
    James Talcott, App’lt, v. Horton Harder et al., Resp’ts.
    
    
      (Court of Appeals,
    
    
      Filed March 11, 1890.)
    
    Fraudulent conveyance — Preferential conveyance not fraudulent MERELY BECAUSE OF SERVICE OF RESTRAINING ORDER IN BANKRUPTCY.
    A transfer "by an insolvent by way of preference 1o a creditor not being illegal under our state law, there is no evidence of fraud in the mere fact that an order in bankruptcy proceedings restraining him from making any distribution of his property had been served upon the debtor before he executed the deed claimed to be in fraud of creditors.
    
      Appeal from judgment of the supreme court, general term, third department, affirming judgment in favor of defendants entered on report of referee.
    
      S. F. Kneeland, for app’It; Fsek Cowen, for resp’ts.
    
      
       Affirming 17 N. Y. State Rep., 1013.
    
   Beckham, J.

The referee found that Nicholas Harder was a purchaser from Horton Harder (the judgment debtor and the original owner), for a valuable consideration, and that there was no proof charging him with any knowledge of an intent ■ on the part of Horton Harder to defraud his creditors, if such intent existed. The referee also found that Mary Gr. Harder was a purchaser from Nicholas Harder for a valuable consideration, without notice of any alleged design of Horton Harder to defraud.

These findings are supported by the evidence and there is no admission in any of the answers at war with them, and the answers were not read in evidence.

The plaintiff, however, claims the referee erred in excluding evidence offered by him for the purpose of showing, as alleged in his complaint, that bankruptcy proceedings had been commenced against the defendant, Horton Harder, the day on which his deed to Nicholas Harder bears date, and that an order had been issued in such proceedings restraining him from making any distribution of his property, and that such order had been served on Horton before he executed his deed to Nicholas.

This proof was objected to on the ground that it was immaterial and incompetent, and the objection was sustained and the plaintiff excepted. The plaintiff claims this proof was admissible as part of the res gestee, “ and that as any transfer was void under the bankrupt law, it necessarily tends to hinder and delay creditors if any such transfer were made.” It was a violation of the bankrupt law to give a preference, and if proceedings had been taken by an assignee in bankruptcy under that law, such transfer might have been avoided.

But a transfer by an insolvent by way of preference, to a credit- or, was not illegal under our state law, and as this is a proceeding under that law, the defendants’ acts must be judged by it. Every creditor, it is true, had the right, to the protection and benefit of the bankrupt law, and if the plaintiff had sought it in the forum where such law could be invoked, it may be assumed that he would have obtained it.

It cannot be contended that under the law of this state there was any evidence of fraud in the mere fact of a preference being given by an insolvent debtor if there were no bankruptcy proceeding pending. How is the pendency of such proceeding of the least materiality in the jurisdiction which permitted a preference to be given ?

The fact that the debtor had executed this deed when he was insolvent would be very good ground in an action under the bankrupt law to set aside such conveyance as a fraud under the act, whether he knew proceedings had at that time been commenced against him or not, but I do not see how it is in the least material to show a fact which when proved would have no effect upon the right of the grantor to make the deed, so far as the state law is-concerned. It was admitted that Horton Harder was insolvent in-April, at the time he made this deed, and so proceedings in bankruptcy were wholly immaterial to show that fact. The bankruptcy proceedings never resulted in the appointment of an assignee, and nothing further is alleged in the complaint than that such proceedings were commenced and a restraining order issued. The most, that could be claimed for this evidence would be that it tended to show an intent to violate, or a clear violation of the bankruptcy act, in giving preferences to creditors, or in making transfers of property, and that fact does not show, or tend to show, any fraud upon creditors under our state law.

Hnder such circumstances the existence of proceedings in bankruptcy is no part of the res gestee in an action in the state court to set aside the conveyance as executed to hinder, delay and defraud creditors. The fact of such a transfer in violation of the act does-not in an action in our state court necessarily or at all tend to-hinder, delay or defraud creditors, as claimed by the counsel for the plaintiff, for it was a transfer which was permitted by our state law, and to do what the law permits is not a fraud.

The judgment should be affirmed, with costs.

All concur.  