Neustadt v. Joel.

land; that the debt was fictitious, and set up by the assignors in collusion with the assignee, and that the assignment was color able only, and made to defraud creditors, and that the assignee was a party to the fraud; that the said Alfred, Louis, and Flora, had commenced to sell at auction the property pretended to be assigned; that the auctioneer, H. H. Leeds, had received and held a portion of the proceeds of such property as had been sold; that great and irreparable injury would be done to the plaintiffs if the Joels should dispose of said property, and the pretended assignment should be allowed to stand and be carried into execution, or the auctioneer be allowed to pay over the funds received by him, and unless an injunction issue. The complaint then prayed for judgment for the debt, with interest, against A. & L. Joel, and costs of the suit, an injunction against all the defendants, and that the assignment should be declared fraudulent, null and void, and that a receiver be appointed.

The defendant, Flora Joel, demurred to this complaint; and showed, among other causes, that the plaintiffs were creditors at large, and had no lien by judgment, or execution, or otherwise, on the property assigned; that they had not exhausted their remedies at law in execution, and did not show that they had any judgment and execution issued and returned unsatisfied, and were in no position to impeach or disturb any disposition that A. Joel & Co. might have made of their property,

John Graham, for plaintiffs,

J. B. Herbert Judah, for defendant, Flora Joel,

BY THE COURT. DUER, J.-The plaintiff is a general creditor, who seeks to set aside an assignment made to the defendant, Flora Joel, as fraudulent and void, as against creditors, and, it is plain, that, as against her, he is not entitled to the relief, or any part of the relief, which he demands, unless his right as a creditor to impeach the assignment is apparent upon the face of the complaint. It is needless to cite authorities to prove that before the Code no such action could be maintained by a creditor, without averring that he had obtained a judgment

Neustadt v. Joel.

against the debtor making the assignment, and that upon this judgment an execution had been issued, and returned unsatisfied; nor do we understand it to be denied that such was the settled law. The whole argument, upon the part of the plaintiff, rests upon the assertion, that the law in this respect has been altered by the Code, and that by force of the alteration every creditor has now the same right to have a fraudulent assignment set aside for his benefit, as was formerly possessed by judgment creditors alone.

This very important alteration of the law, as hitherto administered, is alleged to have been effected by § 219 of the Code; but upon examining the provisions of that section, it seems to us manifest, that they have no bearing whatever upon the question of the right of a general creditor to maintain an action like the present.

The sole object of the section is to enumerate and define the cases in which a temporary injunction may be granted, but all of these are cases in which it appears by the complaint, that the plaintiff is entitled to the relief demanded, against the defendant, to restrain whose acts or proceedings the injunction is sought. The section, doubtless, enlarges the powers of the court to grant injunctions, but does not enlarge the rights of the plaintiff, in any case, to maintain his action, but leaves the question, whether he is or is not entitled to the relief demanded by his complaint, to be determined by the existing law; the law as previously understood and established. Governed by this law, the judge at special term has decided the issue raised by this demurrer in favor of the defendant, and governed by the same law, we cannot do otherwise than affirm his decision.

It would, perhaps, be a salutary change in the law to allow a remedy to creditors in cases like the present, even before their debts have passed into judgment; but such a change, however desirable, can only be made by the exercise of legislative power, and is wholly beyond that of the judiciary.

The judgment appealed from is affirmed, with costs.

Schufeldt v. Abernethy.

GEORGE A. SCHUFELDT, Receiver, v. CHARLES ABERNETHY.

An assignment for the benefit of creditors gave an authority to the assignee to sell the property assigned, "upon such terms and conditions as in his judg ment may appear best, and most for the interest of the parties concerned." Held, that these words, by a necessary implication, gave a discretionary power to the assignee to sell upon credit, and, therefore, according to the judgment of the Court of Appeals in Nicholson v. Leavitt, rendered the assignment, upon face, fraudulent and void.

(Before DUER, CAMPBELL, and BoSWORTH, J.J.)

December 16, 1853.

its

THIS was a complaint filed by the plaintiff as receiver of Cornelius Lockwood, a judgment debtor, to set aside an assignment made by the debtor to the defendant.

The assignment preferred creditors, and the only grounds upon which it was sought to be set aside were, that it contained a provision authorizing the assignee to sell the assigned property on such terms and conditions as in his judgment might be deemed best," and that no schedule of the property was annexed to the instrument as required by its terms.

The cause was argued, at special term, before Mr. Justice CAMPBELL, and the assignment held to be void as to creditors. From his judgment the defendant appealed.

