Hyperlawhypertext legal database Van Slyck v. Bush 56 N.Y. Super. Ct. 478

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Van Slyck v. Bush

56 N.Y. Super. Ct. 478 24 Jones & S. 478 Court N.Y. Super. Ct. Decision date 1889-03-06 English

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p. 478
GEORGE W. VAN SLYCK, Appellant v. JOHN S. BUSH, et al., Respondents.

Headnote

Assignment for benefit of creditors—Non liability of assignee's sureties for the omission of the assignee to pay a claim of his attorney for services directed by the final decree on his accounting to be by him paid out of the funds of the assigned estate.
The plaintiff in this case had rendered services as attorney and counsel to an assignee under an assignment for the benefit of creditors. Upon an accounting by the assignee, to which his sureties were parties, a final decree was made by which the assignee was directed to pay from the funds in his hands, as assignee, within a specified time, to the plaintiff in this action, the attorney for the assignee, the sum of $2,123.37 with interest. At the time of the entry of this decree the assignee had on hand, as such, more than that sum. Plaintiff was not a party to the accounting proceedings and presented no claim therein. After the decree the assignee made a payment to plaintiff on account. This action is brought against the sureties of the assignee to recover the balance of the $2,123.37, remaining after deducting such payment, upon the assignee’s failure to pay it. '
Held, on demurrer to the complaint, that the sureties were not liable.
p. 479
Before Sedgwick, Ch. J., and Truax, J.
Decided March 6, 1889.
Appeal by plaintiff from judgment dismissing complaint entered upon demurrer to complaint.
The facts sufficiently appear in the opinion.
Frederick A. Snow, attorney, and John E. Parsons of counsel for appellant, on the questions considered in the opinion, argued:—
I. The decree is final as to the indebtedness of the estate, and the obligation of the assignee to pay the same, and upon his failure to pay, the sureties became liable. The undertaking of the sureties is that the assignee shall faithfully execute and discharge the duties of such assignee, and duly account for all moneys received by him as such assignee. The condition of the bond involves the obligation of the assignee making payments of the funds in his custody according to the orders of a court having jurisdiction to make them. Assignees for the benefit of creditors are subject to the order and direction of the court. Matter of Mumford, 5 State Rep. 303; §§ 20 and 25 of chap. 466, Laws of 1877. The moneys directed to be applied in payment of plaintiff’s claim were in the hands of the assignee, or, in other words, were in custodia legis. And in such a case when the assignee disobeys the order of. the court the assignee has failed to faithfully execute the trust and there has occurred a breach of the condition of the bond. Titus v. Fairchild, 49 Super. Ct. 211-22 1 Board of Supervisors v. Bristol, 99 N. Y. 316 -321; Jennery v. Olmstead, 36 Hun, 536 -41. The assignee confessedly has not “ duly accounted for all moneys received by him as such assignee.” The accounting therein mentioned refers to the payments of moneys received by him as assignee, and clearly he has not paid
p. 480
out the moneys received by him as assignee as directed. The indebtedness due the plaintiff was incurred by the assignee in the preservation and protection of the assigned estate, and the court had the power to direct its payment. In re Hulbut, 10 Abb. N. C. 290 ; affd. on this point in 10 lb. 452, 458. It was a necessary expense of the trustee,, and it is a well settled rule in equity that the expenses incurred by a trustee in the execution of his office are treated by the court as a first charge or lien upon the estate and the cestui que trust cannot compel distribution of the fund or a conveyance of the property without the payment,of the expenses from the fund. 2 Lewin on Trusts, 639, and cases there cited.
II. The defendants are precluded by the decree from contesting the liability of the estate for the debt of the plaintiff. The sureties were served with process and were parties to the accounting which terminated in the entry of the final decree. Casoni v. Jerome, 58 N. Y. 315 , 322, 323 ; Gerault v. Wilson, 81 Ib. 573, 585; Scofield v. Churchill, 72 lb. 565. Even assuming that the court had no power to make the direction contained in the decree, the sureties are nevertheless bound. Marsh v. Avery, 81 N. Y. 29 . In the above cases, which were actions upon executors’ and administrators’ bonds, the court put considerable stress upon the condition contained in the bonds to obey all orders of the surrogate. It will be found upon examination of these cases that special reference is made to this condition and not to the provision as to the faithful performance of the trust, for the reason that the sureties in those cases were not served with proper notice in the proceedings upon which the decree was made, and that the court cite this provision to show that the sureties had covenanted to be concluded by the order of the court affecting their principal. See. remarks of Finch, J., in Thompson v. McGregor, 81 N. Y. 592 -598. In other words, it was not doubted that there was a breach of condition as to
