Ditmas v. McKane — 92 A.D. 344

Majority

p. 344

Abigail V. Ditmas, Individually and as Sole Surviving Administratrix, etc., of Henry C. Ditmas, Deceased, Respondent, v. James McKane and Others, Appellants, Impleaded with Others.

Headnote

An action is not maintainable by an administrator on a note deposited with a trust company pursuant to section 2595 of the Code of Civil Procedure — a creditor’s action cannot be based on a judgment so obtained — the fact that the administrator afterwards obtains title to the note in her individual capacity does not entitle her to maintain the creditor's suit. . .

Upon the death of Henry 0. Ditmas, who held the promissory note of John Y. McKane for $25,000, letters of administration on his estate were issued to Abigail Y. Ditmas. She did not furnish- a bond in an amount sufficient to ' entitle her to receive possession of the note, and the surrogate directed that the note should not pass to the administratrix but should be deposited with a trust company.

This action of the surrogate was taken pursuant to section 2595 of the Code of Civil Procedure, which provides that in a case where “ the value of the estate or fund is so great that the surrogate deems it inexpedient to require security in the full amount prescribed by law, he may direct that any securities for the payment of money belonging to the estate or fund be deposited with him, to be delivered to the county treasurer or be deposited subject to the order of the trustee, countersigned by the surrogate, with a trust company duly authorized by law to receive the same.”'

Thereafter the administratrix', without obtaining any further order or direction from the surrogate, brought an action against McKane on the note, recovered judgment against him for the amount thereof and issued an execution thereon, which w.as returned unsatisfied.

Subsequently, by a decree of the Surrogate’s Court, the estate of the said Henry C. Ditmas was distributed and the note in question was delivered to his administratrix in her individual capacity. The administratrix then brought, an action as administratrix and in her individual capacity to set aside alleged fraudulent conveyances executed by John Y. McKane.

Held, that the action could not be maintained, for the reason that the plaintiff had no authority to bring the action on the note without obtaining authority from the surrogate;

That a payment of the note to the plaintiff, while it was on deposit with the trust company, would not have discharged McKane’s obligation thereon;

That the fact that the plaintiff, after obtaining judgment on the note, acquired title to the note in her individual capacity, did not entitle her to maintain the judgment creditor’s action;

That, before such an action may be maintained, all the statutory requirements and conditions precedent must be complied with. ■

p. 345

Appeal by the defendants, James McKane and others, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 6th day of September, 1901, upon the decision of the court, rendered after a trial at the Kings County Special Term, setting aside as fraudulent certain deeds, and also from an order entered in said clerk’s office on the 6th day of September, 1901, amending the summons and amended complaint herein, with notice of an intention on the part of the defendant Fanny McKane to bring up for review upon such appeal the above-mentioned order amending the summons and amended complaint and also two orders entered in said clerk’s office on the 2d day of October, 1901, denying said defendant’s motion to postpone the trial of the action. Also a separate appeal by the defendant Fanny McKane from the two last-mentioned orders denying said defendant’s motion to postpone the trial.

The appeal in this action was transferred from the second department of the Appellate Division to the first department.

William E. C. Mayer, for the appellant James McKane.

George W. Roderick, for the appellants Fanny McKane and others.

Marcus B. Campbell, for the appellant Ira McKane individually and as executor of Fanny McKane, deceased.

Somerville & Sheehan, for the appellant Theodore McKane.

Joseph A. Burr, for the respondent.

