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In re Horsfall

5 Abb. N. Cas. 289 Court General Term, February, 1879. English

Decision Majority — Daly, Ch. J. · Concurring — J. P. Daly, J. · Dissent — Van Brunt, J.

Contents

Majority

p. 289
MATTER OF HORSFALL.
N. Y. Common Pleas;
General Term, February, 1879.

Headnote

General Assignment. — Discharge on Assignee. — Accounting.— Waiver. — Composition.—Release oe Sureties.
An assignee for the benefit of creditors under the general assignment act (L. 1877, c. 466, § 20), cannot be discharged without an accounting, even where there has been a composition between the assignor and his creditors, unless the creditors distinctly waive the accounting.[7]
A composition deed providing that after the payment therein stated had been made, the assignee might apply to the court for his discharge without notice to the compounding creditors, does not justify the court in granting his discharge without any accounting.
Before an assignee can be discharged under the provisions of a composition deed, he must perform every condition precedent.
Hence, where such a deed provided that the assignee, after paying all claims which he was liable to pay as assignee, and deducting his fees, might reassign to the assignor the property which might be in his possession under the assignment, and then apply ex parte to the court for his discharge, but with the consent of the assignor he obtained the order for his discharge before making the reassign ment: — Feld, that the assignor could not waive the reassignment, and that the order was irregular.
The provision in such a deed ratifying and confirming all the acts, transactions, payments, and proceedings of the assignee, means when he shall have complied with the conditions of the deed by reassigning the property, and is in a position to procure his discharge in the mode provided by the statute.
It is the duty of the court to see that the rights of all the creditors are protected before discharging the assignee.
Appeal by an assignee from an order vacating an order discharging him and his sureties from liability by reason of the assigneeship.
On January 15, 1878, John H. Horsfall made an assignment to John W. Hesse, who qualified and entered upon his duties as assignee, and who was also a creditor of Horsfall for more than $10,000.
p. 290
The assignee continued the business of the assignor, which was that of manufacturer of cabinet furniture, in the’ city of New York, from January 15, 1878, to May 10, 1878.
In the month of March negotiations were begun on the part of Horsfali to compromise his debts.
The assignee, being next to the largest creditor, was first approached, and his consent sought to a settlement at twenty-five per cent. cash.
The negotiations for a settlement with the assignee were conducted by Horsfall and one Thomas W. Harris, who was engaged by Horsfall to perfect the settlement. Mr. Harris also represented one Samuel Ellis Briggs, the largest creditor and a personal friend of Horsfall.
These negotiations consumed several weeks, the assignee at first refusing to entertain the proposition to settle at twenty five per cent. Various propositions were discussed and forms of composition deeds submitted, but finally the assignee agreed to sign the composition on condition that Horsfall would waive a public accounting. This condition was acceded to, and Harris, Horsfall and Briggs, of the one part, and Hesse of the other, verbally agreed that there should be no public accounting. Thereupon, on or about April 8, 1878, Hesse signed the composition deed, which, executed by the assignor, party of the first part, and assignee, party of the second part, and the creditors of the assignor, parties of the third part, after the formal recitals proceeded as follows: ‘ ‘ The parties of the second and third parts do each hereby agree to accept from the party of the first part a sum equal to twenty-five cents for each and every dollar of their respective claims against said party of the first part, in full settlement of said claims, the said sum to be paid on or before the 10th day of May, 1878. And the parties of the second and third parts do, and each and every of said parties does hereby
p. 291
agree to and with the party of the first part and with each other, that on making such payment the party of the first part shall thereupon be forever released and discharged from any and all liability whatsoever to the party of the second part, the said parties of the third part or any of them. And it is further mutually agreed by and between all the parties to this agreement, that upon the signing and sealing of this agreement and its delivery duly acknowledged to said party of the second part, he may re-assign to the party of the first part all property of whatsoever nature or description which may be in his possession by virtue of said assignment, but before making such re-assignment said party of the second part shall, out of said assigned estate, pay all claims or demands against said assigned estate, which he, as such assignee, shall have become liable to pay, and said assignee shall retain out of said estate to his own use the sum of $200, as and for his fees as such assignee.
“And the parties of the first and third part do hereby ratify and confirm all, each and every, the acts, transactions, payment and proceedings of the said party of the second part as such assignee, and do hereby mutually consent and agree that said party of the second part be relieved and discharged from his trust as such assignee, and from all liability as such, that the bond given by him as such assignee be canceled and annulled, and that the sureties upon said bond be relieved from all liability thereupon, and that an order discharging said assignee, canceling said bond and relieving said sureties may be made by any judge of the court of common pleas for the City and County of New York, sitting as County Judge, upon application of the said party of the second part, without notice to any party to this agreement.”
