Case ID: misc_30/html/0397-01.html
Source: Caselaw Access Project
Author: {"author": "Fitzgerald, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Matter of N. Reynolds & Co.
    (Supreme Court, New York Special Term,
    February, 1900.)
    1. Assignment for benefit of creditors — Accounting of assignee, removed — Citation.
    The court will not permit an assignee for benefit of creditors, whom it has removed for disobedience and ordered to account to his sueeessor, to apply, of bis own motion and by a new attorney, for an order passing bis accounts, fixing bis commissions and counsel fees, cancelling bis bond and discharging bis surety upon turning over to bis successor the balance shown by bis accounts filed, where no citation has been issued and served on all the parties interested in the estate of the debtor, as they have a right, by. means of a reference, to have the accounts duly proved and the corpus at the time of the transfer fixed, to have it determined whether the removed assignee is entitled to or has forfeited commissions and counsel fees, and also to have a determination whether he or the estate should pay the costs of the accounting.
    2. Same — Counsel fees a part of assignee’s account.
    Counsel fees of a general assignee should not be allowed by order but should be paid by him and be made a part of his account.
    Application for an order passing the account of the assignee, fixing the commissions and counsel fees, and directing their payment and directing that upon payment to the substituted assignee of the balance shown by said account, less such commissions and counsel fees, the bond of the assignee be cancelled and the surety thereon released.
    Howard Thayer Kingsbury, for receiver.
    Wendt & Berry, for creditors.
    Nathan & Leventritt, for surety.
   Fitzgerald, J.

This is an application for an order passing the account of the assignee, fixing the commissions and counsel fees, and directing their payment, and directing further that upon payment to the substituted assignee of the balance shown by said account, less such commissions and counsel fees, the bond of the assignee be cancelled and the 'surety thereon' released. It appears that by an order of this court, the said assignee was removed and superseded by an appointee of this court to whom he was ordered to account and to deliver the assigned property within a specified time; he did not comply with the said orders within said time, but, after securing a substitution of his attorneys, has filed his account, the allowance of which is asked, upon this motion; it is opposed by certain creditors, at whose instance the assignee was removed.

The motion cannot be granted for various reasons. Though the Assignment Act (Laws of 1877, chap. 466, § 6, as amended by Laws of 1878, chap. 318, § 2) provides that in the case of the removal of an assignee, under order to account, and the substitution of his successor, his bond shall be cancelled and discharged, upon his discharge upon his own application, and though he has rendered in due form, an account, to which no objections have been filed by the opposing creditors, yet the court must positively refuse to make, merely upon the accounts presented by the assignee with .no information of the items thereof in its possession, and no opportunity for an investigation of the parties, and in the absence of the creditors interested in the property of which an accounting is purported to be made, an order, the legal effect of which would be to charge the substituted assignee, if he continued the existence of the trust, with the value of the property, as stated in said account, and to shut off the .absent creditors from all right of recourse against the surety of the assignee. The rights of the substituted assignee and the interests of the creditors demand that the accounting of the removed assignee should be in such a form, and of such a nature, as will fully determine the extent of the liability of the assignee to his successor and the creditors whom! he represents; the investigation necessary for this purpose this court cannot make, and, even if it would, could not upon the papers presented.

Furthermore, the court will not, upon this motion, undertake to direct the payment of - the commissions of the assignee or the counsel fees of his attorney. While it is true that none of the orders of the court, for disobedience to which he was removed, was served upon him personally, and that he could not, therefore, be punished for contempt (Rochester Lamp Co. v. Brigham, 1 App. Div. 493; Matter of Siebert, N. Y. L. J., Jan. 12, 1900), and while his substitution of attorneys, and the subsequent filing of his account might indicate such a relation with his first attorney as would excuse his former failure to account, yet, as a matter of fact, his neglect, indifference or misconduct may have been such as to call for a refusal to grant him statutory commissions. Matter of Wolff, 13 Daly, 481; Matter of Coffin, 10 id. 27. The circumstances of his removal, as disclosed by the record, do not conclusively establish the fact that his misconduct was such that he is not entitled to ■commissions (See Matter of Rauth., 10 Daly, 52), yet this court, upon the papers presented, and with no proof of the facts' before it, cannot say that such is not the case, and award him commissions. The same consideration applies to” the counsel fees, with the additional objection that they should not be allowed upon this motion, but should be paid by the assignee and their propriety determined upon his accounting. Matter of Ludeke, 22 Misc. Rep. 676.

For these reasons the motion must be denied, without costs. Now that the assignee’s account has been filed, the parties must follow the procedure established by the Assignment Act (Laws of 1877, •chap. 466, § 11, as amended by Laws of 1878, chap. 318, § 3), providing that the court may issue a citation on the petition of a ■creditor, or an assignee’s surety, or an assignor, where an assignee has leen removed and ordered to account. Such a citation, served upon, the assignor, assignees, surety and creditors who presented claims would give the court jurisdiction over all the- interested parties; upon the return thereof, an order of reference must be made, by which proof of the items of the account may be taken, .and the right of the assignee to commissions and counsel fees determined; and upon the findings of the referee, and by the results of the reference, the liability for the costs of the accounting will be fixed upon the estate or upon the removed assignee. Bish. Insolv. Debt. (3d ed.) 514, 515, If 414 and cases cited.

■Ordered accordingly.