Rogers v. Wendell , 61 N.Y. Sup. Ct. 540 ( 1889 )

Martin, J.

On the 8th day of November, 1884, Nathan D. Wendell, the defendant’s testator, was appointed temporary receiver of the property of the Carthage Company, in an action to dissolve such corporation. On the4th day of December, 1884, he became permanent receiver thereof. On November 17, 1884, he employed the plaintiff to take charge of the property of the company at Carthage, and to pay certain disbursements necessary for its protection. The plaintiff entered upon and continued in such employ until January 5, 1886, when Wendell died. During the continuance of such employment the plaintiff furnished materials, looked after the property generally, made reports to Mr. Wendell weekly, and drew drafts upon him for various sums disbursed by plaintiff, which were paid. The plaintiff was not paid for his services, which were of the value of $409, nor was he paid $38 disbursed by him under and in pursuance of such contract. This action was to recover for such services and unpaid disbursements. On the trial the court held that Wendell did not assume aiiy personal liability for the services rendered or disbursements made by the plaintiff, and that plaintiff was not entitled to recover. T cannot assent to this conclusion. In Schmittler v. Simon, 101 N. Y. 557, 5 N. E. Rep. 452, it is said: “Neither executors nor administrators have power to bind" the estate represented by them through an executory contract, having for its object the creation of a new liability, not founded upon the contractor obligation of the testator or intestate. They take the personal property as owners, and have no principal behind them for whom they can contract. The title vests in them for the purposes of administration, and they must account, as owners, to the persons ultimately entitled to distribution.. In actions upon contracts made by them, however they may describe themselves therein, they are personally liable.” In Willis v. Sharp, 113 N. Y. 591, 21 N. E. Rep. 705, the court says: “It is the settled doctrine of the courts of common law that a debt contracted by an executor after the death of his testator, although contracted by him as executor, binds him individually, and does not bind the estate which he represents, notwithstanding it may have been contracted for the benefit of the estate. Austin v. Munro, 47 N. Y. 360. It has been held in numerous cases that an executor, carrying on a trade under the authority of the will, binds himself individually by his contracts in the trade. He is not bound to carry on the trade and incur this hazard, although authorized or directed to do so; but, if he does carry it on, the contracts of the business are his individual contracts.” It is true that in the last case it was held that under the provisions of the testator’s will the estate was also bound in equity for the debt in question, yet it was not held that the executor was not- individually liable, but in effect held that in addition to the personal responsibility of the executor the creditor had a claim in equity against the estate. In Davis v. Stover, 16 Abb. Pr. (N. S.) 227, it is stated that as a general rule an agent employed by a receiver in the execution of a trust must look to the person employing him individually for his pay, and an executory contract of this character does not bind the estate. But it was held in that case that where there was an express agreement that the compensation was to be made out of the estate the services might constitute an equitable set-off against a claim the estate held against the agent. In Noyes v. Blakeman, 6 N. Y. 580, it is said: “It is undoubtedly true, osa general rule, that where a trustee employs agents in the execution of his trust they are to look to him individually, and have no lien upon the trust fund for their compensation.” In Mygatt v. Wilcox, 45 N. Y. 309, it is said: “A party who employs an attorney is personally liable to him for his services, although acting as a trustee or in a representative capacity in the business in which he employs him. Bowman v. Tollman, 2 Rob. (N. Y.) 385.” In People v. Insurance Co., 30 Hun, 142, it was held that a receiver was liable for rent of premises occupied by him. In Kedian v. Hoyt, 33 Hun, 145, it was held that a trustee was personally liable for work, done and for materials furnished to the trust-estate. In Ryan v. Rand, 20 Abb. N. C. 314, which was an action against a receiver individually for services, it was said: “The trial judge erred in holding that the defendant was not individually liable for the services rendered upon his accounting as receiver. The rule is that a person employed by a trustee, receiver, general assignee, executor, or administrator, in matters pertaining to the execution of the trust, must look to the person employing him, individually, for his compensation, as the contract does not bind the estate he represents. The title to the trust property vests in these different officials, and they must account for it to the persons ultimately entitled to distribution. They are individually liable, because they have no responsible principal behind them, for whom they may contract, and against whom the creditor may enforce his demand.” Patton v. Baking Powder Co., 114 N. Y. 4, 20 N. E. Rep. 621.

