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Section 14, subd. 3, enacts that a court has power to punish by fine and imprisonment a neglect of duty where a party to the action fails to pay a sum of money ordered to be paid, where by law execution cannot be awarded for the collection of such sum. Held, that where, on a substitution of attorneys, an order is made requiring clients to pay the former attorney his compensation, the attorney in the event of failure to pay may have an execution.

Appeal from Special Term, Suffolk County.

Action by Thomas Kane and others against C. Gunther Rose, as the sole surviving administrator of the estate of John Manton, deceased, and others. From an order directing plaintiffs severally and jointly to pay Joseph Wood a certain sum for services rendered as an attorney, plaintiffs appeal. Affirmed.

Argued before GOODRICH, P. J., and JENKS, WOODWARD, HIRSCHBERG, and HOOKER, JJ.

Martin T. Manton, for appellants.
Thomas G. Frost, for respondents.

WOODWARD, J. Joseph Wood, an attorney and counselor of this court, was retained by the plaintiffs to prosecute an action to set aside a certain conveyance of real estate. The action, after some delay, was brought on for trial at a Special Term of the Supreme Court, resulting in a dismissal of the complaint. The plaintiffs desired to appeal from the judgment, but were dissatisfied with their attorney, and made a motion for an order substituting Martin T. Manton. An order was granted making the substitution without requiring bonds for the protection of the lien of Mr. Wood under the provisions of section 66 of the Code of Civil Procedure. There being a dispute as to the amount due the latter, the order directed the appointment of a referee "to take proof as to the nature and terms of the retaining of Joseph Wood, Esq., as attorney for the plaintiffs herein, and the value of his services and necessary disbursements not already compensated for, and the amount so due to Mr. Wood, and to report the same back to the court with an opinion thereon"; and it was further ordered "that the said Joseph Wood have a lien to the extent of the amount allowed by said referee upon plaintiffs' cause of action, and all the pleadings, papers, and exhibits of the plaintiffs herein; and further order that no settlement of said cause of action be had or made except upon and after notice to said Joseph Wood." The referee appointed by such order entered upon the discharge of his duties, and found that there was owing to Mr. Wood the sum of $232.73, which report, with a modification, was confirmed by the court, and the order appealed from thereupon issued. This order provides that the plaintiffs "be and they hereby are directed to pay, as their joint and several obligation, to said Joseph Wood, Esquire, within twenty days from the date of the service of a copy of this order upon said Martin T. Manton, Esquire, attorney for said plaintiffs, the sum of two hundred seven and seventy-three one-hundredths dollars ($207.73), the amount found due said Joseph Wood, Esquire, from said plaintiffs, on said reference, together with the sum of eighty-seven and ninety-five hundredths dollars ($87.95) fees and expenses of said reference." The

plaintiffs appeal from this order, and urge that it was not contemplated by any of the parties that the court should make such an order, coupled, as it is, with an intimation in the opinion of the learned court that Mr. Wood may follow this order by a motion to punish as for a contempt if the same is not paid within the time limited. But the order itself does not provide for any punishment as for a contempt, and this court will not presume that any of its members will do that which is unlawful when called upon to act judicially. The plaintiffs accepted the order of substitution containing the provision for the reference, and that order, not having been appealed from, must be binding upon the parties in all of its terms and conditions. Section 66 of the Code of Civil Procedure provides that the "court upon the petition of the client or attorney may determine and enforce the lien," and, the plaintiffs having invoked the equitable powers of the court in making a change of attorneys (Greenfield v. Mayor, 28 Hun, 320, 321), they must be deemed to have submitted to the jurisdiction (Yuengling v. Betz, 58 App. Div. 8, 10, 68 N. Y. Supp. 574), and they are bound to submit to any lawful order of the court. The court has directed them to pay a certain amount within 20 days after the service of the order, and this must be accepted as the terms upon which the order of substitution was granted. There is no doubt of the power of the court to make an order of substitution upon the condition that the plaintiffs shall pay the amount then due to the attorney of record, and the power to send the matter to a referee to determine the amount then due is established by authority. Yuengling v. Betz, 58 App. Div. p. 10, 68 N. Y. Supp. 574, and authorities there cited.