This deed was then circulated among the creditors, and was signed by them, on or before May 10, 1878.
p. 292
Shortly before that date, Horsfall was anxious to get back his estate in order to meet his settlement with the funds in the hands of the assignee, but the latter insisted upon the entry of an order of discharge before he would reassign the property. This was finally acceded to by Horsfall, and an order was, upon the petition of the assignee, obtained ex parte, from Mr. Justice Van Brunt on May 10, 1878, “That said John W. Hesse, and Herman Colell, and William Baltes, the sureties of the said bond of the said assignee be, and they hereby are relieved and discharged from all liability incurred by virtue of their said suretyship to said creditors and each of them, and that said bond be canceled, and that the clerk of this court be, and he hereby is directed to make such suitable entry of such order in the book or books which he may have, in which the filing of the said bond is recorded', and upon the said bond, as will fully carry out the provisions of this order.”
This order was filed the next day before the creditors were paid.
On the morning of the latter day, Hesse gave up possession as assignee to the assignor, and paid over to him the sum of $641.
By borrowing $1,600 of his creditor Briggs, Horsfall was enabled to carry through his composition as to the bulk of his smaller business creditors, but was unable to pay Briggs and another creditor, one John T. Camp.
In the latter part of the same month, Horsfall made a motion to vacate the aforesaid order of discharge as irregular and void, on the ground that it directed the discharge and release of the assignee and his sureties absolutely, and not upon condition of the assignment of the assets, and that it directed such discharge and release before an accounting was had, and before the assets were reassigned to the assignor. He also asked
p. 293
that the assignee account and pay over whatever should be found due.
Judge Vaw Hoesen wrote an opinion, holding the order irregular and contrary to the statute and the practice, bat as it only released the assignee from liability to creditors, and as Horsfall was not injured thereby, refusing to vacate it.[7]
p. 294
Thereupon, and on or about July 16,1878, the creditor Briggs made an application to vacate the order complained of and to remove the assignee: This appli
p. 295
cation was also heard before Judge Vah Hoesen, who rendered an opinion denying the petition of Briggs, holding that he had waived all his rights by being a party to the verbal agreement to waive an accounting, and procuring through Harris the entry of the order in question.[7]
p. 296
;Thereafter, and on or about October 15, 1878, the above-mentioned creditor, John T. Camp, made a motion to vacate said order of release as irregular and
p. 297
void, and for the removal of the assignee and for an accounting. After argument, Judge Larremore vacated the order on or about November 23, 1878.[7]
From this order of Judge Larremore, the assignee and Herman Colell, one of his sureties, appealed.
Louis C. Waehner (Lawrence & Waehner, attorneys), for the assignor, appellant.
One of full age, acting sui juris, can waive a statutory or even a constitutional provision in his own favor, affecting simply his own property or alienable rights, and not involving considerations of public policy (Phyfe v. Eimer, 45 N. Y. 104 ; Broom's Maxims, 310, 547; Conkling v. King, 10 N. Y. 446 ; Goit v. National Protection Ins. Co., 25 Barb. 191 ). The petitioner is estopped, by his consent to the entry of the order of May 10, from questioning its provisions, and from claiming an accounting as a condition of its entry (L. 1878, c. 318, § 6 ; Boerum v. Schenck, 41 N. Y. 182 ; French v. Shotwell,
p. 298
5 Johns. Ch. 555 ; Lansing v. Eddy, 1 Id. 49; De Long v. Stanton, 9 Johns. 37 ; Hamel v. Grimm, 10 Abb. Pr. 150 ). A rehearing will not be granted after a decree has been entered by consent (Coster v. Clark, 2 Chan. Sent. 38; affi’g 3 Edw. 405 ; 2 Ves. Sen. 488; Ambl. 229; Monell v. Lawrence, 12 Johns. 521 ). The petitioner has no claim whatever, either in law or equity, against the assignee.
George C. Lay, Jr., for John T. Camp, respondent.
The assignee should not be discharged without an accounting. See following cases recently decided in this court: Matter of Cottlow, June 12, 1878; Matter of Yeager, June 25, 1878; Matter of Dryer, June 30, 1878; Matter of Horsfall, July 9, 1878; Matter of Lowenthal, October 10, 1878; Matter of Groencke,[7] Dec. 23, 1878. The court at special term lias power to vacate and set aside an order made out of court (West Side Bank v. Pugsley, 47 N. Y. 368 , 372; also
p. 299
opinions of Vah Hoesen, J, in this matter). The order of release was premature and has not the force of a decree entered upon consent. An agreement extra curiam containing a consent cannot be made the authority for a decree in a court of justice, except in accordance with some statute upon the subject. The only two cases in this State where judgments are recorded in the courts without suit and upon written agreement are, judgment upon forfeited recognizances and statements for confession of judgment (3 R. S. [6th Ed.] 774; Code of Civ. Pro. § 1273, et seq.).

