Opinion
November Term, 1900.
Charles G.F. Wahle, for the appellant.
W.B. Yeomans, for the respondent.
The demurrer admits the following facts: The plaintiff and his partners had a cause of action against one Bradford for $3,500 for their work, labor and services intervening August 31, 1895, and October 9, 1896. This claim was assigned to plaintiff in May, 1899. In May, 1894, Bradford lent to defendant Heiland $2,500, secured by her bond and mortgage executed in May, 1897, which mortgage debt is past due and is wholly unpaid. Bradford assigned the bond and mortgage to defendant Scott in 1898. Such assignment was without consideration. Bradford's debt to plaintiff ever since 1895 has been $4,000. Scott knew of this debt at the time of this said assignment. Bradford was insolvent when he made such assignment, which was a fraud worked by him and his assignee, defendant Scott. Bradford died insolvent and left defendant Currier his executor. The plaintiff requested defendant Currier, as executor, to bring this action, offering to pay his expenses, to guarantee him against loss and to furnish proof, but Currier refused. No other action has been brought on the bond and mortgage. The plaintiff sues Heiland, Scott and Currier, as executor, and prays judgment to set aside the assignment of the bond and mortgage as a fraud on plaintiff and on all other creditors, to adjudge the debt due, to stay Heiland from paying the debt, Scott from receiving it, and both from dealing with the security, and to determine that the security and the debt is a part of the estate of said Bradford. I think that this action can be sustained by the authority of Harvey v. McDonnell ( 113 N.Y. 526). The principle that permits the plaintiff to sue is based upon the substantial necessity that some one should proceed to collect the assets of the estate. The executor stands as the trustee for the creditors ( Babcock v. Booth, 2 Hill, 181, 186; Harvey v. McDonnell, supra), and if he be indifferent, recalcitrant or hostile, the creditor takes his place. ( Crouse v. Frothingham, 97 N.Y. 105; Spelman v. Freedman, 130 id. 421; Ettlinger v. P.R. C. Co., 142 id. 189.)
It is further contended that the allegation that Bradford was wholly insolvent and unable to pay his debts is a conclusion, and that a demurrer does not admit a legal conclusion. It is true that insolvency is a conclusion, but it is a conclusion of fact drawn from certain other facts. But it is properly pleaded, for the alternative would be to plead the evidence, which is never required. In Shoe Leather Bank v. Baker ( 148 N.Y. 581, 583) VANN, J., says that the allegation was that Baker "died * * * insolvent, and that during his lifetime he had transferred to his wife," etc., and approves the pleading. An examination of the record in the Court of Appeals shows that the allegation in the complaint was "that the said Frederick Baker, as the plaintiff is informed and believes, departed this life on the 24th day of November, 1894, being then insolvent." (See, too, Wait Fraud. Conv. § 143 and cases cited; Brown v. Carbonate Bank of Leadville, 34 Fed. Rep. 776; Thorp v. Munro, 47 Hun, 246; Evansville Public Hall Co. v. Bank of Commerce, 42 N.E. Rep. 1097.)
Lichtenberg v. Herdtfelder ( 103 N.Y. 302) is not an authority against this action. The right to maintain the action in that case was denied for the reason that if plaintiff had judgment he would, as a result, without having any lien on the real estate, have a satisfaction of his claim in preference to the other creditors, whereas the law impounds the estate for the benefit of all, and does not award preference for vigilance. The court distinguishes Lichtenberg v. Herdtfelder ( supra) in Harvey v. McDonnell ( supra). The prayer here is inconsistent with the theory of preference, inasmuch as the judgment demanded is that the assignment be set aside as fraudulent to all of the creditors, and that the debt form a part of the estate. The question of non-joinder or misjoinder of parties is not raised by the demurrer, and being not so raised it is, of course, not before us. ( Dodge v. Colby, 108 N.Y. 445, 452.)
We think, however, that the judgment as entered is erroneous. As the theory of the action is that the plaintiff stands in the shoes of the inert executor, the action is not authorized to gain a preference, but to recover the debts for the estate, and all that the plaintiff would be entitled to is a cancellation of the fraudulent assignment, a recovery of the mortgage debt, and a pro rata distribution for the common benefit of all creditors. ( Harvey v. McDonnell, supra, 531; Crouse v. Frothingham, supra, 113.)
Therefore, the judgment should not authorize the referee to pay to the plaintiff the full amount of the defendant Heiland's debt to the estate, in the absence of proof that there are no other creditors of the estate, but should be so amended ( Smith v. Rathbun, 88 N.Y. 660) as to provide for a pro rata distribution to all of the creditors entitled to share therein.
All concurred, except BARTLETT, J., absent.
Judgment modified in accordance with opinion of JENKS, J., and as modified affirmed, without costs of this appeal to either party.