C. F. Sandford, for appellant, made and argued the following points.

I. The assignment in question was made and accepted with the bona fide intention of distributing the property of the assignor among his creditors, and not for the purpose of hinder ing, delaying, or defrauding them. 1st. The answer denies any fraudulent intent, and none appears from the proofs. 2nd. There was an actual bond fide indebtedness from the assignor to the preferred creditors, prior to the assignment. 3rd. The assigned property was subject to the lien of an execution previous to the assignment, and an advance was made by the pre

Schufeldt v. Abernethy.

ferred creditors, in addition to their previous claim, of a sum sufficient to remove said lien. 4th. The transfer is absolute and unqualified, without reservation of benefit or control to the assignor. 5th. There was an actual and immediate delivery of the assigned property and books of account, constituting the assignor's whole effects. 6th. There is no resulting trust in favor of the assignor until all his debts are paid.

II. The omission to annex schedules to an assignment for the benefit of creditors is not per se fraudulent; and, if it raise a presumption of fraud, the same may be repelled by the facts and circumstances attending the execution of the instrument. (Cunningham v. Freeborn, 11 Wend. 241, 254; Keyes v. Brush, 2 Paige, 311; Stevens v. Bell, 6 Mass. 339; Havens v. Richard son, 4 New Hamp. 124; Pierpont v. Graham, 4 Wash. C. C. R. 282.) The facts proved, already adverted to, tend to repel a presumption of fraud. 2nd. The preparation of a complete inventory, and the delivery thereof to the assignee simultaneously with the execution and delivery of the assignment itself, are, in effect, equivalent to annexing a schedule, and fully obviate any objection arising from its omission.

The omission of a schedule, to which reference is made as "annexed," leaves no such uncertainty in the words of description, as would invalidate the instrument, considering it as a conveyance. 1st. The annexation thereof is not rendered by such reference a condition precedent to the complete execution of the transfer. (Woodward v. Marshall, 22 Pick. 468 ; Keyes v. Brush; 2 Paige, 311; West v. Steward, 14 Mees. and Wel. 47.) 2nd. The general words of description used cover the whole property of the assignor, and although the subsequent specification of particular articles would have controlled and limited the meaning, had a schedule been actually annexed, specifying particular articles only, and not purporting to be a complete inventory of the assignor's effects, still the entire omission of any schedule will not be regarded as defeating the operation of the general words, the obvious intent of the instrument being to convey the whole of the assignor's property, and the omission of the schedule being, obviously, a mere misprision, cured by the proofs. (Clap v. Smith, 16 Pick. 247.)

IV. The trusts created by the assignment are such as have

Schufeldt v. Abernethy.

long been sanctioned and sustained by the courts, and their legality was unquestioned, until the recent decision of the Court of Appeals in Nicholson v. Leavitt, reversing the judgment of this court, and approving the prior case of Barney v. Griffin · (2 Com. 365), threw a doubt upon the construction of that clause in the instrument, which vests in the assignee discretionary power over the terms of sale. 1st. The general principle that preferences among creditors may be secured by a voluntary assignment for their benefit is deemed too well established to be controverted. (Murray v. Riggs, 15 John. 571; Grover v. Washburn, 11 Wend. 194.) 2nd. The trust to sell upon such terms and conditions, as, in the judgment of the assignee, should appear most for the benefit of the parties concerned, was lawful, and its execution would involve no hindrance or delay as against creditors. (a.) The law requires a trustee to exercise his best judgment in the management of his trust, and the courts, upon application of any interested party, will restrain any erroneous exercise of judgment. The trustee, exercising his judgment, is still amenable to the law, and liable for any violation thereof. (Rogers v. De Forest, 7 Paige, 272.) (b.) The trust under consideration vests no such authority in the assignee to sell on credit, as is contemplated by the decisions of the Court of Appeals, above referred to. (c.) There is a marked distinction between those cases and the present one. In the former, the authority to sell on credit is express and abso lute. In the latter, if it exist at all, it must be implied. (d.) Courts will not imply a violation of law. On the contrary, if it be established that an authority to sell on credit is unlawful and fraudulent, it will be presumed that no authority to make such sale was contemplated in, or conferred by, the instrument in question. (e.) But the very terms of the instrument preclude the implication of such an authority. The assignee is expressly directed to "convert" the assignor's effects into "money," not into notes or debts. (f) It is believed that the courts, and the profession generally, do not regard the decisions above referred to as establishing the doctrine claimed by the plaintiff in this case. A contrary position has been repeatedly taken by the judges of the Supreme Court at special term. (Southworth v. Sheldon, 7 How. Pr. 414; Whitney v. Krows, 11 Barb, 198.)