Bryan v. Madden

Hirschberg, P. J.: The judgment sets aside an assignment of certain contracts whiph William J. Madden made to the appellant, his - wife, as void under [877] the Bankruptcy Law. Madden filed' his petition in voluntary bankruptcy on August 3, 1900, and was duly adjudged a bankrupt, and a trustee in bankruptcy was appointed. He made the assignment of the contracts to his wife on July 14, 1900, thus giving her a preference as a creditor within four months of the filing of the petition, and rendering the assignment voidable by the trustee under the terms of the act. (See 30 U. S. Stat. at Large, 562, § 60.) She knew that he was insolvent at the time, and that he intended to file a petition in bankruptcy. I think a prima faeie case for relief was established, and there can be no doubt of the jurisdiction of the State court. (Bardes v. Hawarden Bank, 178 U. S. 524; Houghton v. Siiner, 92 App. Div. 171; Vollkommer v. Frank, 107 id. 594.) The serious question is as to the plaintiff’s right to maintain the action. On December 4, 1900, the trustee presented a petition to the District Court- of the United States for the eastern district of Hew York asking for an order directing Madden to assign the contracts to him, and an order to that effect was thereafter made, pursuant to which Madden did on January 12, 1901, assign the contracts to the trustee. This was, however, subject to whatever rights the appellant may have had by virtue of the assignment to her. Thereafter, on March 5, 1901, an order was made by the District Court directing the trustee to advertise and sell at public auction the bankrupt’s interest in the contracts, a sale was made, as directed and duly confirmed, and the trastee executed an assignment to the purchaser of the contracts and all moneys due and to grow due under them subject only to an interest not germane on this appeal. The plaintiff succeeded by purchase and assignment to all the rights of the purchaser at the sale directed by the court. The object of the proceedings was clearly to- confer upon the purchaser at the judicial sale all the interest and' rights of the trustee, and I see no reason for not holding that that object was accomplished. Otherwise the purchaser acquired nothing of value at the sale, although the trustee certainly parted with his right to assail the assignment to the appellant and to reap whatever financial results might flow therefrom! In principle the case is like Porter v. Parmley (52 N. Y. 185), where it was held that a sale upon execution of all the right, title and interest of a judgment [878] debtor in chattels which are covered by a mortgage which is void as to creditors is a sale of all that is vendible upon the execution, and gives to the purchaser '.all the creditor’s, rights as against the mortgagee; . The same doctrine was declare,d in Wagner v. Jones (7 Daly, 375 ; affd., 77 N. Y. 590). ■ The trustee could undoubtedly have maintained the action. The judicial sale of the contracts in the absence of qualifying conditions must be deemed to have been designed to carry with it all that was .vendible, including the right to maintain an action in equity to set aside the prior voidable assignment, and the consummation of the sale should be held .to have effected the result- which was intended. The judgment should be affirmed. Bartlett, Woodward, Jenks and Rich, JJ., concurred. Judgment affirmed, with costs. ■