Case ID: ad_87/html/0139-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Patterson, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The People of the State of New York, Plaintiff, v. American Loan and Trust Company, Defendant. In the Matter of Proofs of Claims upon the Final Accounting of J. Edward Simmons, as Receiver of the American Loan and Trust Company. Manufacturers and Traders’ Bank of Buffalo, N. Y., and Others, Appellants ; Louis Bauer and Others, Respondents.
    
      Order of reference to admit or reject claims against a corporation made in an action for its dissolution—exceptions must be fled to the referee’s report—otherwise if the order directs the referee to take and report proof— what creditors are entitled to notice of the filing of the repoi't.
    
    Where an order of reference, made in an action for the dissolution of a corporation, empowers the referee to admit and reject all proofs presented by those claiming to be creditors of the corporation, the referee acts in respect to such claims in a judicial, and not merely in an advisory capacity, and creditors wishing to review his report must file exceptions thereto.
    Creditors who filed claims with the receiver, but who did not appear before the referee in the proceedings under, the order of reference, are not entitled to notice of the filing of the referee’s report.
    
      Semble, that if the order of reference directed the referee simply to take proof of the claims of creditors, and report the same to the court, no exceptions would . be necessary to entitle creditors to review the report.
    Appeal by the Manufacturers and Traders’ Bank-of Buffalo, . N. Y., and others, from an order of the Supreme Court, made at the New York Special Term and- entered in the office of the clerk of the county of New York on the 25th day of February, 1903, confirming the report of a referee, with notice - of an intention to bring up for review upon such appeal various intermediate orders.
    
      O. P. Metcalf, for the appellants Manufacturers and Traders’ Bank of Buffalo, N. Y., and others.
    
      Henry B. Closson, for the appellants Bitch and others, executors.
    
      Barclay E. V. McCarty, for the appellant Hawes, as executrix.
    
      Clarence E. Thornall, for the appellants Browning and others.
    
      James Dunne, for the respondents Bauer and others,
    
      William S. Opdyke, for the respondent receiver.
   Patterson, J.:

This is an appeal from the report of a referee making a final distribution of the remnant of the assets of the American Loan and Trust Company, consisting of a fund in the hands of its receiver and which on May 1, 1902, amounted to $86,976.59. After deducting therefrom certain allowances, which are not objected to, the net amount remaining for distribution is $76,864.12, of which $59,987.95 is directed to be paid to three unpreferred creditors (in designated proportions), namely, Louis Bauer, William. L. Koester and Louise B. O’Connor, as administratrix of the estate of James O’Connor, deceased, and Louise B. O’Connor individually. What is left, namely, $16,876.17, is directed to be distributed among the unpreferred creditors as a whole, after charging those above named with the amounts specifically directed to be paid them. This report was confirmed at the Special Term and it is from that order of confirmation this appeal is taken.

The order, as made and entered, conforms to the requirement .of this court as contained in a prior order made by us, dated April 11, 1902, and entered May 3, 1902. By that order, the distribution of the fund in the hands of the receiver was restricted to Bauer, Koester and Louise B. O’Connor, individually and as administratrix.' It was made on an appeal from an order of the Special Term, relating to the distribution of this same balance in the hands .of the receiver. In the second report of the referee he decided that certain preferred creditors were entitled to the whole sum of $59,987.95, and that it should be distributed among them as interest to which they were entitled upon their respective preferred claims. On the motion to confirm that report the court at Special Term held that the preferred creditors were not entitled to that amount, but that it should be distributed among all'the unpreferred creditors of the corporation. On appeal to this court it was held that the preferred creditors were not entitled to interest, but that the amount was distributable among the unpreferred creditors who had filed exceptions to the second report of the referee. (People v. American Loan & Trust Co., 70 App. Div. 579.) On appeal to the Court of Appeals that decision was afiirmed (172 N. Y. 371),-but with the statement in the opinion of that court that the right of one of the un preferred creditors, namely, the executrix of the estate of Granville P. Hawes, who claimed to have filed exceptions, and, therefore, should be admitted into the distribution, was not before that court for consideration and it was not passed upon.

On the motion to confirm the report of the referee now under review, many creditors of the corporation who had filed claims with the receiver, but who did not appear before the referee in the proceedings eventuating in the second report, and did not except thereto, have filed exceptions to the final report arid claim a general right to participate in the distribution of the fund, arising from the mere fact that they are creditors, while others who tardily filed exceptions to the second report claim that their exceptions were in due time.

