Mills v. Ross

| N.Y. App. Div. | Jul 1, 1899

Barrett, J.:

The demurrer which was sustained was to an amended complaint. The interlocutory judgment dismissed this amended complaint with costs, but gave the plaintiff leave to again amend by including the receiver of the Family Fund Society as a party defendant, on payment of the costs of the demurrer within twenty days. The plaintiff did not avail himself of this privilege, and thereupon final judgment dismissing the complaint with costs and an extra allowance of $250 was granted. The appeal from this final judgment brings up for review the correctness of the interlocutory judgment and of the order granting the extra allowance, as the latter is specified in the notice of appeal. (Code Civ. Proc. § 1316.)

The learned judge assigned as his main reason for sustaining the demurrer that the receiver had not been made a party defendant. In his decision and judgment, however, he sustained the demurrer generally. We think he was right in the latter conclusion, though 'for a different reason from that assigned. The true ground upon which the demurrer should have been sustained is that the complaint does not state -facts sufficient to constitute a cause of action. It would have been equally bad had the receiver been made a party defendant. The action proceeds upon an inaccurate view of the status of the fund in question. The Family Fund Society was dissolved by the judgment of the Supreme Court and Oliver was appointed its receiver. The fund was paid over to this receiver for administration under the direction of the court. ITe did not take or hold it as an ordinary trustee. He took and held it as an officer of the court. In his hands it was in the hands of the law. If the receiver administered it improperly, he is - liable therefor. If the defendant was not entitled to the money, the receiver is liable to the parties who were entitled to it. We have already held that in making the payment the receiver was not protected by the permis■sive order which he obtained from the court without notice to the persistent policyholders. (People v. Family Fund Society, 31 A.D. 166" court="N.Y. App. Div." date_filed="1898-07-01" href="https://app.midpage.ai/document/people-v-family-fund-society-5184541?utm_source=webapp" opinion_id="5184541">31 App. Div. 166.) The plaintiff’s remedy, therefore, is to require the receiver in due course to account for the fund in question and to compel that officer to pay him his proper proportion thereof. He has no right of action directly against the defendant. If the latter is liable his liability is to the depleted estate. If he obtained the money from the receiver fraudulently or illegally, he can be required to restore it. Hltimately, however, the fund must be administered in the dissolution proceedings, and the plaintiff must look to the court’s representative therein for his proper share thereof. If the receiver shall compel restoration by the defendant, the plaintiff will then receive his share of the fund just as he would had it remained in that officer’s hands throughout. If, however, 'the receiver fails to compel such restoration, he will be charged with the sum improperly paid out; aud the plaintiff will then look to him personally and to his bond for satisfaction. The right off action to recover back the money paid to the defendant is vested solely in the receiver. It is not a case where a cestui que trust may maintain an ■action against the trustee and one who has defrauded the trust estate upon an allegation that the trustee was a party to the fraud, or that he, though not such a party, has refused to bring the action. The trust estate in that class of actions is not in the hands of a representative ■of the court. Even there the cestui que trust sues in the legal right of the trustee. Here the legal right is in the receiver, and there can be no equity in a cestui que trust to support an independent action based upon the refusal of such an officer to proceed. That would be equivalent to basing such an equity upon the indifference of the court to the cestui que fatost’s rights and its willingness to compel just activity on the part of its representative.

If, then, the fund was paid out fraudulently, the court will require its restoration. If paid out innocently, but without proper authority, to one who was not entitled to it, the court will also require restoration. In the latter case, the court will instruct the receiver to proceed against the payee. In the former it may do likewise, or, if more appropriate, it may remove the receiver and appoint, some •one in his place who will be more likely to act effectively. In no aspect of the situation, however, can there be an independent accounting with regard to this fund, outside of or apart from the accounting in the pending dissolution proceeding. The defendant is liable either in that proceeding or in an action by the receiver appointed therein. He is thus liable, if at all, for the entire sum improperly paid to him, and that is his sole liability. When that liability has been enforced, he will have a right to present and prosecute his alleged claim thereto the same as the plaintiff and all others similarly situated. He and they can harmoniously exercise that right upon the accounting to which he and they will be entitled •—to be had where it properly belongs—in the pending dissolution proceeding. It follows that the plaintiff cannot maintain this action, and that the demurrer was properly sustained.

We think, however, that the extra allowance of $250 should not have been granted. Nominally, the subject-matter of the action was the fund, as to which the plaintiff prayed that the defendant be adjudged a trustee. What the plaintiff sought to recover, however, was his pro rata share of this fund, which, upon' the undisputed proof, amounted to but $25.65. It is true that he brought this action on his own behalf and on behalf of all others similarly situated, who might elect to become parties thereto and to contribute to the expense thereof. It appears, however, that no other person had so elected ; and, consequently, when the allowance was granted, the plaintiff had complete control of the action and could continue, compromise, abandon or discontinue it at pleasure. (Hirshfeld v. Fitzgerald, 157 N.Y. 166" court="NY" date_filed="1898-11-22" href="https://app.midpage.ai/document/hirshfeld-v--fitzgerald-3606484?utm_source=webapp" opinion_id="3606484">157 N. Y. 166.) We think the allowance should, at that stage of the action and under the circumstances then existing, have been limited to five per cent of the plaintiff’s real claim upon the fund.

The judgment appealed from should be modified by reducing the allowance accordingly, and as thus modified affirmed, without costs of this appeal.

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

Judgment modified as directed in opinion, and as modified affirmed, without costs of appeal.