
    Frank Reynolds, as Receiver of Richard Worthington, Appellant, v. The Ætna Life Insurance Company and Others, Respondents.
    
      JSquity suit — the decision must .direct the judgment amd award costs to designated parties—receiver of a judgment debtor—his property in insurance policies — hostile claimants against the insurance company—■validity of transfers of insurance policies after the appointment of a receiver—the court will not order payment over by one rival claimant who has been paid, to another claimant.
    
    fThe amendments made to section 1022 of the Code "of Civil Procedure in 1894 and 1895, permitting the court to file a decision stating concisely the grounds upon which the issues have been ■ decided, and directing the judgment to he . -entered thereon, and, if costs are discretionary, designating the party to whom •costs are awarded, have not dispensed with the requirement that the judgment which is to be entered shall be directed, and that, in cases where costs are discretionary, the party entitled to the costs shall be designated.
    A decision containing no direction for judgment beyond the words “Judgment for the defendants, with costs,” made in an equity suit, is not sufficient to authorize the entry of judgment.
    The practice would, in such case, require that a judgment entered under such circumstances should be vacated and the case be remanded to the court which tried it for decision, but where it appears that the justice who tried the case is disqualified from acting by reason of his designation as a member of the Appellate Division, it must be held that there has been a mistrial.
    The receiver of the property of a judgment debtor, whose life is insured, has a property right in the policy of insurance, provided that the insured himself had such a property right., and that the policy had a surrender value at the time when the receiver was appointed.
    A life insurance company brought an action of interpleader against a receiver of a corporation, who claimed that the deceased policy holder, who had been the general manager and treasurer of the corporation, had used its funds in the payment of premiums upon the policy in question, and against the widow of the assured, who claimed the policy under an assignment from the assured. Before the action came to trial the defendants therein agreed upon a compromise, and the amount of the policy, which had been paid into court by the company, was paid over to them. Subsequently, a receiver, who had been appointed in proceedings supplementary to execution against the assured, brought an action against the same parties, who were made defendants in the action brought by the insurance company, asking to have the assignment of the insurance policy set aside and to have the proceeds thereof received by said defendants, impressed with a trust in his favor as receiver of the assured.
    