The order vacating the order discharging the assignee should, in my opinion, be affirmed. The statute has provided for the mode in which an assignee in an assignment for the benefit of creditors under the statute, where there has been a composition between the assignor and his creditors, may be discharged, which is on a proceeding for an accounting under the act (Laws of 1877, c. 466, § 20). It was, undoubtedly, as the appellant claims, within the power of the creditors to waive the accounting, for a party may waive any provision of law, or statutory or constitutional enactment designed for his benefit or protection.

But the creditors in this case have not by the composition deed waived an accounting. The assignor and the creditors, Briggs & Harris, who, together, brought about the composition, did so with the assignee, and the application of the assignor Horsfall, and of Briggs, to vacate the order discharging the assignee, was denied by Judge Yah Hoeseh, in the case of Briggs, upon the ground that he had, by the verbal agreement, waived his right to an accounting.* But the petitioner Camp was no party to this verbal agreement, and is in no way concluded by it. He is simply one of the credi

p. 300
tors who signed the composition deed; and all that they agreed to was that an order might be made by any judge of this court, discharging the assignee without notice to them.

The assignee was entitled, under this agreement, to apply to any judge of this court for his discharge without notice to the creditors who signed the composition deed ; but the only mode in which the court had power to discharge him, was upon proof of the composition in a proceeding for*an accounting. When the creditors consent that an order may be made by any judge of the court discharging the assignee, they necessarily mean, discharging him without any notice to them, in the manner prescribed by law, there being no other way in which a judge could discharge him.

To constitute a waiver the consent should have been without any accounting.

The ex parte order, therefore, discharging him, was irregular and was properly vacated.

It was provided by the composition deed, that after the execution and delivery of it, the assignee might, after paying all claims and demands against the assigned estate which, as assignee, he was liable to pay, and after deducting $200 for his fees, reassign to Horsfall, the assignor, the property, of whatever nature or description, which might be in his possession under the assignment.

It is very clear from the instrument, that he was to do this before he had the right to apply to a judge of the court to be released and discharged from his trust.

The composition creditors had agreed to release and discharge the assignor from all liability upon the payment by him of twenty-five per cent, of the amount of their respective claims, and the reassignment of the assigned estate to him by the assignee, as provided for in the instrument, was clearly necessary to enable the assignor to carryout the composition; for it is to be

p. 301
assumed, as this was a general assignment of all the debtor’s property for the benefit of creditors, that he had nothing to enable him to pay the compounding creditors until the property was restored to him by a reassignment; and this is sworn to have been the fact, by the assignor and by Briggs, who was one of the principal creditors.

But the ex parte order discharging the assignee was made with the consent of the assignor before a reassignment of the property, and was for that reason alone irregular. This was not a provision which the assignee could waive, except so far as his rights were concerned. The composition creditors had rights also. It was for their interest that the assignor should be enabled, as speedily as possible, to carry out the composition, as the payments were to be made in about a month after the execution of the composition deed; and the assignor could not, without their consent, agree so as to bind them that the assignee might be discharged before reassigning the property. The provision in the composition deed ratifying and confirming all the acts, transactions, payments and proceedings of the assignee means, when he had complied with the conditions of the deed by reassigning the property, and is in a position to procure his discharge in the mode provided by the statute. From the facts disclosed, an accounting in this case was necessary, as the assignee, if he has done what is alleged, has impaired the estate and lessened the ability of the assignor to comply with the terms of the composition. The opinions delivered by Judges Vah Hoesen and J. F. Daly, in the assignment cases[1] of Cottlow, Yeager, Dryer,

