Case Name: The People of the State of New York, Plaintiff, v. National Mutual Insurance Company, Defendant; In the Matter of the Claim of Anna E. Elmore, Appellant, v. Charles H. Daniels, as Receiver, etc., of The National Mutual Insurance Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1897-06
Citations: 19 A.D. 247
Docket Number: 
Parties: The People of the State of New York, Plaintiff, v. National Mutual Insurance Company, Defendant. In the Matter of the Claim of Anna E. Elmore, Appellant, v. Charles H. Daniels, as Receiver, etc., of The National Mutual Insurance Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 19
Pages: 247–252

Head Matter:
The People of the State of New York, Plaintiff, v. National Mutual Insurance Company, Defendant. In the Matter of the Claim of Anna E. Elmore, Appellant, v. Charles H. Daniels, as Receiver, etc., of The National Mutual Insurance Company, Respondent.
Execution — levy upon a promissory note — directions given to the sheriff by the plaintiff’s attmney to permit the property levied upon to remain with a custodian — conditional acceptance of the property by a receiver.
A letter, delivered by the attorney for a judgment creditor of a corporation to the sheriff holding an execution issued under the judgment, which authorizes the sheriff, after making a formal levy, to permit the property to remain in the possession of the secretary of the corporation as his custodian, taking a receipt from him therefor, and to permit the property so to remain until further direction from the plaintiff’s attorney, means no more than that the property might be left in the custody of that person so long as it was left in the custody of any one, but shows no intention upon the part of the creditor to delay or suspend . the operations of the sheriff or to prevent the execution of the writ.
Although a sheriff cannot levy under an execution upon a promissory note, yet, where the judgment debtor turns the note over to the sheriff, together with certain corporate stock held as collateral thereto, the sheriff may hold the note thus voluntarily surrendered by the debtor, and in any event is entitled to hold the collateral security.
Where a receiver of a corporation receives from the sheriff’s custodian property which has been levied upon under an execution against the corporation, promising to pay out of it the demand of the judgment creditor, the agreement, although made by the receiver without authority from the court, will be enforced.
Appeal by the claimant, Anna E. Elmore, a judgment creditor of the defendant, the National Mutual Insurance Company, 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 11th day of January, 1897, denying her motion to set aside the report of a referee appointed to take proof concerning her claim, and for an order directing Charles H. Daniels, as receiver of the defendant, the National Mutual Life Insurance Company, to satisfy an execution issued upon the claimant’s judgment and alleged to have been levied upon the property of the defendant on the 10th day of May, 1896.
Charles S. Foote, for the appellant.
Hamilton R. Squier, for the respondent.

Opinion:
Rumsey, J.:
The facts show that Mrs. Elmore was a.'judgment creditor of the Rational Mutual Insurance Company, and that on the 10th day of May, 1894, an execution upon her judgment was. issued against that company to the sheriff of the county of New York. On that day the deputy sheriff holding the execution went to the. office of the company, where he saw William G. Lord, the secretary. He produced his execution, and Mr. Lord turned out to him certain property of the company that he might levy upon it. This property consisted of office furniture in the office of the company and a promissory note for $2,500, made by one Rogers, secured by certificates for twenty-five shares of stock of the corporation of a value considerably greater than the' face of .the note. . All this property, including the certificates .of stock, was taken by the sheriff into his actual possession^.and was then delivered to Mr. Lord as custodian, and a receipt Was given by him in the usual form, reciting that he held the property as custodian for the sheriff of Rew York county. On the samé day, but at what hour doe's- not. appear, an order was made appointing D. Edgar Anthony receiver of. the property and effects of the corporation- It is to be assumed from the papers that Mr. Anthony qualified as receiver, but precisely when this was done does not appear. It -has mot. been made to appear whethér the . receiver' was appointed before the. levy was made ; and in the. absence of any proof upon the subject, there is no reason to say that the lien of the levy was not prior to the right of the receiver which became perfected by the filing of his bond, and when perfected related to the- date of his appointment. After the appointment of the receiver, the -property which Lord had received as custodian from the .sheriff was delivered to him with other property of the Corporation, upon .an arrangement made between Anthony and Lord that Anthony, would cause the property to be sold and would pay the amount of Mrs. Elmore's lien out of the proceeds of the property, turning the remainder, if any,- into the general funds of the-company which he held as receiver. After the property had been sold,. Anthony was removed as receiver and the present respond ent substituted, who received the proceeds of the sale of the property which had been levied upon. Those proceeds were considerably more than sufficient to pay the, claimant's judgment and the sheriff's fees. A demand was made of the new receiver to- pay the money to the plaintiff, which he refused to do, and thereupon this motion was made to require him to do so. The motion was denied, and Mrs. Elmore takes this appeal.
The facts above recited are substantially found by the referee to whom the motion was sent to report the facts with his opinion thereon. The conclusions of law of the referee, that Mrs. Elmore was not entitled to the payment of the amount of her judgment, are based upon certain facts which have not yet been referred to. Those facts are that, before the levy was made, the plaintiff's attorney in the execution delivered to the sheriff a letter, which said in effect that the sheriff was authorized, after making the formal levy upon the property of the company, to permit the same to remain in the possession of William G-. Lord, as his custodian, taking a receipt from him for the property levied upon under the execution, and to permit the same so to remain until further direction from the plaintiff's attorney, who signed the letter. The referee held that the legal result of this letter was to deprive the levy of any effect to bind the goods of the judgment debtor. This finding was based upon the idea that the duty of the sheriff, after receiving the letter,was to proceed no further with the execution, and that, being bound to follow the instructions of the plaintiff's attorney, he had no power to do anything more than to permit the property to remain in the custody of Mr. Lord, without taking any steps to reduce it to money and devote it to the payment of the execution.
