Case ID: abbn-cas_1/html/0039-01.html
Source: Caselaw Access Project
Author: {"author": "Folger, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THRASHER v. BENTLEY.
    
      New York Court of Appeals,
    
    1875.
    Bankruptcy.—Assignment for Benefit of Creditors.
    The bond of an assignee for benefit of creditors was approved, not by the county judge, but by the special county judge. In the assignee’s action to recover assets,—Reid, 1. That the approval was valid. 2. Were it otherwise, the assignee might still recover assets, though he could not apply or convert them.
    
    Abandonment of a parol contract may be made by consent not amounting to an express agreement.
    
    This action was brought by plaintiff, as an assignee under an assignment for benefit of creditors, to recover on an account for goods sold, &e., by his assignor, to the defendant.
    The assignment was dated and acknowledged, November 27th, 1871; the assignee’s acceptance of the trust, November 28th, 1871; a bond by the assignee, and justification, dated November 28th, 1871, was approved by the special county judge, but there was nothing to indicate absence or inability of the county judge, and the approval bore no date. The bond was filed December 1st, 1871. Demand of the sum sued for was made by the assignee, on December 1st, 1871; before suit was brought. The complaint in the suit was verified December 22nd, 1871; the answer was verified December 30th, 1871. The date of the service of the summons or appearance of the defendant did not appear.
    The principal defence was a set-off, or counterclaim for use and occupation of premises of the defendant, occupied by the assignor, and a claim that the indebtedness sued for was incurred in an agreement that it should be applied on a claim for money paid to the assignor, by defendant, under a subsequently abandoned agreement for purchase of lands. The original agreement was by parol. Deeds and mortgages were executed agreeably to it, but were held back undelivered by reason of the purchaser not being ready to pay all he had agreed. The referee held that the agreement had not been rescinded for default, but abandoned by mutual consent; and hence the agreement to apply the price of the goods sold upon the purchase price of the lands was superseded, and the former might be recovered.
    
      The supreme court, in an opinion by Mxjllib", P. J., printed in 2 Suprm. Qt. (T. & Q.) 309, held, on the question as to the objection that the bond was not approved by the proper officer, that the assignment was not rendered wholly void ab initio thereby. During the thirty days from the date of the assignment, in which to file the bond, the title must be in the assignee,, so that the legislature contemplated that the title should
    
      pass, but until a proper bond was filed, the assignee had no authority to sell, dispose or convert for the purpose of the trust any of the assigned property (Laws of 1860, ch. 348, § 3). Collecting the assigned choses is not a conversion of them within the meaning of this section. The objection that any assignment for benefit of creditors was necessarily void for conflict with the bankrupt law, was overruled.
    Defendant appealed from the judgment.
    
