Opinion
March 17, 1916.
Isidor Cohn, for the appellant.
Benjamin F. Schwartz, for the respondent.
The order was granted on the return of an order to show cause obtained by Charles Perman on an affidavit showing that he was a creditor of one Philip Friedman, a merchant tailor, who incorporated the appellant and transferred his business to it in bulk without complying with the provisions of section 44 of the Personal Property Law (Consol. Laws, chap. 41; Laws of 1909, chap. 45), as amended by chapter 507 of the Laws of 1914; and it directs the receiver to take possession of the business of the appellant and to continue it for ten days, and to liquidate the assets, and requires the appellant to account to the receiver for the property and business so transferred. The claims of the creditors have not been adjudicated and no action has been brought by any of them. The order was granted on notice to the appellant and to the alleged debtor.
Subdivision 1 of section 44 of the Personal Property Law, as so amended, prescribes the conditions to be observed in selling a stock of merchandise in bulk. Subdivision 2 thereof contains definitions and exceptions; and subdivision 3 provides, so far as material to the question presented by the appeal, that "Any purchaser, transferee or assignee who shall not conform to the provisions of this section shall upon application of any of the creditors of the seller, transferrer or assignor become a receiver and be held accountable to such creditors for all the goods, wares, merchandise and fixtures that have come into his possession * * *;" but it is further provided therein that if the provisions of the statute have been complied with, then the purchaser, transferee or assignee shall not be so accountable. It may be competent for the Legislature to provide a summary remedy for creditors in such cases by motion, and to have their claims adjudicated in the proceeding, and the property appropriated for the payment thereof; but that would be a wide departure from the administration of justice as it has heretofore existed, and we find no provision in the statute indicating such an intent on the part of the Legislature, for the statute contains no provision regulating the procedure. When the statute is called into operation, what it contemplates is that the purchaser, transferee or assignee shall be deemed to hold the property as trustee for the benefit of the creditors, but not that he shall in every case and under any and all circumstances be deemed or be appointed receiver. The court may permit him to hold the property and account therefor as receiver, and should do so if that may be done with safety to the rights of the creditors; but if their interests require it, the court may appoint another receiver and require the purchaser, assignee or transferee to account to such receiver for the property.
We are of opinion that the remedy of the creditor is to bring an action against the debtor and the purchaser, transferee or assignee, in behalf of himself and all other creditors, in which his and their claims may be adjudicated, and in such action to make the application to the court to have the purchaser, transferee or assignee designated a receiver, and to require him to account as such. This court held in Touris v. Karantzalis ( 170 App. Div. 42) that the remedy given by the statute was intended for the benefit of general creditors, as well as judgment creditors; but that was a suit in equity for the benefit of all creditors, which is, we think, the appropriate remedy.
It follows that the order should be reversed and the receivership vacated, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.
CLARKE, P.J., SCOTT, SMITH and PAGE, JJ., concurred.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.