We do not think that any such effect should be given to that letter. The sheriff had the right to leave the property in the hands of any person' whom he might select as custodian. If, because of the fault of the person so selected, the property was lost and the judgment creditor could not realize the value of it, the sheriff would be liable, because the custody of the custodian was his custody, and he was bound to keep the property safely so that it might he devoted to the satisfaction of the execution in the legal way. The letter which authorized the sheriff to select a particular person as custodian . would probably have had the effect .to relieve him from liability, if the property had been lost becaiise of the .negligence of that particular custodian. But it would not.-have any other effect, unless, by a reasonable construction of the letter, it can be said that the sheriff-was directed to do nothing more with the property than to leave it in the custody where he had placed it. An examination of the letter shows that the- sheriff was not directed- to do anything. He received,no instructions which should govern his action in, regard' to this property which he had levied upon. There was nothing in-the letter which even required him to leave it in the custody, of Mr. Lord; nor. was there anything in it which required him to postpone the sale of it, or even left him at liberty to postpone such sale. The letter -must be read in connection with the execution'which had been delivered to the-sheriff. That execution required, him to make the amount of the judgment out of the property upon which he levied ; "and the letter permitted him to leave tlie property which he levied, upon in the possession of the custodian and until further directions-should be -given by the plaintiff's attorney, the plain meaning being that the'property might be left in .the custody of that person so long as it was to be left in the custody of anybody, and until, pursuant to the command of the execution, it bécame the duty of the sheriff to make- other disposition of it, itnless directions .should be given by the attorney in the execution to take it out of '.the' custody of that person, The letter cannot be said. to require the sh°riff to sell, or to forbid him from selling, the property according to the directions of his writ. Much less can it be said to show an intention on the part of the judgment creditor that the writ should not be executed. The case is not at all like that of Robertson v. Lawton (91 Hun, 67) even if that case was well decided, which we are not prepared, toadinit.
It is süggestéd that the sheriff, acquired no lien- by his levy upon the promissory note, because a promissory note is not a subject of levy upon execution. Undoubtedly, a chose iii action, of that nature cannot be levied upon by virtue of an execution, against the objection of the judgment debtor. (Ingalls v. Lord, 1. Cow. 240.) If that. were.all there was of=the" case, no lien could.be acquired -by this act of the deputy sheriff. But while the judgment debtor, holding the promissory note, is undoubtedly, at liberty to say that such a note cannot be levied upon by virtue of an execution against his property, yet if, when the execution is presented to him, he turns over to the sheriff the promissory note with the intention that the latter should hold it subject to the execution, there is no reason why he should "afterwards be permitted to say that the sheriff did not acquire the right to hold that property precisely as he should hold any other property. There is nothing in the nature of this particular property which renders it improper that it should be taken into the custody of the sheriff with the consent of the judgment debtor. The statute authorizes a levy upon any chose in.action made by a corporation, municipal or otherwise, or by a public officer, which is in terms negotiable or payable to the bearer or holder. (Code Civ. Proc. § 1411.) It is quite true that that section does not include promissory notes made by private persons; but there is no real distinction between the two kinds of property, and no reason why, if such a note as this should be turned over to the sheriff, he should not be permitted to hold it and insist iipon his lien upon it. But in this case, in addition to the promissory note, the secretary of the company turned out to the sheriff the shares of stock. So far as they belonged to this company, they were clearly leviable, and the sheriff was authorized to sell the interest of the company; and if the actual owner of the stock, who pledged them as security, found no fault with it, we can see no reason why the sheriff might not properly hold them as against anybody else. We conclude, therefore, that the sheriff acquired, by the act of the secretary of the company, a valid lien upon the property which was turned out to him to apply upon this execution.
It is said, however, that the receiver had no authority to make the contract, into which he afterwards entered, that he would take possession of this property with the other property of the company, and, having sold it or collected the money upon it, would devote so much of that money as was necessary to the payment of Mrs. Elmore's claim. It may be that the receiver, before making such a contract, should have asked the permission of the court. But, if the receiver had refused to make such an arrangement, it is quite clear that he could not have gotten possession of this property without a direction of the court that it be turned over to him. It is equally clear that, upon the facts here shown, the court would only turn the property over upon the condition that the lien of the plaintiff in the execution should be protected. This .lien was supe- ' rior to the right of the receiver. He took the property charged with that lien. The agreement that he made was, therefore, one which the' court would have made; and, while technically perhaps - he should not have made it without permission of • the court, yet, as he was enabled by it to get possession of this property and to save . for the company the amount which he collected over the amount which the plaintiff was entitled, to receive out of it, the agreement he made is one which ought to be enforced. We see no reason why it should not be enforced. It was made to appear in the' case that this note was a part of the reserve fund of the company; but there is nothing to show' for- what purposes the -reserve fund was 'established, and certainly, in the .absence of proof, there can be. no presumption that any particular fund of a corporation is exempt, from the claims of its creditors.
For these reasons we think the appellant should have been permitted to receive the amount due upon her judgment out of the. money- collected by' the receiver upon this property Which was turned over to Mr. Lord by the sheriff-. The order, therefore, denying her motion must be reversed, with ten dollars costs and dis- - bursements, and the motion granted, with ten dollars costs and disbursements of the reference.
.Van Brunt, P. J., Williams,. Ingraham and Parker, JJ., concurred.
Order reversed, with ten dollars costs and disbursements, and motion'' granted, with ten dollars costs and disbursements of the reference.