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faithful performance upon failure to pay money directed to be paid by the court, but the doubt was as to whether the sureties who were not parties to the proceedings were bound by the decree, and the provision as to obedience of orders of the surrogate was in effect a provision binding upon the sureties without notice or service of citation. 4 Abb. App. 391; 2 Duer, 169 -170.
Francis B. Chedsey, attorney and of counsel for respondent Bush, argued:—
I. The provision in the decree of the court, settling the account of the assignee, which directed him to pay out of the funds in his hands the amount of his indebtedness to the plaintiff, for services rendered by the plaintiff as attorney for the assignee in the management of the estate, must be construed simply as passing and allowing to the assignee that item as a proper expense incurred by him. The proper form to have drawn the decree would have been to have simply allowed the item to the assignee as a proper item of expense. Matter of Worthy, G. T., 10 Daly, 12 . The debt was the personal debt of the assignee, and the court had not jurisdiction in those proceedings to order or compel the assignee to pay it. By § 20, sub. 4, of the “ General Assignment act,” 1877, as amended by laws 1878, power is conferred upon the court “ to settle and adjudicate upon the account and the claims presented, and to decree payment of any creditor’s just proportional part of the fund.” The bond in suit was given, pursuant to § 5 of the act, to the “ People of the State,” and authority for its prosecution was conferred by § 9, which provides that u all moneys realized thereon shall be applied by direction of the county judge in satisfaction of the debts of the assignor,” clearly showing that the bond was required by the statute and given for the protection and security of the creditors of the assignor only. Sureties can only be charged when the case is brought within the very terms of their contract, and the
p. 482
obligation of sureties is not to be extended by construction to embrace purposes and objects not contemplated by the parties. People v. Chalmers, 60 N. Y. 154 .
II. The plaintiff’s position is not sustained by sub. 9 of § 20 of the act providing that the court shall have power “ to exercise. such other or further powers in respect to the proceedings and the accounting therein as a surrogate may by law exercise in reference to an accounting by an executor or administrator.” A surrogate has no power to direct payment of a sum by an executor or administrator to his counsel for the services of the latter. Seaman v. Whitehead, 78 N. Y. 306 ; Ferrin v. Myrick, 41 Ib. 315; Austin v. Munro, 47 Ib. 360; Schmittler v. Simon, 101 Ib. 554; Devin v. Patchin, 26 Ib. 441. The plaintiff at the trial relied on the case of Casoni v. Jerome, 58 N. Y. 315 , which sustained a recovery against the sureties in a bond given by an administrator with the will annexed. That claim was made directly against the estate (see foot of page 317) for erecting a monument which the will directed to be erected (see page 318), and for the payment for which it was, on the accounting, expressly adjudged that the estate was liable (p. 317). The bond itself (p. 316), unlike the one in suit, contained a provision that .the administrator would obey all orders of the surrogate, etc. The judgment against the sureties was sustained only because the claim had been adjudged, as a fact, to be a claim, not against the administrator personally, but against the estate (see foot of p. 321). In the case at bar there has been no adjudication that the claim was against the assigned estate, but the complaint, paragraph five, distinctly avers to the contrary.
E. C. Pearson, attorney and of counsel for respondent, Camp, on the questions considered in the opinion, argued:—
I. But the plaintiff relies upon the provision in the decree of the court directing the payment to him by the
p. 483
assignee out of the funds found to be in his hands, and contends that as the defendants were cited to appear upon the proceedings resulting in this decree, they are now estopped to deny their liability. To this it is answered : First.—The extent of the defendants’ obligation was that the assignee should faithfully discharge his duties as assignee, and duly account for all moneys received by him as assignee. That he did account, and that his account was approved is alleged in the complaint, and, as already shown, the duties to be discharged were due to creditors of the assignor. With the accounting and the discharge of his duty to the creditors of the assignee, the defendants’ liabilities as sureties of the assignor ceased. They did not bind themselves that he should obey every order or conform to every decree or judgment that might be made or rendered. They stand strictly on their contract, and this order or provision of the decree did not come within its terms. People v. Chalmers, 60 N. Y. 154 . Second.—But plaintiff cannot sue on this decree because he was not a party to it, and hence was not bound by it. He could not be estopped by the decree from suing the assignee for a larger sum; he might have declined to accept the sum allowed, contending that it was insufficient, and brought action for the real value of the services rendered. It is an elementary principle that no one can avail himself of a judgment as an estoppel who is not himself bound by it. ■