      J. M. Dunning, for the appellant.
    I. The assignment was void under the bankrupt act of the United States and should not have been received in evidence. 1. The bankrupt act suspended the statute of 1860, providing for an assignment by a debtor and the distribution of his assets among his creditors from the time the act went into operation, June 1, 1867. (a) It has been held, and such is the law, that the bankrupt act suspended the insolvent laws of the several States (Exp. Eames, 2 Story, 322, 326; Chamberlain v. Perkins, 51 N. H. 39; Sturges v. Crowninshield, 4 Wheat. 122, 196; Comr. v. O’Hara, 6 Am. Law Reg. N. S. 765; Day v. Bardwell, 97 Mass. 246; Meekins v. Creditors, 19 La. An. 497; Martin v. Berry, 37 Cal. 208-222). These cases hold in reference to that subject that the law of Congress is supreme and paramount. That the State law is within the purview of the act of Congress and must yield, and is therefore suspended. That the two systems act upon the same subject-matter, the same persons, both debtors and creditors, and have the same object in view, the equal distribution of the debtor’s assets among his creditors, and that both systems cannot go on without collision, and that it would be inconsistent with that uniformity which it was the object of the constitution to establish to allow them to stand together, (b) The same reasoning, and the same principles apply to the law of 1860, under which the assignment offered in evidence was made. I submit the assignments contemplated by the lavr of 1860 are not permitted by the bankrupt act, and the assignment offered in evidence was therefore void. 3. And it does not require the institution of proceedings in bankruptcy, to produce such a result. Reed, et al. Pet’rs, in matter of Independent Insurance Co., reported in 6 Albany Law J. 309). I submit the bankrupt act is paramount and supreme, and the only way the estate of an insolvent debtor can be distributed is in pursuance of the bankrupt act. Any other way is void, because it is in contravention of that act. The debtor must ask the aid of the bankrupt court, and procure his assignee to be appointed under the bankrupt law. An assignee appointed in any other way gets no title to the debtor’s estate. Here the plaintiff gets no title to the demand in this action, and cannot recover any more than an entire stranger. He is not the real party in interest. He took his trust under a law suspended by a higher authority. 3. The assignment is under the law of 1860; that being suspended, it is void, and was improperly admitted in evidence—and there is no other evidence in the case to sustain an assignment for the benefit of creditors, even at common law. 4. But if there were, the same rule applies to assignments at common law, within the State, as to assignments under the statutory laws of the several States. No distinction or reservation is made in the cases cited, neither can be upon principle. (a) The same objections apply as well to assignments at common law for the benefit of creditors as to those under the statute.
    II. The bond of the assignee was not approved by the county judge, and should not have been received in evidence. 1. The bond should have been approved by the county judge (Laws of 1860, c. 348, p. 594). 2. The special county judge approved it. He gets no authority from the act creating his office Laws) of 
      1864, c. 368, p. 860). By that act he is to perform the general duties of a county judge at chambers, and in case of vacancy or inability. The approval of such a bond does not come within the general duties of a county judge at chambers. It is not a judicial duty ; it is in no action or proceeding. It is a special duty conferred by statute on the county judge alone. 3. The bond not being properly approved should not have been received in evidence. 4. And there being no evidence of any sufficient bond having been filed, the plaintiff had no title to the debtor’s estate, and cannot recover (Juliand v. Rathbone, 39 N. Y. 369).
    III. There should be proof of actual rescission, and restoration of what was received under the contract of sale.
    
      G. W. Miller (Goddard & Cheney, attorneys), for respondent, as to the assignment, cited Seymour v. Mercer, 13 How. Pr. 564; People v. Main, 20 N. Y 434; and insisted also that the contract was invalid and was rescinded.
    
      
       There is a brief memorandum of this case in 59 N. Y. 649. On the same subject, see the next case, p. 47. These cases are so often inquired for, that they are presented here in full. See MacDonald v. Moore, the next case but one; also Hedges v. Bungay, 16 Abb. Pr. N. S. 313, 316; S. C., 3 Hun, 594; Produce Bank of N. Y. v. Baldwin, 49 How. Pr. 277; Kercheis v. Schloss, Id. 284.
    
    
      
       See also Hand v. Williamsburgh Ins. Co., 57 N. Y. 41; Myers v. De Mier, 52 N. Y. 647; aff’g. 4 Daly, 343; Ackerman v. Voorhies, 33 Super. Ct. (1 J. & S.) 487; Westlake v. Bostwick, 35 Id. 256; Fullager v. Reville, 3 Hun, 600.
    
   Folger, J.

The assignment from Syme to the plaintiff, in trust to pay all his creditors equally, was not void, so far as any facts appear in this case.

The first position of the appellant is that the act of 1860 (Laws of 1860, chap. 348, p. 594) is void; for that it is suspended by the bankrupt act of the United States. It is true that any laws of the State legislature which are the same in object, effect and method, as the bankrupt act of Congress, are inoperative so long as the latter act is in force. But if it should be granted that the act of 1860 is of that sort, still the assignment in this case is not yet shown to be void. • The act of 1860 does not give the right to make an assignment in favor of creditors, with or without preferences. The right exists at common law, and if exercised honestly, and with no design to hinder, delay or defraud creditors, does not require the act of 1860 to warrant it. The act of 1860 is a statute, not of creation, but of direction. It recognizes the existence of the power in the citizen to make an assignment of his property to trustees, for the benefit of his creditors, and does no more than prescribe the mode in which the power shall be used, and furnish some safeguards against abuse.

