Wallace v. Wallace — 21 A.D. 542

Majority

p. 542

George W. Wallace, as Executor, etc., of James Wallace, Deceased, Appellant, v. Thomas P. Wallace, as Sole Surviving Partner of the Firm of James Wallace & Son, and as Executor, etc., of James Wallace, Deceased, Appellant. Charles M. Warner, Receiver of James Wallace & Son, Appellant; The Southern National Bank of New York, Respondent.

Headnote

Attachment —permission to levy it upon property in the hands of a receiver — what - . must be shown on an application therefor

Á motion noticed on February 38, 1897, but not heard until the following June, to permit a creditor to levy a warrant of attachment upon the property of a ■ surviving partner of a firm of which a permanent receiver had been appointed on February 37, 1897, will be denied in the absence of proof that the firm was ■sólvent at the time of the hearing of the motion, or that the permanent receivership was instituted in fraud for the purpose of delaying creditors. In such a •case the receiver has the entire title to the assets of the firm, and it is his duty .to apply them to the payment of the claims of its creditors.-

Appeals by the plaintiff, George W. Wallace, as executor, etc., by the.defendant, Thomas P. Wallace,-as sole surviving partner, etc., • and by Charles M. Warner, as receiver, etc., from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county' of New York on the 20th day of July, 1897,. granting a motion made by the Southern National Bank of New York for leave , to levy a certain warrant of attachment obtained by said bank against Thomas P. Wallace upon property of said Thomas P. Wallace, and directing that the receiver of said Wallace deliver to the sheriff a sufficiency of the property and assets of his as shall equal the amount claimed by the said bank under the warrant of attachment.

Henry Wynans Jessup, for the appellants.

■ Herbert A. Heyn, for the respondent.

This is an appeal from an order permitting an attaching creditor to levy a warrant of attachment upon property in the hands of a receiver of the defendant Wallace. The attachment was issued on the 23d of February, 1897, in an action in which' the Southern

p. 543

¡National Bank was the plaintiff and Thomas B. Wallace, the surviving partner of the firm of James Wallace & Son, the defendant. The motion for leave to levy under the • warrant was based upon an order to show cause issued on the 23d of February, 1897, but the order appealed from was not made until the 20th of July, 1897. The motion was not heard until sometime in June, 1897, as we infer from the fact that many of the affidavits which were used on that motion were sworn to during that month of June. On the 27th of February, 1897, final judgment was entered in this action, and in that judgment Charles M. Warner, who had been the temporary receiver of the defendant’s property, was appointed permanent receiver “ of all the property, assets and effects of the late firm of James Wallace & Son, and of the said Thomas P. Wallace, as sole surviving partner thereof,” and, as such permanent receiver, was directed to “ sell and dispose of all the said property, assets and effects, and * * bring the same into court to he distributed in pursuance of the provisions of this decree with all convenient speed.”

The order appealed from is sought to be supported by the authority of Schloss v. Schloss ( 14 App. Div. 333 ) and The Matter of Thompson (10 id. 40). The respondent sought to show by the affidavits used on the motion that the temporary receivership was collusive, procured for the purpose of delaying creditors, and that the defendant, at the time that temporary receivership was created and afterwards, was solvent; and that, solvency and fraudulent intent being shown, it was entitled to the order permitting the levy to be made. When the order was made the assets were in the hands of a permanent receiver, whose duty it was to close up the assigned estate and make distribution pro rata among the creditors. ■ The nature of the receivership in this case distinguishes it from the Sohloss case. Here the estate is in the hands of a permanent receiver for the express purpose of distribution among creditors. The permanent receiver has the entire title, and is bound to administer the assets of the receivership and to apply them to the payment of the creditors’ claims, and, if he fails to discharge his duty,' he may be removed for good cause shown. It is not made to appear that there was any fraud or wrongdoing in the procurement of the final judgment by which .this permanent receiver was appointed.

p. 544

The weight of evidence is that, at the time the judgment in this, case was entered and for some time before, the defendant was insolvent There are conflicting affidavits respecting the financial condition of the defendant and the estate of James W. Wallace at the time the temporary receivership was created, and for some time afterwards, but the affidavits of the receiver and of the accountants show that there was a deficiency of-the assets to pay debts, at the time the permanent receivership was created, of something like a hundred thousand dollars. An explanation is given by the receiver of what led him to make contrary statements in previous affidavits, verified before the expert examinations had been made, as to • the condition of the defendant’s business. We think the tests by which this motion should have been determined are, first, what was the condition as to solvency of the defendant when the motion was heard by the court below; secondly, was the permanent receivership instituted in fraud for the purpose of delaying creditors or for some ulterior object, other than the distribution of assets among creditors.? These being the tests, the proof was not sufficient to authorize the making of the order - appealed from, which must be reversed, with costs, and the motion for leave to levy under the warrant of attachment denied, with costs.

Van Brunt, P. J., Williams, O’Brien and Ingraham, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.