The receiver in this case was appointed in voluntary proceedings for the dissolution of a.corporation on the 11th day of September, 1895, and at that time the sheriff had levied upon certain property of the corporation under .warrants of attachment against the corporation. Subsequently the property thus levied, upon was, under an order of the court, turned over to the receiver, subject to the attachment theretofore levied" upon it. Such property thus levied upon by the sheriff' realized the sum of. $1,669.81. The receiver proceeded to reduce to possession- other property of the corporation not levied upon by the sheriff, and he has now in his possession, including the amount realized from the property so levied Upon, the sum of 82,42-1.6-1.
The order appealed from directs the -receiver to retain in his hands the sum of $1,000, as- a fund from which to pay the necessary expenses of administration, including his fees as receiver. We think this provision is clearly, right. ■ The fees and expenses administration are disbursements necessary to realize the sum of money from the assets of the corporation to distribute among its. creditors and stockholders. Sxich disbursements are necessary before the property can be reduced to money and the debts of the corporation collected: They come in ahead of. all claims against the corporation, because their application is necessary to produce the fund from which such claims áre to'be paid.. But for such services rendered by the receiver-or liis counsel, and-his necessary disbursements, to pay for which- this fund is reserved, there would be no fund for ’ distribution among the creditors. A receiver cannot be expected to-devote his time to the collection of the assets of. a corporation for the. purpose of distribution among those entitled thereto, .without compensation, or without being paid the necessary expenses paid by him in the discharge of his duty-of collecting the assets and turning -them into money. Thus, expenses -and disbursements are just as much - a charge upon the fund after he has collected it as would be-the amount expended for the completion of property in process of manufacture, which had come into the' hands of the receiver before completion, and which he afterwards sold for a sum largely in excess of the amount that he could have procured for it in the condition in which it - came into his hands. In either case the disbursements-*417are necessary in order to provide the fund which is to be distributed, and are to be paid before any of the claims against either the property or the former owner of the property. When a court of equity - takes property into its possession for distribution among those entitled to it, the necessary costs and expenses for the protection of that: property or fund are of necessity a lien upon the fund, superior to-that of the person who was its former owner, or to those who succeed to the former owner’s rights. Where there was a specific lien upon the property created before the receiver took possession, and where the receiver’s possession is subordinate to that lien, the lienor’s interest not vesting in the receiver, then, of couTse, the lien comes in ahead of the receiver’s claim for compensation or disbursements. Where, however, that lienor was a party to the. proceeding, and where the receiver is ordered to take into his possession the property of the lienor as well as of the former owner, to protect that property for the lienor and others interested in it, then the lienor’s interest becomes chargeable with the proportion of the expenses necessary to protect- the property or to change it into money for the lienor’s benefit.
The property of this corporation was levied upon under attachments. The attaching creditors had a right to have the property disposed' of to pay their liens. The court, however, as a court of equity, took the property and directed the receiver to turn it into money and to hold the- money in place of the property, the proceeds to be applied, so far as necessary, to the payment of the liens. The expense.of turning this property into money and dividing it among the various attaching creditors was one that must be borne by the property thus turned into money for the benefit of the attaching creditors and others having a right subordinate to them. If the property had been sold by the sheriff, the sheriff’s fees and disbursements would have been payable before anything would have been payable to the attaching creditors.