* The eases here referred to are as follows: In the Matter of Cottlow (N. Y. Common Pleas, Special Term, June, 1878), above referred to, it was held that the court will not order a reference to pass on objections filed by a petitioning creditor to an account filed by the assignee, without bringing in the other creditors. In that case an ex parte application was made to the court for a refer *302 ence to take proof of all matters relating to the account of Morris Leon, assignee for the benefit of creditors of Louis Cottlow. The aflidavit on which the application was based was made by the attorney for one of the creditors of the assignor, and stated that the said creditor, Emanuel Schwerin, had obtained an order directing the assignee to file his account, and that the said assignee had complied therewith, and the petitioner had filed his objections to said account. That this accounting was not final, but ordered only on the petition of said Schwerin, and that no other creditor had appeared therein. The attorney for the assignee consented to the entry of the order of reference. Tile following is the opinion of the judge, denying the application for the order, June 12, 1878. Van Hoesen, J. — I deny this application. Ho such proceeding will ever receive any sanction from this court. Mr. Schwerin and Mr. Leon may propose, but they will not be permitted to dispose. Let Mr. Leon do what he ought to do — apply for a general citation. The only effect of such an application as this is to arouse suspicions — • suspicions which may be unjust and unfounded — as to the good faith of the parties to it. Mr. Leon cannot hold his accounting secretly and slyly, with my consent. In the Matter of Yeager (N,T. Common Pleas, Special Term, Jhne, 1878), above referred to, it was held that the court will not discharge the assignor and his sureties after a composition by all the creditors, unless there has been an accounting. A petition was presented to the court by Henry Eisner, assignee of Israel Yeager and Seligman Bauer, asking leave to reconvey to said assignors the assigned property, and that he and his sureties be discharged. The application was founded upon a compromise agreement signed by all the creditors, and containing their respective receipts for their dividends, and their written consent that the assignee reconvey to the assignors the assigned property. It appeared that no notice to creditors to present their claims to said assignee had been published. Judge Van Hoesen, in denying the application, delivered the following opinion, June 25, 1878. Van Hoesen, J. — On this application the release can only be from *303 liability to the compounding creditors, who appear and who have been cited to appear on this application. If the bond is to be canceled and the sureties discharged there must be an accounting. It will be merely formal, perhaps, but it must be had. The court will not discharge the bond, except after an accounting. In the Matter of Dryer (N. Y. Common Pleas, Special Term, June, 1878), above referred to, it was held that the court will not even order a discharge pro tanto without an accounting. The case was an ex parte application by John D. Wienholz, an assignee, for benefit of creditors of William Dryer, for an order relieving him on account of a general release. The creditors of the insolvent had agreed by an instrument in writing, signed and sealed by each one in the presence of a subscribing witness, who duly acknowledged the same, to accept a sum equal to twenty-five per cent, of their claims in full satisfaction thereof. The assignor having complied with the terms of the agreement, the creditors also signed and sealed a general release, dated February 20, 1878, in the presence of a subscribing witness, who duly acknowledged the same. On June 5, 1878, the assignee obtained an order for a citation to issue for the creditors to attend a final accounting on June 15, 1878, and all the creditors were duly cited accordingly. Pending this proceeding for an accounting, the assignor applied for an order relieving him from any further liability on account of his trust as assignee, in so far as the same might be affected by the claims of any creditors whose names appeared upon the general release, and also for the release of his sureties. Judge Van Hoesen, in denying the application, delivered the following opinion, June 30, 1878. Van Hoesen, J. — There can be no discharge without an accounting. Experience has shown the absolute necessity for the giving, by the assignee, of an account of his stewardship. I have now before me a case apparently like this, in which an assignor joined with the assignee in petitioning for the discharge of the assignee’s sureties, and where after such discharge the assignee retained and refused to surrender to the assignor the surplus remaining in his hands. I will not sign any order for a discharge pro tanto: Let the assignee make his account, show that his duty has been done, and that *304 nothing remains to be done, and then, upon turning over to the assignor the balance in his hands, a discharge will be granted. In the Matter of Lewenthal (N. Y. Common Pleas, Special Term, October, 1878), it was held that on the final accounting required under these rules, all creditors, even though they have signed releases must have notice, and advertisement for claims must have been made. A petition was made by M. Petshaw, assignee of Raphael Lewenthal and Max Gabriel, for his discharge as assignee. The petition of the assignee stated the making of the assignment, filing of inventoiy and bond, and that all the creditors had proved their claims. Also that a compromise by deed had been effected between the assignors and their creditors, and that all the latter had executed releases to the former. Affidavits of the assignors confirming the statements of the assignee accompanied the petition. The assignee asked to have his accounts referred to an auditor to examine the same and to take proof of the several matters referred to in his petition and to report thereon to the court, together with his opinion as to the amount to be paid to counsel, and the amount due to the petitioner for commissions, and that thereupon he should be discharged and his sureties released. Judge J. F. Daly, in denying the application, delivered the following opinion, October 10, 1878. J. F. Daly, J. — No discharge will be granted the assignee except upon a proceeding for an accounting to be instituted by citation. The statute is clear upon this point. The assignee must apply by petition for a citation to all persons interested in the estate, to attend the settlement of his accounts, and all parties, whether they have signed releases or not, must be notified. Advertisement for claims must be made where the assignee seeks relief by reason of a compromise between the assignor and the creditors. As to necessity of advertising for claims, see note at the end of the principal case.

