DOWNEY v. MAY

DOWNEY v. MAY. N. Y. Supreme Court, First District, Chambers ; March, 1887. 1. Assignee's account; allowing creditor in default to present claim and contest account.] In a creditor’s suit in behalf of himself and other creditors, to settle the account of an assignee for the benefit of creditors, and distribute the trust fund, a creditor who did not receive notice to prove his claim before the referee, or who, although notified of the proceedings, failed to appear on the reference through misapprehension, excusable mistake, carelessness or procrastination on his part, may be allowed' Upon terms, after the peremptory day fixed by the referee for presentation of claims, to come in and prove his claim and contest the assignee’s account. 2. The same; terms.] So held, sending back the whole matter to the referee upon the application of a creditor to a large amount, with leave to prove claim and file objections to the assignee’s account, upon stipulating, if substantially unsuccessful, to pay all expenses of the further proceedings before the referee. Motion by Mrs. Hetty H. B. Green to open the report, and refer this ease back to William S. Keiley, referee, with liberty to prove her claim of $560,000, and file objections to the assignee’s account. On January 15, 1885, John A. Cisco and Frederick W. Foote, bankers, composing the firm of John J. Cisco & Son, made an assignment for the benefit of their creditors to Lewis May. The assignment contained no preferences except to employes. The inventory by the assignors of their estate was verified and filed February 2, 1885. The assignee filed his bond on February 3, 1885. The nominal value of the estate, as stated in the inventory, was $3,294,-448.78 ; the actual value, $2,467,370.70. The schedules of indebtedness exhibited the fact that a portion of the assets, consisting of railroad bonds and other securities, had been pledged by the assignors in the aggregate for $1,085,331.25, which deducted from the $2,467,370.70, left the aggregate actual value, $1,382,039.45, as the net actual value of the estate, as appeared by the"assignor’s inventory. This suit was brought by John Downey as a creditor of the assignors, in behalf of himself and all other creditors, against Lewis May, the assignee, and against the assignors, for an accounting and distribution of the assets under the assignment. On May 8, 1886, the usual interlocutory decree was made, referring it to William S. Keiley as referee, to take proof of the • plaintiff’s claim, and of all other creditors, and to fix a peremptory day, and advertise once in each week for three weeks for creditors to come in and prove their claims by such day, or be excluded from sharing in the distribution of the estate. The referee fixed May 29,18S6, as the peremptory day, and published a notice in two papers. The first insertion of such notice was on May 11. On January 8, 1887. the referee made his report ■by consent of the attorneys for the assignors and assignee. No claims were proved before the referee except the plaintiff’s. The assignee, however, filed with his report a list of the creditors of the assignors, stated to have been taken from their books. Upon this application Mrs. Green swore that she did not receive the notice to prove claims, and did not know anything about the suit until about December 26, 1886. The grounds of Mrs. Green’s motion were, the failure to publish the notice for creditors to come in and prove their claims as required by law ; that she had not, in fact, received any notice of the suit; that the assignee’s account was informal, that it omitted many items on the debtor side with which he should be charged, and embraced many items on the credit side with which he should not be credited ; that it did not appear by the referee’s report that any claims had been proved except the plaintiff’s, and hence ■.that no .decree could be entered for distribution. Nelson Smith, for the moving creditor.—I. It is a matter of course to allow a creditor who swears that he had no notice, or gives other excuse, to come in and prove his claim after the peremptory day (Wilder v. Keeler, 3 Paige, 164; Angell v. Haddon, 1 Madd. Ch. R. 529; Mason v. Codwise, 6 Johns. Ch. 184; Hoffman’s Ch. 181, 182; Gillespie v. Alexander, 3 Russell, 130). Defaults in actions at law are opened on the same principle (Quinn v. Case, 2 Hilt. 467; Hanford v. McNair, 2 Wend. 286; Van Horne v. Montgomery, 5 How. Pr. 238). II. In the absence of any provision in the Code of Civil Procedure, the old chancery practice upon the subject of accountings is still in force (Wiggin v. Gans, 4 Sandf. 