
    HEYWOOD v. KINGMAN.
    
      N. Y. Supreme Court, First Department; General Term,
    
    1892.
    1. Creditor’s suit; reference.] A general direction for an accounting, contained in a judgment in a creditor’s suit, is to be construed by the situation in which it was made; and if the suit be by specified creditors, for their own benefit only, and not on behalf of others also, the accounting should proceed no further than to ascertain and reach enough to pay plaintiff’s claims.
    2. Reference; creditor’s suit.'] If the referee, in an individual creditor’s suit, proceeds to a general accounting, when not necessary in order to satisfy plaintiff’s claim, his report should be confirmed only as to plaintiff’s claim, and its payment, and set aside in other respects.
    3. Case disii?guished.] The case of Mandeville v. Avery, 124 N. Y. 376, distinguished.
    4. Reference; accounting.] It seems, that upon a general accounting, the referee, even if no specific objections are made, may disallow items which appear fraudulent or objectionable on their face, provided he points them out to the accounting party and gives him opportunity to show them to be just.
    Appeal from an order of the Special Term of the Supreme Court confirming the report of a referee appointed to take the account of an assignee for the benefit of creditors by a judgment setting aside the assignment as fraudulent and appointing of a receiver.
    The action was brought by Henry Heywood and others, against Richard S. Kingman and others, to set aside an assignment for the benefit óf creditors, made by the defendent Kingman to the defendant William M. Thacher, for alleged fraud on creditors, and to obtain satisfaction of a judgment which the plaintiffs had recovered against Kingman.
    
      The plaintiffs obtained judgment setting aside the assignment appointing a receiver of the property assigned, and a referee to pass the accounts of the assignee, and also directing the receiver to first pay plaintiffs claim out of the proceeds of the property received by him.
    The referee in his report, after finding that the assignee had paid the receiver a sum of money more than sufficient to satisfy plaintiffs’ claim, found that the assignee had made unauthorized credits in his account, and that the receiver was entitled to a .further amount.
    The assignee excepted to the report on the ground that it was unnecessary to account generally, but the accounting was simply a special accounting so far as necessary in order to pay plaintiffs’ claim.
    
      The Special Term confirmed the referee’s report. The defendant Thacher, the assignee, appealed to this court from the order of affirmance.
    
      Abram Kling, for appellants.
    
      Edwin C. Cloyd, for respondent.
   Barrett, J.

The accounting which was directed by the judgment was not a general accounting with respect to the assigned estate, but an accounting for the purpose of satisfying the plaintiffs’ claim. If the court had been informed, at the time the decree was made, that the assignee had in his hands, in money, more than sufficient to pay the plaintiffs’ judgment, an accounting need not have been ordered. In that case the decree would simply have required the assignee to pay the plaintiffs’ claim as adjudged.

This distinction between a special accounting for the purpose of satisfying a particular claim and a general accounting as assignee, becomes important in view of the fact that the referee in the present instance disallowed certain items of disbursement made by the assignee and charged him with the whole estate, less such items of credit as the referee deemed proper. -

It will not be necessary on this appeal to consider' the inherent propriety of the disposition thus made of the credits claimed by the assignees for two reasons: First, because the items in question were not properly objected to; and second, because prior to the somewhat summary investigation of the account generally the assignee duly accounted to an amount more than sufficient to pay the plaintiffs’ claim and all costs and expenses.

The decree, it is true, is general in its items with regard to the accounting ; but it must be construed with reference to the precise situation at the time it was made. That situation was this : There was a judgment in favor of the plaintiffs for a sum of money, which judgment was a lien upon the assets in the assignee’s hands, and which the court decreed should be paid out of such assets. There was also the fact that the court was not aware of the extent of these assets, and consequently could not then tell whether they were sufficient to pay all that was decreed. It certainly could not have been the intention to require the assignee to account for the estate generally, as this suit was brought by the plaintiffs for their own sole benefit and not on their own behalf and on behalf of other creditors. Consequently the assignment was áet aside solely as against these particular plaintiffs. As to all other creditors it remained in force, and as to all other creditors the assignee’s duty under the assignment continued. Any other view would involve the proposition that on a bill filed by a particular creditor to set aside an assignment as against him the court might proceed to set aside the assignment as against all other creditors and wind up the estate generally.

It is clear, therefore, that even under the broad provisions of this decree the assignee was only bound to account so far as was necessary to satisfy the plaintiffs’ claim in full. He so accounted when he paid over to the receiver, in the presence of the referee, an amount of money more than sufficient to fully satisfy the plaintiffs’ claim. The accounting which proceeded thereafter was in reality an accounting with regard to the estate generally, an accounting which was unnecessary, and, on a fair construction of the decree, unauthorized.

But even if the decree could be construed to direct such unnecessary accounting, then it is quite clear that the items which were disallowed should have been distinctly and specially objected to, and the assignee thus apprised of the charges which he was required to meet. Instead of this, nothing whatever was done after the presentation of the assignee’s accounts save to cross-examine him with regard thereto, and upon the close of such cross-examination to except generally.

