In Re the Accounting of Gall

74 N.E. 875, 182 N.Y. 270, 20 Bedell 270, 1905 N.Y. LEXIS 924

Opinion

Werner, J.

For twenty years this estate has been in litigation. It has been before this court on three previous appeals. (Gall v. Gall, 114 N. Y. 114; 138 id. 675; 160 id. 696.) The result of it all has been an adjudication finally determining the validity of the respondent’s claim to substantially the whole estate. With this adjudication, which seems eminently just on the merits, we are not disposed to interfere, unless some insurmountable rule of law compels us to do so.

"Upon this appeal two questions are presented for determination : (1) Is this proceeding baiued by the Statute of Limitations'? And (2) should the infant, Caroline Gall, have been made a party to it ?

1. The appellants’ reliance upon the Statute of Limitations is based on the fact that eight years and about one month elapsed between the date of the granting'of letters to tlie' administratrix, July 29th, 1890, and the date of tlie com mencement of this proceeding, September 3rd, 1898. Her counsel invokes the rule laid down in Matter of Rogers (153 N. Y. 316, 320) where this court said: “ It is well settled that as to legacies not charged upon land, distributive shares of an estate and debts owing by decedent, the statutes of this state give a concurrent remedy to legatees, creditors and next of kin, in courts of law and equity and in the Surrogate’s Court, and that as the Statute of Limitations is a bar at law it is also a bar in the Surrogate’s Court or in a court of equity.” There is no question as to that rule, but we think it does not apply to such facts as are disclosed in the case at bar. It will be observed that in December following the issuance of letters to the administratrix she was served with notice of the respondent’s claim. It was not rejected, nor were any proceedings taken to have the claim passed upon under the provisions of section 1822 of the Code of Civil Procedure, but an accounting and distribution of tlie estate were had, just as though the respondent had not been in existence.' In that accounting proceeding the administratrix not only made no mention of the respondent’s claim, but alleged upon oatli that her daughter Caroline was “ the only creditor or person claiming to be a creditor of the decedent.” The respondent was not cited to appear and had no notice of that proceeding. The decree entered therein, authorizing the distribution of the estate, was, therefore, void as to the respondent. (Matter of Killan, 172 N. Y. 547.) But this was not all. A serious wrong had been done to the respondent. His claim had not only been ignored, but the estate had been distributed and, as subsequent events proved, had been devastated. All this was accomplished through the falsehood and fraud of the administratrix. Thus it is obvious that the question is not simply whether the Statute of Limitations applies to such a proceeding, but whether an administratrix can use it as a shield against her own fraud.

When the respondent had duly presented his claim to the administratrix, he was justified in assuming that no final decree settling the latter’s accounts and distributing the estate would be made without notice to him. Acting upon that assumption he began an action at law in 1893 against the administratrix for the payment of his claim. The administra trix contested that action at every step, two appeals being taken to the Appellate Division and one to this court. After the judgment therein in favor of the respondent had been affirmed by the Appellate Division on the second appeal, and pending the appeal to this court, in September, 1898, the respondent commenced this proceeding to modify the decree settling the account and distributing the estate.

The numbers of the sections of the Code of Civil Procedure which apply to this proceeding have been changed since the issuance of letters to the administratrix, but their substance remains unaltered and we will refer to them by their ' present numbers. Sections 2726 and 2727, so far as material, provide that a creditor of a deceased ¡rerson, after the expiration of one year from the issuance of letters, may apply to the surrogate for a judicial settlement of the representative’s account. The representative also had the right to so apply. Section 2722 provides that after six months have expired since the issuance of letters a creditor may petition the surrogate for a decree directing the payment of liis claim. Section 2514 defines the meaning of terms used in these sections and provides : “ The word debts ’ includes every claim and demand, upon which a judgment for a sum of money, or direct; ing the payment of money, could be recovered in an action ; and the word creditor ’ includes every person having such a claim or demand. * * * ”

The appellant contends that these sections of the Code afforded the respondent an ample remedy at any and all times for six years after eighteen months had expired since the issuance of letters to the administratrix; that the remedy thus provided was concurrent with the remedy at law, and that the statute which would bar one would bar the other. "We do not x propose to discuss that question in its general aspects, but simply as applied to the facts of this case. Here the administratrix has obtained a judicial settlement of her accounts and has distributed the estate without citing a creditor whose claim has been duly presented. As to that creditor the proceeding was a nullity. It is idle to talk about his having had an effective remedy in the Surrogate’s Court. While he was trying to establish his claim in a court of competent jurisdiction where the administratrix was contesting him at every step, the administratrix was engaged in despoiling.the estate of which she had obtained possession under the false representation to the surrogate that there were no creditors. The court in which the respondent prosecuted his claim was the . very tribunal to which he would have been relegated by the. surrogate if the latter had been ousted of .jurisdiction by the opposition of the administratrix to the claim. Section 2722 expressly provides that where a répresentative of an estate puts in an answer questioning a claim the surrogate must dismiss the proceeding. Practically the same result would.have followed if the respondent liad proceeded under sections 2726 and 2727 for a general accounting. In such a proceeding the surrogate has jurisdiction to pass only upon claims that have been admitted or established upon the accounting or other proceeding in the Surrogate’s Court or other court of competent jurisdiction, and where there is a dispute the creditor is driven to the common-law courts to have his claim established. (Code Civ. Pro. § 2743; Glacius v. Fogel, 88 N. Y. 434; Riggs v. Cragg, 89 id. 479; Lambert v. Craft, 98 id. 342, 347; Jessup’s Sur. Pr. p. 1310.) Thus it will readily be seen that if the appellant’s contention is sound, the representative of an estate needs only to contest a claim long enough to be sure of defeating it by pleading the Statute of Limitations as to the remedies given to the creditor by the Code, but which he had neither occasion nor authority to invoke until his contested claim has been legally established'.

