
    MACDONALD v. MOORE.
    
      U. S. District Court, Southern District of New York;
    
    
      December, 1876.
    Bankruptcy. —Assignment under, State Daw.—Preference Secured by Execution.
    A general assignment for benefit of creditors, though under a State law, and without preferences, is void as against an assignee in bankruptcy, if the petition in bankruptcy is filed in season.
    
    A levy, before the filing of the petition, upon goods so assigned, though made before the assignment is set aside, is valid, and secures a preference over the title of the assignee in bankruptcy, if there is nothing more on the part of the debtor than passive nonresistance to the creditor’s proceedings.
    
      It seems that the mere delivery of the execution to the sheriff, before filing the petition, would be enough to gain a preference.
    
    Upon setting aside in bankruptcy the assignment under the State law, the assignee may be allowed for services and disbursements.  Forms of pleadings in such a case.
    Robert MacDonald, as assignee in bankruptcy of David Solinger, brought this suit in the bankrupt court, against Wm. T. Moore, and others.
    On December 28,1875, David Solinger being insolvent, made a general assignment under the laws of the State of New York, of all his property to the defendant Mayer, in trust to pay his creditors share and share alike. Mayer accepted the trust and took possession of the property on the said day, and complied with the statute, as to filing a bond and inventory. The property consisted of a stock of dry goods in a retail store in the city of New York.
    On January 4, 1876, the present defendants, Moore, Tingue & Co., recovered a judgment in the State court, against Solinger, for one thousand five hundred and eight dollars and thirty-eight cents, and on the same day an execution was issued to the sheriff (who was also made a defendant in this suit), and was placed in his hands.
    On January 5, 1876, a petition in bankruptcy was filed against Solinger, whereon he was adjudged a bankrupt on January 17.
    The plaintiff was chosen assignee in bankruptcy, and an assignment was made to him by the register on February 16, following.
    The plaintiff now filed a bill claiming that he has a title to the property which was embraced in the assignment to Mayer, superior to the claims of Moore, Tingue & Co., and of the sheriff ; that the assignment to Mayer was made in fraud of the bankrupt act, and that the property or its proceeds ought to go to the plaintiff as assignee in bankruptcy, free and clear of the claims of all the defendants. Mayer, in his answer expressed Ms willingness to relinquish his trust in favor of the plaintiff, on being paid Ms disbursements for counsel fees and other expenses in administering his trust, and his commissions thereunder. Moore, Tingue & Co. in their answer insisted upon their right to have the property applied on their execution as against Mayer and the defendant. The sheriff, in his answer insisted on Ms claim to the property under a lien acquired by virtue of a levy thereon under said execution.
    
      
      Dunne & Carr, for plaintiff.
    
      John Henry Hull, for Moore, Tingue & Co.
    
      Vanderpoel, Cummings & Green, for the sheriff.
    
      Mr. Blumenstiel, for the assignee.
    
      
       The contrary is held in the State courts. See the two preceding cases.
    
    
      
       See Bond v. Willett, 1 Abb. Ct. App. Dec. 165, and cases cited; and Hathaway v. Howell, 54 N. Y. 97.
    
    
      
       See Collumb v. Read, 24 N. Y. 505; Bostwick v. Beizcr, 10 Abb. Pr. 197; Coope v. Bowles, 18 Id. 442; Colburn v. Morton, 1 Abb. Ct. App. Dec. 378.
    
   Blatchford, J. (after stating the facts)

—■ The assignment to Mayer, must be held to have been invalid as against the rights of the plaintiff under the bankruptcy ,, act, although it was an assignment in trust for creditors - without preference. It was made when Solinger was insolvent, and it had the necessary result of preventing the property from coming to any assignee in bankruptcy of Solinger, who should be appointed, and of preventing such property from being distributed under the bankruptcy act, in any proceedings in bankruptcy instituted against Solinger, and therefore it must be held to have been made by Solinger with such view, inasmuch as it was made by his affirmative action, and could not have been made without such action. Mayer had reasonable cause to believe Solinger to be insolvent, and must be held to have known that Solinger made the assignment with such view, because he must be held to the knowledge that the making of the assignment would have the necessary result above mentioned. The assignment was made within three months before the filing of the petition in bankruptcy against Solinger.

