Case ID: ad_97/html/0079-01.html
Source: Caselaw Access Project
Author: {"author": "Woodwabd, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

North Side Bank of Brooklyn, Plaintiff, v. The John Good Cordage and Machine Company and Others, Defendants. Leopold Wallach and Alfred A. Cook, Constituting the Firm of Wallach & Cook, Appellants; James J. Phelan and Estate of David H. McAlpin, Deceased, Respondents.
    
      Allowance to an attorney for a receiver for services in defending an action to foreclose a fraudulent mortgage — he is not entitled to priority over judgment creditors who have aided in the defense.
    
    In an action brought to foreclose a mortgage executed by a corporation which had passed into the hands of a receiver, certain j udgment creditors of the corporation and the receiver thereof were made parties. The judgment creditors and the receiver appeared by separate attorneys, and each interposed the defense that the mortgage was fraudulent. This defense prevailed, and, so far as appeared from the record, the attorneys for the judgment creditors were as instrumental in obtaining a favorable result as were the attorneys for the receiver.
    
      Held, that the attorneys fot the receiver were not entitled to have their allowance for services paid out of the property of the mortgagor corporation in preference to the judgment creditors who had also aided in the defense of the action upon the theory that the attorneys for the receiver had rescued the corporation’s property and made it available for the payment of claims.
    Appeal by Leopold Wallach and another, constituting the firm of Wallach & Cook, from an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 23d day of February, 1904, denying their motion for an allowance of $15,000.
    
      
      Alfred A. Cook [Leopold Wallach with him on the brief], for the appellants.
    
      Abel Crook, for the respondents. .
   Woodwabd, J.:

The learned court at Special Term, in a memoranda in this matter, says : “ I think the propositions on which the motions are based are not even debatable,” and we .are inclined to concur in this opinion. It appears from the petition that one Berthold A. Reiss, now deceased,, was appointed receiver of the John Good Cordage and Machine Company on the 15th day of July, 1897, and that he retained as his attorneys the appellants in this proceeding. On the 9th day or January, 1897, the said cordage -company had máde,. executed'and delivered to the Kings County Trust Company of Brooklyn, as trustee, a mortgage or deed of trust for the sum of $300,000, covering its properties in Kings and Queens counties, and.bonds aggregating $106,000 had been issued and disposed of- to Frank & J. G. Jenkins, a corporation, under, the provisions of this trust deed. The latter corporation, upon the refusal of the Kings County Trust Company to act, brought an. action for the foreclosure of the mortgage,. and Mr. Reiss, as receiver, ■ under advice of his attorneys, defended the action, alleging the fraudulent character of the-mortgage, and the litigation resulted in the court holding that the same was fraudulent and void as against the receiver and judgment creditors., (Jenkins v. John Good Cordage & Machine Co., 56 App. Div. 573; affd., 168 N. Y. 679.) In the foreclosure action James J. Phelan and David H. McAlpiri, as judgment creditors, whose rights in the cordage company’s property had become vested,' were -made parties, and appeared by their attorneys' throughout the litigation, . and so far as: appears from ¡the record, were as instrumental! in bringing about the results as the attorneys for the receiver. Messrs. Wallach and Cook, attorneys for the receiver, now move for an allowance of $15,000 for services, this sum to be paid out of 'the- property of the cordage company ahead of the judgment creditors, upon the theory that they have rescued this property and made- it available for the .payment of these, claims; That is, parties who- have appeared in a litigation by their own attorneys, and who have-ad vised and. consulted with: the attorneys for .the. receiver^, as much to his advantage as their own, in all probability, are to be deprived of their property to the extent of thousands of dollars to compensate the attorneys for the receiver, upon the theory that it was by reason of the receiver’s defense, through his attorneys, that the property was saved from the lien of the $300,000 mortgage. No precedent appears in the books, so far as we are able to discover, for such an allowance. The judgment creditors on being made parties to the foreclosure action had a vested right in the property of the cordage company; they had rights prior to those of the receiver, who took only the property of the cordage company subject to the existing liens upon it. The trust mortgage being fraudulent, that defense was open to the judgment creditors equally with the receiver. There is no presumption that the attorneys for the judgment creditors were incapable of asserting this defense, or that they would not have been able to maintain the litigation if the receiver had not appeared at all. It is rather. extraordinary that the receiver’s counsel should feel that they were entitled to compensation for rescuing this property, when both of the judgment creditors were represented in the litigation, and presumptively discharged all of the duties of attorneys in such cases. The judgment creditors’ attorneys might, with equal propriety, claim a right to compensation for saving a portion of the property to the receiver, for it does not appear that the receiver did not have the benefit of the counsel of the judgment creditors quite as much as the latter had the benefit of the counsel of the receiver. The truth is that the defense was equally available to the receiver and the judgment créditors, and they equally availed themselves of' the defense, and their interests being the same they acted together. They both succeeded, and the rights of the judgment creditors cannot be taken from them by a proceeding in the nature of that now before us.

The order appealed from should be affirmed, with costs.

All concurred.

Order affirmed, with ten dollars costs and disbursements.