      Held, that the defendants in the action brought by the insurance company, if they acted in good faith in the assertion of their claims, acquired a good title to the moneys received by them in that action;
    That the rule that a claimant thus situated must' obtain the money upon his own independent claim, in using which he does not prejudice his competitors, and that he should not exercise any right or title of which he has wrongfully divested his competitors, did not apply to this case, in which the transfer of the policy of insurance, alleged by the receiver of the property of the assured to have been fraudulent, occurred after his appointment as receiver, and could not, therefore, in a legal sense, have been prejudicial to him;
    That such transfer being void as to him, he could still, notwithstanding the payment already made by the insurance company, enforce his claim, if a just one, against the company, the company having had notice, • before the money was paid over in the action of interpleader brought by it, of the existence of this claim on the part of the present plaintiff.
    Appeal by tjie plaintiff, Frank Reynolds, as receiver of Richard Worthington, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Kings on the 20th day of January, 1896, upon the decision of the court rendered after a trial at the Kings County Special Term dismissing the plaintiff’s complaint upon the merits, with costs, and also from an order entered in said clerk’s office on the 29th day of January, 1896, denying the plaintiff’s motion to vacate and set aside the said judgment as irregular and unauthorized and to declare the same null and of no. effect and to restore the cause to the Special Term calendar for trial.
    The decision of Mr. Justice Cullen, before whom the action was tried, was as follows :
    I am of the opinion that the two policies of insurance, payable to the judgment debtor or to his estate, were property, which passed to the plaintiff as receiver in supplementary proceedings.' This case is to be distinguished from all those cited by defendant’s counsel. In those cases there was no property right in the judgment debtor and . ' never had heen, so there was no title in the debtor to which his receiver could succeed. There was merely a trust or equity in favor of the creditor which it was held he alone could enforce. But in the case at bar this policy had a money surrender value, and was also capable of assignment or sale by the .debtor. It seems, therefore, to come within the principle decided in Powell v. Waldron (89 N. Y. 328), and to be property.
    There are but two disputed questions of fact in the case, which I decide as follows : I find that Mr. Gar ah rant was not aware at the ’ time of his letter to the receiver that these policies were payable to the defendant. Second, though the question is not free from doubt, I find in accordance with the weight of the testimony, that the defendant’s counsel were not apprised' of the institution of the present suit at the time of the payment of the money to and by the chamberlain, though-1 find they did know that a receiver had been appointed by the judgment debtor Richard Worthington, and did contemplate the possibility of other claimants interfering with the - settlement.
    It appears, without controversy, that after and before the appointment of the plaintiff as receiver, the premiums on these policies were paid out of the Worthington Company’s funds, and charged to the judgment debtor or to his wife. It does not appear that the company was insol vent. It is -shown that the company was controlled and managed by the debtor Worthington as his own property, all the other stockholders acquiescing therein; that on the dissolution of the company the defendant Little was appointed receiver; that he instituted an action against the insurance company, Worthington and his wife, to have these policies adjudged his property, pending which action Worthington died; after the death of Worthington his widow and the defendant receiver made a compromise, by which she was to take three-eighths and the receiver five-eighths, and the policies be assigned to the receiver. The insurance company brought an interpleader suit against all parties claimants other than the present plaintiff. In that action the moneys were paid into court, and then paid out to the receiver and the defendant Margaret Worthington.
    Having held that the legal title to the policies passed to the receiver, it follows that had he given notice to the company of his rights, I should hold that he was entitled to recover of the insurance company their amounts or at least the amounts subject, it may be, to the equitable claims of others. But such relief is not sought in this action. The plaintiff has discharged the insurance company, and seeks to make the receiver and defendant Margaret Worthington repay the moneys paid to them.
    I cannot see how the money paid to the receiver can be impressed with a trust in favor of the plaintiff. The basis of the receiver’s claim was not under the legal title to the policy, but in hostility to it. He did not claim that the policies were payable to him or that he in any manner succeeded to the title of the payees, but that by the improper application of the company’s funds a fraud had been committed, and that by reason of the fraud he was entitled to the policies. ' In this contention he was undoubtedly wrong for it has been so held in the case of Little v. Garabrant. But he had a right to be wrong, as long as the claim was made in good faith. This claim he made to the insurance company during the life of Worthington, and after his death compromised with his widow, and obtained an assignment of her right to the policies.
    I assume the law to be that though the title to the policies vested in the receiver plaintiff, until notice was given to the insurance company of his appointment and claim the company would be protected in payment to the person who held the apparent title, and as at the time of the final settlement and payment the receiver had received an assignment of the policies, it might.he said he claimed under such apparent title, and hence was a trustee for the real owner. But the answer to this is that whether the receiver had notice or not of the plaintiff’s claim before the payment of the fund the insurance company had notice, and as already said, the plaintiff’s claim is based not on any equities between him and the defendants, but because he had the legal title to the chose in action. If with this knowledge the insurance company saw fit to pay the defendants, it was not relieved from liability to the plaintiff. If relieved it is by the action of the plaintiff, and no agreement between plaintiff and the insurance company can affect the defendant’s right. The case seems to fall exactly within the decision in Patrick v. Metcalf (37 N. Y. 332), and Butterworth v. Gould (41 id. 450).
    Nor is the case varied by the fact that the money was paid in pursuance of an order of the court. . To the interpleader suit this plaintiff was not a party. The order appears to have been made on the motion of the defendant Little, receiver. But the insurance company does not seem to have resisted it. An affidavit showing a superior title in a person not a party would have been a complete answer to the application, and the plaintiff in that suit, the insurance company, should have either discontinued the suit or had this plaintiff made a party to it. If the order was erroneous plaintiff should have appealed from it. It did neither. It chose to make the payment knowing plaintiff’s superior title. This being so, the plaintiff’s claim was unpaid. He had his remedy against the insurance company, not against the moneys paid the defendant, and his agreement with the insurance company could not increase his rights.
    Judgment for defendants, with costs.
    
      Frederic A. Ward, for the appellant.
    
      William S. Bennet, for insurance company.
    
      James M. Fisk, for the respondent Little.
    
      William C. Davis, for the respondents Margaret Worthington, individually and as administratrix, etc., Mary Glover and Jennie Doman.
   Hatch, J.:

This is an action in equity, brought to set aside assignments of certain insurance policies upon the life of Richard Worthington, of whose property and effects the plaintiff is the receiver, which were payable to himself if he survived a certain period, and to his estate if he died prior thereto; also to impress a trust upon the proceeds of the policies or of the moneys- due thereon. Worthington having died before the period entitling him to receive the proceeds, the defendants Little and Margaret Worthington made claim to said policies and their proceeds. The insurance company, under the direction of the court, has paid the sum represented by the policies into court, and the money thus paid has been, under the same order, paid over to the claimant Little, and a part of such moneys has been paid by the latter to the attorney of Margaret Worthington.