The question whether a general assignment in trust for creditors without preferences under a State law, is void under the bankruptcy act, is elaborately discussed by Judge Emmons in the recent case of the Globe Ins. Co. v. Cleveland Ins. Co. (15 N. Bankr. Reg. 311), in the circuit court of the United States, for the northern district of Ohio, and the decision is that it is void. That has always been the law in this circuit.

The assignment to Mayer being set aside, the question arises as to whether the property is subject to a lien under the execution in favor of Moore, Tingue & Co., as against the assignee in bankruptcy. There is nothing to impeach the validity of the judgment and execution. Under the law as settled in the case of Wilson v. City Bank (17 Wall. 437), it is not to be inferred from the mere fact that a debtor remains passive and suffers a judgment to be obtained against him and an execution thereon, to be levied on his property, that he has any view therein to thereby give a preference to the creditor obtaining the judgment and issuing the execution and causing the property to be taken thereunder. If there be nothing more than such passive non-resistance by the debtor, there is nothing inhibited by the bankruptcy act, however much the creditor may have intended to secure a preference over other creditors in the case of a debtor known to him to be insolvent, and however successful he may have been in securing such preference.

On the same day on which the execution was delivered to the sheriff, January 4, a deputy of the sheriff went with the execution to the store of Solinger, in which was the property which had been assigned to Mayer, and of which Mayer then had possession, and finding it shut and locked, endeavored in vain to effect an entrance into it. He then obtained a ladder, and, by the use of that, looked through an open fan window over the door into the store, there being no person inside, and saw that there were goods there, and then made a memorandum on the back of the execution in pencil in these words: “January 4, levied upon stock and fixtures at 328 Bleecker St.,” that being the store in question. From January 4 to 7, some one acting for the sheriff, watched the store on the outside to see that no goods were removed; and on the 7th, che sheriff having received a bond of indemnity from the judgment creditors, broke into the store and took possession of the goods.

It is contended, for the plaintiff, that no lien could be or was obtained by Moore, Tingue & Co., under their execution, because the goods had ceased to be the property of Solinger, and the title to them, subject to be defeated under the bankruptcy act, had passed to Mayer by a valid assignment before the execution was issued, and that then the proceedings in bankruptcy intervened so that the execution never became operative against the goods; and that when the assignment is set aside, the goods must pass to the plaintiff free from any lien or claim under the execution.

This view is not sound. When the assignment is set aside, it becomes void, from the time it was made, against all persons who, after the time it was made, took steps to acquire rights against the property embraced in it as still the property of Solinger, and who, but for the obtainment of the assignment, would have secured and enjoyed such rights free from any obstruction. Such rights arrange themselves in order according to their priorities in point of time. This principle applies equally to rights under the bankruptcy act and to rights under the State law.

¡Nor is this principle inconsistent with the other principle, that if the assignment is valid, except as made invalid by some provision of the bankruptcy act, all acts done under it in good faith, and without notice that proceedings in bankruptcy have been taken, are to be upheld.

As between Moore, Tingue & Co. and Solinger, the. execution of the former bound the goods of the latter from the time the execution was placed in the hands of the sheriff. The assignee in bankruptcy acquired no rights, in that respect, as against Moore, Tingue & Co., which Solinger did not possess. The assignee in bankruptcy does not occupy a position of bona fide purchaser.

But, even if he did, I think what was done by the sheriff’s deputy on January 4, in respect of the goods, constituted an actual levy on them. As the rights of the assignee in bankruptcy relate back only to January 5, when the petition in bankruptcy was filed, it follows that the goods were subject to the lien of the execution when that petition was filed, and that such lien has precedence of the claim of the plaintiff.

After this suit was brought, a receiver of the goods in question was appointed in it by this court, and the goods were delivered by the sheriff to the receiver, and the receiver by order of this court, sold them at public auction. The net proceeds, three thousand seven hundred and eighty-three dollars and ninety-three cents, are now in this court to the credit of this suit.

The sheriff claims to be paid the sum of two hundred and forty-six dollars and sixty-six cents for poundage, levy fees and keeper’s fees. This amount does not seem to be objected to by any of the parties, but, if it is, it may be further inquired into. Otherwise, it will be allowed and the sheriff will be allowed his costs of this suit to be paid out of the fund.

Mayer was in possession of the goods for ten days. Then the sheriff took them from him. Mayer will be allowed the disbursements he made before the sheriff took the goods, one hundred and forty-seven dollars and fifty cents, and the sum of three hundred dollars to cover his own services and those of his counsel. As between Mayer and the plaintiff no costs of this suit are allowed to either as against the other.

