In re the Final Accounting of Mather — 40 N.Y. St. Rep. 882

Majority

p. 882

In the Matter of the Final Accounting of Edgar D. Mather, Assignee.

(Supreme Court, General Term, Fifth Department,

Filed October 23, 1891.)

Headnote

1. Assignment fob cbeditobs—Judgment confessed by assignob.

An assignee for benefit of creditors had knowledge before the assignment that his assignor had confessed a judgment in favor of relatives, and he was notified by the creditors that he would be held liable if he allowed it to be paid out of the estate. The creditors did not request him to bring an action in this behalf or furnish funds therefor. The assignee was a layman, had counsel and had otherwise faithfully performed his trust. Held, that it was error to charge the assignee with the amount of said judgment for his mere failure to sue.

2. Same—Negligence of assignee.

It is the negligent omission of duty which alone can charge an assignee personally.

3. Same—Objections to his account.

Objections to an account of an assignee must be specific and must suffi* ciently apprise him of the charge which he is to meet.

Appeal from a decree of the county court of Ontario county made September 15, 1890, on the final accounting of the appellant, as assignee, under a general assignment made by Lincoln A. Mink for the benefit of creditors.

H. M. Field, for the assignee, app'lt; Mark T. Powell and John Colmey, for the creditors, resp’ts.

This case was brought into this court by an .appeal from the decree of the county court, by which the assignee under a general assignment made for the benefit of creditors is •charged with the sum of $1,183, for failure to take legal proceedings to set aside judgments confessed by the assignor to his wife and mother before the making of the assignment.

The assignment was made on the 4th day of December, 1888. The assignor was engaged in the sale of agricultural implements and produce, and the assignee was a banker. On the day preceding the assignment, to the knowledge of the assignee, the

p. 883

assignor confessed two judgments, one in favor of his wife for $101 damages, besides costs; another in favor of his mother for $1,275.30 damages, besides costs. When such judgments were confessed, as is found by the learned county judge, it was arranged between the assignor and assignee that the assignment should be executed by them on the following day, namely, the day of its date. The property of the assignor was seized by the sheriff under executions issued upon these judgments, but by an arrangement between the sheriff and the assignee the latter was permitted to retain possession of the personal property as the agent of the sheriff, and he was to convert the same into cash, and to apply the same upon the execution held by the sheriff, which was accordingly done, the assignee making satisfactory sales of the property, and realizing therefrom as much money as could be obtained under any forced sale. The appellant also had some personal interest in one of these judgments by way of an assignment as collateral security for the payment of a note held by him; but it is not believed that such fact is of very much importance on this appeal, though considerations of delicacy arising therefrom might well have deterred him from accepting the trust under the assignment.

On the 24th day of April, 1889, the assignee was personally notified by certain of the creditors that these judgments so confessed by the assignor were fraudulent and void, and that these creditors would charge the assignee personally on his accounting with all sums paid by him on such judgments. There appears, however, to have been no request made by them to the assignee to bring an action to set aside such confessions, and to apply the property in the administration of his trust.

In the decision of the county judge, there is no finding that the assignee was guilty of any fraud or negligence in failing to prosecute an action in behalf of the general creditors under the assignment for the purpose above stated, except as the same is contained in his last finding of fact, where it is stated “ the sum of $1,183 is the amount of a trust fund so lost to the creditors of said trust estate by reason of the negligence and misconduct of said assignee.” That this was not, and that it was not intended by the learned judge to be, an affirmative finding of neglect, as a fact, so as to charge the assignee personally with the loss of these funds to the creditors, is seen by an examination of other findings made by the learned judge. Upon the request of the appellant’s counsel this special finding was made: “4. That the assignee used diligence in converting the property into money and no loss came to the estate by reason of any act of the assignee by converting the same into money.” He says further in the special findings as follows: “ Finally, I have found and decided that the exceptions of the creditors should be sustained upon the sole ground that the assignee had failed to bring an action to have the judgment confessed in favor of Mrs. Lucy Mink vacated and set aside as fraudulent and illegal,- and my reasons therefor are more fully stated in my opinion.”