The cause was tried before Mr. Justice Cullen, who decided the same and wrote an opinion therein. Upon this decision all the defendants, except the insurance company, entered judgment, dismissing plaintiff’s complaint, with costs. The appeal from the order and from the judgment were argued together, and may be disposed of' in like manner. Prior to 1894, the provision of the Code of Civil Procedure (§ 1022) required that the decision. of the court must state separately the facts found and the conclusions of law; “ and it must direct the judgment to be entered thereupon. In an action where the costs are in the discretion of the court, the decision * * * must award or deny costs; and', if it awards costs, it must designate the party to whom costs, to be taxed, are awarded.” This provision of the Code was amended in 1894, and again in 1895, the latter amendment to take effect January 1,1896. So far as the particular point now under consideration is concerned, the amendments have not changed the law. The Code now provides that the decision may state separately' the facts found and conclusions of law, and direct the judgment to be entered thereon,, or the court may file a decision stating concisely the grounds upon which the issues have been decided," and direct the judgment to be entered thereon.” The provisions respecting costs remain the samé as before the amendments. It is, therefore, plain, that when the court adopts the practice of stating concisely its decision it does not dispense with the necessity of directing the judgment to be entered thereon. And where costs are discretionary it must also designate the party entitled thereto. This provision of the Code has in part been construed prior to the amendments, and, as it remains the same since, such decisions are applicable to the present controversy. In Clason v. Baldwin (36 N. Y. St. Repr. 982) the action was brought against the defendant as the executrix of her husband, and the conclusion of law as found by the referee was that the plaintiffs were entitled to judgment against the defendant. This was held not to be a compliance with the Code, and did not constitute a direction for judgment; that the clerk had no authority to enter judgment, and the same was wholly unauthorized and irregular.

In Paine v. Aldrich (36 N. Y. St. Repr. 999) it was held that the court must settle the judgment and direct that judgment to be entered, and that until this was done the clerk had no authority to act, and could enter no judgment..

The decision in the present case contains no direction for the entering of judgment beyond the Words “ Judgment for defendants, with costs.” It is quite evident that the learned judge did not intend that the decision which he handed down constituted a determination upon which judgment should be entered without further direction. It was, in fact, a memorandum opinion discussing the questions of law which the case presented, and did not pretend to formally state a determination of all the issues involved and direct the judgment to be entered. It first states plaintiff’s legal right and title to the policies of insurance; then states the learned judge’s conclusion upon two disputed questions of fact, followed by a discussion of plaintiff’s claim against the defendants Little and Margaret Worthington. It does not decide the issues between the plaintiff and the ' insurance company. True it states that the plaintiff has discharged the company, but this was said by way of enforcing the argument which the court was making, and not as a determination of that question. It states, at the close, that plaintiff has his remedy against the insurance company. The direction as to costs is not in compliance with the section. Costs were in the discretion of the court, and the Code requires that the party to whom costs were awarded shall be designated. It is quite evident that the reason for this rule rests in the fact, of which this case is an illustration, that the equities of the parties, where there are many, may he widely different, and that some parties may he equitably entitled to costs and others not. In the present case the court states that plaintiff has his remedy against the insurance company, and then awards costs in its favor, if this determination should be treated as a direction for judgment. Upon the conclusion reached by the court, as to the law of the case, it might be quite reasonable to award costs in favor of some of the defendants. It would be quite repugnant to equity to award costs in favor of the insurance company or to render any judgment in its favor. And to meet such cases the Code requires that the specific designation, shall be made when costs are awarded. We are, therefore, of opinion that this memorandum was not intended as a formal decision of the ease, but was rather a direction upon which such decision could be based; that it did not contain the direction for the entry of judgment or the award of costs which the Code contemplates, and furnished no authority for the clerk to enter the judgment which he did.

The order denying the motion to vacate and set aside the judgment must, therefore, be reversed, and the judgment be vacated and set aside.

This conclusion disposes of the appeal from the judgment. But as the case was very elaborately argued, and as we have examined the record, and as a new trial must be had, it is the view of the court that expression should be given of the conclusion we have reached upon the merits. The court below has held, and in that view we concur, that plaintiff became vested with the legal title to the policies of insuranc 3 upon his appointment and qualification as receiver. (Powell v. Waldron, 89 N. Y. 328.)

