Court Opinion

ID: 5189352
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:33:30.289523+00
Date Added: 2024-06-11T08:26:51.841203
License: Public Domain

O’Brien, J. (dissenting) :
The action was to enforce against a surety a decree made by the surrogate of New York county on an accounting by Michael Keegan, as administrator of the estate of Jane Keegan, deceased, pursuant to section 2607 of the Code of Civil Procedure. The decree upon the accounting charged the administrator with a balance of cash, amounting to $254.98, and with three judgments recovered against him by decedent in her lifetime, and amounting, with interest, to $821.53, and adjudges that the administrator should have accounted for such judgments as debts due from him to the estate and should be personally charged therewith.
As correctly stated in the opinion of the General Term of the City Court: “ The issues herein, with the exception of one, have been discussed and decided by the Appellate Division on a former appeal. See McMahon v. Smith and Keegan v. Smith, 24 App. Div. 25. The defense or issue which constitutes the one exception above mentioned is set up in an amended answer interposed after the decision of the above-cited cases and is as follows: That the surety of the administrator is not liable for the three judgments obtained by the administrator’s intestate in her lifetime against the administrator, because the latter was, at the time of the death of the intestate, and ever since has been, insolvent and wholly unable to pay said indebtedness. The liability imposed by the 2 R. S. 84, S. 13 is as follows: ‘Any just claim which a testator had against one named as executor, of his (or who is appointed administrator) shall be included in the inventory, and such executor shall be liable *175for the same as for so much money in his hands, * * * and he shall apply and distribute the same in the payments of debts, etc., * * * an executor, although insolvent at the time of his appointment, is bound to account for a debt so due from him, and should be charged therewith on settlement of his accounts as for so much money in his hands.’ It has been held that, under this statute, the liability of an executor or administrator is a qualified one, and that if the proofs show that the executor was wholly unable to pay his debt to the estate for want of property, he cannot be punished for contempt, nor would he be guilty of embezzlement. (Baucus v. Stover, 89 N. Y. 5; Baucus v. Barr, 45 Hun, 582; affd., 107 N. Y. 624.)”
No fault is to be found with this statement, and had it been followed upon the trial, the error into which, I think, the trial court fell in disposing of the defenses interposed would have been avoided. To sustain the defense that the administrator at the time of the death of the intestate and ever since had been insolvent, evidence was introduced on the trial. The administrator testified: “ Since the death of my sister the largest salary I ever commanded was $15 a week. Outside of my salary I have not at any time since the death of my sister, Jane Keegan, owned any money or property. I have a family — a wife and six children. I have been in the habit since the death of my sister of applying my salary to the support of my family. Since the death of my sister I have not at any time been able, financially, to pay those judgments which are in evidence and which were obtained against me by her or any part of them.” On cross-examination the fact was elicited that prior to the death of his sister he had owned a liquor store at the corner of Lexington avenue and Thirty-second street which had been sold some five months before his sister’s death for $5,250, part in cash and part in notes. The great portion of this, he testified, went to pay the debts which he then owed, and besides a horse which lie said was sold on a judgment for $450, it did not appear that he had any money or property. And the attempt to show that part of the sum received from the sale went into his wife’s bank account, was met by a denial from him.
After the defendant rested on this proof of insolvency and inability to pay, the administrator’s brother, who was one of the plaintiffs, *176and who was examined on his own behalf, testified that he saw the wife’s bank account and other books after the sale, and “ the bank book amounted to $2,000 or $3,000. It was in his wife’s name and in one of his children’s name.” It is true he states that the only . means the wife had was such as she got from her husband, but outside of a check which he states was between $700 and $800 received upon the sale of the horse which, he says, was sold to a man in New Jersey, but which the administrator testified was sold on execution, there is no evidence that any of- the money, either upon the sale of the horse or upon the sale of the. liquor store five months before the death of the sister, went into the wife’s bank account. But if we should assume that the results of the sale of the store were deposited in her account and thus became her property, it would be doubtful, to say the least, if it could be reached by subsequent creditors of the husband, because in the absence of proof of' the existence of debts or of an intent to defraud existing creditors, there was nothing to prevent the husband from making a gift of the money to his wife.
It is unnecessary, however, to determine these questions as they are not presented, reference being had to this testimony merely for the purpose of showing that the defendant undertook to establish his defense by the production of evidence tending to- prove that the administrator at the time he became such was insolvent, and from that time on, during the period while he was acting as administrator, was never financially able to pay the judgments which his sister had recovered against him ; and this was met by the plaintiff’s evidence tending to show that he was able to do so. All of this testimony was entirely disregarded by the learned trial judge as shown by the proceedings upon the trial, for as the case was tried without a jury and each side proposed findings of fact and conclusions of law which were disposed of and séttled, and the decision rested upon the finding's of fact and conclusions of law. as settled, we are enabled to see exactly the ground upon which the decision was based.
The learned trial judge refused to find as proposed by the defendant that the evidence showed that the administrator had been insolvent and unable to pay, and in his conclusions of law found:
“ First. That the defence having conceded in his argument on this trial that the surrogate of New York had jurisdiction to make *177the decree of August 29th, 1895; hut seeks to attack it in an action hy the- next of kin for its enforcement, I hold that this cannot be done. The decree while it stands is conclusive, however hard its provisions may seem.
