Allen v. . Gray

Werner, J. There is' evidence in the record to sustain the findings of the trial court to the effect that the transfer was not fraudulent and did not contravene the provisions of the Bankruptcy Act. We are, therefore, precluded from any further review of that branch of the case. We are of opinion, moreover, that the plaintiff was entitled to a jury trial, and as this conclusion necessitates a reversal of the judgment it is unnecessary to examine the evidence in detail. The appellant did not properly appeal from the order transferring the cause from the jury term to the Special Term, but that was not necessary. He insisted upon his right to a jury trial at the opening of the case, and his exception to the refusal to accord him that right raises the question in this court. The failure to appeal from an order transferring the cause from one calendar to another was not a waiver of his constitutional right to trial by jury. The Code provides for the manner in which the right to trial by jury may be waived. (Code Civ. Proc. § 1009.) Section 60a of the Bankruptcy Act provides: “ A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, * * * made a transfer of any of his property, and the effect of the enforcement of such * * * transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class * * Subdivision b of the same section further provides: “ If a bankrupt shall have given a preference, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the pioperty or its value from such person. * " * ” *508 It is settled by the decisions of this court that under these provisions of section 60 a trustee may bring an action at law to avoid a preferential transfer and to recover the value of the property thus transferred. (Cohen v. Small, 120 App. Div. 211; affd., 190 N. Y. 568 ; Coudert v. Jarvis, 114 App. Div. 913; affd., 188 N. Y. 584.) The learned counsel for the respondent contends that these decisions have no application to the case at bar, as this action was not brought to set aside a preferential transfer under section 60, but is founded upon the provisions of section 70 of the National Bankruptcy Act. That section differs from section 60 in that it authorizes the trustee to set aside fraudulent transfers although made prior to the four months before the filing of the petition in bankruptcy. But it is identical with section 60 in so far as it authorizes the trustee in such cases to recover the property or its value. It is not quite certain which one of these sections of the Bankruptcy Law was in the mind of the framer of the complaint when the pleading was drawn. The complaint contains no express statement that the transfer was made within the four months prior to the filing of the petition, but from the dates set forth that conclusion would seem to follow. Neither is it stated whether the transfer was made by written instrument or otherwise. The provisions of section 70 of the Bankruptcy Act, so far as material to the present controversy, are as follows : 70a. “ The trustee of the estate of a bankrupt, upon his appointment and qualification, * "" * shall * * * be vested by operation of law with the title of the bankrupt * * * to all * * * property transferred by him in fraud of creditors * * *.” Sub-section “ e ” of the same section provides : “ The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from any person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value.” *509 So far as the question here is concerned, there is no essential difference between the provisions of this section and those of section 60. Both confer power upon the trustee to avoid fraudulent transfers and to recover the property or its value. In many cases it may be impossible to ascertain from the pleadings under which section relief is sought. It is apparent, of course, that the form of trial to which the parties are entitled, whether in equity or at law, must be determined upon the face of the pleadings. It is too late to determine that question after proofs are taken. A complaint may allege a transfer within the four months period, as it did in this case, and upon the trial the evidence may disclose that it was long prior to that time. As this court has already decided that in actions brought to set aside a preferential transfer under section 60 the parties are entitled to a jury trial, we think the logic of the situation demands that the same method of trial must be pursued inactions brought under section 70. Under cither of these sections a trustee in bankruptcy may demand simply a money judgment, and the establishment of the alleged fraud in the transfer or of other facts necessary to a recovery is purely incidental to the main relief demanded. In the Supreme Court of this state, and in the Federal courts there has been some diversity of opinion upon this question. Some of the decisions are to the effect that such cases are cognizable in equity, although based upon a variety of reasons. (Houghton v. Stiner, 92 App. Div. 171; Stern v. Mayer, 99 id. 427; Dyer v. Kratzenstein, 103 id. 404; Vollkommer v. Frank, 107 id. 594; Lesser v. Bradford Realty Co., 116 id. 212; Wall v. Cox, 101 Fed. Rep. 403 ; Pond v. N. Y. Exchange Bank, 124 id. 992; Matter of Plant, 148 id. 37 ; Mason v. Herkimer County Bank, 163 id. 920 ; Off v. Hakes, 142 id. 364; Parker v. Black, 151 id. 18.) In the case last cited, the United States Circuit Court of Appeals in this circuit felt constrained by authority to adopt this view, with a strong intimation that if the question were an open one, a different decision would have been made. In other cases it has been held that in such actions the parties are *510 entitled to a jury trial. (Warmath v. O’Daniel, 159 Fed. Rep. 87 ; Merritt v. Halliday, 107 App. Div. 596; Coudert v. Jarvis, 114 id. 913; Reichardt v. Am. Platinum Works, 47 Misc. Rep. 650.) It will serve no useful purpose to discuss the reasons for these conflicting decisions, since this court is committed to the view that in actions which are not essentially different from the case at bar, the parties are entitled to a jury trial. (Cohen v. Small, supra; Coudert v. Jarvis, supra.) The judgment should be reversed and a new trial granted, with costs to abide the event. Cullen, Cli. J., Geat, Vann, Hisoook and Collin, JJ., concur; Haight, J., absent. Judgment reversed, etc.