We regard the rights of each of the claimants respectively as being determinable by the status he occupied in the proceeding which resulted in the making of the second report. The order made by this court on the appeal from the order of confirmation of that second report finally settled the rights of the claimants, disposed of the whole fund and directed it to be distributed among those who were represented before the court. That fund was created by the diligence and through the efforts of certain unpreferred creditors who had put themselves in the proper attitude to attack the second report of the referee. The order made by this court settled the principle of distribution and named the distributees. We held that only those creditors were entitled to share in the distribution who had filed exceptions to the report of the referee. That decision was made in conformity with the requirement of rule 30 of the General Rules of Practice of the Supreme Oourt. -

The reference, so far as creditors’ claims are concerned, was not one merely to take proof and report to the court. Had it been such no exceptions would have been required. The original order of reference did require the referee to take proof and report with his opinion as to claims for costs, expenses a/nd counsel fees incurred in the administration of the receivership, but it also ordered and directed the referee and clothed him with power to admit and reject all proofs of creditors’ claims presented pursuant to notice by the receiver in accordance.with the rules and practice of the court requiring such presentation by those claiming to be creditors of the corporation. That called for judicial action on the part of the referee. He was not to aet merely in an advisory capacity. He was required' to adjudge, and that, being so, the rules and practice of the court demanded that his judgment should be reviewed upon exceptions.

When the cause came before us. on the appeal relating to the second report there, were no exceptants other than Bauer, Koester and Mrs. O’Connor, individually and as administratrix, unless it be Mrs. Hawes, as executrix, and to that further reference will hereafter be made. No other parties were before the court. The claims now presented by the Fayerweathér estate, the Hull estate, the Seacord estate and the Manufacturers and Traders’ Bank were not before the court. Exceptions were filed ■ by those parties, but not until long after the order of this court of the 11th of April, 1902, was entered. Their exceptions accomplished no purpose whatever and they were altogether too late, and no right was acquired by filing them. It is claimed, however, that those exceptions were timely, for the reason that no notice was given such exceptants of the filing of the referee’s report, and, therefore, that their time within which to file exceptions had not been limited. They were not entitled to notice. On an examination of the referee’s second report we find the statement of the names of the parties who appeared before him and took part in the proceedings. Neither of the exceptants is named in that statement, and there is nothing in the rules of procedure or in the law, as we understand it, which required notice of motion for the confirmation of that report to be given to every creditor who had merely filed a claim with the receiver. We are still of the opinion that the unpreferred creditors who are entitled to -share in the distribution of the fund now remaining in the hands of the receiver are those unpreferred creditors who filed exceptions in due time to the second report of the referee, and none other.

We are thus brought back to the consideration of the right of Mrs. Hawes, executrix, to participate with the three other creditors named above in this final distribution. We have heretofore held that she was not so entitled, and that determination was founded upon the construction we gave to certain exceptions she filed which we did not regard as sufficient, but which, if sufficient, were in time. On a reconsideration of this subject we are led to the belief that too narrow a construction was given to her exceptions. It is true that the position taken by her was one of insistency upon her right as a preferred creditor and that in the exceptions filed by her she did not claim to rank as an unpreferred creditor, and did not specifically assert her rights.as such, but she did, iñ fact, file some exceptions. She. excepted and objected as matter of fact, as well as' matter of law, to the allowance of interest on the claims of preferred creditors, so far as that might prevent the payment in full of her two preferred claims and until, they should be first paid to her as executrix. That exception does not technically raise the objection that the preferred creditors were not entitled to interest at all, and hence we spoke generally of her not having filed exceptions;. but it does indicate that the exceptant’s view was that interest to such preferred creditors was to be postponed until after her superier preferred claims were allowed and paid; and yet by a broader and more equitable construction it may be regarded that it was open to her to argue that the preferred creditors were not entitled to interest, or, in other words, that the whole subject of interest was brought up for consideration. Mrs. Hawes was represented before the referee on all the hearings. She was contesting the right of other preferred creditors to rank either above or in equality with her, and in that position of antagonism to them, on further reflection, we think that her exception may be deemed sufficient. It is not too late to rectify the mistake which has operated to the prejudice of Mrs. Hawes, as executrix. The denial of the motion made on her behalf to resettle the order of April 11, 1902, or for leave to go to the Court of Appeals, are not estoppels upon her.

The order appealed from should be modified by admitting Mrs. Hawes, as executrix, to participate with the other three unprefei*red creditors in the distribution of $59,981.95, and as thus modified affirmed, without costs.

Ingraham, McLaughlin and Laughlin, JJ., concurred; Van Brunt, P. J., concurred in, result.

Order modified by admitting Mrs. Hawes, as executrix, to participate with the other three unpreferred creditors in the distribution of $59,981.95, and as thus modified affirmed, without costs.