The case, therefore, is one unlike that presenting the questions

p. 884

discussed in Matter of Cornell, 110 N. Y., 351 ; 18 N. Y. State Rep., 200. The mere failure of an assignee to bring an action to set aside the confessed judgments is not sufficient to charge him personally with the sum of money that might have been reclaimed by the successful prosecution of such an action. It is the negligent omission of duty which alone could charge the appellant. Many reasons might exist which would excuse the assignee from bringing an action even where it was thought that the right of action was good. Whatever judicial procedings might be instituted by the assignee would be so instituted for the benefit of ereditois, and not for the benefit of the assignee in any respect. The case, as presented, is one where the creditors have failed to induce any action by the assignee by'voluntarily assuming the expense of such litigation, or by indemnifying the assignee against personal expenses.

But it is claimed in behalf of the respondents, that because the assignee had knowledge of the fact that such judgments had been confessed, and that they were so confessed the day before making the assignment, he is conclusively charged with the duty of acting upon his own knowledge and of bringing an action based thereon. Whatever knowledge the assignee personally possessed of the facts as stated above and whatever inferences may now, in the light of subsequent events, be drawn in respect to the intent with which such judgments were confessed, it must be borne in mind that every step in procuring such judgments was taken under the advice of experienced counsel, who advised all the parties that they were valid. It appears, therefore, that the knowledge which the assignee is said to have possessed was not of such a character as would lead him, as a layman, to the conclusion that he could successfully assail these judgments, and that, consequently he cannot (be charged with culpable neglect in not attempting to set them aside.

Moreover, the objections made to the appellant’s account did not sufficiently apprise him of the ground now relied upon by counsel. The objections were originally placed under four heads. The first and second of these were struck out by the county judge on motion. There remained therefore only the third and fourth objections, which are as follows: Third objection. “ To the items in said account, to wit, the goods in store sold on execution after the assignment but levied prior to'same, and that ■said assignee should be charged with all moneys paid out by him under and by virtue of said executions, and that he shall not be credited therewith; that such shall be decreed as being in his hands for distribution.” Fourth : “ Object to so much of said account as credits said assignee with the payment of all moneys paid upon or property taken upon and under two judgments against said Mink in favor of Lucy Mink and Libbie Mink.”

These objections contain no charge of culpable neglect or of any degree of neglect of duty in failing to bring an action to set aside the judgments. The judgments were valid as between the parties, and also as to all persons other than the creditors of the

p. 885

assignor. They were regular and sufficient in substance and in form. They were not, consequently, void, but voidable, and that only upon the interposition of the creditors, or the assignee acting in their behalf, under evidence, which never seems to have been placed in the assignee's hands, that they were made with intent to defeat the general assignment act of 1877 (chap. 466) or fraudulent as to such creditors. Under these circumstances it was the duty of the assignee to execute the trust imposed upon him by his acceptance thereof, for the assignment must be treated as valid until declared fraudulent by the judgment of a competent court. Knower v. C. N. Bank, 124 N. Y., 552 ; 37 N. Y. State Rep., 89.

Upon the hearing of this matter the assignee had the right to be apprised of any charge that might be made against him of this grave nature. The objections as filed must be deemed in substance to have the force and effect of an answer in an action, and, consequently, it was the duty of the contestants thereby to charge the assignee in a proper manner with the negligence now urged against him before calling upon him to respond in the manner stated.

It follows, from these considerations, that the decree appealed from should be reversed in respect to the charge against the assignee of items amounting in all to $1,183, and. a re-hearing had, with costs of this appeal to abide the event

Decree reversed, and a re-hearing ordered.

Dwight, P. J., and Lewis, J., concur.