The discussion and decision in Metcalf v. del Valle (64 Hun, 245; affd., 137 N. Y. 545) recognize the property right of the receiver of the property and effects of a judgment debtor in policies of life insurance upon the judgment debtor’s life, in cases where the insured himself had a property right and the policies a surrender value at the time of the appointment of the receiver; that they became more valuable thereafter inured to the benefit of the legal title. There can be no question but that from the time of the appointment of Little as receiver of the Worthington Company (of which company Worthington had been the general manager and treasurer, and with- the funds of which Little claimed that the premiums upon the policies in question had been paid), he claimed title to these policies in active hostility to the right and title of plaintiff, and the same is true of Margaret Worthington. At no time did either of these parties recognize the right or title of plaintiff, but each made separate and independent claims to the policies and their proceeds. When the interpleader suit was brought by which Little and Margaret Worthington were made parties, the attitude of neither was changed with respect to the claims which each made, and each of such claims was in. hostility to the claims of any other person or parties. If the parties' acted in good faith it was clearly competent for them to arrive at an adjustment of their differences, and with the sanction of the court to carry out the compromise agreed upon. The court was authorized to make the order which it made in the interpleader action, and the parties thereto, acting in good faith, were authorized to accept the benefits which the order conferred. We can see no reason why each did not get good title to the moneys, paid by the insurance company in pursuance of the order in. the interpleader action, as against plaintiff within the doctrine of Patrick v. Metcalf (37 N. Y. 332) and Butterworth v. Gould (41 id. 450).

It is, however, earnestly and ably argued that this conclusion overlooks the exception which exists to the rule of these cases, and entirely ignores plaintiff’s equitable rights in the premises. This exception to the rule is probably stated'as fairly and as strongly in Brown v. Brown (40 Hun, 420) as in-any other case to which' our attention has been called. It is there said: “ But this rule rests upon the basis that the wrongful claimant obtains the money upon his own independent claim; that in using his own he does not prejudice his competitors; that he does not exercise any right or title, of which he has wrongfully divested his competitor.” The rule then is that the money must be obtained upon an independent claim, - and that such claim must not prejudice another’s right or divest him of title. Plaintiff claims that Margaret Worthington obtained her title through her own fraud and that' of Richard Worthington and Jennie JDoman; that Little had no title or right except through the assignment from Margaret, which was fraudulent and not based upon any claim or right which he held prior thereto. ■ If we assume this to be true, how is plaintiff affected thereby ? He had the legal title to these policies, and as against him the transfer by Richard and Margaret Worthington to Jennie Doman and by the latter to Margaret, and from her to Little, was absolutely void, and did not in anywise affect his title. None of these transfers was made until after his appointment as receiver, in consequence of which they were all void as to him. Such is the effect of the decision in' Bostwick v. Menck (40 N. Y. 383); Metcalf v. del Valle (supra).

He could not be prejudiced in a legal sense by transfers void as to him. Had he brought his action against the insurance company, the existence of these fraudulent transfers raised no barrier to his success; they would all have gone down before his legal title. Their existence, therefore, did not prejudice him, and however often they were made divested him of no title; he could still pursue the original debtor and collect of it his rightful claim, and all transfers, orders and determinations to which he was not a party did not operate in the slightest to defeat or impair his legal right. ' The rule would be different if the insurance company, in ignorance of the legal right, and in reliance upon an apparent title, paid the sums due to the wrongful claimant. But such is not the fact here. This leads us to the conclusion that plaintiff does not bring himself within the exception he seeks to invoke. In this view of the case it is not material to inquire whether Little and Margaret Worthington had notice of plaintiff’s claim or not, as it does not affect his right against the insurance company.

If this decision could be treated as a direction for the entry of a judgment, it is quite clear that the conclusion which dismissed the complaint and awarded costs in favor of the insurance company could not be sustained. There was no proof that plaintiff had released it or that his attitude was changed from what it was when he brought his action. The complaint demanded' a judgment against it, and that issue was not disposed of by the decision rendered. The company had notice of the commencement of the action at the time when the order was made in the interpleader action, and when it paid over the money. It could not justify payment under such order, "as it knew of plaintiff’s claim, and was bound to call the court’s attention thereto, and the court would have made no order directing the money to be paid to. Little with notice of a rival claimant thereto. Had the court made a formal decision this undoubtedly would have been set right.

The rule which should be adopted in this case would require that the judgment be vacated and set aside, and that the case be remanded to the Special Term for decision by the court who tried it. (Putzel v. Shulhoff, 29 N. Y. St. Repr. 26; approved m Clason v. Baldwin, supra.)

But the learned justice who tried the case, having been designated to sit in the Appellate Division of this court, is now disqualified and can render no decision therein. (§ 2, art. 6, Const.; Matter of the Mayor, 139 N. Y. 140.)

In effect, therefore, there has been a mistrial of the case. Our conclusion is that the order appealed from should be reversed, and the judgment should be vacated and set aside, with ten dollars costs and disbursements, and ten dollars costs of the motion.

All concurred, except Cullen, J., not sitting.

Order reversed, with ten dollars costs and disbursements, and motion to vacate and set aside the judgment granted, with ten dollars costs.  