14 Blatchf. 146 | U.S. Circuit Court for the District of Northern New York | 1877
This is an application to review the decision of the district court in bankruptcy. The material facts are, that, on the 19th of July, 1876, the now bankrupts made a voluntary assignment of all their property for the benefit of all their creditors, without preferences, and complied in respect to it, with all the provisions of the statutes of New York regulating such assignments. The assignee accepted the trust and qualified as'assignee. Afterwards, creditors recovered judgments against the assignors in adverse suits, upon debts existing before the assignments, and executions were issued thereon to the sheriff of the proper county, who levied upon all the goods and merchandise covered by the assignment, and took the same into his actual possession. Afterwards, and on the 11th of September, 1876, creditors of the assignors, other than the judgment creditors, filed their petition praying that the assignors might be adjudged bankrupts. On the 26th of September, 1876, an adjudication of bankruptcy was duly had, a warrant issued, and an assignee was afterwards duly appointed and qualified. Afterwards, upon the stipulation of the parties in interest, the property levied upon was sold by the sheriff, the proceeds to be held subject to the order of the district court in bankruptcy. The questions involved were brought before the court upon motion, and, after hearing the parties interested, it was decided that the assignment, not having been made with intent to hinder, delay or defraud creditors, contrary to the laws of New York, was valid as against the execution creditors, and that they took nothing by the levy made under the executions; but that the assignment, having been made within three months before the filing of the petition against the bankrupts, was void as against the assignee in bankruptcy, and that he, therefore, was entitled to the proceeds of the property, to the exclusion of the execution creditors’ claim of priority, and it was ordered accordingly.
That such an assignment is void against the assignee in bankruptcy has been long held in the courts of the United States, in most of the circuits. It has been recently elaborately re-examined by Judge Em-mons, in the sixth circuit, and his opinion is so full and able that it scarcely leaves any thing material to be added. Globe Ins. Co. v. Cleveland Ins. Co., [Case No. 5,486.] All the judges in this circuit have repeatedly so held. [See Allison v. Loveridge, recently decided by Judge Shipman, MS. Feb. 1877.]
The general intent of the bankrupt law was not only to administer assets on the-basis of equality, but to secure that result by giving to the creditors, and not to the debtor, the selection of the person to be entrusted with their administration, and to-add the sanctions of the criminal laws of the United States to secure the results aimed at. To permit the administration of the assets of an insolvent and bankrupt debtor to-be committed to a trustee of his choice, and thus to reduce the bankrupt law to a mere process for discharging a debtor from his debts, is quite inconsistent with any fair view of the purpose of this legislation.
Thus far the courts of the United States
We now come to a different case, in respect to which differences of opinion exist among the judges of the district courts, and upon the decision of which this cause depends. Here, the assignment was not made to hinder, delay or defraud creditors, and all the requirements of the laws and statutes of the state of New York had been complied with in respect to it. The title to the assigned property passed, by the assignment, to the assignee. No creditor, as such, could successfully assail it. No judgment or execution, obtained against the debtor after the assignment, could bind the property, for the plain reason that the title of the debtor was gone from him by a transfer valid against him and valid against creditors. But, under the provisions of the bankrupt acts, (Rev. St. § 5129, and Act June 22,1874, [18 Stat. 180,] § 10,) a right was conferred upon an assignee in bankruptcy of such an assignor, to avoid such an assignment, provided it was made within six months before the filing of the petition for an adjudication of bankruptcy in a voluntary case, or within three months in an involuntary case, and provided, also, that the other requisites pointed out by the statute existed. The right thus given was to recover the property, or the value of it, as assets of the bankrupt. The title of the assignee in general relates back only to the commencement of the proceedings in bankruptcy, but, in the particular cases of transfers made void as to him, his title relates back to the time of such transfers. The substantial question is, whether, under these provisions of the law, creditors by judgment and execution obtained after the assignment, having, by reason of it, no lien upon or right in the assigned property, are to be let in to intercept, and take precedence of, the right of an as-signee in bankruptcy to the property or its value, when he exercises his right to avoid the assignment and to recover the property. Upon this question the opinion and decision of Judge Wallace against the claim of the judgment creditor is given in. Johnson v. Rogers, [Case No. 7,408.] In Macdonald v. Moore, [Id. 8,763,] Judge Blatchford reaches a different conclusion, and each of these learned judges has stated the arguments and considerations which led him to his conclusion. Between these conflicting views the controlling and decisive consideration seems to me to be that which Mr. Justice Story puts forward as the ground of his judgment upon a similar question under the bankrupt act of 1841, [5 Stat. 440,] in the case of Everett v. Stone, [Case No. 4,577.] He says, in substance, that the judgment creditors cannot avail themselves of a fraud under the bankrupt act, to defeat the very policy of the act itself. That policy is, equal distribution among creditors, through the agencies of the bankrupt law. To avoid the assignment as in conflict with that policy, and, as a consequence, to allow particular creditors to intercept the fruits of avoiding it, and thus prevent equal distribution, would be contradictory, and would subvert the whole laudable purpose of the bankrupt act, so far as creditors are concerned. These considerations were overlooked in McLean v. Meline, [Case No. 8,890,] where it was assumed, rather than adjudged, that, if an assignment could be avoided under the bankrupt act, the necessary consequence was that judgment creditors would be let in to claim according to their priorities, in preference over the assignee in bankruptcy.
The acts of the assignee in bankruptcy do not enure to increase the rights of the judgment and execution creditors. Dodge v. Sheldon, 6 Hill, 9; Seaman v. Stoughton, 3 Barb. Ch. 344. When the assignee recovers the property, he takes it as the debtor had it at the time of the act which the assignee avoids, so far as creditors of the debtor are concerned. Avoiding the transfer in favor of the assignee in bankruptcy does not revest the property in the debtor, but vests it directly in the assignee, who takes it by virtue of the statute. The transfer by the debt- or, good against him, and good against his creditors, prevents any lien by subsequent judgment or execution. Upon the property so situated the statutory transfer to the assignee in bankruptcy operates directly, and cannot be subjected to the liens of intervening judgments and executions without overthrowing both the language and the policy of the bankrupt act in its most vital provisions. I am, therefore, of opinion that the order of the district court under review was correct, and should be affirmed.
[From 15 N. B. R. 228. The case of Allison v. Loveridge is nowhere reported; opinion, not now accessible.]