In so far as the order appealed from is concerned, we are clearly of the opinion that the court had jurisdiction and power in the premises, and that the plaintiffs have no reason to complain. It may be proper to suggest, however, in view of the intimation in the opinion of the learned justice, that section 779 of the Code of Civil Procedure provides that, where a sum of money is directed by an order to be paid, if it is not paid within the time fixed by the order, or within 10 days after the service of the order, an execution against the personal property of the party required to pay the same may be issued by any party or person to whom the same is payable by the terms of the order (Halsted v. Halsted, 21 App. Div. 466, 467, 47 N. Y. Supp. 649), so that it is doubtful if there be any authority under subdivision 3 of section 14 of the Code of Civil Procedure to punish the plaintiffs as for a contempt of court. This subdivision limits the power of the court to punish as for contempt for the "nonpayment of a sum of money ordered or adjudged by the court to be paid" to a "case where by law execution cannot be awarded for the collection of sum, or for any other disobedience to a lawful mandate of the court." The order appealed from is merely an adjudication that the sum mentioned in the order is due to Mr. Wood, with a direction that it be paid. If the plaintiffs fail to pay the same within the time limited in the order, Mr. Wood may issue an execution against the personal property of the plaintiffs, as was done in the case of Greenfield v. Mayor, supra, although the dictum would extend the power beyond this point. The limitations which we have suggested appear to be sanctioned by

84 N.Y.S.-8

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O'Gara v. Kearney, 77 N. Y. 423, 426, and Myers v. Becker, 95 N. Y. 486, 493, and authorities there cited. The order appealed from should be affirmed, with costs.

Order affirmed, with $10 costs and disbursements. All concur.

(87 App. Div. 139.)

PEOPLE v. AMERICAN LOAN & TRUST CO.

In re SIMMONS.

(Supreme Court, Appellate Division, First Department. October 23, 1903.) 1. INSOLVENCY-DISSOLUTION OF CORPORATION-RIGHTS OF CREDITORS - RES

JUDICATA.

The decision of the court on appeal from an order of confirmation of the report of the referee in proceedings for the dissolution of a corporation, which disposed of the whole fund and directed it to be distributed among certain creditors, determined the rights of the creditors. 2. SAME REPORT OF REFEREE-HEARING ON EXCEPTIONS.

The report of a referee appointed in proceedings for the dissolution of a corporation, not only to take proof and report with his opinion as to claims for costs, expenses, and counsel fees, but to admit and reject creditors' claims, can only be reviewed on exceptions.

3. SAME-NOTICE TO CREDITORS.

A creditor of a corporation in process of dissolution, who has not appeared before the referee appointed to state the account of the receiver, is not entitled to notice of the filing of the referee's report.

4. SAME

EXCEPTIONS-PARTICIPATION IN BENEFITS.

Only those unpreferred creditors of a corporation who except to the report of the referee in proceedings for its dissolution, allowing interest to preferred creditors, are entitled to participate in the funds which, by rulings on the exceptions, are turned from the preferred claims. 5. SAME-EXCEPTIONS-SUFFICIENCY.

In proceedings for the dissolution of a corporation, a creditor who excepted to the report of the referee appointed to state the account of the receiver, which allowed interest on the claims of preferred creditors so far as that might prevent the payment in full of her preferred claims, sufficiently excepted to the report to entitle her to participate in the funds as an unpreferred creditor, on the court disallowing interest to the preferred creditors.

Appeal from Order Entered on Report of Referee.

Action by the people against the American Loan & Trust Company. From an order confirming the report of the referee for the distribution of the funds on dissolution of defendant corporation (80 N. Y. Supp. 627), certain creditors appeal. Modified.

Argued before VAN BRUNT, P. J., and McLAUGHLIN, PATTERSON, INGRAHAM, and LAUGHLIN, JJ.

H. B. Closson, for appellants Ritch and others.

B. E. V. McCarty, for appellant Hawes.

O. P. Metcalf, for appellants Manufacturers' & Traders' Bank and others.

Clarence E. Thornall, for appellants Browing and others.

Wm. S. Opdyke, for respondent receiver.

James Dunne, for respondents Bauer and others.

PATTERSON, J. This is an appeal from the report of a referee making a final distribution of the remnant of the assets of the American Loan & Trust Company, consisting of a fund in the hands of its receiver, and which, on May 1, 1902, amounted to $86,976.59. After deducting therefrom certain allowances, which are not objected to, the net amount remaining for distribution is $76,864.12, of which $59,987.95 is directed to be paid to three unpreferred creditors (in designated proportions), namely, Louis Bauer, William L. Koester, and Louise B. O'Connor, as administratrix of the estate of James O'Connor, deceased, and Louise B. O'Connor, individually. What is left, namely, $16,876.17, is directed to be distributed among the unpreferred creditors as a whole, after charging those above named with the amounts specifically directed to be paid them. This report was confirmed at the Special Term, and it is from that order of confirmation this appeal is taken.

