Locke v. Covert — 6 N.Y. St. Rep. 55

Majority

p. 55

Aubin C. Locke, as Administrator, etc., of John D. Locke, deceased, App’lt, v. James W. Covert, as Receiver of The James D. Locke Company (limited), Resp’t. The People of the State of New York, v. The John D. Locke Company (limited).

(Supreme Court, General Term, Second Department,

Filed December 14, 1886.)

Headnote

Costs—When receiver of a corporation will be directed to pay.

When the costs of the action were incurred for the benefit of the fund in the receiver’s ha ds, the receiver will be required to pay them.

Appeal from an order denying a motion to compel payment by the receiver of a domestic corporation of so much of a judgment against him as awarded costs and allowance. The moving party is an administrator, who, after resistance by the receiver, finally obtained judgment against him in an action brought against the corporation before his appointment. After the dissolution of the corporation, the receiver served an answer denying nearly all the material allegations in the complaint, and defended the action. Upon the trial, at which the receiver was represented by counsel and opposed the plaintiff’s claim, the plaintiff’s six causes of action were proved by entries in the books of the corporation then produced by the receiver in obedience to a subpoena. The complaint contained copies of these entries in these books. The receiver has on deposit in a trust company more than ten times the amount of the costs and allowance.

All other claims against him which are entitled to a preference have been paid.

Roger Foster, for resp’t; Denis O'Brien, attorney-general, for the People, and Porter & Kelvert, for the receiver.

The receiver is the custodian of a fund, subject to the direction of the court, to pay it out to parties establishing claims thereupon.

The costs of the action were incurred for the benefit of the fund. It is therefore equitable that the expenses of the effort should be borne by the fund in whose behalf they were incurred.

In the language of Justice Woodruff, this is not giving a preference to a debt as such; it is requiring the fund to pay an expense incurred for its own benefit.

The case of Shields v. Sullivan (3 Demarest, 296), is in point, and to the same effect. It follows that the motion to require the receiver to pay the costs should have been granted.

Order reversed, with ten dollars costs and disbursements.