In Re the Assignment of Lewis

81 N.Y. 421, 59 How. Pr. 251, 1880 N.Y. LEXIS 257

• Court: New York Court of Appeals
• Decided: June 15, 1880
• Status: Published

Opinion

Finch, J.

The assignor in this case, in 1876, executed his bond and mortgage to Upham and Tucker, as trustees, to secure a debt due to them of $25,000. In 1879 he made a general assignment to John A. Davenport, in trust, to pay certain preferred creditors in full, or ratably, and out of any surplus remaining to pay the balance of his indebtedness in full, or so far as the assigned estate would allow. The mortgage contained a provision that, upon failure to pay interest or taxes, the whole mortgage debt, at the option of the creditor, should become due. That emergency arising, the mortgagees commenced an action for the foreclosure of their security; and through the intervention of a receiver appointed upon their motion, became possessed of the mortgaged lands pending the foreclosure. It appearing that Lewis had failed to pay the taxes of 1877, 1878 and 1879, and a Croton water tax, the mortgagees presented their petition to the Court of Common Pleas of the city of Hew York, reciting the foregoing facts, and asserting that the mortgaged lands were an insufficient security for the debt, and asked for an order that the assignee should pay and discharge the taxes in arrear. The assignment contained no provision giving any preference to taxes, or directing their payment at all, except as embraced in the gene rai and unpreferred debts of the assignor. The prayer of the petition was denied, and the order thereupon entered was afterward affirmed by the General Term.

We think the motion was properly decided. The assignee derives all his power from the assignment, which is both the guide and measure of his duty. Beyond that, or outside of its terms, he is powerless and without authority. The control oí the court over his actions is limited in the same way, and can only be exercised to compel his performance of the stipulated and defined trust, and protect the rights which flow from it. He distributes the proceeds of the estate placed in his care, according to the dictation and under the sole guidance of the assignment, and the statutory provisions merely regulate and guard his exercise of an authority derived from the will of the assignor. The courts, therefore, cannot direct him to pay a debt of the assignor, or give it preference, in violation of the terms of the assignment and the rights of creditors under it. To hold the contrary would be to put the court in the place of the assignor, and assert a right to modify the terms of the assignment, after it had taken effect, against the will of its maker, and to the injury of those protected by it. We agree that the assignee is merely the representative of the debtor and must be governed by the express terms of his trust. (Nicholson v. Leavitt, 6 N. Y. 519.) The case is not like those to which our attention was asked, of the distribution of a decedent’s or a bankrupt’s estate. There the law dictates the distribution because, in the one case, the decedent did not do it during his life, and in the others, by force of direct enactment, the court takes possession of the estate which the bankrupt is unable to hold. But in cases of general assignment, the right to control the distribution remains, as yet, in the assignor.

It is claimed that taxes constitute a debt due to the State, and are entitled to preference in payment from an insolvent’s effects. That they constitute a debt which the insolvent owes is true, and possibly an abstract right to a preference may belong to the State. But it is not necessary to discuss or determine that question, for the State is not here asserting any such claim. It has been content to rely upon its usual and ordinary inodes of collection, and neither to assert or enforce any such preference. It may never do so, and while it does not, we fail to see how an. individual can interfere in its behalf. It is not for the plaintiff to say when or how it shall drive its rights to results, or assume to vindicate an authority it chooses not to exert. Nor can the assignee, upon the petition of these mortgagees, be required to pay the taxes and water rent accrued since the assignment. If compelled to do so by State or municipal authority, he might be allowed the expense. Until then, his duty to those interested in his trust requires a different action. They would have a right to insist that he should not incur a needless expense, which produced no benefit to the fund but lessened it without necessity. The preference of the State, if it has any, is quite as much over the claim of these petitioners as over those of the general creditors, and we do not discover the equity which could lead us to enforce it against the latter for the benefit of the former.

The order should be affirmed.

All concur.

Order affirmed.