Max Kliger, Respondent, v. Samuel Rosenfeld and Morris Weisman, Defendants; Samuel Rosenfeld, as Receiver, etc., Appellant

Max Kliger, Respondent, v. Samuel Rosenfeld and Morris Weisman, Defendants. Samuel Rosenfeld, as Receiver, etc., Appellant. First Department, February 5, 1909. Beceiver of partnership — reference — evidence — amendment nunc pro tunc permitting receiver to show payment of firm debts — conditions imposed. Where an order appointing a receiver of partnership property does not empower him to pay partnership debts, a referee appointed to take and state the partnership accounts should exclude evidence that the receiver paid debts. Where, however, the order appointing a receiver gives leave to move for such further order as may be necessary, the court on the motion of a receiver who on advice of counsel and in good faith has paid firm debts, .may amend the order . nunc pro tunc so as to authorize the payments and direct the referee .to take proof thereof. The court in granting such order nunc pro tunc will not pass upon the validity of payments made by the receiver. But where it is asserted that certain evidence of the invalidity of claims paid by the receiver cannot now be procured, the court, on amending the order so as to permit the receiver to prove payment of the firm debts, will require him to stipulate that he will assume the burden of showing affirmatively that the debts paid were valid, and that evidence given before a former referee may be read. Appeal by Samuel Rosenfeld, as receiver, etc., from an order of the Supreme Court, made at the Row York Special Term and entered, in the office of the clerk of the county of Rew York on the 20th day of Rovember, 1908, denying a motion to amend an interlocutory judgmentnunc pro tuno. Lewis Johnston, for the appellant. Louis H. Levin, for the respondent. [MAJORITY — Scott, J. :] Scott, J. : In April, 1905, an interlocutory judgment was entered in this action dissolving the copartnership which had theretofore existed between the parties, appointing the defendant Samuel Rosenfeld receiver of the partnership property, and appointing á referee to take and state the copartnership accounts. The referee made a report upon which a final judgment was entered, which was, however, reversed upon appeal to this court by reason of the admission of incompetent evidence by the referee. (120 App. Div. 896.) A new referee was appointed and it was referred back to him to take and state the copartnership accounts. That reference is still pending. The interlocutory decree directed the-receiver to collect and reduce to money the partnership assets, and to retain such proceeds subject to the further order of the court. ISTo authority was given to the receiver to pay any partnership debts, but leave was given to either party to apply to the court for such further order as might be necessary. Oh May 25, 1906, the receiver filed his accounts showing that he had collected and received the aggregate sum of $10,878137, and had paid out and expended $10,626.28, consisting mainly of what are alleged to have been debts of the copartnership. Exceptions were filed to the account, and there was appointed as referee to pass upon the account and exceptions the same referee before whom the copartnership accounting was pending. When the receiver attempted to prove the debts paid by him the referee very properly refused to receive the evidence because under the terms of his appointment the receiver was not empowered to pay debts. The receiver then moved for an order amending the interlocutory decree nuno pro tmio as of the date thereof permitting the receiver to pay-all just and true debts and liabilities of the copartnership, and directing the referee to take proofs of all payments of copartnership liabilities made by the receiver. That motion was denied and the receiver appeals. We think that there is no doubt of the power of the court to make such an order as is asked for. The court, under the terms of the interlocutory decree, could at any time before payment have made an order authorizing the payment of the copartnership debts, and can now ratify the act of the receiver in doing that which it could have authorized him to do. Whether the order should be. made is another question. The receiver swears that he made the payments under the- advice of counsel that the interlocutory decree permitted lnm to do so, and as there is no means of contradicting that, statement we consider that it should be accepted and the receiver acquitted of any intentional wrongdoing in making the payments. If the receiver made the payments in good faith, believing that he had a right to do so, and if the debts which he paid were bona fide and valid obligations of the copartnership, he should not now'be compelled to be at a loss merely because his counsel advised him erroneously and failed to protect him by applying for an order permitting the payment. It is strongly urged upon us that two of the claims, for considerable amounts, were shown to be fictitious by certain evidence produced before the former referee in the copartnership accounting. That may or may not be true, but it is clear that we should not pass upon their validity upon this motion. It is also said that the plaintiff, who objects to the allowance of the payments, cannot now procure and produce some of the evidence which he was able to bring out at the former reference, and which, he says, tends to prove the invalidity of the claims. While the receiver may be excused for his failure to procure an enabling order before he paid the claims, he may not be permitted to take an advantage from that failure. If he had made application for an order permitting him to pay the claims, the plaintiff would have.had notice of the application, and the court would undoubtedly have required some proof t>f the validity of the claims. We are unwilling to absolutely cut the receiver off from any opportunity to protect himself and defend the payments made by him, but he should only be put in a position to do so upon stipulating (1) that he will assume the burden of showing affirmatively that the debts which he has paid were valid, enforcible liabilities of the copartnership, and (2) that there may be read as evidence before the present referee appointed to pass upon the receiver’s accounts, any part of, the evidence and depositions taken before the former referee appointed to take and state the copartnership accounts. These conditions will impose no real hardship upon the receiver because he was a copartner in the firm, presumably cognizant of its affairs. The order appealed from will, therefore, be reversed and the motion granted upon the conditions above stated, without costs to either party in this court. Settle order on notice. Ingraham, McLaughlin, Clarke and Houghton, JJ., concurred. Order re versed, and motion granted on terms stated in opinion, without costs. Settle order on notice.