
    In the Matter of the Accounting of Adolph Ludeke, Appellant, as Assignee of Edwin A. Thrall, Respondent, for the Benefit of Creditors.
    
      Assignee for the benefit of creditors — authority of, to compromise a lease of his ■ assignor f or an unexpired term.
    
    The authority of an assignee for the benefit of creditors, which, by the terms of the assignment, is limited to the payment of “ all the debts and liabilities now due or to grow due ” from the assignor, is not exceeded when such assignee, acting in good faith, and by advice of counsel, compromises to the advantage of the assigned estate, and with the approval of the Supreme Court, although obtained without notice given to the assignor, the obligation of his assignor under an existing lease, the term of which continues fo.r some four years after the execution of the assignment, by the payment of a specified sum, where the landlord has not taken advantage of a provision in the lease that, “if the party of the second part shall abandon or vacate said premises, the party of the first part shall be at liberty, if he shall think advisable, to relet the same; and if sufficient shall not be realized on such reletting to satisfy the rent hereby reserved, the party of the second part agrees to pay or satisfy any deficiency which may arise thereon” — the entire liability of the assignor under such a lease being one existing upon the day when the assignment was delivered, and one which the assignee was directed by the assignment to pay, and which, so long as the landlord did not avail himself of the option to relet the premises, the landlord had the right to enforce against the assigned estate.
    Appeal by the assignee, Adolph Ludeke, 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 29th day of July, 1898, confirming the report of a referee appointed to take- and state the accounts of the assignee herein; also from so much ot an intermediate order bearing date the 12th day of April 1898, and entered in said clerk’s office, as sustains the objection .to the payment by the appellant of $2,500 to Byam K. Stevens (if any portion of said order can be¡ so construed).
    
      Everett P. Wheeler, for the appellant.
    
      George S. Coleman, for the respondent.
   Barrett, J.:

The question presented by this appeal, under an arrangement of counsel, is whether the payment of $2,500 made by the assignee to the assignor’s landlord, in settlement of all claims against, theassignor and'the assigned estate, was valid. It was disallowed by the referee upon the assignee’s accounting, and also by the court at Special Term. The appellant agrees, if the question on this head be decided iii his favor, to waive a second ground of: appeal with regard to his ■commissions, The referee reported that all the creditors had been paid in full except one Dr. Swan, who stated that he preferred to look to the assignor personally for his claim of but five-dollars. The accounting was consequently between the' assignor and the assignee, and the former alone objected ¡to the allowance of the item in question. '

The assignment was executed and delivered on the 30th day of January, 1896. At that date the assignor was in possession of premises ¡No. 3 Maiden Lane, under a lease expiring upon the 1st day of May, 1900, at a rental'of $8,000 per annum to the 1st day "of May, - 1897, and thereafter at a yearly rental of $9,000. The lease contained the following provision: “ Third. That if the party of the second part -shall abandon or vacate said premises, the party of the first part shall be at-liberty, if he shall think advisable, to relet the same; and,if sufficient shall not be' realized on such reletting to satisfy the rent hereby reserved, the party of the second part agrees to pay or satisfy any deficiency which may arise thereon.” The assignment required the assignee to pay and discharge in -full “ all the debts and liabilities now due or to grow due ” from the assignor. The premises in question were-used by the assignor as a jewelry shop-. The assignee took possession of these premises, and used them for auction sales of goods until about the middle of .April, ■1896, and he paid "the monthly rent reserved in the lease to the 1st day of May, 1896. The landlord never exercised the option given him by the 3d paragraph of. the lease which we have quoted. On the contrary, he entered into a written agreement with the assignee upon the 29th day of February, 1896, for the surrender of the lease upon the thirteenth of the following April, and for the complete release thereupon of the assignor and of the assigned estate. This agreement provided that the assignee should pay the monthly sums accruing under the lease down to the first of the following May, and, upon the surrender, the additional sum of $2,500 in full settlement of all the landlord’s claims against the assignor and the assigned estate. It was also provided that the agreement was subject to the approval of the Supreme Court. This agreement was fully executed. The assignee paid the rent to the first day of May, and also the specified sum of $2,500. He acted throughout under the advice of counsel, and he obtained an order of the Supreme Court approving of the compromise agreement: It is true that the assignor had no notice of the application to the Supreme Court, and that he personally objected to the compromise. There can be no doubt, however, that the assignee acted in perfect good faith, and that the compromise, as matter of fact, was greatly to the assignor’s benefit, and to that of the assigned estate. The rental deficit would certainly have quite considerably exceeded the very moderate sum which the landlord accepted for the cancellation of the lease. The referee and the court below have in effect-charged the assignee personally with this payment, and they have done so mainly upon the ground that he exceeded his power, in that he was limited by the terms of the assignment to the payment of past debts. The $2,500 payment was treated by the referee and the court as the payment of a new debt created subsequent to the assignment. We think this an erroneous view of the compromise agreement, and of the circumstances which surrounded it. The assignor’s liability under the lease was certainly not a new debt created after the execution of the assignment. The; contract and the entire liability of the assignor thereunder existed upon the day when the assignment was delivered. The assignor was directed to pay debts due and to grow due, in other words, sums payable under existing contracts, whether due in jprc&senti or payable in futuro. So long as the landlord did not avail himself of the option contained in the 3d paragraph of the lease, he undoubtedly had a valid and certain claim against the assigned estate for the rent reserved in the lease.” (Matter of Hevenor, 144 N. Y. 271.) It is claimed that the landlord here did exercise this option, but that claim is not borne out by the facts. The landlord and his agents undoubtedly made efforts to secure a new tenant. - So, also, did the assignee, hio offer, however, was accepted by the landlord, or reduced to a complete contract, until after the execution of the compromise agreement. Then, too, the offer was for a lease of only three-fifths of the premises, at an annual rental of but $4,800. ■'

