Locke v. Mabbett.

wit, the sum of two thousand seven hundred and four dollars and sixty cents, being the income and increase of said trust property since the death of said testatrix, over and above what was necessary for the support and maintenance of defendant Truman G. Mabbett, was then in the hands of the said Catharine M. Williams, as trustee of the said Truman G. Mabbett, and in the hands of the said Truman G. Mabbett, as her agent. He therefore ordered that the sum of one thousand seven hundred and seventy-five dollars and thirty-four cents, being the amount of the judgment of the plaintiff therein, unpaid, and the costs of the proceedings, out of said sum of two thousand seven hundred and four dollars and sixty cents, be applied to the satisfaction of the judgment in this action, by the said Catharine M. Williams and the said Truman G. Mabbett, within ten days of the service of a copy of said order.

From this order, Mabbett and the executrix appealed to the general term, where the same was affirmed, and they now appeal to this court.

U. G. Paris, for Mabbett, appellant;-Insisted that the order did not bind the executrix, and therefore could not bind Mabbett, her agent; and that the order was not proper, there being a dispute as to the title. Teller v. Randall, 40 Barb. 242; Rodman v. Henry, 17 N. Y. 482; People v. King, 9 How. Pr. 100; Sherwood v. Buffalo, &c. R. R., 12 How. Pr. 136.

Isaac J. Davis, for Catharine M. Williams, appellant;-Cited also, Corning v. Tooker, 5 How. Pr. 16, and insisted that the surplus could not be reached thus-citing Clute v. Bool, 8 Paige, 83; and that Miss Williams, though not strictly a party, could appeal, and was not bound to await proceedings for contempt.

Isaac Mott, for the plaintiff, respondent;-Insisted that as the executrix neither claimed an interest nor denied the debt, the case was not one for a review, within section 298.

BY THE COURT.-DAVIES, Ch. J. [After stating the facts above.]-It is objected that the executrix cannot properly ap

Locke v. Mabbett.

peal from this order, as she is not a party to the proceedings before the officer who made the order transferring the money claimed to be in her hands, belonging to the judgment debtor. If the order is obligatory upon her, it is difficult to perceive why she is not a party to the proceeding, and why she should not be heard in all courts, to contest its lawfulness. An absolute order has been made on her or her agent, to pay over to the plaintiff in a judgment a certain sum of money. She is compelled by the terms of the order to make the payment, whether or not she has any moneys of the judgment debtor in her hands or under her control. The order is absolute, and compliance can be enforced against her by process to punish her as for a contempt. I am clearly of the opinion, therefore, that she can be heard in opposition to the order.

It may be regarded as very doubtful, since the decision of this court, in Graff v. Bonnett, 31 N. Y. 9, whether property held in trust for the debtor, and for his benefit, may be reached through the agency of a court of equity, and applied to the satisfaction of his debts; but there can be no doubt, if we are prepared to sanction the doctrine of the opinion in that case, that property held in trust for him upon a trust, or arising out of a fund, proceeding from a third person, designed to secure to the debtor personally a support, cannot be so reached or taken by a judgment creditor. In the present case, the moneys sought to be reached and applied to the satisfaction of the judgment against Mabbett are the incomes of real and personal property held in trust, proceeding from a third person, and which income was to be applied by the trustee to the support of the cestui que trust. The present case, therefore, falls directly within the principle of that case, and if it had been decided upon that point, it would have been conclusive authority for the position, that the income of the fund held by this trustee could not be appropriated for the payment of the debts of the cestui que trust.

But this court did decide in that case, that if the income could be reached at all, it was only such surplus thereof, as might remain after setting aside sufficient thereof, for the support and maintenance of the beneficiary, and that this could only be done through the instrumentality of a court of equity.

Locke v. Mabbett.

The learned judge who delivered the prevailing opinion of this court, in Graff v. Bonnett, said that nothing could be reached even by a receiver, unless there should be a surplus over and above the inalienable right of a judgment debtor to a support, and this surplus, it has been held, is not properly ascertainable under supplementary proceedings to discover' and appropriate the debtor's property to the satisfaction of the judgment, but only in a suit or proceeding, where the issue is directly made upon the amount necessary for a debtor's support, and to which the trustees and cestui que trust are parties." This is decisive of the present proceeding, and must lead to a reversal of the orders made, and to a dismissal of the application.

