#### BIRD et al. v. LANPHEAR et al.

(Supreme Court, General Term, Fifth Department.

December 28, 1895.)

1. Receivers—Appointment op.

A receiver is properly appointed during the pendency of an action to recover the amount of commissions in '.which it is alleged plaintiffs are entitled to share, but some of which, with a mortgage securing the remainder, are in the hands of defendants, who have fraudulently concealed their receipt from plaintiffs; and the court may, by order, direct defendants to turn over to the receiver all sums received by them as commissions in the transaction set out in the complaint

2. Same—Solvency op Dependant.

It is not an abuse of discretion to appoint a receiver of a fund in litigation which is in the hands of defendant, though he is financially responsible, when he is charged with fraudulent conduct, and is shown to be attempting to dispose of his property in the state.

Appeal from special term, Monroe county.

Action by Charles A. Bird, in Ms own behalf and on behalf of all others similarly situated who may desire to join, against Erwin H. Lanphear and others. From an order appointing a receiver pendente lite, defendants appeal. Affirmed.

Argued before LEWIS, BRADLEY, WARD, and ADAMS, JJ.

De Merville Page, for appellant Erwin H. Lanphear.

Edward L. Jellinek, for appellant Earl M. Lanphear.

Frederick Collin, for respondents.

LEWIS, J.

The defendant Erwin H. Lanphear, in the early part of the year 1891, through the agents of the owners, obtained options for the purchase of three blocks of land in a tract in the town of Tonawanda, near Buffalo, known as the “Englewood Tract.” Said blocks were known and distinguished as blocks 7, 8, and 16 of said tract. Lanphear resided at the time in the city of Hornellsville. He secured these options with the intention of inducing others to join with him in purchasing these lots; and, to accomplish his purpose, he interviewed a large number of his neighbors and acquaintances residing in and about Hornellsville, and informed them about the options which he had secured. With a view to induce them to join him in making the purchase, he represented to the plaintiff and others that land in this Englewood tract, including the blocks mentioned, w'as rapidly increasing in value, and that there was no reasonable doubt that, at the prices for which they could be purchased, there was a fine opportunity to make money by investing in the property. He stated that he was required to pay $15,000 for block 7, the same amount for 8, and $14,000 for block 16; that he was willing to and would allow the plaintiff, and any others who wished to join him in making the purchase, to come into the deal on equal terms with himself. He stated, further* that no one was to receive any commission for the sale of the lots. Relying upon these representations, and believing them to be true, the plaintiff and a large number of others joined the defendant Erwin H. Lanphear in forming three different syndicates to purchase the property. Fifteen *1070persons, including the plaintiff and the defendants Tadder and Erwin H. Lanphear, entered into a written agreement with the owners to purchase blocklio.8 for the sum of $15,000. The plaintiff, with the two defendants mentioned, together with nine others, entered into a written contract with the owners to purchase block 16 for the sum of $14,000. Some of those who composed the syndicates for the purchase of blocks 8 and 16 joined with the defendants Erwin H. and Earl M. Lanphear, and entered into a contract with the owners to purchase block number 7 for $15,000. The plaintiff was not a member of the last-named syndicate. The members of the different syndicates, with the exception of the defendants, advanced money to make the down payments upon said purchases, amounting to the sum of $3,000 for each block, and, by the terms of the various contracts, the purchasers agreed to pay, and did pay, $150 a month upon each block of land, until the sums required to be paid as a condition to the giving of the deeds were paid, when deeds were given. By arrangement between the stockholders, the conveyances ran to the defendants Erwin H. Lanphear and Arthur O. Tadder, in trust for the owners. After having made these various payments, it came to the knowledge of the plaintiff and others who had taken shares in the purchases that the statements and representations of the defendant Erwin H. Lanphear, made to induce them to join in the purchase, were false; that, instead of their having been permitted to join him upon equal terms in making the purchases, the owners of the property, through their agents, had agreed to pay him commissions for making the sale, amounting to some 20 per cent, of the contract price, which amounted in all to from ten to twelve thousand dollars, and that a part of these commissions had been paid to him in money; that, upon receiving the deed of block 16, the defendants Erwin H. Lanphear and Tadder had given to the grantor a purchase-money mortgage for $9,500; and that thereafter the mortgagee assigned said mortgage to the defendant Earl M. Lanphear, in payment of the balance of the commissions agreed to be paid to Erwin H. Lanphear. The plaintiff and other shareholders continued to make payments after the conveyances were executed to Erwin H. Lanphear with the expectation and understanding that he was to apply the money towards the payment of the unpaid purchase price of the land. He paid a considerable portion thereof to the defendant Earl M. Lanphear, in part payment of the mortgage thus assigned to him. It was charged in the moving papers that this transfer of the mortgage to Earl M. Lanphear was in pursuance of a collusive arrangement entered into between himself and the defendant Erwin H. Lanphear, who is the father of Earl M., and that the mortgage was in fact held by Earl for the benefit of his father. It was further charged that a small portion of the commissions received by the defendant Erwin H. Lanphear were paid by him to the defendant Tadder. It was made to appear by affidavits read in opposition to the motion that the defendant Earl M. Lanphear had, prior to the commencement of the action, sold said mortgage, and was not, at the commencement of the action, the *1071owner thereof; but it did appear, as stated, that there had been paid to him thereon a considerable sum of money.