II. The decree was not intended to clothe the plaintiff with any legal rights, but was intended solely for the benefit of the assignee and should be so construed. It is well settled that an assignee has no authority to employ counsel at the expense of the assigned estate to aid him in the discharge of his duties, but that in such employment he acts in his individual capacity. The court may, in its- discretion, where the necessity of legal aid is shown, allow the assignee a compensation in addition to his commission to pay for legal services as one of
p. 484
the reasonable expenses incurred by him in the discharge of his duties; but such an allowance is part of the assignee’s compensation, and gives the counsel no rights against the funds in the assignee’s hands. Matter of Worthley, 10 Daly, 12 ; Matter of Johnson, 10 Ib. 123; Matter of Garrick, 13 Ib. 181; Matter of Hazard, 17 N. Y. St. Reporter, 26. The language of the assignment act is to the same effect, viz., that the allowance must be made to the assignee. § 20, subd. 9. Under § 2562, Code Civ. Pro., as to allowances to an executor [or] administrator, for his counsel fees and other expenses, the allowance must be to the executor or administrator, and not to the counsel; and it has been repeatedly held that an allowance to counsel in a decree was improper. Seaman v. Whitehead, 78 N. Y. 306 ; Devin v. Patchin, 26 Ib. 441. A careful examination of the case of Marsh v. Avery, 81 N. Y. 30 , will show that the decision has no bearing upon the case at bar. Had the decree been in the form required in the Worthley case, 10 Daly, 12 ; i. e., of an allowance to the assignee for legal services, the plaintiff would never have thought of bringing this action, for it would have then been perfectly evident that no claim could exist against the sureties. Certainly, the decree is not to be construed as raising any obligation which the court had no authority to create. The sureties were not bound to look to the language of this provision, as they were not interested in the compensation allowed to the assignee; therefore, there is no question of estoppel.
• HI. But if this decree could by any means be construed to give the plaintiff a cause of action against the defendants, it would so far be void, as in excess of the power of the court. Sec. 24 . of the Assignment Act; Frees v. Ford, 6 N. Y. 176 ; § 20 of the Act; Risley v. Phenix Bank, 83 N. Y. 318 ; Chemung Bank v. Judson, 8 Ib. 254 ; People v. Liscomb, 60 Ib. 559, 570 to 573.
IV. The authorities cited by the appellant at the special term do not support his contention, but on the
p. 485
contrary, so far as they are to be regarded as bearing upon this case, they are authorities for the respondents. In Casoni v. Jerome, 58 N. Y. 315 , the decision of the court was rested upon the ground that “ the question whether the plaintiff’s demand was a debt against the estate, was necessarily determined by the surrogate on the accounting.” That is, the surrogate had adjudged the claim to be one against the estate. In the statement of the case (foot of p. 315), it is said: “And by said decree it was adjudged that there was due to the said plaintiffs from said administratrix the sum of $5,500, the amount of their claim against said estate, which she was directed to pay with costs.” It is not pretended in the case at bar that the court in its decree adjudged that the appellant had any claim against the assigned estate. On the contrary, it is alleged in the complaint, that the assignee was directed to pay “ to this plaintiff, the attorney for the said assignee.” This is a distinct recognition, if it is not absolutely a finding, that the appellant’s claim was not against the estate, but was against the assignee. It is further to be noted that in the case cited the condition of the sureties bond was that the administratrix should “ obey all orders of the surrogate.” In Gerould v. Wilson, 81 N. Y 573 , the question was whether the surrogate could direct an administrator after revocation of letters, to pay to a distributee ; and the opinion is mainly devoted to an examination of the power of the surrogate to make such a direction; the further ground for the decision that the sureties were bound by the decree is rested upon the fact that their bond was conditioned for the compliance by the principal with all orders of the surrogate.

