In re the Judicial Settlement of the Accounts of Kennedy

A petition was filed on the 13th day of June, 1888, by Henrietta E Hoxie, a creditor, asking that the executors be cited to show cause why they should not render and settle their accounts. A citation was thereupon issued in accordance with the prayer of the petition, returnable July 6th. The proceeding was continued to July 12th, at which time both executors appeared and filed separately, petitions for the judicial settlement of their accounts, upon which citations were issued to all parties, who were shown to be interested in the estate of the decedent, and an order of publication was granted. Upon the 4th day of Septena

The petitioner, Henrietta E. Hoxie, obtained a judgment against the executors on the 9th day of January, 1888, for $6,094.15. There are other debts of the estate amounting to about $600. The executor, Anna E. Kennedy, who is. the widow of the decedent, received into her possession property, including interest on deposits, to the amount of $2,610 17, made up of cash on deposit upon general account in bank and the amount of a certificate of deposit taken, as follows: September 12, 1882, the decedent presented at the banking house of William H. Seward & Co. checks drawn by T. L. Poole, as United States pension: agent, upon the assistant treasurer of the United States in New York, for pension moneys, to which the decedent was entitled from the government in his own right, to the amount of $3,873.12. He took from a bank a certificate of deposit for $2,000 of this amount. The certificate was made payable to his own order, with interest. Twice the decedent drew the interest upon the $2,000, and each time took a new certificate for the principal sum. The last one was dated September 12, 1883, and was outstanding at the time of his death, October 3, 1883.

The executrix, Anna E. Kennedy, presented this certifi - cote at the bank where it was made payable on the 11th day of May, 1885, and received the interest thereon and $200 of the principal and a new certificate for $1,800, payable to her „order as executrix. The question now arises between the petitioner, as creditor of the estate of Terrence J. Kennedy and Anna E. Kennedy, individually, and as executrix, whether the proceeds of the certificate of deposit which came to the hands of the latter are applicable to the payment of the decedent’s debts, it being claimed that the exemption of pension money from levy and sale by virtue of an execution, provided by section 1393 of the Code of Civil Procedure, extends to the property in question and that the same passes to the legatees named in the decedent’s will.

It was held in this district, in the case of Wygant v Smith ( 2 Lans., 185 ), under the act of 1864 (chap. 578), that

The case at bar involves the inquiry as to whether the pension money was paid away and exchanged for other property or still retained the character of pension money at the time of the testator’s death. Was the taking of an interest bearing certificate of deposit for the money, the purchase of other property with it, or merely the depositing and receiving a receipt for the money ?

It was held by the supreme court, in this department, in the case of Burgett v. Fancher ( 35 Hun, 647 ), that pension money deposited in a bank subject to a party check, without interest, and for which a deposit slip had been given, continued to be exempt from execution. The court placed its decision upon the ground that the money was subject to the draft or check of the owner and was, undrawn in the hands of the bankers, the pay and bounty of a soldier.

A clear distinction is made in the opinion between such a transaction and a loan of money upon interest to the bankers; also between a mere memorandum and a certificate of deposit, bearing interest, which is made payable upon presentation.

The latter, when payable to order, as was the instrument held by the decedent, is in the nature of commercial paper. Pardee v. Fish, 60 N. Y., 265 .

It represented not only a deposit, but an instrument, and an agreement to pay interest upon a loan. It was property obtained in exchange for the pension money, and was as distinct from it as would have been a promissory note purchased with the money.

It is contended by counsel for the widow that the testator had the right to give away the pension money, and that he has rightfully disposed of the same by his will to the exclusion of his creditors. It may be true that had the testator given the money to his wife, before a certificate of deposit was issued, and she had taken a certificate in her own name, that his creditors could not have reached it, but the transaction with the bank was had by the testator personally, and the exemption did not continue to the time of his death. But had it so continued, the testator would seem to have appropriated the pension money, with all his other property.

After directing “ that the sum of $100, and no more, be expended for (his) my funeral expenses,” the will proceeds: “2. That all my debts be paid.” The third clause provides-a fund to be kept invested, the income of which is to be used in the care of a cemetery lot and vault.

The fourth, fifth, sixth, seventh, eighth and ninth clauses of the will contain specific legacies. By the tenth clause, general legacies of money to the amount of $600 are given, with the directions that “ in case there is not enough cash on hand to pay the same, each such legacy is made a charge upon my real estate.” A residuary clause then follows, by which all the rest, residue and remainder of the estate, real and personal, is given to the testator’s wife and sister, share and share alike, with provision for the same in case of the death of either of them before the death of the testator. There is no specific bequest of the pension money or of the certificate of deposit purchased therewith, but, on the contrary, the provision for a charge of legacies upon his real estate, shows the testator contemplated the possibility^ that-his personalty, aside from the articles of comparatively small value, specifically bequeathed, would not be sufficient to pay his debts and general legacies. I think the direction in the commencement of his will that all his debts be paid, would operate as a dedication of the pension money to that purpose, if it had continued to be exempt from the claims of creditors at the time of the testator’s death. This explanation is deemed proper on account of the claim of counsel, that property exempt from seizure and sale upon execution in the life-time of the judgment-debtor, continues thus exempt after his death, for the benefit of his widow, as held in the case of Becker v. Becker ( 47 Barb., 497 ) In that case an execution had been issued prior to the death of the judgment-debtor. - A levy was made after his death under the statute authorizing a sale in such cases. It was held that, as the execution bound the debtor’s property from the time of its delivery to the sheriff, and the Property in question was then exempt, it so continued, after is death, in the hands of his widow, who continued to reside in the house occupied by her husband in his life-time, with her minor children, for whom she provided. It is not necessary to decide whether the pension money in question, would have continued to be exempt from the claims of creditors in the present case, if specifically bequeathed to the widow, or left undisposed of by will, as the testator has expressly appropriated his property to the payment of his debts, by the very instrument under which it is claimed his widow may take the same in opposition to creditors It follows that the avails of the certificate of deposit in question must be applied to the payment of debts, and the petitioner is entitled to share therein ratably with other creditors.