646 ; Palmer v. Palmer, 13 How. Pr. 363 ; Ketchum v. Clark, 22 Barb. 319 ; Genl. Rule 85 [1883]). A creditor coming in under a decree of this description must make affidavit to his claim, that it has not been paid, and that he has no security (Morris v. Mowatt, 4 Paige, 142; Hulbert v. McKay, 8 Paige, 651, 654; Hoffman’s Ch. 182). On proving life claim, a creditor is, in a legal sense, a party (Neve v. Weston, 3 Atk. 557; Hoffman’s Ch. 183, 184). The same principle applies to creditors in bankruptcy (Ex parte O’Neill; In re James L. Fowler, 1 Lowell’s Dec. 163). It is not incumbent upon Mrs. Green to entitle her to come in, to show the assignee’s account erroneous. Upon proving her claim, she may examine the 1 assignee to discover errors, and then tile objections to his account from time to time., as advised (2 Daniell’s Ch. Pr. 4 ed. 1223, 1224). A. D. Williams, for the plaintiff. Dos Passos Bros., for the assignee. Childs & Hull, for the assignors. See cases cited in brief of counsel for the moving creditor. [MAJORITY — Andrews, J.] Andrews, J. The affidavits submitted in support of this motion conflict with these submitted in opposition to it upon important points,1 and leave many matters in doubt. It is difficult to determine when Mrs. Green, or her counsel, or friends, first knew of the pendency of this action, or of the pendency of the reference which was ordered. Even • if the conclusion were reached that Mrs. Green is mistaken when she swears that, to the best of" her recollection and belief, the first that she ever heard of Downey, or of any suit by Downey, was about December 26 or 28, 1886, it is not entirely clear that she knew the object of the suit, or what the effect of the referee’s report would be if confirmed by the court. The affidavits made by Mrs. Green, and others on her behalf, are also so at variance with those submitted upon the other side as to leave it doubtful what authority any person or persons had to represent her, what examination of the assignee’s accounts was made by any one on her behalf, and what knowledge or information she had as to the nature of the objections which had been made before the referee to such accounts. It appears that these objections were" of a serious character, and that a contest followed, lasting for several months. As I understand the affidavits, these objections were not passed upon by the referee, but the whole matter was disposed of by a "compromise, made by the attorneys of Mr. Cisco, the assignee and the plaintiff Downey. Xo creditor except the plaintiff was represented befofe the referee, and Mrs. Green, who is a very large creditor, is dissatisfied with the compromise. It is claimed by the counsel of Mrs. Green that the assignee’s accounts are made out in such a manner that it is difficult to understand them, or to follow and trace out the various transactions which are covered by them. It is also strenuously insisted that the account omits many items on the debtor side with which the assignee should be charged, and embraces many things on the credit side with which he should not be credited ; and it would be very difficult, if not impossible, for me, upon the papers now presented, to decide whether this contention on the part of Mrs. Green’s ■counsel is, or is not, to some extent well founded. The matters about which question is so raised involve several hundreds of thousands of dollars, and Mrs. Green swears that if the referee’s report shall stand she will be injured to at least the sum of from fifty to one hundred thousand dollars. She also swears that no one was ever authorized by her to say that she did not propose to contest the assignee’s accounts, and that she does not believe any one ever assumed to say so on her behalf. It does not appear that Mrs. Green ever assented to the compromise, or knew the nature of the report of the referee, or of the decree, until after the report had been made and the decree had been signed. Applying to this motion the rules which are usually followed by courts in cases of this character, it would seem that even if Mrs. Green was not as vigilant as she should have been, and even if she was informed that proceedings of some sort were pending before the referee, but failed to appear on the reference, through misapprehension as to the nature of such proceedings, or through any excusable mistake, carelessness, or procrastination on her part, she nevertheless ought to have a hearing, and is entitled to relief upon suitable terms. After a careful consideration of the motion, I have concluded, though with some hesitation, that the whole matter should be sent back to the referee for a further hearing, in the same manner and with the same effect as if Mrs. Green had appeared upon the reference, before the report was made, with leave to file such objections to the assignee’s accounts, and to offer such evidence as she may see fit. An order to this effect will, therefore, be made, but only on condition that she will stipulate that, if substantially unsuccessful, she will pay all the expenses of the further proceedings to be had before the referee, and that she will proceed with reasonable speed. The order may be settled upon two days’ notice.