It is also claimed that the landlord’s act in authorizing his agents to relet the premises showed his intention to exercise his option. That does not follow. His intention was to do just what he did, namely, claim from the assignee all that he was entitled to under his lease,, and save both for himself and the assigned estate what he could by securing a new and .solvent tenant. And in this respect the assignee was right in co-operating with him. But even if the landlord intended throughout to exercise his option, he .did not do so. His -rights depend upon his filial' act, and not upon his prece- . dent intention. His final act was to compromise his claim for .all that was to grow due ” under the lease, and thereupon to cancel the instrument. His reletting was distinctly under the right conferred by this compromise agreement, and not under the 3d paragraph of the lease. We have carefully examined all the evidence presented by the learned counsel for the assignor, and we see nothing therein to bring this case- within that of Matter of Hevenor (supra). On the contrary,.the distinction between the two cases is marked. The claim in the Hevenor case was for an actual deficiency subsequently resulting from the reletting under the exercise of the option. Here the claim was naturally for the rent to grow due under the lease. When the compromise agreement was made, there was in fact no other-subject of compromise, inasmuch as the premises' had not then been relet, and consequently the landlord-had not definitely exercised his option. The probable deficiency upon the contemplated reletting undoubtedly played an important part in the compromise, and had its debatable bearing upon the sum finally agreed upon. But it was hot an independent factor in the- matter. The Hevenor case was reviewed and fully explained by Guay, J., in People v. St. Nicholas Bank (151 N. Y. 592), and the present case is clearly within the distinction there pointed out.

We think, therefore, that the payment in question was a- just settlement of an existing contract obligation, for which the estate was liable, and that it should have been allowed to the assignee. The settlement was, upon all the facts, a fair exercise of judgment upon the latter’s part, and his judgment was- fortified, as we have seen, both by the advice of counsel and by the approval of the court. Even without the latter support, however, the payment was, under the circumstances, judicious and proper.

The order appealed from should, therefore, he modified by overruling the assignor’s objection to the payment by the assignee of $2,500 to Byam K. Stevens, and sustaining the assignee’s exceptions upon that head. It should accordingly direct the payment of the balance in the assignee’s hands to 0. IT. Windsor by virtue of- the assignment to him from the assignor. The costs of the accounting and of the appeal should he allowed to the assignee to be paid by the assignor.

Van Brunt, P. J., Rumsey, Patterson and O’Brien, JJ., concurred.

Order modified as directed in opinion, with costs of accounting and of appeal to the assignee to be paid by the assignor.  