This is an appeal from a judgment in plaintiff’s favor setting aside ■ certain deeds of property belonging to John T. McKane, now deceased, as fraudulent. Brior to the bringing of this action John T. McKane, who was then living, had the title in fee to many distinct parcels of real estate which are particularly described in the complaint, some of which were transferred to his brother, James McKane, and some to George W. Roderick. The parcels thus separately deeded had, at the time of the commencement of this action, by mesne conveyances, in the making of which the appellants were concerned, come into the possession of Fanny McKane, wife of John T. McKane.

p. 346

When the original transfers were made John Y. McKane was indebted to Henry C. Ditmas, deceased, in the sum of '$25,000, which was represented by a promissory note for that amount. ' The plaintiff herein, . Abigail Ditmas, having together with Johanna Ditmas, applied for letters of administration of the estate of Henry C. Ditmas, deceased, and not having furnished a bond in an amount sufficient to entitle her to receive and obtain possession and control •of the entire assets, the surrogate, pursuant to the provisions of the Code of Civil Procedure to which we shall advert, issued letters of administration to .them, but directed that the possession and custody of the note in question should not pass to the administratrix, but that the note should be deposited with a trust company. Without thereafter obtaining any order or direction from the surrogate, and while the note was thus in the custody and possession of the trust company, the plaintiff, as surviving administratrix (Johanna Ditmas having died) brought .an action against John. Y. McKane, who was then in prison, and subsequently entered a judgment against him for the full amount of the note and interest. Thereupon the plaintiff issued execution, and it having been returned unsatisfied, she has now brought this action for the purpose of setting aside the conveyances made in favor of the several defendants, which, it is alleged, were made in fraud of her rights as a creditor.

It will be noticed that this is a judgment creditor’s action, the basis of which is necessarily the obtaining of a valid judgment against the debtor and the return of an execution against his property unsatisfied. If, therefore, the plaintiff had no right to sue upon the note and obtain a judgment, or, having the right to obtain a judgment, had no right to issue an execution to collect it-against the property of the debtor, then it would follow that she had no right to institute this judgment creditor’s action.

Section 2595 of the Code of Civil Procedure provides that in a case where “ the value of the estate or. fund is so great that the surrogate deems it inexpedient to require security in the full amount prescribed by law, he may direct that any securities for the payment of money belonging to the estate or fund be deposited with him, to be delivered to the county treasurer or be deposited subject to the order of the trustee, countersigned by the surrogate, with a trust company duly authorized by law to receive thé same. After such

p. 347

a deposit has been made the surrogate may fix the amount of the bond with respect to the value of the remainder only of the estate or fund. ■ A security thus deposited shall not be withdrawn from the custody of the county treasurer or trust company, and no persons other than the county treasurer or the proper officer of the trust company shall receive or collect any of the principal or interest secured thereby, without the special order of the surrogate entered in the appropriate book. Such an order can be made, in favor of the trustee appointed, only where an additional bond has been given by him, or upon proof that the estate or fund has been so reduced .by payments or otherwise, that the penalty of the bond originally given will be sufficient in amount to satisfy the provisions of law relating to the penalty thereof, if the security so withdrawn is also reckoned in the estate or fund.”

Pursuant to this provision, the note was deposited with a trust company which was alone entitled to “receive or collect” any of the property or interest secured thereby; and we have been unable to find any warrant for the step taken by the plaintiff, while it thus remained in the custody of such trust company; in suing upon a nofe which was not in her possession and to which she had not obtained the title.

It may be suggested that in analogy to limited letters of administration, which are issued to collect death claims based upon negligence, a distinction is to be observed between the right to sue and the1 right to collect. By reference, however, to the statute under which such limited letters are issued (Code Civ. Proe. § 2664) it will be noticed that while the right to collect is withheld, the right to sue is expressly given. Under section 2595 of the Code, no such right to sue is given; and although the surrogate might, by subsequent order, have conferred such right, which we do not decide, because unnecessary, it is not contended that any such order in the present instance was granted. Even if there were a doubt upon this subject, which we do not entertain, holding as we do that the plaintiff could not without the permission of the surrogate sue upon the note while it remained in the custody of the trust company, there cannot be the slightest, doubt upon the further proposition that the plaintiff had no right to issue an execution upon the judgment, because that is expressly forbidden by the section.

