Case ID: ny-st-rep_36/html/0417-01.html
Source: Caselaw Access Project
Author: {"author": "Bradley, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

William P. Willis et al. v. Aurelius S. Sharp, Ex’r.
    
    
      (Court of Appeals, Second Division,
    
    
      Filed March 10, 1891.)
    
    1. Receiver—Restitution of unauthorized payments.
    A receiver was appointed in this action and directed to pay the judgment out of defendant’s estate. Pending appeal from the order of receivership, other actions were brought by plaintiffs and others, the judgments in which extended the receivership and directed him, after reserving the amount of the judgment herein, to pay such judgments. The receiver did not reserve such amount, but paid out all the funds on the subsequent judgments. The order having been reversed for error, Held, that such payments having been unauthorized, the receiver should be required to restore to defendant the amount of the judgment, but with interest only from the time the order was reversed by the court of appeals.
    2. Same.
    The general term erred in requiring plaintiffs to pay defendant the commissions and expenses of the receiver, as the money retained by the receiver pursuant to the order of the court until he made the last payment to the plaintiffs embraced these items and were included in the sum he is directed to restore to the defendant.
    Two appeals from an order of the general term of the supreme •court, in' the second judicial department, affirming order of the .special term.
    The defendant’s testatrix by her will, which was admitted to probate in April, 1885, expressed her wish and direction that some legitimate business be carried on by the executors for the benefit of her son, and that her husband be the manager of it at a salary of $1,500 per year. One of the persons nominated in the will as executor renounced, and letters testamentary were issued to the defendant alone, who was husband of the testatrix at the time of her death. He thereafter carried on the merchant tailoring business; and in doing so incurred liability to the plaintiffs for goods purchased. They brought this action against him as executor; and in June, 1886, recovered judgment for debt and costs, $1,393.42, and by it the defendant was directed to pay the judgment out of the funds and property of the estate of his testatrix. This judgment was affirmed. 113 H. Y., 586; 23 H. Y. State Rep., 670. During the pendency of the appeal from the affirmance by the general term of that judgment, and July 2,1887, on motion of plaintiffs, an order was made by the special term appointing Thomas J. Ritch, Jr., receiver of the estate of the testatrix, and by it the defendant was directed to transfer to the receiver all the money, credits and property of the estate; and it was ordered that out of the money the receiver pay to the plaintiffs or their attorney the amount of the judgment before mentioned, and that for costs entered on affirmance by the general term, with interest from its date, and ten dollars costs of the motion, and hold the balance of the money subject to the further order of the court. Pursuant to that order the defendant handed over to the receiver the entire, fund of the estate, amounting to $2,295.80!
    The plaintiffs, on May 4, 1887, recovered another judgment against the defendant as executor for $417.75, and on July 16, 1887, on motion of the plaintiffs, an order was made by the special term appointing the same Mr. Eitch receiver in that action No. 2 of the estate of the defendant’s testatrix, and ordering the receivership in action No. 1 to be extended to the other; and that upon, the performance of his duties under the prior appointment the receiver pay the plaintiffs the amount of the judgment in action No. 2 with interest from its date and ten dollars costs of motion, and hold balance of the fund subject to the further order of the court. In February, 1888, John D. Cutter and another recovered a judgment against the defendant, as executor, of upwards of $1,500, whereby, after reciting that Eitch had been so appointed in the two former actions, it was adjudged that the receiver, “after satisfying the obligations of said prior receiverships, pay to the plaintiffs, or to their attorney in this action, the amount of the judgment with interest from its date. The defendant appealed from the order made in action No 1, and it was reversed October 8, 1889. 115 N. Y, 396; 26 N. Y. State Rep., 125. In the meantime and in June, 1888, an order was made on plaintiffs’ motion directing the receiver to pay out of such fund to the plaintiffs the amount of the judgment in action No. 2, with interest and motion costs. And on the same day an order was made directing him to pay on the Cutter judgment to its extent after paying judgment and costs in action No. 2, and further directing the receiver to retain in his hands during the pendency of the appeal to the court of appeals from the judgment inaction No. 1, the amount of the principal sum of that judgment; and that he should not, during that time, pay such amount so directed to be retained to the plaintiffs in the latter judgment. On September 5, 1888, the receiver paid to the plaintiffs’ attorney $494.17, on account of judgment and costs in action No. 2, and on the same day he paid to the plaintiffs’ attorney, on account of the Cutter judgment, $408.21. The sum of these two payments was all of the fund in his hands except the amount he was so directed to retain. Afterward and on the day the order in action No. 1 was reversed by the court of appeals (October 8, 1889), he paid to plaintiffs on the Cutter judgment the balance remaining in his hands, less $229.75 retained for his expenses and commissions as receiver.
    By the order made August 8, 1890, and which is the subject of this review, it was ordered that the receiver pay to the defendant or his attorney the amount of the first judgment in action No. lr $1,393.42, and that for costs on its affirmance by general term, seventy-six dollars, and interest on both of them from the time of their entry, respectively; and that the plaintiffs pay to the defendant or his attorney the amount of the judgment in action No. 2, $417.75, with interest from its date of entry, and the sum of $229.75 commissions and expenses of the receivership, with interest from September 5, 1888, and ten dollars costs of the motion. The receiver and the plaintiffs, respectively, appealed from this order to the general term, and, on its affirmance, they in like manner appealed to this court.
    
      Walter S. Logan, for app’lts; Alexander Y.> Campbell, for resp’t.
    
