Boese v. King

By deed of assignment executed and delivered September 25, 1873, William H. Locke, a citizen of New Jersey, transferred and conveyed to William King, John M. Goetchius, and Edward E. Poor, and the survivor of them, and their and his heirs and assigns, all of his property of every kind and description-except such as was exempt by law from execution-'in trust to take possession of and collect and sell and dispose of the same at public or private sale in their discretion, and to distribute the proceeds to and among the creditors of the said William H. Locke, in proportion to their several just demands, pursuant to the statutes in such case made and provided, and on the further trust to pay the surplus, if any there be, after fully satisfying and paying the said creditors, and all proper costs and charges, to the said William H. Locke.'

Although the deed does not, in terms, refer to any particular statute, it may be taken-the fact being so found-that the intention of Locke and the assignors was to have a distribution made among the creditors of the former in conformity with the requirements of an act of the legislature of New Jersey, passed April 16, 1846, entitled 'An act to secure to creditors an equal and just division of the estates of debtors who convey to assignees for the benefit of creditors.'

That act provides, among other things, that every conveyance or assignment by a debtor of his estate, real or personal, or both, in trust, to an assignee for the benefit of creditors, shall be made for their equal benefit in proportion to their several demands to the net amount that shall come to the hands of the assignee for distribution; and all preferences of one creditor over another, or whereby one shall be first paid or have a greater proportion in respect to his claim than another, shall be deemed fraudulent and void, excepting mortgage and judgment creditors, when the judgment has not been by confession for the purpose of preferring creditors, (section 1;) further, that the debtor shall annex to his assignment an inventory, under oath or affirmation, of all of his property, together with a list of his creditors, and the amount of their respective claims, such inventory not, however, to be conclusive as to the quantity of the debtor's estate, and the assignee to be entitled to any other property belonging to the debtor at the time of the assignment, and comprehended within its general terms, (section 2.) Other sections provide for public notice by the assignee of the assignment; for the presentation of claims of creditors; for filing by the assignee under oath of a true inventory and valuation of the estate; for the execution by him of a bond in double the amount of such inventory or valuation; for the recording of such bond; for the filing with the clerk of the court of common pleas of the county of the debtor's residence, within three months after the date of the assignment, of a list of all such creditors as claim to be such, and the amount of their demands, first making it known by advertisement that all claims against the estate must be made as prescribed in the statute, or be forever barred from coming in for a dividend of said estate, otherwise than as provided; for the right of the assignee or any creditor or person interested to except to the allowance of any claim presented; for the adjudication of such exceptions; for fair and equal dividends from time to time among the creditors of the assets in proportion to their respective claims; and for a final accounting by the assignee in the orphans' court of the county such settlement and adjudication to be conclusive on all parties, except for assets which may afterwards come to hand, or for frauds or apparent error. Sections 3, 4, 5, 6, and 7. The act further provides:

'Sec. 11. If any creditor shall not exhibit his, her, or     their claims within the term of three months as aforesaid,      such claim shall be barred of a dividend unless the estate      shall prove sufficient after the debts exhibited and allowed      are fully satisfied, or such creditor shall find some other      estate not accounted for by the assignee or assignees before      distribution, in which case such barred creditor shall be      entitled to a ratable proportion therefrom.

'Sec. 12. Whenever any assignee or assignees, as aforesaid,     shall sell any real estate of such debtor or debtors as is      conveyed in trust as aforesaid, he or they shall proceed to      advertise and sell the same in manner as is now or may      hereafter be prescribed in the case of an executor or      administrator directed to sell lands by an order of the      orphans' court for the payment of the debts of the testator      or intestate.

'Sec. 13. Every assignee, as aforesaid, shall have as full     power and authority to dispose of all estate, real and and to sue      for and recover in the debtors had at the time of the      assignment, and to sue for and recover in the proper name of      such assignee or assignees everything belonging or      appertaining to said estate, real or personal, of said debtor      or debtors, and shall have full power and authority to refer      to arbitration, settle and compound and to agree with any      person concerning the same, and to redeem all mortgages and      conditional contracts, and generally to act and do whatever      the said debtor or debtors might have lawfully done in the      premises.

'Sec. 14. Nothing in this act shall be taken or understood as     discharging said debtor or debtors from liabilities to their      creditors who may not choose to exhibit their claims either      in regard to the persons of such debtors or to any estate,      real or personal, not assigned as aforesaid; but with respect      to the creditors who shall come in under said assignment and      exhibit their demands as aforesaid for a dividend, they shall      be wholly barred from having afterwards any action or suit at      law or equity against such debtors or their representatives,      unless on the trial of such action or hearing in equity the      said creditor shall prove fraud in the said debtor or debtors      with respect to the said assignment or concealing his estate,      real or personal, whether in possession, held in trust, or      otherwise.'

The estate which came into the hands of the assignees was converted into money in New Jersey,-the amount being nearly $200,000,-and the proceeds, for the convenience of the assignees, were deposited in a bank in the city of New York. No proceedings in bankruptcy were ever taken against Locke.

On the third day of February, 1876, William Pickhardt and Adolph Kutroff recovered a judgment against Locke in the supreme court of the city and county of New York for $3,086.85. Upon that judgment execution was issued and returned unsatisfied. Subsequently, May 27, 1876, in certain proceedings, before one of the judges of that court, supplementary to the return of execution, Thomas Boese, plaintiff in error, was appointed receiver of the property of Locke, and having executed a bond for the faithful discharge of the duties of his trust, he obtained an order from the same court giving him authority, as receiver, to bring an action against the assignees of Locke. Thereupon, June 9, 1876, he commenced this action. It proceeds upon these grounds: (1) That the indebtedness from Locke to Pickhardt and Kutroff arose in New York, where they reside, before the making of said assignment; (2) that the statute of New Jersey with reference to, or under which, said assignment was made, was, by force of the bankruptcy act of 1867, suspended and of no effect; (3) that the assignment was fraudulent and void by the laws of New Jersey, in that it was made with the intent upon the part of Locke to hinder, delay, and defraud his creditors, and in that he had a large amount of money and other property which he fraudulently retained to his own use and not surrender to the assignees.

The prayer of the complaint-the allegations of which were fully met by answer-was for judgment against the defendants; that the assignments be adjudged fraudulent and void; and that the defendants be required to account to plaintiff for all the property and money received, or to which they are entitled under and by virtue of said assignment. It was conceded at the hearing that defendants had in their hands, of the proceeds of the sale of the assigned property, an amount sufficient to pay the judgment of Pickhardt and Kutroff.

The supreme court of New York both in general and special term, sustained the supreme court of New York, against the assignees in favor of Boese, as receiver, for the amount of the demand of Pickhardt and Kutroff. But in the court of appeals that judgment was reversed, with directions to enter judgment for the defendants.

C. Bainbridge Smith, for plaintiff in error.

A. P. Whitehead, for defendant in error.

HARLAN, J.