In re Cadenas & Coe

.HAND, District Judge (after stating the facts as above). The order of May 28, 1907, gave notice to the trustee that he took subject to equities, a provision which was unnecessary; but it gave no notice of any specific equities. The same order directed the trustee to defend any suits brought against the assignee. The trustee’s attorneys, White & Case, did in fact appear and defend the suit in which judgment was entered against the assignee. Meanwhile, and on October 29, 1907, an order confirming a composition was entered under which subsequently the trustee, as directed, turned over the assets to the bankrupts, the consideration for which the trustee has since then distributed. The trustee claims that this order protected him, though he does not assert that he brought to the court’s attention at any time the existence of the petitioner’s claim against the assignee. Therefore, the trustee, being charged in general with equities upon the fund, put it out of his hands without seeking to protect those equities by reserving any part of the fund or of the consideration. If he did this without knowledge of the existence of the claim, I do not consider that the terms of the order charged him; but, if he had adequate knowledge of the claim, he was in the same position as any other person who with knowledge of existing equities attaching to a res disposes of the res — that is, he became responsible as trustee to the person injured. On September 11, 1907, the petitioner wrote to the assignee asking for an appearance in his proposed action. On October 2, 1907, the trustee’s attorneys, White & Case, wrote a letter, headed “Hirsch & Co. v. Hubbell,” saying, among other things, that they had before them the summons and complaint which had been served on the former attorney for the assignee, and asking for an extension of time, as they must assume the defense of that action. This the petitioner answered on October 3, 1907. Again on October 9, 1907, White & Case wrote inclosing an extension to plead till October 17th. On [160] October 25, 1907, they wrote suggesting a discontinuance; but, as indicating that they knew the claim might not be abandoned, they said: “If, however, it is your intention to proceed further with this matter, our client instructs us to decline to discontinue, unless costs are paid. We trust you will conclude to refrain from further proceeding, and we feel that this is the proper course.” On October 28, 1907, the petitioner wrote: “Also please advise me if you will appear for Mr. Hirsch in an action to be commenced in the Supreme Court.” On October 29, 1907, White & Case wrote: “We talce it from your letter that you do desire to bring another action in the Supreme Court.” This was the very day the order of composition was confirmed, and White & Case refer to it in their letter, the first intimation of the composition which the petitioner received. This correspondence leaves no doubt that the trustee had the fullest notice of the claim before the composition was confirmed and went on without advising the petitioner of the composition till he supposed it' was too late. Could there, be a more absolute disregard of the petitioner’s rights guaranteed him specifically by this court? If it w’as not carelessness, it must have been a conscious effort to cut him off from any recourse to the fund. The judgment in the Supreme Court is binding, because the trustee was vouched in and actually assumed the conduct of the cause. I can see no possible escape for the trustee. It is 'urg'ed that the result is unjust; but I cannot see why. At best he was most careless, and his carelessness must fall on his own head. Certainly it would be most unjust to throw it upon the petitioner. Again he says that the petitioner could have sued in this court. So he could; but he need not have done so, or at least the trustee might have applied to compel him to come here on pain of a distribution .of the assets without regard to his rights. He suggested nothing of the sort, but continued in disregard of his claim. Clearly it is only justice, as well as law, that in so doing he should be held to have taken the chance of the event, and the chance has gone against him. I see no reason to change my first decision, and an order must pass directing the trustee to pay the claim personally upon an assignment of the petitioner’s rights, whicli the trustee may then try to work out against the bankrupt who received the fund. Upon the validity of such a claim, of course, I make no suggestion. The trustee is still amenable to the orders of this court, as he has not been discharged; perhaps he would be, if he had. Nor can I see any ground for a stay unless the trustee give security here or in the Supreme Court of New York.