126 N.Y.S. 1046 | N.Y. App. Div. | 1911
Appellant seems to concede that Chamberlain, as assignee, had a cause of action against it for the conversion of the property assigned
The act of bankruptcy, upon which the application for adjudication of Bevins & Co. as bankrupts was predicated, was the making .of the general assignment to' Chamberlain. This within the decisions, though made with no fraudulent intent,, was. a constructive fraud upon the Bankruptcy Act itself, and was an available act of bankruptcy, if made within’four months before the petition was filed. (Cohen v. American Surety Co. 192 N. Y. 227, 236 ; Matter of Gray, 47 App. Div. 554.) The effect of a general assignment, considered in relation to the Bankruptcy Law, is thus stated in Collier on Bankruptcy (7th ed. p. 814):' “A general'assignment, being not only a fraud on the act, but an act of bankruptcy, seems' .to stand on a different footing from fraudulent transfers per se. The assignment being void by operation of law, no title passes and the general assignee does not become an adverse claimant, but at ' most but an agent of the assignor. Property of the bankrupt in his • possession, or that of his agent, can, therefore, be reached summarily by the method suggested in Bryan v. Bernheimer.
Respondent further insists that appellant cannot shield itself from liability to plaintiff for the full value of the property taken from the assignee under the warrant of attachment by showing in mitigation of damages that some part of the property taken has been again taken into the legal possession of an officer of the court acting in a proceeding begun by it after the conversion was accomplished. In support of this position our attention is directed to the case of Wehle v. Butler (61 N. Y. 245). In that case the court says: “ It has been considered in the courts how far property illegally taken, and subsequently seized and sold under process- by a third party, who was a creditor of the owner, might be used as a defence in an action for the wrong. If the wrongdoer was not in connivance with the third party, it has been held that the fact of the taking by the third party might be used in mitigation of damages.” (Citing cases.) “ But where the party who wrongfully takes the property procures it to be afterward seized and sold under process in his own favor it affords him no protection in any form, and in this case that fact was made sufficiently apparent.” Though appellant was a petitioning creditor, the proceeding instituted was not in effect in its behalf, or for its benefit, but was one directed not against Chamberlain, the general assignee, in whose right this action is brought, but against Bevins & Co. only, its ultimate object being to have the bankrupts’ property applied ratably in satisfaction of the claims of all creditors of the firm. It is not a proceeding the purpose of which, primarily at least, is, as in the case last above cited, to destroy the title to property of one from whom it has been illegally taken, or render it ineffectual in support of his cause of action against the wrongdoer; but it is to have all the property of the real owners, the bankrupts, including the property taken from the assignee, applied in the orderly course of bankruptcy proceedings in payment of the claims against the bankrupts. There would seem to be no reason why the fact that appellant joined in such a petition should preclude its right to set up the facts, already fully set out above, in mitigation of damages in this action any more than it would in a similar case where it appeared an adminis
All concurred. . ,
Judgment.reversed and new trial ordered, with costs to appellant to abide event. ■
181 U, S. 188. —Rep.