Sec. 2745 provides that “ where an action is pending between the executor or administrator, and a person claiming to be a creditor of the decedent; the decree must direct that a sum, sufficient to satisfy the claim, or the proportion to which it is entitled, * * * be retained in the hands of the accounting party.” That section clearly has no application here, because it plainly refers only to a case in which no distribution has been made before the pendency of an action to enforce a claim is brought to the notice of the surrogate. It follows from this, we think, that the administratrix by her conduct in distributing the estate without citing the respondent in her accounting proceedings, made herself personally responsible for the amount of his claim, and that she cannot now be heard to say that the Statute of Limitations protects her from the consequences of her own wrong.

(2) The learned Appellate Division appears to have held that the infant, Caroline Gall, was not a necessary or proper party to this proceeding, on the ground that this was a contest simply between the respondent and the administratrix, in which the latter was sought to be made personally liable for the amount of the respondent’s claim, because of her wrong in procuring a decree of distribution without citing him. We take a different view. This proceeding is of an equitable nature, and while the surrogate would have no right to decree restitution by the infant, of the portion of the estate paid to her (Matter of Underhill, 117 N. Y. 471; Matter of Lang, 144 id. 275), still as one of the next of kin she was interested in the final distribution of the estate, and her rights would necessarily be affected by the final decree herein. In passing upon a somewhat similar question in Riggs v. Cragg (89 N. Y. 479, 486) this court said : “ It is a general rule of courts of equity that all persons materially interested in the object of the suit must be joined, so that there may be a complete and final determination of the controversy. There are exceptions to the rule, where its enforcement would cause .great practical inconvenience, or where the interests of persons not parties are deemed to be protected by representation. Of the latter class is the case of a bill filed by a single creditor or legatee, against an executor or administrator for the satisfaction of his single debt or legacy, without joining the other creditors or legatees, or next of kin, although the allowance of the particular debt or legacy may diminish the fund in which they are interested. But if special facts exist, which render the actual joinder of all the persons interested proper, as where there is a deficiency of assets, the bill must make all the persons so interested parties either as plaintiffs or defendants, or where their rights are identical or not inconsistent, it must be filed in behalf of the plaintiff and all others in the same relative situation. And in actions against trustees in respect to the trust property or for an accounting, and the administration of the trust estate, all the oestuis que trust or beneficiaries are necessary parties.” (See, also, Matter of St. John, 104 App. Div. 460.)

We think the special facts of this case render it proper, if not necessary, that the infant, Caroline F. Gall, should be made a party to the proceeding. The respondent had the right to proceed against the administratrix alone, but the American Surety Company, who had been made a party and was the surety upon her bond, had the right to ask that the infant, who would be vitally interested in the question of ultimate restitution and distribution, as well as in the alleged devastation of the estate, should be brought in so that the surrogate, to the extent of his jurisdiction, could pass upon and protect her rights. That is the practice which seems to have been provided in section 2727 for cases where there is a surplus of an estate distributable to creditors or to persons interested.. In such cases the surrogate may at any time issue a supplemental citation to the same classes of persons who are required to be cited in proceedings for a final accounting under section 2728.

There are objections by the appellants to the report of the referee, but they present questions of fact which we have no jurisdiction to review.

Since all the questions relating to the liability of the administratrix have been correctly disposed of, and the only remaining issues are such as may possibly arise when the infant is made a party, the order of the Appellate Division should not be reversed, but should be • modified by directing that the proceeding be remitted to the Surrogate’s Court, and when so remitted that the American Surety Company be permitted to make the infant a party, upon such conditions as to time as the Surrogate’s Court may deem just; the proceeding should then be continued in so far, and so far only, as said court may deem it necessary for the proper protection of the infant’s rights and interests.

As so modified the order of the Appellate Division should be affirmed, without costs to either party on this appeal.

Gray, O’Brien, Bartlett, Haight and Vann, JJ., concur ; Cullen, Ch. J., not sitting.

Ordered accordingly.