p. 302
Lowenthal, and by Judge Yah Hoeseh, in the application of Horsfall and Briggs, in the present case, show how essential and indispensable it is that there should be an accounting in every case, and that it
p. 303
cannot be dispensed with unless there has been a clear, distinct and undoubted waiver of it by every creditor who could in any way be affected by the assignee’s discharge, which was not the case here.
p. 304
I do not think that it affects the question whether the petitioner may have been tendered the amount of the composition or not, if the discharge was irregular. He was not, as Briggs was, concluded by any agreement on his part to waive an accounting, and had the right to bring the matter before the court, it being the duty

Concurrence

p. 305
of the court to see that the rights of all the creditors are protected before discharging the assignee.

The order, therefore, should be affirmed.

[Concurring.]—That the proceedings of the assignee to procure his discharge were wholly irregular, and the decree or order discharging him was unauthorized bylaw, the'chief justice points out clearly in his opinion.

The interest of the petitioner Camp in t h matter is that he is to be bound by such unauthorized decree. He is made a party to the proceeding to the extent of having his claims barred. Whether, owing to his release and waiver of notice under seal, he would be permitted, in a regular proceeding, to be heard in opposition to the assignee’s discharge, is a totally different question from the one before us. He certainly is not barred from claiming that the judgment cutting him off is not authorized by law.

[Dissenting.]—In order to entitle a party to seek the intervention of the court it must ajjpear that he has some rights which he is entitled to enforce or some grievance which he has the right to have redressed. If any other rule were to prevail every stranger who should find what he might think to be an improper or improvident order or proceeding upon the files of the court would have the right to come in and claim the attention of the court as to matters in which he has no possible interest.

Therefore, if it should appear that Mr. John T. Camp, the moving party upon this application, could not have, under any possibility, any interest in the assigned estate, or if an accounting were ordered could not possibly be heard upon that accounting, and that he has released every claim that he has against the assigned estate, and has formally released by an instrument under seal for a sufficient consideration, the

Dissent

p. 306
assignee from each and every claim which he might have against him, it is of no consequence what the nature of the order complained of in this proceeding may be, Camp should not be allowed to make any application in respect thereto, as he has no right to enforce or no grievance to redress. [The learned judge here stated the substance of the agreement, and then proceeded as follows:]

This agreement is under seal which imports a consideration, and is valid and binding upon all the parties to it, and its validity could not be impeached upon the motion under review.

It is to be observed, that the composition between the assignor and his creditors contained in this agreement is entirely independent of and distinct from the covenant' and agreement included therein between the assignee and the creditors of the assignor. The creditors agree separately with the assignor that upon the signing and sealing of this agreement the assignee may reassign; not shall reassign, but may reassign all property, &c., to the assignor.

And then the agreement proceeds to say that the assignor and his creditors do hereby ratify and confirm all the acts and proceedings of the assignee, and that they do hereby mutually consent and agree that the assignee be relieved from all liability as such, and his sureties discharged, and ■ an order be entered without notice to that effect.

Here is an absolute release to the assignee, signed by each and every creditor upon a sufficient consideration, whereby they have mutually released every claim which they and each of them had against the assignee or the assigned estate ; and it is to be observed that this release is not predicated upon the fact that the assignee will reassign the assigned property to the assignor, but is entirely independent of and distinct

p. 307
from it. The release is absolute. The assignee may reassign.

It is clear that no creditor who has that agreement could possibly raise any question upon any accounting which the assignee might be called upon to make. They would, each and every of them, after this formal release of the assignee, be precluded from raising any objection to any of his acts or proceedings.

If for any reason any party had the right to rescind this agreement, he must bring his action for that purpose. Such a question could not possibly be tried upon an accounting.

It then clearly appears that Mr. Camp had no interest whatever to be protected by this motion, and for that reason his motion should have been denied.

I think the order appealed from should be reversed.

Order affirmed.

Cases cited