“Second. I therefore render judgment for- plaintiffs against John Smith for $639.20. * * * ” ■
There was, therefore, no adjudication based on the oral evidence ■ mentioned which was adduced upon the trial as to whether the administrator was or was- not financially able to pay the judgment against him, although the learned trial judge states in his sixth finding of fact that the report of the referee upon the accounting had found “ that the said administrator should have accounted for said judgments as debts due from him to said estate, as he was. able to pay them.” In this statement, however, the court fell into error, because the referee made no finding in regard to the ability of the administrator to pay the judgment, and the words used by the court, “ he was able to. pay them,” are not contained in the referee’s report, either in this or any other connection. Thus the issue presented by the defense on the1 trial upon which testimony was adduced was not considered, by the learned trial judge, and the defense was practically eliminated by the theory upon which he proceeded, and to which we have already adverted, that the decree of the surrogate was conclusive. -, ,
At the General Term of the City Court practically the same view was taken. Although that court recognized that the trial court had fallen into error .as to what the referee had found on the accounting and the judgment could not be sustained on that ground, it took advantage of ,the evidence referred to which was given at the trial by the brother of the administrator, and which tended to show that the defendant had been able to pay the judgments. Thus, in the opinion of the General Term, it is said: “ There is evidence that the administrator, about five or six months before the deceased’s death, disposed of a liquor store at $5,250, and sold a horse for about $700 to $800, and that from $2,000 to $3,000 of that money was deposited in his wife’s name in a Savings Bank.” No reference was made to the evidence adduced upon the part of the defendant to the contrary which tended to show that the administrator had been *178insolvent. The decision, however, did not rest upon the sufficiency of the evidence tending to show that the defendant was able to pay the judgments, for, in the opinion, it is said: “ On the former appeal, 24 App. Div., supra, the Appellate Division held that this decree is conclusive upon the administrator and also upon the surety, who is in privity with the administrator.” Thus, in the General Term also the defense of the surety was again eliminated and he was held liable upon the theory that the decree of the surrogate was conclusive.
Upon appeal to the Appellate Term the error into which the trial court had fallen was pointed out, as shown by the' opinion, wherein it is said (33 Misc. Rep. 74) “ the statement contained in such sixth finding that the administrator 1 was able to pay them ’ is without foundation.” The court then proceeded to review the law bearing upon the liability of sureties for debts due by an administrator to the estate; and correctly held that the decree of the surrogate is not conclusive upon the question of such liability, and “ although the executor or administrator may be adjudged to be personally liable for the debt, ‘ as for so much money in his hands,’ yet, for the purpose of administration, such debt £ will not, for all purposes, stand on the same footing as if he had actually received so much money.’ ” And it was therein also correctly held that notwithstanding the decree of the surrogate^ it was proper in an action to determine the liability of the surety, to have the question determined, if raised as matter of defense, whether or not the administrator had been financially able to pay judgments of the intestate against him.
Upon the trial of such an issue it is important to remember upon whom rests the burden of proof. To obviate the force of the decree it is necessary for the administrator and the surety to show, as matter of defense, that they should not be held liable as for so much money in hand, because, as matter of fact, the administrator never during his term as administrator was financially able to pay his indebtedness to the estate. This must be the rule for the reason that where there is a decree of the surrogate that an executor or administrator has in his hands sums applicable to the payment of debts, etc., if a surety wants to avoid the implication as to debts owing to the estate by the executor or administrator and included in the decree, it is incumbent upon him to show that the executor or administrator never had the funds or property requisite to satisfy *179the obligations. In other words,-a surety must prove that the executor has at all times been insolvent and unable to pay the debts owing by him to the estate, the presumption arising from the decree being that the executor did have funds in his hands sufficient to answer and satisfy the liability fixed by the decree.
The duty and burden of taking this charge out of the decree, and relieving the surety from the failure of the administrator to comply therewith, is upon the one who insists that he is not bound, and, therefore, it is here upon the defendant. The decree imports that the administrator has become liable for the debts as for money in his hands, and thus his liability, prima facie, is the same as though he had the money actually in his possession. Certainly if an effort was made to collect it of him, by proceedings for contempt, he would be bound to show that he was insolvent; and, unless he did show that, he would have to pay as required by the decree. This, as we understand it, is precisely the rule laid down in Baucus v. Stover (supra) and Baucus v. Barr (supra). So far as the administrator is concerned, the decree imposes an absolute duty upon him to pay the debt. The surety is in no better position; and unless he can show, as matter of fact, that the administrator was unable to pay, he becomes liable for the default of the administrator.
This was the position assumed by the defendant who interposed the defense and undertook by evidence to show that the administrator was insolvent and unable to pay the judgment. The failure to note upon whom the burden of proof rested in the first instance, inadvertently led the learned Appellate Term into stating that “ a 1 breach of the bond in suit is not established until it is shown that the administrator was of sufficient pecuniary ability to pay the debt or that by the exercise of due diligence he could have collected the same.” In this, as I have endeavored to point out, that court overlooked the force and effect to be given to the decree in the first instance and the necessity imposed upon one who would assail such decree to affirmatively establish what under the statute could alone obviate its binding effect, that the administrator, because at all times without funds and unable to pay, should not be charged and compelled to account for the debts as though he had so much money actually in hand.
I agree, however, with the Appellate Term that the defense *180interposed by .the surety was neither considered nor passed upon by the trial court,, and, therefore, think that the conclusion reached by the Appellate Term in ordering a new .trial was right and should be affirmed, with costs.
Determination of the Appellate Term reversed and judgment below affirmed, with costs.