It is probable that this course was adopted by the plaintiffs, because they had no real interest in any further accounting, after the receipt by the receiver of qiore than enough money to pay their claim. However that may be, the assignee could not be charged, as he has been, without specific and precise objection to each item of the account intended to be questioned and without evidence in support of such objections (Matter of Mather, 4 N. Y. State Rep. 882).

We do not mean, however, to suggest that upon a general accounting, it is not within the province of the referee, even where specific objections are not made, to scrutinize such account, and to disallow items seemingly fraudulent or objectionable on their face. That is undoubtedly his province. But even in such a case it would be the duty of the referee to point out to the assignee the particular items which seemed to be objectionable, and give him an opportunity to show that they were not amenable to just criticism. This was not done, either by the counsel or the referee ; and upon their face the disallowed items were not fraudulent nor necessarily objectionable. For aught that appears there is no other .creditor who has any lien upon the assigned estate, or -who has any right to question the assignment or the conduct of the assignee thereunder. What he properly did in defending the assignment was certainly binding upon the -creditors benefited thereby, and indeed upon all creditors who do not seek to set the instrument aside. It may well be, therefore, that the assignee is entitled to the whole or the greater part of the very items of disbursement'which have been disallowed by the learned referee. As to these plaintiffs such items cannot be questioned unless they stand in the way of their obtaining what was awarded to them by the judgment.

As it appears that there is more than sufficient in the hands of the receiver to fully satisfy the plaintiffs’ judgment, they can have no further interest in the accounting of this assignee.

The order appealed from should therefore be reversed and the report modified by confirming the first finding of the referee, which shows the payment to the receiver of the sum of $1,798.50; and setting aside the report in all other respects ; and adjudging that as against the plaintiffs in this action the' said assignee has sufficiently accounted under the true intent and meaning of the decree;—the expenses of the accounting before the referee and the costs of the motion to confirm the report and the appellant’s costs and disbursements of this appeal to be paid by the receiver out of the sum in his hands after the payment of the plaintiffs’ claims.

O’Brien, J.

The accounting was not ordered by the court of its own motion, but in aid of the plaintiffs’ judgment. The plaintiff, however, has no practical interest in any further accounting by the assignee.

His claim is fully provided for by the cash paid over to the receiver, and he may take his money at any moment, as no substantial right either of the plaintiff or of any other party to this record or of any party who can come and claim the benefit of the decree can possible be affected by the conclusion arrived at by J ustice BARRETT. I concur in the result.

Van Brunt, P. J.

[dissenting.]—I cannot concur in the conclusions arrived at by my associates upon this appeal. It is stated in the opinion of Mr. Justice BARRETT that the accounting directed by the judgment was not a general accounting with respect to the assigned estate, but an accounting for the purpose of satisfying the plaintiffs’ claim ; and that if the court had been informed at the time the decree was made that the assignee had in his hands money sufficient to. pay the plaintiffs’ judgment an accounting would not have been’ ordered ; that in that case the decree would simply have required the assignee to páy the plaintiffs’ claim as adjudged.

This statement seems to me to be in direct variance with the express language of the decree. And what is the foundation in this record for the assumption that the court was not informed at the time of the making of this decree that the assignee had in his hands, in money, more than sufficient to pay the plaintiffs’ judgment, I am unable to imagine. We are entirely ignorant of what was before the court at the time of the entry of the judgment by which the referee in this action was appointed.

All that we know is that by the judgment a receiver was appointed of all the property and assets of every kind and nature assigned or attempted to be assigned by the defendant Kingman to the defendant Thacher as assignee for the benefit of creditors, and of all the property of any nature or kind whatsoever belonging to the defendant Kingman ; and that a referee was appointed to pass the accounts of the assignee, and that the assignor and assignee were directed forthwith to convey and deliver to such receiver all the property and assets, together with all books, vouchers, evidences or papers relating thereto ; and that they execute any writing, instrument, or deed which might be necessary for perfecting or assuring the said receiver thereto.

And it further appears by the judgment that the receiver was required to give a bond in the sum of $5,000 for the faithful performance of his duties as such receiver.

How any limitation can be spelled out from this language, or any intimation that the court did not intend to invest the receiver with the title of all the assigned property, and to compel the assignee to account for all the assigned property, it is impossible to imagine. That such was the intention is further evidenced by the amount of the bond required to be given by the receiver.

If he was only to receive the amount which the plaintiffs might collect by their judgment, which was about $i,ooo,-it is difficult to conceive why a bond in the penalty of $5,000 should have been required. But if he was to-receive the whole of the assigned property, amounting to over $3,000, the fixing of the amount of the bond becomes intelligible.

I think, therefore, that not only the language of the decree, but its internal evidence shows that it was the intention of the court making the decree that the assignee should account to the receiver for the whole estate; and that the attempt to construe the decree in the limited manner which is sought to be done upon this appeal is nothing but a modification of the decree, without any appeal having been taken therefrom. It would appear from the opinion that it was one of the privileges and duties of a referee who is appointed by a decree to modify its express terms because he might think it was improvidently or mistakenly granted.

