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Farrelly v. Skelly

Supreme Court of New York, Appellate Division

March 5, 1909

STEPHEN FARRELLY, RECEIVER
v.
MARY SKELLY ET AL.

[115 N.Y.S. 523] Frederic J. Swift (William R. Conklin, on the brief), for appellant.

Charles O. Maas, for respondents.

Argued before INGRAHAM, McLAUGHLIN, HOUGHTON, CLARKE, and SCOTT, JJ.

MCLAUGHLIN, J.

The plaintiff, as receiver of the City Trust, Safe Deposit & Surety Company of Philadelphia, which is a judgment creditor of the defendant Mary A. Skelly; as executrix of the estate of Patrick Larney, deceased, brought this action to impress a trust upon certain real property situate in the city of New York, known as No.216 East Forty-Ninth street. The complaint alleges the recovery of a judgment by the surety company which is wholly unpaid, and that the property in question was purchased by the defendant Skelly as executrix of the estate of Patrick Larney, deceased, with funds of the estate; title to such real estate being fraudulently taken in the name of the defendant Finnegan. The judgment demanded is that a trust be impressed upon such property in favor of the plaintiff, and that the same be sold and the proceeds derived therefrom be applied, so far as necessary, to the satisfaction of the judgment. The answers put in issue the material allegations of the complaint. At the trial the complaint was dismissed upon the merits, and the plaintiff appeals.

From the facts developed at the trial it appears that on the 27th of January, 1897, Patrick Larney gave to the surety company his bond, by which he agreed to save it harmless from any loss which it might sustain by reason of having issued its bond for $8,279 to the comptroller of the city of New York, on behalf of one Patrick Costello, to discharge a mechanic's lien in favor of the Glen Cove Granite Company. Patrick Larney died in May, 1897, leaving a will by which he gave all his property to his widow for life, remainder in equal shares to his seven children, naming two of them, John P. Larney and the defendant Mary A. Skelly, as executor and executrix. The will was admitted to probate, and letters testamentary issued to the executor and executrix named therein. The widow died in July, 1898, and John P. Larney died intestate some time thereafter, and the defendant Skelly was appointed his administratrix. The estate of Patrick Larney consisted solely of certain real property in the city of New York, known as Nos. 325-327 East Thirty-Eighth street, and on the 6th of June, 1901, by a deed of conveyance recorded the following August, the defendant Skelly, as sole surviving executrix, under a power of sale contained in the will, transferred this property to her aunt, the defendant Devlin.

In the meantime the Glen Cove Granite Company had brought an action in the Supreme Court of the state of New York to foreclose its lien, which resulted in a judgment against Patrick Costello; the complaint being dismissed as to the surety company. In February, 1901, however, the granite company commenced an action against the surety company on its bond in the United States Circuit Court for the [115 N.Y.S. 524] Eastern District of Pennsylvania. When this action was commenced, the surety company notified the defendant Skelly of that fact, and she at once consulted an attorney, one Anderson, who notified the attorney for the surety company that he had been retained by her in the subject-matter of the litigation. This action resulted on the 15th of May, 1901, in a judgment against the surety company for $6,532.63, and it immediately notified Anderson of the recovery of the same. During the course of the trial it was in effect admitted that the letter books of the firm of attorneys of which Anderson was a member would show that a letter was written to the defendant Skelly on May 20, 1901, and that the registers of the firm, containing a record of the proceedings in the granite company action, would show that the defendant Skelly called at their office the following day. The contents of the letter and the entries in the register do not otherwise appear, but the inference to be drawn from the admission is irresistible to the effect that the defendant Skelly knew of the recovery of the judgment against the surety company when she transferred the property referred to to Mrs. Devlin on the 6th of June, 1901. It further appears that on the 27th of June of the same year, she, by the same firm of attorneys, presented a petition to the court to be allowed to intervene in the action brought by the granite company in this state, asking that the judgment against Costello be vacated and she be given leave to defend or appeal.

An appeal was taken from the judgment obtained in the Circuit Court of the United States, which was ultimately, in 1903, affirmed by the Circuit Court of Appeals. The surety company then paid the judgment and served a formal proof of claim upon the defendant Skelly, as executrix, for the amount paid, which she rejected, and it thereafter commenced an action against her in the Supreme Court of this state. The result of this action was a judgment in its favor for $9,202.39, with costs against her personally. The surety company then filed a petition in the Surrogate's Court asking that she, as executrix, be compelled to account and pay its claim, and in the petition alleged, on information and belief, that she had received, as executrix, the proceeds of the sale of the Thirty-Eighth street property to the defendant Devlin. She accordingly filed an account, charging herself with $18,000, received from the sale, and crediting herself with payments to Mrs. Devlin of $6,000 $1,000 for funeral expenses, and $5,000 on a promissory note of the testator), and of $2,000 to each of the six surviving children of the testator, who were legatees under his will, and that such payments exhausted all of the assets which she had received. The surety company objected to the account on the ground that no vouchers were presented for any of the payments, and that they were illegal and improper, inasmuch as they were made after notice of its claim.