Plaintiff commenced this action in his own behalf, and in behalf of all others similarly situated who desired to come in and assist in its prosecution, to compel the repayment to the stockholders of the-money received by the defendants, as and for commissions, according to the amount of each one’s share in said purchase, with interest, and that the mortgage mentioned and assigned to the defendant Earl M. Lanphear be ordered to be held in trust by him for the benefit of the plaintiff and the other parties, as their interests may appear, and for such further or other relief as, under the facts, the plaintiffs may be entitled to. All of the parties to the various contracts, with the exception of the defendants and two others, gave notice to the plaintiff of their desire to take part in prosecuting the action, and retained the attorneys for the plaintiff to act in their behalf in prosecuting the action.

Upon these facts, the court, upon motion of the plaintiff, appointed a receiver during the pendency of the action; and, by the terms of the order, the defendants were directed to pay over to the receiver all moneys received by them as commissions, and, from the order thus made, this appeal was taken.

It is claimed by the appellants that the plaintiff, Bird, not being a party to the purchase of block 7, has no interest therein, and therefore the order, so far as it directed the repayment of any commissions received from the sale of that lot, was erroneous. While the plaintiff, Bird, has no direct interest in block 7, he and the shareholders in-block 7 are jointly interested in the mortgage of $9,500 mentioned; and in any moneys which may have been paid to Earl M. Lanphear while he was the owner of said mortgage; and, the shareholders in block 7 having signified their desire to become parties to the action, block 7 was properly included in the order, so that, in case the plaintiffs succeed in the action, a final distribution of the entire fund may be had. It may, and probably will, be difficult to trace the funds paid as commissions; but they have been paid to and received by the defendants, and the plaintiff is entitled, through the receiver, to seek to obtain possession of the money. Refining Co. v. Fancher, 145 N. Y. 552, 40 N. E. 206. The parties to these various agreements joined in these ventures with a view of speculating in this real estate. They allege in their moving papers that they were induced by false and fraudulent representations to enter into these contracts, and that they have been defrauded by the misconduct of the defendants. It is a case where the court, if they succeed in establishing their cause of action, will exercise its general equitable powers to compel the defendants to restore to those entitled thereto the moneys which have been improperly appropriated; and, to that end, the court, as a part of its incidental power, can impound the fund in litigation during the pendency of the action. Decker v. Gardner, 124 N. Y. 334, 26 N. E. 814.

It is contended that a receiver should not have been appointed, for the reason that the defendants are financially responsible, and able to *1072respond in any damages wMch the plaintiff can, in any event, recover. Erwin H. Lanphear was shown to have considerable property, but there was evidence that he had property interests in the state of Pennsylvania, and that he had been trying to dispose of his property in this state. We think the granting of the order was within the discretion of the special term, and fail to find any reason for disturbing it.

The order should be affirmed, with $10 costs and disbursements. All concur.