I have yet to learn that any such function devolves upon a referee by virtue of an appointment. It is making: the referee an appellate tribunal, whereas the Code provides that an appeal shall be taken in a different manner.. The whole foundation of this construction of the decree.•depends upon the opinion of the court that it was too broad and general in its terms. If that was the case, the law provides a remedy; but it does not provide that such a decree may be modified either by a, referee or by the ■court in a collateral proceeding.

I am of the opinion that it was the plain duty of the referee, which he has followed out, to take the account of the assignee as to the whole property; and if the assignee desired any other course to be pursued, he should have appealed from the decree, and had it modified if he was entitled to that relief. If' the whole record which was before the court below was before this court, it may very well be that this court would find that the decree was such as the facts of the case required should be made and we are bound to presume it was so required.

I' think, therefore, that the order should be affirmed.

The .following opinions were rendered on motion for .re-argument.

BARRETT, J.

The case of Mandeville v. Avery (124 N. Y. 376) was not brought to the attention of the court upon the argument of this appeal. But with this case before us, the conclusion arrived at would have been the same. The distinction between the two cases is pointed ©ut by the assignee’s counsel. That distinction is a clear .one. The effect of the judgment in this case was to set aside the.assignment as against the plaintiffs, and against them only. No accounting which the court could order in this action would have been binding upon creditors who were not parties to the action. If, for instance, the assignee had been successful upon such accounting in sustaining his claims for the items disallowed, the order in his favor would not have' barred other creditors. These other creditors could have questioned these very items in their cases. The rule should operate both ways, and no Anal decree should be made with reference to the estate generally, except such as would bind all parties and release the assignee.

In the case of a single plaintiff proceeding solely on his own account, the court can direct such an accounting .as will bind both parties to the record and as may be needful to procure satisfaction of the particular claim ■sought to be recovered. It may.well be doubted whether the court has authority to proceed further in this class of ■cases without bringing in all other parties in interest or without notice to them.

Our construction of the decree in this case removes all ■embarrassment on this head and avoids all questions as to its validity. Whatever may have been the duty of the referee, the power of the court upon the case being again brought before it to make such final order or judgment as is appropriate cannot be doubted. We think the order .already directed by the General Term was in substance the order which the court at Special Term should have made when the case was thus before it upon the entire record, including the decree and the referee’s report, and the motion for a re-argument should therefore be denied.

Van Brunt, P. J.

I concur in the result of the foregoing opinion, that the motion for re-argument should be denied. The decision made was arrived at with deliberation, and after a close examination of the record and question involved. It may be true that in the decision rendered assumptions were indulged in which were riot justified by the record, as seems to be done in the foregoing •opinion, but nothing in the record was overlooked' by the learned justices who concurred in the prevailing opinion. It was deliberately decided that upon an appeal from an order confirming a referee’s report, appointed by a judgment, where a referee had acted strictly pursuant to the directions of the judgment without any appeal having been taken therefrom, this court had the right to reverse the referee’s report and the judgment in a material portion thereof, no portion of the record upon which such judgment was founded being before this court.

O’Brien, J.

[dissenting.]—The rule of the law, however logical, which prevents an assignee from being credited with amounts paid out in good faith for counsel fees and other expenses in his effort to uphold an assignment which has been attacked by creditors and subsequently set aside on the ground of fraud, has always seemed tome to be a harsh one. Whereas'in this case it would appear that no person other than the plaintiff was interested in the result of the action and that an amount sufficient to fully compensate him was in the hands of the receiver. I was therefore of the opinion that the result reached by Mr. Justice BARRETT would serve the ends of exact justice.

Our attention is now called to the case of Mandeville v. Avery (124 N. Y. 376) for the first time ; and, as stated by Mr. Justice BARRETT, it was not brought to the attention of the court upon the argument of the appeal. That case is seemingly authority for the view that a receiver in actions prosecuted to set aside transfers of property made by a debtor to defraud creditors, represents the creditors- and possesses the same rights as the creditor under whose judgments he was appointed would himself have had.

This case, together with the facts now appearing that, the suit was brought, not only on behalf of the plaintiff, but that there are other judgment creditors who take the-same position, hostile to the assignment, and whose claims may not be secured by the amount now in the hands of the receiver, it seems to me presents a case for a re-argument, to the end that all the facts may be again presented, and the bearing of Mandeville v. Avery thereon determined.

I am therefore of opinion that the motion for a re-argument should be granted.

VAN BRUNT, P. J.

Upon reading the above memorandum I am at a loss to understand how facts appearing outside of the appeal book can be considered upon a motion for re-argument. The new argument would be upon the facts disclosed by record only if a re-argument is ordered upon extrinsic facts. The re-argument would be ordered upon one record and the re-argument heard upon another.

Re-argument denied.  