Fox v. McGrath (152 F.2d 616, 1945)

CLARK, Circuit Judge.

Petitioner, Frank Fox, has appealed from an order of the District Court denying a petition that a judgment obtained by him in the Supreme Court of New York against Long Island University, debtor in reorganization proceedings, be declared a first lien against the proceeds of sale of the debtor’s real property. The claim upon which the judgment was entered was on a note given by the University to the Brooklyn National Bank, August 17, 1936; and the Bank began suit upon it in March, 1942. After appearing in the action, the defendant admitted it had no defense and stipulated that judgment might be entered against it without further notice. The Bank assigned its claim to Fox before termination of the suit, however, and judgment was entered and docketed in his name on January 14, 1943. The debtor had knowledge of this by February, and the present reorganization proceedings were not initiated until September 3, 1943. In the petition for reorganization, the assignment to and recovery of judgment by Fox were recited with specific detail. The debtor and its trustees in reorganization now contend that entry of judgment in Fox’s name without a previous court order substituting him as plaintiff invalidates it and destroys the lien upon defendant’s real property, which otherwise dates from the time of its docketing. N. Y. Civil Practice Act, § 510.

Since this is a collateral attack on the New York judgment, we cannot hold the lien invalid unless the defect is one which, under the New York law, went to the jurisdiction of the court. White v. Crow, 110 U.S. 183, 4 S.Ct. 71, 28 L. Ed. 113; Me Goon v. Scales, 76 U.S. 23, 9 Wall. 23, 19 L.Ed. 545; Mellen v. Moline Malleable Iron Works, 131 U.S. 352, 9 S. Ct. 781, 33 L.Ed. 178; Santiago v. Nogueras, 214 U.S. 260, 29 S.Ct. 608, 53 L.Ed. 989; Straton v. New, 283 U.S. 318, 322, 51 S.Ct. 465, 75 L.Ed. 1060. Sec. 83 of the N. Y. Civil Practice Act, on which respondents base their contention, itself appears to treat the question of assignments pendente lite very pragmatically, allowing continuance by the assignor, substitution of the assignee, or joinder of both parties “as the case requires.” And failure to comply literally with its terms appears to be an oversight on the part of the parties or court officials of the kind which is amendable under N. Y. Civil Practice Act, § 109(12), or at most an omission or irregularity which a New York court must ignore or correct under § 105. In fact, 2 R.S. 1829, pt. 3, tit. 5, p. 425, § 7, which was the predecessor of § 109, was so construed in Christal v. Kelly, 88 N.Y. 285, 286, where the plaintiff had failed to comply with the statute requiring a court order for amendment to add a party. And in Wight v. Alden, 3 How.Prac., N.Y., 213, before even the passage of the remedial sections, the court denied a motion to set aside a judgment upon confession on the grounds that the plaintiff failed to obtain the required court order. Here, as in both of the cases cited, there is apparent no injury to respondents through the omission to procure a court order. The debtor itself stipulated that it had no defense to the action brought by the Brooklyn National Bank, and it has not seriously questioned the validity of the assignment to Fox.

Respondents contend, however, that a defendant is entitled to notice of a substitution so that it may have a chance to contest the new ownership or to assert a counterclaim against the transferee. They rely upon Smith v. Zalinski, 94 N.Y. 519, 522, where, however, the court significantly added: “Such a transfer of interest is usually a formal matter in which the defendant has no concern except to be protected from a double claim.” Here the court had general jurisdiction, an