It does not appear that the attaching creditors opposed the granting of this order directing the attached property to be delivered' to the receiver; nor does it appear that this delivery to the receiver was made solely 'for the benefit of the corporation. The amount realized upon the sale of this property, namely, $1,669.84, is a special fund held by the receiver, not as receiver of the corporation, but as an officer appointed by the court to take and sell this specific property; eand as the property sold for less than the liens, upon it,' the ¡creditors of the corporation have' no interest in it.. It, belongs 'to the attaching creditors, and no reason is suggested why it should not be paid to them. So ' far as appears, all the expenses attending the salé have been paid, with the exception of the compensation to be allowed to the receiver for receiving and selling the property and collecting and paying over the proceeds thereof.' ■ It is quite clear that neither the State nor the. city have a lien upon this special fund as superior to the attaching creditors. By the attachment, a specific lien Was created to which this "property Was subject; and when .the receiver was appointed', this property did not, ■come into his hands as the property of the corporation. .It was. property held by the sheriff with which to satisfy the specific ■ lien created by the levy under the attachment. We held in the case of Wise v. Wise Co. (12 App. Div. 320) that as no. lien had beén acquired by the city or State prior to the levy of the attachments, the right of the city to apply this property to the payment of taxes was subordinate to that lien. As stated in that case, the attaching creditor had a right to have the sheriff sell this property and páy the proceeds,to hiin upon his'.entering final judgment in this action. The title ,to¡. the property became subordinated to that lien thus, acquired, and it is quite clear that neither the Staté nor the city, would have been entitled to take this property out of the hands of the sheriff, after he had levied upon it under the attachment, to be applied to the payment of taxes against the corporation, and the receiver received this property “ subject to all existing liens by attachment thereupon, which said liens * * * follow the said property into the hands of the said receiver and remain upon, follow and attach to. the same, and when the same should be sold or collected, then to attach in like manner to any and all proceeds thereof, subject to. distribution in due course of law as might by "the court be directed.” Thus, when the receiver sol'd this property, the proceeds in. his hands stood subject to the same liens that were, upon the property when it was received by him ; and these, liens are entitled to be paid before any payment is made either to the State or city on account of taxes due from the corporation.It does not appear that the attaching creditors opposed the granting of this order directing the attached property to be delivered' to the receiver; nor does it appear that this delivery to the receiver was made solely 'for the benefit of the corporation. The amount realized upon the sale of this property, namely, $1,669.84, is a *418special fund held by the receiver, not as receiver of the corporation, but as an officer appointed by the court to take and sell this specific property; eand as the property sold for less than the liens, upon it,' the ¡creditors of the corporation have' no interest in it.. It, belongs 'to the attaching creditors, and no reason is suggested why it should not be paid to them. So ' far as appears, all the expenses attending the salé have been paid, with the exception of the compensation to be allowed to the receiver for receiving and selling the property and collecting and paying over the proceeds thereof.' ■ It is quite clear that neither the State nor the. city have a lien upon this special fund as superior to the attaching creditors. By the attachment, a specific lien Was created to which this "property Was subject; and when .the receiver was appointed', this property did not, ■come into his hands as the property of the corporation. .It was. property held by the sheriff with which to satisfy the specific ■ lien created by the levy under the attachment. We held in the case of Wise v. Wise. Go. (12 App. Div. 320) that as no. lien had beén acquired by the city or State prior to the levy of the attachments, the right of the city to apply this property to the payment of taxes was subordinate to that lien. As stated in that case, the attaching creditor had a right to have the sheriff sell this property and páy the proceeds,to hiin upon his'.entering final judgment in this action. The title ,to¡. the property became subordinated to that lien thus, acquired, and it is quite clear that neither the Staté nor the city, would have been entitled to take this property out of the hands of the sheriff, after he had levied upon it under the attachment, to be applied to the payment of taxes against the corporation, and the receiver received this property “ subject to all existing liens by attachment thereupon, which said liens * * * follow the said property into the hands of the said receiver and remain upon, follow and attach to. the same, and when the same should be sold or collected, then to attach in like manner to any and all proceeds thereof, subject to. distribution in due course of law as might by "the court be directed.” Thus, when the receiver sol'd this property, the proceeds in. his hands stood subject to the same liens that were, upon the property when it was received by him ; and these, liens are entitled to be paid before any payment is made either to the State or city on account of taxes due from the corporation.It does not appear that the attaching creditors opposed the granting of this order directing the attached property to be delivered' to the receiver; nor does it appear that this delivery to the receiver was made solely 'for the benefit of the corporation. The amount realized upon the sale of this property, namely, $1,669.84, is