      
       Modifying and affirming 35 N. Y. State Rep., 329.
    
   Bradley, J.

The receiver claims that he paid out the fund in good faith and in obedience to orders directing him to do so. If that contention is sustained by the facts the claim as against him for restitution cannot be supported. He received the fund pursuant to the order made in action Ho. 1 appointing him as such, and directing the defendant to hand it over to him, and he made "the payments of - September 5, 1888, of $494.17 on account of plaintiffs’ judgment in action Ho. 2, and $408.21 • on the Gutter judgment in obedience to the direction in orders of the court, and by them he was protected in so doing. But the amount which he was directed to retain during the pendency of the appeal from the judgment in action Ho. 1 he had no specific direction to pay out except that given by the first order to pay it on the last-mentioned judgment; and the purpose of that direction was defeated when such order was reversed by the court of appeals. It is, however, urged that on such reversal the adjudication in the Cutter judgment and the order to make payment upon it remained effectual and opened the way for the payment of the balance in his hands upon that judgment; but it may be observed that the adjudication there was that the receiver pay the judgment “after satisfying the obligations of the prior receiverships,” and that the order directed him to retain the amount of the principal of the first judgment during the pendency of the appeal from it to the court of appeals; and it evidently was contemplated that in case it was affirmed such amount might become applicable to payment upon it.

There was never any direction to otherwise pay it out. That judgment was affirmed, and as such remained effectual; and afterwards on reversal of the order he held the balance so retained subject to the direction of the court; but without applying to the court for further instructions he paid it on the Gutter judgment. In this the receiver was justified if the plaintiffs in that judgment were entitled to it It is insisted they were, because their judgment, declaring their right to payment out of the funds of the estate, and the order before mentioned recognizing such right, remained undisturbed. This judgment as well as those preceding it established the claims of the plaintiffs as against the estate, and were charges upon it to the extent which the law would enable them to enforce them and obtain satisfaction. It appeared in the papers upon which the order under review was made, that there were creditors of the testatrix having unpaid claims amounting to $10,000. These judgment creditors whose debts were created subsequently to her death had no right in exclusion of her creditors to appropriate to the payment of their claims the entire amount of the estate of the testatrix; and how much of the fund they could eventually receive was dependent upon the distribution which the surrogate should direct after opportunity given to the creditors of the decedent to be heard. This was held in Willis v. Sharp, 115 N. Y., 396; 26 N. Y. State Rep., 125, upon reversal of the order. No greater right than that was established by the judgments or derivable from the orders. And the fact that the Cutter judgment and the orders in that case and in action No. 2 remined unreversed was not in the-way of inquiry by the court into the situation and its determination that they were not entitled to the money. They had an absolute right to seek and obtain a preference as against him personally who was executor, for debts created by him after the death of his-testatrix, but the fund belonging to her estate was held by him for all the creditors whose claims were properly chargeable upon it; and those parties had no right to make available to themselves a preference in the manner they sought to assert it. These views do not proceed upon the ground that the reversal of the order in the first action had any effect upon the existence of the judgment, and order in the Cutter case or of the order in the second action.

The question differs in that respect from that which would exist, in case of a series of orders appointing receivers of the property of a debtor in behalf of his creditors. Then if the earlier orders became inoperative for any cause, the advantage of priority might fall on those remaining in the order of time in which they are made. But that rule is not applicable to a trust fund or the estate of a deceased person, the disposition or distribution of which, when the rights of creditors are involved, is governed by law,, which the trustee cannot effectually disregard. While the executor could not afford any right to these parties by his consent, he was so far the representative of the creditors that he could take steps to restore the fund to its proper depository, and it was his duty to do so, with a view to its distribution through the action of the tribunal having jurisdiction of the subject of the administration of the personal estate of deceased persons, and whatever rights the plaintiffs in those judgments have in the fund must be ascertained and taken through the exercise of that jurisdiction. It follows that they had no legal right to appropriate, the fund in question through' the receivership sought to be created, and that the receiver was no further than he was by orders of the court directed to do so, justified in paying over to them the moneys which came to his hands. No satisfactory reason appears for charging him with interest upon the $1,393.42 from the time of entry of the judgment for that amount or with the costs of the general term, as he had the direction of the court to-pay over the entire fund in his hands except the sum last mentioned. The conclusion also follows that the plaintiffs were not. entitled to the money paid to them by the receiver. While the order permitted them to receive the money, the court properly determined that it established no right to its appropriation by them to the payment of the judgment. It is suggested by their counsel that, the motion and order under review were made in action No. 1 only, and, therefore, restitution of money received in No. 2 could not properly be directed in the order. The general rule goes in support of that contention, but in the present case the parties and their attorneys are the same in both actions, and all the facts are presented by the depositions ana papers upon which the motion was heard.

It does not appear that any such question was raised in the court below; and under such circumstances the objection now taken is not available. But we see no reason why the plaintiffs should be required to pay to the defendant the commissions and expenses of the receiver. The money retained by the receiver pursuant to the order of the court, until he made the last payment to the plaintiffs in the Cutter judgment, embraced the amount of those commissions and expenses, and they were included in the sum which he is directed to restore to the defendant.

The order as against the receiver should be so modified as to require him to pay only $1,393.42, and interest thereon from October 8, 1889. And as against the plaintiffs it should be so modified as to order them to pay only the sum of $494.17; and interest thereon from September 5, 1888, and as so modified the order as to such parties, respectively, should be affirmed.

All concur.