p. 348

Although the letters of administration granted to the plaintiff were general in form, they were necessarily limited by section 2595 of the Code which deprived the plaintiff of the custody and control of the note and, to that extent, therefore, they were, by the very language of the section, limited so as to exclude from the administration of the plaintiff the particular security which had thus been ■ impounded and which as. directed was deposited with the trust company. ' By the grant of letters of administration, therefore, no right or authority was conferred upon the plaintiff to sue upon this particular note, because, by order of the surrogate, it had been deposited with the trust company ; and we fail to see by what right the plaintiff could proceed to do so without first obtaining the consent of the surrogate. .That the statutory requirements must be complied with and that the conditions precedent must appear before a judgment creditor’s action can be maintained,' has been so frequently decided that the citation of authority would seem to he unnecessary; but as illustrative of the principle involved two cases among others to which we may refer are Prentiss v. Bowden ( 145 N. Y. 342 ) and Dittmar v. Gould ( 60 App. Div. 94 ).

We do not think, moreover, that a payment to the plaintiff, if made after the deposit of the note with the trust company, would have discharged the obligation of John Y. McKane upon it, particularly without his having obtained repossession of the note. This, however, the plaintiff could not give him and as long as she had no power or authority to get the note for the purpose of surrendering it, she was not in a position to ask, demand or receive payment. As she could not, therefore, legally receive payment from the debtor and discharge him, it is difficult to see upon what theory she could sue for and obtain a judgment against him and thereafter issue execution to collect it.

It is suggested that even though we reach the conclusion that the plaintiff as administratrix had no right to obtain the judgment and issue the execution, still, for the purpose- of maintaining this judgment creditor’s action, there is another view upon which it can be supported, namely, that she subsequently obtained, as an individual, ail right, title and interest in and to the note. In this connection our attention is called to the fact that upon the trial (and against the opposition of the defendants) an amendment was allowed

p. 349

to include Abigail Ditmas individually as a plaintiff, she having originally brought this action as administratrix. It appears that after the judgment was obtained upon the note and the execution returned unsatisfied and the estate of Henry 0. Ditmas was collected and ready for distribution, á decree of the surrogate was entered in the matter of that estate which directed distribution of the assets and discharged the administratrix and which turned over the note in question to her as her individual property.

The obvious answer is that all these things occurred after the obtaining of the judgment and the issuing -of the execution upon which this judgment creditor’s action is based; and it would be a curious process of reasoning which would render a judgment in favor of the plaintiff as administratrix, which was invalid when obtained and upon which she had no right to issue execution, perfectly valid and effectual for the purpose of supporting' the execution upon the ground that she had at a much later date got possession of and title to the note as an individual. We do not think that the plaintiff, because of the subsequent delivery of the note to her as an individual, could obtain any rights in a judgment which as administratrix she had improperly obtained.

We do not deem it necessary to discuss the merits as to the validity of the transfers made by John T. McKane in his lifetime, nor the numerous other questions which have been presented by the appellants, thinking as we do that the objection which- we have been considering and which lies at the very foundation of the plaintiff’s right to maintain this judgment creditor’s action is fatal to such right.

The appeal of the defendant Fanny McKane from the two orders denying motions to postpone trial must be dismissed. The order amending, summons and amended complaint must be affirmed. The proceeding to bring up for review upon the appeals from the judgment the order amending the summons and amended complaint, and the two orders denying mOtitins to postpone -trial must be dismissed.

The judgment must be reversed and a new trial ordered, with one bill of costs to appellants to abide the event.

Tan Brunt, P. J., Patterson, McLaughlin and Laughlin, JJ., concurred. •

p. 350

Appeal of defendant Fanny McKane from the two orders denying motions to postpone trial dismissed. Order amending summons' and amended complaint affirmed. The proceeding to bring up for review upon the appeals from the. judgment the order amending summons and amended complaint, and the two orders denying motions to postpone trial dismissed, judgment reversed and new trial ordered, with one bill of costs to appellants to abide event.

Cases cited

Prentiss v. Bowden 145 N. Y. 342 N.Y. 1895-03-19 p. 348