a special fund held by the receiver, not as receiver of the corporation, but as an officer appointed by the court to take and sell this specific property; eand as the property sold for less than the liens, upon it,' the ¡creditors of the corporation have' no interest in it.. It, belongs 'to the attaching creditors, and no reason is suggested why it should not be paid to them. So ' far as appears, all the expenses attending the salé have been paid, with the exception of the compensation to be allowed to the receiver for receiving and selling the property and collecting and paying over the proceeds thereof.' ■ It is quite clear that neither the State nor the. city have a lien upon this special fund as superior to the attaching creditors. By the attachment, a specific lien Was created to which this "property Was subject; and when .the receiver was appointed', this property did not, ■come into his hands as the property of the corporation. .It was. property held by the sheriff with which to satisfy the specific ■ lien created by the levy under the attachment. We held in the case of Wise v. Wise. Go. (12 App. Div. 320) that as no. lien had beén acquired by the city or State prior to the levy of the attachments, the right of the city to apply this property to the payment of taxes was subordinate to that lien. As stated in that case, the attaching creditor had a right to have the sheriff sell this property and páy the proceeds,to hiin upon his'.entering final judgment in this action. The title ,to¡. the property became subordinated to that lien thus, acquired, and it is quite clear that neither the Staté nor the city, would have been entitled to take this property out of the hands of the sheriff, after he had levied upon it under the attachment, to be applied to the payment of taxes against the corporation, and the receiver received this property “ subject to all existing liens by attachment thereupon, which said liens * * * follow the said property into the hands of the said receiver and remain upon, follow and attach to. the same, and when the same should be sold or collected, then to attach in like manner to any and all proceeds thereof, subject to. distribution in due course of law as might by "the court be directed.” Thus, when the receiver sol'd this property, the proceeds in. his hands stood subject to the same liens that were, upon the property when it was received by him ; and these, liens are entitled to be paid before any payment is made either to the State or city on account of taxes due from the corporation.
*419This fund of $1,669.84, less the fees of. the receiver, which are fixed at five per cent upon that amount, should be paid to the attachment creditors according to their several priorities. This leaves a balance of $999.79, being the total amount remaining in the hands of the receiver which he holds as receiver of this corporation. Upon that amount we think both the city and the State are entitled to a preference as against the general creditors of the corporation.
The case of The Matter of the Receivership of the Columbian Insurance Co. (3 Abb. Ct. App. Dec. 242) is controlling upon this question. The tax there claimed was due to the city of New York, and the receiver of taxes had a warrant to collect the same, issued to him under the provisions of the Revised Statutes, which are now a portion of the Consolidation Act (Chap. 410, Laws of 1882), which warrant was similar to. that held by the receiver of taxes in this case. It was there held that the warrant issued to the receiver of taxes gave a right which was entitled to precedence over the equitable claims of the creditors of the corporation. The right of the people of the State to collect a tax imposed directly by the State is certainly equal to the right of the political divisions of the State — which are merely political and organized for the convenience of administration — to a priority over the general creditors of the corporation. Such tax is imposed, by the State sovereignty for the purpose of providing for the State and local government; and as was said by the Court of Appeals in The Columbian Insurance Co. Case (supra) : “ The interest subsequently acquired by the creditor was subject to the prior rights of the State; and when the property, in virtue of local process, came to be in custodia legis. it was the duty of the court to respect this priority of right in the application of the funds of the insolvent corporation.”
This lien, however, of the State and city is subject to the general expenses of the receivership, and á sum sufficient to satisfy that charge should be reserved by the receiver, the balance to be applied to the payment of these taxes of the State and city. The tax to the State of seventy-five dollars and interest should be first paid, and the balance of the fund in the hands of the receiver, subject to such expenses of the receiver, should be paid to the receiver of taxes of ■the city of New York on account of the taxes due. The court *420below directed the receiver to retain in his hands the. sum of $1,000 to pay the administration expenses of the receivership and the receiver’s commissions; There was nothing before . the court from which the amount of the receiver’s expenses and commissions could be ascertained. It is clear, however, that there will be sufficient to pay the claim of the State for taxes due from .this corporation, and that can be paid at once, and the receiver is directed to retain the balance in his hands until the settlement of his final account, when the amount remaining, after deducting what was necessary to pay his commissions and the expenses of closing his trust, should be paid to . the receiver of taxes of the city of New York on account of the taxes due to- the city from this corporation.
The order appealed from should be modified as herein provided, and, as modified; affirmed, without costs of this appeal.
Van'Brunt, P. J., Rumsey, Williams and Parker, JJ., concurred.
Order modified as. directed in opinion and, as modified, affirmed, without costs of appeal.