On the argument it was practically assumed that Wendell’s liability as receiver was similar to the liability of an executor or administrator, and several of the cases cited to sustain this judgment relate to the liabilities of thelatter. Conceding the correctness of this assumption, the Schmittler and Willis Cases, supra, must be regarded as controlling authorities in this case. But, independent of those cases, the other authorities cited are to the effect that the receiver was individually liable to the plaintiff. I think it should be so held, both upon principle and authority. Wendell employed the plaintiff, and he performed the services and made the disbursements for which he seeks to recover. The plaintiff had no knowledge of the directions which the court gave Wendell as receiver, nor of the powers that were vested in him by its orders. The receiver had no principal against whom the plaintiff could maintain an action. Nor could he maintain an action against Wendell’s successor, as there was no contract or privity between them. Navigation Co. v. Railroad Co., 41 N. J. Eq. 187, 3 Atl. Rep. 134. If the plaintiff cannot recover against the estate of Wendell, he has no right of action, and his claim cannot be enforced. A receiver cannot of his own motion contract debts chargeable upon the fund in litigation. While a court may allow expenses incurred by a receiver for the preservation of the property, it is nevertheless the order of the court, and not the act of the receiver, which creates the charge, and upon which its validity depends. Vilas v. Page, 106 N. Y. 451, 13 N. E. Rep. 743. It is no answer to the plaintiff’s claim to say that if it is just and proper the court will allow it, and order it paid. It may have been perfectly proper so far as the plaintiff was concerned and still improper as against the estate. The receiver may have been guilty of some act which would render the allowance of this claim against the estate improper. In such event the plaintiff’s claim would be disallowed, and he compelled to lose his demand, although his action was in all things proper. The plaintiff’s rights under his contract should be dependent upon no such uncertain remedy for their enforcement. He made his contract with the receiver, presumptively, upon his individual responsibility, and the receiver should be required to perform it.

But it is said that the receiver ought not to be held personally liable upon a contract made for the benefitof the estate he represents. Why not? If his action was of doubtful propriety, or if the estate was of doubtful sufficiency, why should not the receiver be liable, if, acting under such circumstances, he obtains the services and property of another? If the estate was insufficient, he knew it better than any other person, and should not have incurred the liability. Under such circumstances the law would not require it of him, and common honesty would forbid his making such a contract at the expense of another. If held to be individually liable, no improper harm can fall upon the receiver, or his estate. If the action of the receiver in making this contract and incurring this expense Was proper and authorized, the demand, when paid, can properly be charged in his accounts, and will be allowed by the court. If the receiver acted improperly, or without authority, in employing the plaintiff and directing him to make such disbursements, then his estate should bear the burden of his unauthorized act, and it should not be cast upon the plaintiff. This is not a case where there was an agreement by the plaintiff to exonerate the receiver from individual liability, nor Where there was an agreement to make the debt a charge upon the trust-estate. Nor does the evidence tend to show even that the plaintiff performed such services, and made such disbursements, upon the faith and credit of the estate. Therefore the cases of New v. Nicoll, 73 N. Y. 127; Foland v. Dayton, 40 Hun, 563; Martin v. Platt, 51 Hun, 435, 4 N. Y. Supp. 359, have no application. Although it may be that Wendell could have exempted himself from individual liability by an express agreement to that effect, still an express agreement was necessary, and it was not sufficient that the plaintiff, in doing the work and making the expenditure, did it upon the faith and credit of the estate. New v. Nieoll, supra. I think the trial court erred in holding that Wendell was not individually liable to the plaintiff, and in dismissing the complaint, and that for such error the judgment should be reversed.

For concurring opinion of Hardin, F. J., see 8 N. Y. Supp. 515.