The costs of Moore, Tingue & Co. in this suit will be paid out of the fund, and so will the costs of the plaintiff. The amount of the judgment of Moore, Tingue & Co. with interest, will be paid, and the remainder of the fund, after the above named payments are made, will be paid to the plaintiff to be held and administered by him as assignee in bankruptcy.

Note.—The allegations of the bill and answer were in the following form.

Bill.] “That on January 5, 1876, a petition for adjudication of bankruptcy against the said David Solinger was filed in this court, and an order to show cause was duly issued thereon and served upon the said debtor. That on January 7, 1876, the said David Solinger was duly adjudged bankrupt by this honorable court, and that thereafter your orator was duly chosen and appointed assignee of the estate of said bankrupt, and that by an instrument of assignment thereafter duly executed and delivered to your orator by Henry Wilder Allen, Esq., one of the registers of this court in bankruptcy, under the seal of this court, and bearing date February 16,1876, all the estate of the said bankrupt was duly assigned and conveyed to your orator in accordance with the provisions of Title LXI. of the Revised Statutes of the United States, relating to bankruptcy.

That prior to the said adjudication of bankruptcy the said David Solinger was a merchant, doing business in the city, county and district aforesaid, and had' in his possession and was the owner of a stock of goods [describing it briefly], of the value, &c.

That on December 28, 1875, and within two months before the filing of the petition for an adjudication of bankruptcy as aforesaid, the said David Solinger made and delivered, under and pursuant to the provisions of the Statute of the State of New York, to Max L. Mayer above-named, ah assignment, transfer and conveyance of all his property, goods and chattels and things in action, in trust, however, to convert the same into money and thereupon to pay, after paying the expenses of said trust, the creditors of said David Solinger, ratably their just and legal claims against him so far as such proceeds thereof would pay the same.

That at the time of the aforesaid assignment and transfer thereof to the said Max L. Mayer, the said David Solinger was insolvent or in contemplation of insolvency and bankruptcy, and that the said assignment was made with a view to prevent said property from coming to his assignee in bankruptcy, and to prevent the same from being distributed under the bankrupt laws, and to defeat the object of, and to impair, hinder, impede and delay, the operation and effect of, and to evade the provisions of Title LSI. of the Revised Statutes of the United States relating to bankruptcy.

That the said Max L. Mayer, accepted of the trust in said assignment reposed in him, and executed and filed a bond for the faithful performance of his duties thereunder, in such form and amount, as was required by the officer having jurisdiction to fix and regulate the same under and pursuant to the Statutes of the State of New York; that said assignment, and such schedules of the property of the said David Solinger and of his creditors as are and were required, under and pursuant to the provisions of the aforesaid statute, were filed and recorded as therein required, and that immediately upon the execution of said assignment, and on said December 28, 1875, the said Max L. Mayer, thereunder took possession of all and singular the goods, chattels, property and effects of said David Solinger and remained in the sole and exclusive possession thereof until the time hereinafter particularly named.

That at the times hereinafter named, William 0. Conner was, and still is the duly qualified and acting sheriff of the city and county of New York, in the district aforesaid.

And the said William T. Moore [and, others named], were at said times, and still are, co-partners in business, as merchants in the city of New York, under the firm name of Moore, Tingue & Co.

That upon January 7, 1876, the said William C. Conner, as such sheriff, by some one of his deputies or agents or servants, seized and took into his possession all of the goods, chattels and property of the said David Solinger hereinbefore mentioned and described, which were then in the possession of the said Max L. Mayer as aforesaid, and the said sheriff has at all times since retained and still retains the possession of the same, and of the whole thereof.

That the said William C. Conner, sheriff as aforesaid, claimed to have legal right to seize and take into his possession said property, under and by virtue of an execution issued out of one of the courts of the State of New York upon a judgment recovered therein, in favor of the said William T. Moore [and others named], against the said David Solinger, January 4, 1876, and claims to have legal right to retain and hold the same thereunder.

That such execution was issued, and such seizure made thereunder at the instance, direction, and request of the said Moore, Tingue & Co., and that they, at the time they so caused and procured the issueing of such execution and seizure of said property, had reasonable cause to believe that the said David Solinger was insolvent, and knew that a fraud upon the bankrupt laws was thereby intended.