The complaint averred the making of an assignment by one Brick of all his property to one Campbell, “ in trust for the benefit of the creditors of Brick, in pursuance to the statute in such case made and provided ” ; also that Campbell

p. 486
executed his bond conditioned “ that if the said Eobert Campbell should faithfully- execute and discharge the duties of such assignee, and duly account for all moneys received by him as such assignee, then the said obligation to' be void, otherwise to remain in full force and effect”; that the defendants executed said bond as sureties ; that Campbell entered upon the discharge of his duties as assignee and presented an account of his doings as such: that “ after due service of citations upon all persons interested in the said proceedings, including the defendants as the sureties on'said bond,” the account was sent to a referee; that “ thereafter the said referee’s report was confirmed by the court and a final decree was entered in which decree the said Campbell, as said assignee, was directed to pay from the funds in his hands as assignee, within 30 days from the entry of said decree, to this plaintiff the attorney for the said assignee, the sum of $2,123.37 with interest; ” that the said indebtedness was necessarily incurred by the said assignee for legal services performed by the plaintiff as an attorney at law on behalf of and as the attorney of the said assignee “ in the care, preservation and protection of the said assigned estate; ” that at the time of the entry of the final decree, the' assignee had on hand, a part of the assigned estate, more than the sum of said $2,123.37 ; that the plaintiff has demanded payment of the balance due him óf the last mentioned sum, both of the assignee and of these defendants, “ and that the said assignee should obey the said decree, but payment of said balance has been neglected and the said Eobert Campbell has not obeyed the direction aforesaid of said decree ; ” that the Court of Common Pleas directed the said bond to be prosecuted by and on behalf of the plaintiff for his benefit ; that the said Campbell has paid the sum $1,250 on account, wherefore the complaint demanded judgment for the sum of $873.37.

The defendants demurred severally, on the ground that the complaint did not state a cause of action.

p. 487
The court below sustained the demurrer, and upon the decision then made, the judgment was entered, and from this the present appeal was taken.

The plaintiff was not a party to the accounting, and the final adjudication was not in his behalf, in the sense that it would give him a cause of action upon it directly. Up to the time of the adjudication, the plaintiff’s rights were confined to a cause of action he had against Campbell personally, and not relatively as assignee. This cause of action was not affected by the conduct of the parties to the accounting. As he was not bound by the adjudication, so he could not take advantage of it as an adjudication; and if Campbell was not liable to the plaintiff upon it, Campbell’s sureties would not be liable. If any use could be made of the adjudication, in an action between the plaintiff and Campbell, the action it would tend to support, would be against Campbell personally, and not as assignee.

The learned counsel for appellant claims, that the direction of the order to pay to the plaintiff established a duty upon Campbell, as assignee, to pay to the plaintiff, and the failure to perform this duty, made the sureties liable.

The single phrase that directs the payment is not to be taken and construed by itself. Its meaning and effect are to be ascertained from it and its connections in the proceeding.

The plaintiff had no claim against the estate. He did not present a claim. If that were necessary to the formation of a cause of action, it was to be pleaded. There is, therefore, no adjudication as in Casoni v. Jerome, 58 N. Y. 315 , that he had a claim. In Marsh v. Avery, 81 N. Y. 29 , it appears that the attorney who made the claim, must have been a party to the proceedings before the surrogate, for he was the respondent in the appeal.

It is clear that on the accounting, the claim made by Campbell as to this matter, was not made as assignee.

p. 488
It was made for himself individually and personally. He personally was giving account of his actions as assignee. He took the position that he had become personally liable for services of the plaintiff. If he had paid for those services he would have had a right to reimbursement of the money he had paid. If, as in this case, he had not paid, he would have a right, as indeed was competently adjudged, to obtain leave to pay for the services out of funds of the estate. If he then paid, the transaction would be in effect, the transfer of money held by him,-as assignee, to himself personally, and then the payment of it in discharge of his own obligation. Such a payment would be payment by him personally and not as assignee. The neglect to pay would not be an omission of duty as assignee. So long as payment was not made, the money would be part of the assigned estate. There might be a case where it would be his duty to refuse to pay, even after provision for reimbursement had been made. When the provision was made for the future payment, it was implied that the payment was to be necessarily made for the purpose indicated. The fund was not to be left in his hands or set apart for any purpose, other than as disbursement. So that the direction to pay to the attorney, was not more than a direction to perform the condition upon which Campbell’s right to have the fund set apart, depended.

As in all that would follow the order, Campbell would act for his own personal interest and not as assignee, I am of opinion,, that the omission to pay to the attorney, was not a breach of duty by Campbell, as assignee, and therefore that the sureties are not liable for the omission.

The judgment should be affirmed with costs.

Teuax J., concurred.

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