In Woods v. Garcewich (67 App. Div. 53) it was held by this court that in summary proceedings in the Municipal Court in the city of New York the assignment of a lease might be attacked on the ground of fraud and the decision of that court would be a bar to an action to set aside the assignment.Summary of this case from Meyerhoffer v. Baker
December Term, 1901.
William J. Barr, for the appellant.
Stanley W. Dexter, for the respondent.
This is a suit in equity to have an assignment of a lease by defendant's husband to her declared null and void, on the ground of fraud and illegality, and to perpetually enjoin the execution of a warrant issued upon a final order in a summary proceeding instituted in the Municipal Court of New York by the appellant, as petitioner, for the removal of the respondent from premises No. 45 Whitehall street in the borough of Manhattan. The lease in question was executed by Isaac Seckle, the owner of the premises, to Robert Garcewich, for the term of five years from the 1st day of January, 1897. It was thereafter assigned to Morris Garcewich, appellant's husband, who entered into possession thereunder and conducted thereon a men's furnishing business; and it is the contention of the plaintiff that he continued to occupy the premises until about the 27th day of July, 1901, but that is controverted. On the 11th day of July, 1901, three creditors of Morris Garcewich petitioned the United States District Court for the southern district of New York, praying that he be adjudicated a bankrupt, and his consent thereto was filed therewith. The court on that day duly appointed a receiver of the property, assets and effects of said Garcewich, and on the twentieth day of the same month Garcewich was duly adjudged a bankrupt. The respondent also claims that the receiver took possession of the store and lease, and that thereafter, and on the twenty-seventh day of July, pursuant to an order of the court, he sold to respondent the business, stock and fixtures and all his right, title and interest in the lease and good will of the store, for the sum of $3,200, whereupon plaintiff paid said sum to the receiver and received from him a bill of sale of the assets, including said lease, and an assignment thereof, and that thereupon the receiver delivered to the respondent the keys and possession of the store. Subsequently, and on the ninth day of August, appellant demanded possession of the store from the respondent, claiming to be entitled thereto by virtue of a written assignment of the lease made by her husband to her on the 9th day of July, 1901. It is alleged in the complaint, and the allegation is supported by affidavits, that this assignment of the lease from the bankrupt to his wife was made with full knowledge on the part of both of his insolvency and with intent to hinder, delay and defraud his creditors. On the twelfth of August last the summary proceeding was instituted, and by the petition it appeared that appellant based her right to possession upon said assignment of the lease to her. The respondent appeared and interposed an answer, setting up the invalidity of the assignment of the lease upon the same grounds upon which it is attacked in the complaint herein. The issues thus raised by the petition and answer were tried in the Municipal Court on the 19th day of August, 1901. Conflicting affidavits are presented with reference to what took place upon the trial, it being claimed on the part of the appellant that the respondent was permitted to offer any evidence to establish her legal or equitable defense, but that her counsel confined his claim to the invalidity of the assignment on account of the bankruptcy of the appellant's husband, and it being claimed on the part of the respondent that the judge unreasonably declined to grant him an adjournment and refused to hear evidence that the assignment to the petitioner was fraudulently made. The issues were decided, however, and a final order was made therein by the court on the 26th day of August, 1901, directing that a warrant immediately issue in favor of the petitioner, and thereupon this action was commenced and a temporary injunction order granted, which, on the return of the order to show cause, was continued pendente lite.
