In re Bank of United States

237 A.D. 104, 260 N.Y.S. 866, 1932 N.Y. App. Div. LEXIS 5281

Opinions

Martin, J.

The respondent, a depositor in the Bank of United States, on December 10, 1930, at which time it was closed by the Superintendent of Banks, had a credit balance in his account. He duly filed a claim therefor with the Superintendent of Banks. The claim was rejected. The respondent then brought an action in the Municipal Court for his balance. The bank set up a counterclaim alleging that the respondent was indebted to it as indorser on two notes. The question of notice of dishonor was raised with respect to the notes. On the trial it was proved that he had received notice of dishonor on one note and waived it with respect to the other note. The trial court granted the bank judgment on its counterclaim and directed that the said judgment be paid out of or set off against the respondent’s deposit balance.

The respondent appealed from the form of this judgment to the Appellate Term which granted him judgment in the sum of $56.51, the difference between his deposit balance and the defendant’s counterclaim, and gave him costs amounting to the sum of $53.60. The liquidation dividends of -thirty per cent and fifteen per cent have been paid to the respondent on the amount of the judgment of $56.51.

The sole question presented to this court is whether the judgment creditor of a bank in liquidation who obtains a judgment after the commencement of the liquidation on a claim contested by the liquidator is entitled to the payment of costs in full or to regular liquidation dividends on such costs.

A similar proposition was before this court in Matter of Carnegie Trust Co. (161 App. Div. 280). In that case it was held that in an action brought against a bank taken over by the Superintendent of Banks the costs and disbursements taxed in such an action are payable by the Superintendent in full out of the bank’s property. The court said: “ It is well settled that costs against executors, administrators, assignees for the benefit of creditors and receivers are payable out of the estate and have priority over the claims of general creditors. (Matter of Friedlander, 160 App. Div. 475; Cunningham v. McGregor, 12 How. Pr. 305; Matter of Randell’s Estate, 8 N. Y. Supp. 652; Matter of Mahoney, 37 Misc. Rep. 472; Camp v. Niagara Bank, 2 Paige, 283; Columbian Ins. Co. v. Stevens, 37 N. Y. 536; People v. Locke. Co., 42 Hun, 484.)”

Although the appellant admits the existence of such a ruling, we are now asked to hold to the contrary, on the ground that the above opinion was erroneous.

The authorities on this subject appear to distinguish between cases where the costs have been awarded prior to liquidation and those where costs have been awarded in a litigation terminating unfavorably to the claim of the liquidator. There are other cases which hold that the liquidator must pay costs out of the fund in his possession where the litigation was wholly or partly carried on by the liquidator in an effort to defeat the claim of a claimant.

There appears to be no valid reason offered why costs should not be allowed and paid in full when the liquidator contests a claim and costs are awarded to the successful party. Such costs are given as a matter of right because of such successful termination of the litigation. Any other ruling, especially where small claims are involved, would cast the burden of the litigation upon the successful litigant. A very good illustration is to be found in a case where a claim for $100 is rejected by the liquidator. A trial and an appeal to the Appellate Term may require an expenditure of sixty or seventy dollars for printing the record and for stenographic minutes. If a dividend only is to be paid on the costs, the successful litigant may not be reimbursed for disbursements actually expended. If a liquidator elects to contest a claim and is unsuccessful, he should pay in full the costs and disbursements awarded to the successful party.

We believe that the purpose of section 1500 of the Civil Practice Act, relating to the payment of costs, is to protect such a litigant by permitting the collection of costs and disbursements in full.

The order appealed from should, therefore, be affirmed, with twenty dollars costs and disbursements.

Finch, P. J., and Townley, J., concur; Merrell and Sherman, JJ., dissent and vote for modification.