The present case affords an illustration of the soundness and propriety of the rule laid down in Graff v. Bonnett. There is a controversy, whether, in fact, any surplus exists. The person holding the fund does not admit the existence of any such surplus, and the provisions of section 297 of the Code of Procedure were never intended to be applicable, except to a case where the party admitted, or it was most clearly established, that the party upon whom the order was to be made, had in his hands property of the judgment debtor, or was indebted to him. These facts were not established on the present investigation, and, therefore, the order made was improvidently granted. A receiver should have been appointed, under section 298 of the Code, and an application should have been made to the court for leave to institute an action against the trustee and cestui que trust, to ascertain if there was any surplus of income over and above what was necessary for the support and maintenance of the cestui que trust. The fact of any surplus could only be ascertained upon an accounting, and whether, if any existed, it could be so applied, would depend upon the facts developed, and the principles of equity applicable thereto. If the reasoning and views of the leading opinion in Graff v. Bonnett are sound, it would follow, that as the trust fund proceeded from a third person, the income of it, being designed to secure to the debtor, personally, a support, could not be sequestered for the payment of his debts.

Without, however, definitely passing upon this point, we are

McClelland v. Remsen.

clearly of the opinion that the orders appealed from must be reversed, and the proceedings dismissed, with costs.

All the judges concurred.

Orders reversed, and proceedings dismissed, with costs.

MCCLELLAND v. REMSEN.

September, 1867.

Affirming 36 Barb. 62; S. C., 14 Abb. Pr. 831.

Either member of a partnership may secure one of its creditors by a transfer of property; and this may be done by an assignment in the nature of a mortgage, executed in the firm name, under seal, with a trust to account for and repay the surplus, if any.

John McClelland sued George Remsen, sheriff of Kings, in the supreme court, for trespass in seizing plaintiff's goods.

The goods were a stock of liquors, &c., which, on and before June 2, 1860, belonged to William McClelland & Co., a firm consisting of one William McClelland and Elizabeth Hasluck (a married woman), engaged in selling wines and liquors, in the city of Brooklyn.

On June 2, 1860, the firm, being then indebted to the plaintiff in this action in the sum of three hundred and fifty-seven dollars, for goods sold them, William McClelland executed a general assignment of the assets of the firm to the plaintiff, upon the trust" to sell and convert into money, either at public or private sale, and to collect the debts and choses in action, pay all reasonable expenses and costs of executing the assignment, and with the residue, pay the debt due to the plaintiff of three hundred and fifty-seven dollars, with the interest; and then to pay whatever may remain of such money, if any, to the parties of the first part."

Both the partners were named in the instrument, as copartners and as assignors; but the execution of it was by William McClelland only, in the firm name, and under seal, and there was no evidence that Mrs. Hasluck knew of its being given.

McClelland v. Remsen.

Some days afterward, the plaintiff's demand remaining unpaid, he took possession of the assigned goods.

Mrs. Hasluck afterward confessed judgment to another. creditor, who issued exccution, and the defendant in this action. levied it on the goods in plaintiff's possession.

The supreme court, on exceptions taken at the trial, and heard in the first instance at general term, held, that the instrument was a mortgage, as distinguished from a general assignment in trust, and, therefore, was not void as to creditors; and observing the same distinction, it was within the power of one partner to make it, without the concurrence of the other. They accordingly ordered judgment for plaintiff. Reported in 36 Barb. 622; S. C., 14 Abb. Pr. 331.

Defendant appealed.

N. J. Waring, for defendant, appellant.

James Troy, for plaintiff, respondent;-That the instrument in question was not "a transfer or assignment made in trust for the use of the persons making the same,"-cited, Beach v. Burdet, 1 Paige, 305, 309; Stevens v. Bell, 6 Mass. 339; Passmore v. Eldridge, 12 Serg. & R. 198; 4 Mason, 18. That it was not necessary that it should be executed by both partners. Egbert v. Wood, 3 Paige, 517; Havens v. Hussey, 3 Paige, 525; Graser v. Stellwaggon, 25 N. Y. 315.

BY THE COURT.-PORTER, J.-It was the right of either of the firm to secure the plaintiff, as one of its creditors, by a transfer of partnership property. Mabbett v. White, 12 N. Y.

315.

The assignment, in this instance, was in the nature of a mortgage. It did not divest the entire title, but left a residuary interest in the assignors, which could be reached by their other creditors. Its primary purpose was to secure payment of the debt, and the trust to account for the surplus was purely incidental. Such a trust is not within the condemnation of the statute, and such a reservation is not unlawful. Leitch v.