Case ID: ad_140/html/0551-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.: Ingraham, P. J. (concurring):", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Adolph Eichholz, as Trustee in Bankruptcy of John McKim, Individually and Trading as John McKim and Company, Respondent, v. Isaac Polack and Joseph Goldstone, Copartners, Doing Business under the Firm Name and Style of Polack & Goldstone, and Bernard J. Shapiro, Appellants.
    First Department,
    November 15, 1910.
    Bankruptcy — when assignment by insolvent void — expenditures by assignee for benefit of bankrupt—sums paid to creditors’ attorney — dividends.
    Where within four months of the filing of a petition in bankruptcy the insolvent owing §2,900 to a copartnership and $1,600 to other creditors, and while , threatened with suit on an overdue note assigned all his property to an agent representing the firm without consideration, save that the firm placed certain money in the hands of their attorney from which he deducted his fee and expended the balance in paying an eight per cent dividend to the general creditors, the assignment is voidable by the trustee in bankruptcy either under subdivisions a and b of section 60 of the Bankruptcy Act or under subdivision e of section 67 of that act.
    But the assignees should be credited with sums paid to the insolvent’s landlord, to workmen, clerks and servants employed by him, and to other creditors, for the bankrupt’s estate benefited pro tanto.by such payments.
    But the assignees should not receive credit for a sum paid to their attorney where he acted only in their interest, nor should they be credited with a sum repaid to them by way of dividends upon their claim.
    Appeal by the defendants, Isaac Polack and another, copartners, etc., and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 30th day of December, 1909, upon the decision of the court rendered after a trial at the New York Special Term, and also from an order entered in said clerk’s office on the same day granting the plaintiff an extra allowance.
    John McKim, the bankrupt, was doing business in Philadelphia, and was indebted to the defendants for about $2,900. They were his largest creditors and were familiar with his business. He Owed other general creditors about $1,600. A past-due note made by him was in the hands of attorneys, who were pressing it for collection. At this time, about March 18,1908, the defendant Goldstone was informed by the bankrupt of the threats of suit made by the attorneys holding the note. On the advice of Goldstone’s attorney,
    McKim immediately turned over practically all his property to Goldstone and put him in charge of his business. Both Goldstone and his lawyer knew at the time that McKim was insolvent. A formal bill of sale was drawn up and signed by McKim, whereby McKim sold all his property to one Shapiro, an employee of the firm of Polack & Goldstone. No consideration passed to McKim for the execution of this bill of sale, but $1,200 was to be paid by Polack & Goldstone to Goldstone’s lawyer. This was used by the attorneys in paying their fee, the expenses of the proceeding and a
    dividend of eight per cent to the general creditors of McKim. The defendants Goldstone and Shapiro quickly sold off all the manufactured and raw stock of the bankrupt. The value of the stock in trade was considerably in excess of $1,200. Within four months of the transfer to Shapiro a petition in bankruptcy was filed against McKim.
    
      Nathan D. Stern, for the appellants.
    
      Dean Emery, for the respondent.
   Scott, J.:

In my opinion the facts fully warranted the conclusion that the assignment by the bankrupt McKim to the defendant Shapiro as the agent and representative of the other defendants, was voidable by the trustee in bankruptcy under the provisions of subdivisions a and b of section 60 of the Bankruptcy Act, as well as under subdivision e of section 67 of that act. (See 30 U. S. Stat. at Large, 562, § 60, subds. a, b, as amd. by 32 id. 799, 800, § 13; 30 id. 564, § 67, subd. e, as amd. by 32 id. 800, § 16.) In either case the defendants are liable to refund to the bankrupt estate the proceeds of the property so assigned. This action is, however, brought in equity, and the judgment should so far as possible adjust the equities between the parties. It appears from the findings, and the fact was not substantially disputed upon the trial, that defendants paid to the landlord of the premises theretofore occupied by McKim and to workmen, clerks and servants employed by him the sum of $282.90, and also paid to certain creditors of McKim, exclusive of defendants themselves, the sum of $271.62. The defendants should, as we consider, be credited with the aggregate of these sums amounting to $554.52. The bankrupt estate benefited pro tanto by these payments, and it would be inequitable to compel the defendants to pay the same sums over again.- We do not consider that defendants should receive credit for the $250 paid to the attorney because he clearly acted in defendants’ interest and they alone reaped an advantage from his efforts. JNor should the defendants be credited with the sum repaid to them by way of dividend upon their debt. That they can obtain in the Bankruptcy Court. The findings contain all the necessary facts to enable us to modify the judgment without the necessity for a new trial.

The amount of the judgment should, therefore, be reduced by the sum of $554.52, with interest, and the additional allowance proportionately reduced, and as so modified the judgment should be affirmed, without costs to either party.

Clarke and Miller, JJ., concurred.

Ingraham, P. J. (concurring):

1 do not think that in this case the judgment, so far as it sets aside the transfer of the property te the defendants, can be assailed on the ground that it was fraudulent and void as against creditors. It was conceded that the defendants were creditors of McKim in an amount exceeding the value of the property transferred. The defendants were entitled to acquire that property on account of their indebtedness, and it was not fraudulent and void as against the other creditors of McKim upon the ground that by such a transfer the defendants got their debts paid to the exclusion of the oiher creditors. (See Lehrenkrauss v. Bonnell, 199 N. Y. 240.) Treating this as a preference, however, it’ was voidable under the Bankruptcy Law, and the plaintiffs, as assignees in bankruptcy, were entitled to recover the property transferred or its value.

I, therefore, concur in the modification of the judgment, as suggested by Mr. Justice Scott.'

Lahghlin, J., concurred.

Judgment modified ás stated in opinion, and as modified affirmed, without costs.