In re Ripsom & Newland Fur Co.

Fitzgeeald, J. There is presented to the court in this proceeding application for the confirmation of the referee’s report taking — 57 — and stating the account of the assignee, either as filed or as modified by the exceptions filed thereto by the various contesting creditors interested in the assigned estate. The most important of the exceptions filed to the report of the referee, and by which, that report is sought to be modified, contain objections- to all that portion of the referee’s report which mathematically takes and states the account of the assignee, recites the figures with which he should be charged and credited and reports the balance to be distributed among the creditors, and also to that portion of the report which allows the assignee the expenditures recited in the schedule of his account as proper, reasonable and necessary in the administration of the trust, less certain payments made by him to certain creditors on account of their alleged claims. The exceptions further object to the allowance by the referee of a preference to the claim of the city of New York for arrears of personal taxes, and of certain other claims presented to the assignee as general claims against the assigned estate. The exceptions filed to the confirmation of the report are largely a repetition of the objections filed to the account of the assignee and tried before the referee. Those objections went generally to the administration of the trust by the assignee, and brought in issue generally the question of the exercise of due diligence by the assignee in collecting all the assets of the assigned estate, in procuring the reasonable value of the assets thereof by the proper sale and disposition of the same, and also questioned the fact of the incurring of the expenditures recited in the schedules of the account and of the necessity, reasonableness and propriety of the same, and finally objected to the allowance and right to share in the distribution of the assigned estate, of the claims of the creditors above referred to. Upon these general objections and in answer thereto the only testimony offered before the referee consisted of the general statements by the assignee contained in paragraph 2 of the testimony that the account correctly sets forth all the receipts and disbursements received and made by him, and of all the proceedings in the administration of his trust, and contains no errors or omissions other than an unimportant one recited at said portion of the testimony. This mere general testimony to the accuracy of the statements of the account, and of the reasonableness, necessity and propriety of the expenditures recited therein, is little more in fact than a mere verbal repetition of the written affidavits attached to the account itself, and was amplified and — 58 — detailed only by the additional testimony brought forth upon the cross-examination of the assignee by the contesting creditors. By this testimony it must appear that the assignee did not sustain the burden of proof which is imposed upon him by the rules of this court (rule 6 of 1st Dept., subd. 27), stating that the affirmative on the accounting lies with him. It clearly appears that, for a long time subsequent to the execution of the deed of assignment of all of the assigned property to the assignee, the goods were in the assignee’s possession and had not been sold by him in accordance with the directions of the express trust contained in the deed of assignment. It furthermore appears that, contrary to the general rule expressed in Levy’s Accounting, 1. Abb. N. C. 177, 181; in Burdick v. Post, 12 Barb. 168, 184; and in Matter of Petchell, 10 Daly, 102, the assignee, long subsequent to the execution of the assignment, sold to certain parties in bulk property of the assigned estate upon credit. It is true that in explanation thereof it is explained by the assignee that the goods of the assigned estate were scattered in different parts of the country, that they were in such condition as to necessitate extensive repairs thereon for the purposes of making them salable, and that he was guided in his delay of said sale, in his manner of disposing of the property and in making repairs thereon by the advice of the officers of the assignor and of other dealers in the said property, with whom he frequently consulted. The obligation of an assignee with respect of making a sale of the assigned property was long since expressed in Hart v. Crane, 7 Paige, 37; and in Hodge v. Newton, 13 N. Y. St. Repr. 140; the result of which decisions is to make it incumbent upon the assignee that where, perhaps, the necessities of the case compel a departure by the assignee from the expressed directions of the trust, in making a sale of the assigned property, it is incumbent upon him to show by proper and sufficient proof the propriety of his delay and methods in disposing of the property of the assigned estate, by showing that such delay and" methods were 4 necessary and proper for the benefit of the trust. See, also, Matter of Rice, 10 Daly, 1; Matter of Rauth, Id. 52; Matter of Marklin, Id. 123. The assignee here did not produce such proof on his direct examination in answer to the objections of the contesting creditors, nor does it sufficiently or affirmatively appear from his cross-examination. The persons from whom the advice was obtained by him were neither named nor produced. There was no — 59 — explicit statement of facts showing the condition of the goods that necessitated delaying the sale and the making of extensive repairs, and though the officers of the assignors, by whose advice the assignee was, according to his own testimony, frequently guided, appeared in support of their own claims, yet they were not called or sworn to substantiate the statements of the assignee, as they might easily have been. On the other hand, it is impossible for the court, upon this motion, in view of the fact that the schedules of the assigned'estate were prepared, not by the assignee, but by the assignor, and, in view of the fact that there is some small evidence in the case to establish the fact that all of the loss with which the assignee is sought to be charged, should not be chargeable against him, to take and