y. 191, 201.)
In the Palmer case it was held that the conclusive character of a judgment as a bar extends only to identical issues, and they must be such not merely in name, but in fact and substance. The Bell case is to the effect that, while a valid judgment upon a question directly involved in a suit is conclusive evidence as to that question in another suit between the same parties, although for a different cause of action, that it must appear, either by the record in the former suit or by extrinsic evidence, that the precise question was raised and determined therein, and the burden of establishing it rests with the party who endeavors to make use of the judgment as conclusive evidence upon that point.
In Hymes v. Estey there was a claim that a former judgment was conclusive as to the existence of a public way. In the former action the question was whether the public had a right to a strip of land for a street, and in the second it was whether the land was used as a street or visible as such. It was there held that the question in the second case was not within the purview of the former or essential to be determined, and, hence, the judgment was not conclusive.
The Lewis case establishes the principle that, where a judgment may have proceeded upon two or more distinct facts, the party seeking to avail himself of it in a subsequent action as conclusive evidence as to one of those facts must show affirmatively that the former decision was based upon that fact. In the Rose case it was held that, as the second cause of action accrued after the former judgment, it was not a bar to a recovery in the second.
In House v. Lockwood it was held that a judgment does not operate as an estoppel in a subsequent action between the parties as to immaterial and unessential facts, even though put in issue by the pleadings and directly decided. It is simply final as to facts litigated and decided therein, having such a relation to the issue that their determination was necessary to the determination of that issue. In the Ward case it was held that before the record of a former judgment between the same parties would be conclusive it must appear that the court in the first action had jurisdiction, and the same fact involved in the second action was at issue in the former and was material and determined.
In Matter of Flushing Ave. ( 98 N.Y. 445) an order was made denying a motion to set aside for irregularity the report of commissioners of estimate and assessment in proceedings for a local improvement. Pending an appeal a second motion was made upon substantially the same papers, but assailing the constitutionality of the act under which the improvement was made. The second motion was denied and the constitutionality of the act affirmed in the Court of Appeals. It was there held that the second motion was no bar to a subsequent review of the first and that the parties were not precluded from examining the question of regularity.
In Avila v. Lockwood ( 98 N.Y. 32), where a suit was brought to set aside a sale as fraudulent and to recover the property sold, the defendant, a corporation, disposed of it pending the litigation, and when judgment was rendered ordering it to deliver the property, the defendant was unable to comply with the judgment, and it was held that such a judgment was no bar to a subsequent action by the plaintiff's assignee to recover from the defendant's agents the proceeds of the property sold pending the original suit and received by such agents.
Applying the principles of these decisions to the question under discussion, it is quite obvious that neither of the orders relied upon by the appellants effected an estoppel as against either the plaintiff or the insurance company. The parties were not the same, nor was the plaintiff a privy of either of the parties to the interpleader suit. In that suit none of the questions involved in this was determined. There the insurance company came into court and alleged that it had a fund in its hands to which there were two claimants, that it was indifferent between them, and asked the court to decide which was entitled to it. One of the defendants alleged that he was the owner as against the others and this they admitted. Upon that state of the pleadings the order was made. There was no adjudication that the fund in fact belonged to Little or to Worthington, or to both as against the claim of the true owner. Nor did the insurance company admit that it belonged to either. It merely alleged that both claimed it and asked the court to determine who, as between the then parties, should have it. The only question decided in that case was that as between the defendants in that action Little was entitled to the money due on the policies. Did the insurance company by this action admit or estop itself from denying that the policies belonged to either when the true owner appeared, established his ownership and sought to enforce his right? We think neither of the orders relied upon by the appellants in any way estopped or prevented the court from awarding the relief granted by the Appellate Division, especially in view of the facts found and the obvious fraud of the appellants in obtaining from the insurance company the money that justly and legally belonged to plaintiff.
The issue in the interpleader suit is in no way involved in this. In the former it was as to which of the defendants should have a fund which was admitted to be due upon the policies, which were in the possession of Little. In that case there was no issue, claim or pretense that the policies belonged to the plaintiff in this action or any other person than Little. No such question was involved. Indeed, no question as to the title of the policies was litigated. In this case the title was the only issue litigated, and the question was whether the plaintiff owned the policies, and, if he did, whether the defendants Little and Worthington should refund the money which they obtained wrongfully upon the claim that they were the owners and entitled to the money payable thereon. These issues were new, have arisen since the former order was made, and were not tried or determined in the interpleader action. There was no decision in the former suit that the defendants Little and Worthington were entitled to the policies as against any other claimant, which was binding ether upon the plaintiff or the insurance company upon a second trial.
Under these circumstances, and in view of the authorities cited, it is obvious that neither the order in the interpleader action nor the order permitting the settlement between Little and Mrs. Worthington was a bar to the right of the plaintiff to recover against these defendants, or to the right of the court to adjudge that Little and Mrs. Worthington should pay the amount wrongfully received by them to the insurance company in case it should be required to pay its policies a second time. That question was raised by answer of the insurance company, was germane to this action and was properly determined by the Appellate Division.
The judgment should be affirmed, with costs.
All concur (VANN, J., in result).
Judgment and order affirmed.