The issue raised by the objections to the account was sent to a referee to take proof and report, and he found that on June 7, 1901, the executrix had distributed $12,000 as claimed by her, which payments were unlawful, and that her account should be surcharged with this sum. He also disallowed the payment of $1,000 for funeral expenses, and surcharged her account with that amount. He charged the executrix [115 N.Y.S. 525] with $18,000 as proceeds derived from the sale of the Thirty-Eighth street property, together with interest on $13,000, from the 6th of June, 1901, and credited her with the payment of $5,000 on the note above mentioned, which left in her hands something like $15,000, out of which should be paid to the surety company $9,202.39, with interest from December 14,1903. His report in February, 1905, was confirmed by a decree of the Surrogate's Court, which settled the account as found, and directed the defendant Skelly to pay to the surety company $9,561.28, the amount of its claim with interest, and, in addition, $412.30, costs, and to distribute the balance among the six children of the testator, the legatees under his will, in equal payments of $911 each, which sums they were found to have received in full. Mrs. Skelly failed and neglected to comply with the decree by making the payment therein directed, and she was subsequently imprisoned for several months for failing to do so. Execution was also issued out of the Surrogate's Court on the decree, which was returned wholly unsatisfied.

This action was then commenced; the complaint alleging that the transfer of the Thirty-Eighth street property to Mrs. Devlin was without consideration, and for the purpose of hindering, delaying, and defrauding creditors, that the property was not actually sold until July, 1902, when it was conveyed to Elizabeth M. Anderson, and that the proceeds derived from this sale, some $17,500, were received by Mrs. Skelly and used by her in purchasing the Forty-Ninth street property, and title being taken in the name of the defendant Finnegan, her cousin. It is upon this property that the trust is sought to be impressed.

It appeared: That Mrs. Skelly had a bank account which was kept in the name of Skelly & Larney, but which was in fact her personal account, that when Mrs. Anderson purchased the Thirty-Eighth street property in 1902-ostensibly from Mrs. Devlin, the holder of the record title-her agent paid a deposit of $1,000, less his commission of $177.50, in cash, and the day following Mrs. Skelly deposited in her bank account the sum of $822.50 in cash. The agent was unable to state whether he paid the money to Mrs. Devlin or to Mrs. Skelly. When the title was closed and the deed of conveyance delivered, the balance of the purchase price was paid by two checks aggregating $16,755.87, and these checks were deposited the next day by Mrs. Skelly in the same account. The following September Mrs. Skelly signed the contract for the purchase of the Forty-Ninth street house as purchaser. Subsequently an adjournment for closing the title was had at her request, and it is conceded that the purchase price of this property was paid by her checks drawn upon this same account, being wholly, or in part at least, the identical money received from the sale of the Thirty-Eighth street premises, and that the defendant Finnegan, in whose name the title was taken, advanced no part of the consideration. After the conveyance of the Thirty-Eighth street house to Mrs. Devlin, in 1901, Mrs. Skelly and other members of her family continued to reside therein until the purchase of the Forty-Ninth street house, to which place they then moved, and where they still reside. Mrs. Devlin and Miss Finnegan, her niece who lived with her, also moved into [115 N.Y.S. 526] the Forty-Ninth street house when it was purchased, but they have since removed therefrom.

The foregoing facts were uncontradicted, and the trial court, upon the oral testimony of interested parties-not only uncorroborated, but contradicted as to the material portions-held that fraud had not been established, and the conveyance to Mrs. Devlin was a real and bona fide transaction. Such finding, if permitted to stand, upon the facts set out in the record, would be a travesty on justice.

But it is claimed by the respondents that the decree of the Surrogate's Court prevents a recovery, inasmuch as it is res adjudicata that the Thirty-Eighth street property was in fact sold to Mrs. Devlin, and that she paid $12,000 in cash therefor which is a bar to the maintenance of this action. It is not res adjudicata, and I am unable to see any validity in the claim thus made. The Code of Civil Procedure provides that a judicial settlement of the account of an executor or administrator is conclusive upon the parties: (1) That the items allowed for moneys paid out are correct; (2) that the party has been charged with all interest for moneys received for which he is accountable; (3) that the money charged as collected is all that was collectible on the debt stated; and (4) that the increase and decrease in the value of the property have been correctly stated. A decree of the Surrogate's Court settling the accounts of an executor or administrator is conclusive as to these facts. Section 2742. A decree directing the payment of a debt or a distributive share is also conclusive. Section 2743. But none of these items is attacked or questioned in any way by the present action. The plaintiff does not seek to charge the executrix with having received any greater amount from the sale of the Thirty-Eighth street property than that with which the decree charged her, and which she admitted she had received. Neither is any question made as to the amount decreed to be paid.

For this reason the authority called to our attention (Mutual Life Ins. Co. v. Schwaner, 36 Hun, 373, affirmed on opinion below, 101 N.Y. 681) has no application. There an executor caused real property belonging to the estate which he represented to be appraised and its sale directed by an order of the Surrogate's Court at not less than its appraised value. Under a power of sale contained in the will, the executor sold the property to a third person, the real purchaser being the executor himself and his partner, for the sum fixed by the order. He charged himself in the account subsequently filed in the Surrogate's Court with the amount thus received, and his accounts were finally and judicially settled. The property was subsequently sold under foreclosure and a surplus realized, which the persons interested in the estate claimed belonged to them, to the exclusion of the executor and his partner. It was held that these persons were represented in the Surrogate's Court at the time the decree was entered, that they were bound by it, and could not claim any further share.

This case was followed in Rhodes v. Caswell, 41 A.D. 229, 58 N.Y.Supp. 470, where property was sold by the executors to the wife of one of them. In their accounts the executors charged themselves with the purchase price, which the surrogate found to be the full fair [115 N.Y.S. 527] value of the property. Their accounts were settled by a decree duly entered, and the shares paid to the distributees as directed by the decree. It was held, Mr. Justice Cullen writing the opinion, that, assuming the sale to have been avoidable in the first instance, the wife of the executor could convey good title, since the ...


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