state definitely the account of the assignee, in accordance with the authorities above cited. The same consideration applies to the objection to the expenditures incurred by the assignee and recited in his account. The objections to the same as presented before the referee were quite general in character, yet it was incumbent upon the assignee, in view of the said objections, to establish the fact and the reasonableness, the propriety and necessity of such expenditures by competent and sufficient proof. Dorney v. Thacher, 76 Hun, 861. The creditors, excepting to the report, seek to have all of the said expenditures, as recited in said account, entirely disallowed, and to surcharge the assignee with the amount thereof. Such a course would be manifestly unjust, as it is evident that there are numerous of the expenditures recited in the said account which are properly chargeable against the funds of the assigned estate by the assignee as proper, reasonable and necessary disbursements in the administration of the trust. It is, therefore, impossible for the court to select from the recitals in said schedule of the account, and, also, in the absence of evidence, to' determine upon this motion the items of expenditure which are justified and should be allowed. With reference to the allowance of the claims of George P. Johnson, Brainerd & Armstrong, and Robert Zinober, as found by the referee, and exceptions to which are made by the objecting creditors, it is impossible for the court to decide. It is improper to allow the said claims in view of the objections thereto made and filed by the contesting creditors; and it is impossible to disallow the said claims upon this motion because of the failure of the record to disclose the service of any notice of said objections upon the said creditors, and of any opportunity afforded them to prove their claims in the or — 60 — dinary manner. Until the said claimants have been served with notice of said objections and are afforded the opportunity to establish their rights as creditors of the assigned estate, and until the record discloses a legal trial of said claims, it is impossible and improper for the court to pass upon the same. The same considerations apply partially to the claim of Louis M. Jones, with reference to which the record recites that an affidavit concerning the payment of rent would be filed with the referee and accepted with the like force and effect as if the said creditor had been personally present and testified to said facts. The record subsequently discloses the presentation of no such affidavit, nor does one appear among the papers presented to the court. Furthermore, in view of the referee’s finding that the assignors were liable for the actual value of their use and occupation of the premises demised by the said claimant, it must be said that it was incumbent upon said claimant, who-sought to share in the distribution of the assigned estate as a creditor for said use and occupation of his premises, to establish the proper and reasonable rental value thereof. Objections to the allowance of the claim of the Clinton Bank should be and are hereby sustained, as it is evident that the insertion of the name of the said creditor among the list of those found entitled to share in the distribution of the estate by the referee was an error, and due to the fact that he had overlooked the withdrawal of said claim by the said creditor. Exceptions to the allowance of a preference to the claim of the city of New York for personal taxes should be and are hereby overruled. See Matter of Donaldson, 27 Misc. Rep. 745, and cases there cited. The exceptions to that portion of the report of the referee which refuses to allow a preference to the claim of Kriegel & Bassevitch should be and are hereby sustained. It clearly appears upon the testimony that the said claimants were not employees of the assignor at the time of the assignment, and that their claim against the assigned estate was not for wages or salary actually owing to them at that time. It appears that at that time, as a partnership, they were independent contractors and performed for the assignor ordinary work, labor. and services upon materials furnished them by the assignor; that in the performance of said work, labor and services they supplied many of the incidental and necessary materials; that their time and manner of operation were in no way subject to the control or direction of the assignor and that their claim consequently was purely one for work, labor and — 61 — services upon materials furnished by the assignor and to be performed to its satisfaction. For these reasons the claim for a preference of the indebtedness of the assignor to said claimants should be and is hereby disallowed and the payments made by the assignee to said claimants should be and are hereby disallowed, except in so far as they might be credited to him on payments to be made to the said claimants as general creditors of the assigned estate in the distribution thereof. The computations of the referee in taking and stating the account are slightly erroneous. There is no recital in the report or proof in the testimony of a compliance with Rule III of 1st Dept., requiring the notice to present claims to the referee to be sent to all the creditors upon the books of the assignor. For these reasons the report must be referred back to the referee to take proof and report upon the uncompleted matters above referred to in accordance with the above instructions. To facilitate the completion of the hearings at the smallest possible expense the contesting creditors should, before the hearing, file specific and definite objections to the items of the account which are contested, stating the grounds of said objection and also the specific and definite objections to the items of the account which the assignee seeks to have allowed as credits. This will narrow the issue, and in accordance with the proof given thereon and the determination of the referee it will be easy for the court to determine the justice and fairness of the account and the proposed objections and, consequently, the liability of either the assignee or contesting creditors to bear the expenses of the additional proceedings. Ordered accordingly.