That by reasop of the premises the said assignment, and the said seizure of said property, were fraudulent as to the creditors of said David Solinger, and were a fraud upon the bankrupt law, and the same are void and of no effect as respects your orator, and your orator is in equity and good conscience entitled to recover back the said property and the whole thereof, and to have the same assigned and transferred to him by the said Max L. Mayer.

That all of said property is now in the possession of the said Wm. 0. Conner, sheriff as aforesaid, and no part thereof has been delivered to or has come into the hands of, and possession of, your orator.

That the said [Mayer, Conner, aforesaid, and Moore, Tingue & Co.,] each claim to have some lien upon, or right or interest in said property, or in the proceeds thereof. But your orator is not informed of the extent and nature thereof. Your orator, however, alleges the fact to be that they, and neither of them, has any lien thereupon, or claim or interest therein, as against the right and claim of your orator thereto.

That said property is depreciating in. value, and the expenses for the care and keeping thereof during the pendency of this suit, will decrease very largely the amount of the proceeds to be derived from a sale thereof. That it is for the best interests of all concerned that the same should be sold by and under the direction of this court, and the proceeds derived from such sale brought into this court to abide the order and judgment of the court upon tne claims of the respective parties hereto.

And your orator further shows, upon information and belief, that the said Moore, Tingue & Co. are likely to institute proceedings, but in what form your orator is not advised, to have said property sold for the purpose of paying and satisfying their alleged and pretended claim thereon, and the said Max L. Mayer is about to commence some proceedings relative thereto; but in what form your orator is not informed or advised, but your orator alleges the fact to be that their right and interests therein, and lien thereon, if any, can be fully adjudicated upon and determined in this suit. "Wherefore, &c.

Answer of Moore, Tingue & Co.—That the assignment set forth in the said complaint, by said David Solinger to Max L. Meyer, was made and done with a view to hinder, delay, and defraud the creditors of said Solinger, and was fraudulent and void as against these defendants and said creditors, and that the provisions of the statute of the State of New York were never carried out and obeyed, in reference thereto, and that said Meyer never took possession of the assets of said Solinger, and never acquired any right thereto.

[Then it was alleged that defendants instituted a suit in, &c., for, &c.,] said sum being then and'there justly due to these defendants from said Solinger, and that in said suit, on Jan. 4, 1676, said Solinger having no ground of defense to said suit, and having interposed no answer to these defendants’ complaint therein, and without any collusion between these defendants and said Solinger, and without the consent or procurement of said Solinger, judgment was rendered, entered, and docketed therein, in due course of judicial proceedings, and in accordance with the statutes of said State, in such case made and provided, and not otherwise, in favor of these defendants, and against said Solinger, for the sum of $1,508.38, being the amount then and there due to these defendants as aforesaid, with interest and costs. That on Jan. 4, 1876, in accordance with the statutes of said State, execution was duly issued out of and under the authority of said court, upon said judgment, and without the knowledge or consent of the said Solinger, directed, &c., and him commanding, &c., and that by virtue of said execution, and in obedience thereto, and not otherwise, and in accordance with law, and without the consent of said Solinger, said sheriff, on the said January 4,1876, duly levied upon certain personal property of said Solinger in said county, and then in his exclusive possession and control, and in the control or possession of no other person; but as to whether the property so levied upon constituted all the stock in trade of said Solinger, or as to what was the value thereof, these defendants cannot state.

These defendants deny that at the time of the issuing of said execution, they had reasonable cause to believe that the said Solinger was insolvent, and knew that a fraud upon the bankrupt law was thereby intended, and they deny the same, and aver that said Solinger was not bankrupt or insolvent.

And said defendants aver that the said complainant is in no wise entitled to the possession of said property, but that the said sheriff is entitled thereto, and should be allowed to sell the same, and pay and satisfy said judgment in full.

That said sheriff and these defendants have been enjoined and restrained from selling or disposing of, or removing said goods, to the great damage and injury of these defendants, and to their damage to the amount of $500, and which sum these defendants claim and insist shall be allowed herein.

That all said judicial proceedings, in said marine court, were instituted, and said judgment obtained, and execution issued, and levy made, in the utmost good faith on-the part of these defendants, and without any collusion with said Solinger, and that each of said acts and things were done and performed in due course of law, and according to the statutes of the State of New York.

And these defendants deny that said goods and property were vested in said complainant by virtue of said bankruptcy proceedings, or otherwise.

All of which, &c.  