So that it is not necessary to determine in this case whether the act of 1860 is or is not in conflict with the United States bankrupt act, and therefore now inoperative. For if in conflict, and therefore silenced by the bankrupt act, the citizen may still exercise his right to assign his property, in such manner as is valid at common law, unless his act, in so doing, is itself in hostility to that act.

We do not discover in the facts of this case anything which shows that this assignment is in hostility to the bankrupt act, and therefore void. There is no preference created by it in favor of any creditor. On the contrary, it provides in terms for the payment of all his creditors in full; and if that may not be, then ratably and in proportion. There is no intimation that the debtor (Syme) has ever been proceeded against or taken proceedings in the bankrupt court. We do not find in the bankrupt act any provision which makes an assignment of such kind, by a debtor not made a bankrupt, an instrument void per se. On the contrary, there are authorities that such an assignment is not void. It was so held in Sedgwick v. Place (1 Bank. Reg. 204, by Nelson, J.); and on Hawkins’s Appeal, in the supreme court of Connecticut (see 34 Conn. 548).

Nor is the objection of the defendant good, that the bond of the assignee was approved by the special county judge of Monroe county, and not by the judge of that county. Even if the bond be invalid for that reason, and the same is no bond, yet the assignment is not thereby rendered void. The title to the trust property has vested in the trustee. By the provisions of the act of 1860 the giving of a bond is not a pre-requisite to the validity of the assignment. Thirty days are given (sec. 3) after the date of the assignment for the entering into a bond. But in the mean time the title to the assigned property is not in the debtor, nor is it in abeyance. It is in the assignee, who is forbidden, only to sell or dispose of it, or convert it to the purposes of the trust. But the bond was approved of by an officer who had power to do that act (Const. of 1846, Art. 6, § 15; Const. of 1869, Art. 6, § 16; Laws of 1864, c. 368, p. 860; Seymour v. Mercer, 13 How. Pr. 564; People v. Main, 20 N. Y. 434).

There was testimony sufficient for the referee to find that there was a mutual abandonment of the parol contract for the sale and purchase of the house and lot. The defendant urges that an abandonment of a contract is not a rescission. But it is not well to insist upon words merely. . The referee, when he found that the agreement for the purchase and sale of the house and lot had been mutually abandoned and given up by the parties to it, meant that they had by their declarations, their acquiescence in declarations, and their acts, come to an understanding that the contract should be annulled, and not held as binding by either upon the other. A rescission may be by consent. It need not be expressed as an agreement, (James v. Cotton, 7 Bing. 266).

The acts of the defendant, the acts and declaration of Syme, showed that they meant to and did consent to relieve each other from any obligation in which they were by this parol agreement, and that the defendant should have the value of the use and occupation of the premises as a set-off to the account of the plaintiff’s assignor.

As no objection was made at the trial, that the proofs were not in' accord with the allegations of the complaint, it cannot be raised here. Beside the proofs made by the plaintiff herein accord with the averments of his complaint, and it was evidence which was brought out by the defendant, and by the proof in reply thereto, that changed the aspect of the case from that made by the complaint.

Certain testimony was admitted under the objection of the defendant, that it was not material. It is plain that it did her no harm. The facts are in the main found as she claimed them to be, save perhaps that of the abandonment of the contract, and that is based upon testimony to which she did not object.

The defendant offered to prove certain declarations of Syme, which at one stage of the trial were ruled out, at another similar declarations were testified to, and the defendant had the benefit of a finding that the fact was as she sought to prove it thereby.

The judgment should be affirmed with costs.

All concurred. 
      
       Compare Globe Ins. Co. v. Cleveland Ins. Co. (14 Nat. Bank. Reg. 311).
     
      
       For other recent illustrations of the rule that new matter pleaded in avoidance may he rebutted by-plaintiff, by proof of other matter which he had not pleaded,—see Peck v. Winne, 51 N. Y. 641; Dambman v. Schulting, 4 Hun, 50; Mandeville v. Reynolds, 5 Id. 338; Johnson v. White, 6 Id. 587.