The question presented by this appeal is, whether on these facts the execution of the final order made by the Municipal Court in the summary proceeding may be enjoined, and it resolves itself into the question as to whether the judgment of the Municipal Court is a bar to this action. Manifestly, the Municipal Court, being an inferior court not of record, could not grant affirmative equitable relief or cancel the assignment of the lease for any reason. It does not follow, however, that that court did not have jurisdiction to take evidence and decide, for the purpose of sustaining the respondent's defense, that the assignment of the lease to the appellant by her husband was fraudulent and void, and that, therefore, the petitioner had no title upon which she could maintain the proceeding. Formerly the answer in a summary proceeding was confined to a denial of the allegations of the petition; but in 1893 (Chap. 705) the Legislature amended section 2244 of the Code of Civil Procedure by providing that the answer might set forth "a statement of any new matter constituting a legal or equitable defense or counterclaim," and that "such defense or counterclaim may be set up and established in like manner as though the claim for rent in such proceeding was the subject of an action." It may be that it was not competent for the Legislature to vest these inferior courts with power to pass upon equitable defenses of every nature. Fraud, however, is a legal defense, as well as an equitable defense, and we think the Municipal Court had jurisdiction to pass upon the validity of the assignment of the lease and to dismiss the petition if the evidence showed that the assignment had been made fraudulently or illegally; and although there is no binding precedent on the construction of this amendment, the trend of the decisions that have been made are in accordance with these views. ( Rodgers v. Earle, 5 Misc. Rep. 164; Wulff v. Cilento, 28 id. 551; Matter of Hattersley v. Cronyn, 22 id. 259.) The respondent interposed it as a defense and hazarded the result before coming to this court for relief. Under the former practice and now, inasmuch as the Municipal Court could not give full relief, the respondent might at the outset, or perhaps at any time before the final order was made, have brought a suit in equity for a cancellation of the lease upon the ground that the assignment to the appellant was illegal and fraudulent, and might in such suit have obtained an injunction order restraining the prosecution of the summary proceeding. The court of equity could then have granted complete relief, and, if the plaintiff succeeded, the summary proceeding would be perpetually enjoined. ( Younger v. Duffie, 26 Hun, 442; Becker v. Church, 115 N.Y. 562; Potter v. Potter, 59 App. Div. 140; San Remo Hotel Co. v. Brennan, 64 Hun, 607; Noble v. McGurk, 16 Misc. Rep. 461; Rodgers v. Earle, 5 id. 164; Boyd v. Boyd, 26 id. 679.) But when this suit was commenced, the final order had been made and it is pleaded as a bar and defense herein. Here the respondent not only could have availed himself of this defense in the Municipal Court and have protected his right by appeal, but he could have come into equity before judgment went against him. In such cases courts of equity do not grant relief. (Pom. Eq. Juris. §§ 1361-1365, 1370; Barker v. Elkins, 1 Johns. Ch. 465; Smith v. Lowry, Id. 321; Lansing v. Eddy, Id. 49.) We think that the final order established the petitioner's right to possession as against the respondent which depended upon the validity of the assignment to her and it is res adjudicata and may not be reviewed collaterally. ( Reich v. Cochran, 151 N.Y. 122; Jarvis v. Driggs, 69 id. 143; Brown v. Mayor, 66 id. 385; Quinn v. Quinn, 46 App. Div. 241; Wetterer v. Soubirous, 22 Misc Rep. 739; Sage v. Crosby, 33 id. 117; Hausauer v. Dahlman, 72 Hun, 607.)
It follows from these views that the injunction order was improperly granted, and it should be reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.
VAN BRUNT, P.J., and HATCH, J., concurred; INGRAHAM and PATTERSON, JJ., dissented.
I do not think that the Municipal Court had any jurisdiction to pass upon the question as to whether the assignment of the lease to the defendant by her husband should be set aside. Until that assignment was actually set aside, there was no defense to the summary proceeding before the Municipal Court; and as that court had no jurisdiction to pass upon that question, its determination was not an adjudication binding upon the plaintiff. The Municipal Court has no equitable powers, and any attempt of the Legislature to confer upon it equitable jurisdiction would be prohibited by the Constitution (Art. 6, § 18). I think this was clearly a case in which the Supreme Court would have jurisdiction to set aside the assignment of the lease, and, pending its determination, to restrain the defendant from proceeding to enforce the warrant obtained in the proceeding to dispossess the plaintiff.
I think, therefore, the order should be affirmed.
PATTERSON, J., concurred.
Order reversed, with ten dollars costs and disbursements, and motion dismissed, with ten dollars costs.