Willis v. . Sharp , 124 N.Y. 406 ( 1891 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] 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 No. 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 No. 2, and $408.21 on the Cutter 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 No. 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 direction of the court, but without applying to the court for further instructions he paid it on the Cutter 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 ten thousand dollars. 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), 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 remained 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 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 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 and 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.

Ordered accordingly.