The order, as made and entered, conforms to the requirement of this court as contained in a prior order made by us dated April 11, 1902, and entered May 3, 1902. 75 N. Y. Supp. 563. By that order the distribution of the fund in the hands of the receiver was restricted to Bauer, Koester, and Louise B. O'Connor, individually and as administratrix. It was made on an appeal from an order of the Special Term, relating to the distribution of this same balance in the hands of the receiver. In the second report of the referee he decided that certain preferred creditors were entitled to the whole sum of $59,987.95, and that it should be distributed among them as interest to which they were entitled upon their respective preferred claims. On the motion to confirm that report, the court at Special Term (73 N. Y. Supp. 584) held that the preferred creditors were not entitled to that amount, but that it should be distributed among all the unpreferred creditors of the corporation. On appeal to this court it was held that the preferred creditors were not entitled to interest, but that the amount was distributable among the unpreferred creditors who had filed exceptions to the second report of the referee. On appeal to the Court of Appeals that decision was affirmed (65 N. E. 200), but with the statement in the opinion of the court that the right of one of the unpreferred creditors, namely, the executrix of the estate of Granville P. Hawes, who claimed to have filed exceptions, and therefore should be admitted into the distribution, was not before that court for consideration, and it was not passed upon. On the motion to confirm the report of the referee now under review, many creditors of the corporation who had filed claims with the receiver, but who did not appear before the referee in the proceedings eventuating in the second report, and did not except thereto, have filed exceptions to the final report, and claim a general right to participate in the distribution of the fund, arising from the mere fact that they are creditors, while others, who' tardily filed exceptions to the second report, claim that their exceptions were in due time.

We regard the rights of each of the claimants, respectively, as being determinable by the status he occupied in the proceeding which resulted in the making of the second report. The order made by this court on the appeal from the order of confirmation of that second re

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port finally settled the rights of the claimants, disposed of the whole fund, and directed it to be distributed among those who were represented before the court. That fund was created by the diligence and through the efforts of certain unpreferred creditors, who had put themselves in the proper attitude to attack the second report of the referee. The order made by this court settled the principle of distribution, and named the distributees. We held that only those creditors were entitled to share in the distribution who had filed exceptions to the report of the referee. That decision was made in conformity with the requirement of rule 30 of the general rules of practice of the Supreme Court.

The reference, so far as creditors' claims are concerned, was not one merely to take proof and report to the court. Had it been such, no exceptions would have been required. The original order of reference did require the referee to take proof and report with his opinion as to claims for costs, expenses, and counsel fees incurred in the administration of the receivership; but it also ordered and directed the referee and clothed him with power to admit and reject all proofs of creditors' claims presented pursuant to notice by the receiver, in accordance with the rules and practice of the court requiring such presentation by those claiming to be creditors of the corporation. That called for judicial action on the part of the referee. He was not to act merely in an advisory capacity. He was required to adjudge, and, that being so, the rules and practice of the court demanded that his judgment should be reviewed upon exceptions.

When the cause came before us on the appeal relating to the second report there were no exceptants, other than Bauer, Koester, and Mrs. O'Connor, individually and as administratrix, unless it be Mrs. Bauer, as executrix, and to that further reference will hereafter be made. No other parties were before the court. The claims now presented by the Fayerweather estate, the Hull estate, the Seacord estate, and the Manufacturers' & Traders' Bank were not before the court. Exceptions were filed by those parties, but not until long after the order of this court of the 11th of April, 1902, was entered. Their exceptions accomplished no purpose whatever, and they were altogether too late, and no right was acquired by filing them. It is claimed, however, that those exceptions were timely, for the reason that no notice was given such exceptants of the filing of the referee's report, and therefore that their time within which to file exceptions had not been limited. They were not entitled to notice. On an examination of the referee's second report, we find the statement of the names of the parties who appeared before him and took part in the proceedings. Neither of the exceptants is named in that statement, and there is nothing in the rules of pro'cedure or in the law, as we understand it, which required notice of motion for the confirmation of that report to be given to every creditor who had merely filed a claim with the receiver. We are still of the opinion that the unpreferred creditors who are entitled to share in the distribution of the fund now remaining in the hands of the receiver are those unpreferred creditors who filed exceptions in due time to the second report of the referee and none other.