Case Name: William Early, as Trustee in Bankruptcy of Camden and Philadelphia Soap and Manufacturing Company, Bankrupt, Respondent, v. Electro Bleaching Gas Company, Appellant
Court: New York Supreme Court, Appellate Term
Jurisdiction: New York
Decision Date: 1915-06
Citations: 90 Misc. 613
Docket Number: 
Parties: William Early, as Trustee in Bankruptcy of Camden and Philadelphia Soap and Manufacturing Company, Bankrupt, Respondent, v. Electro Bleaching Gas Company, Appellant.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 90
Pages: 613–615

Head Matter:
William Early, as Trustee in Bankruptcy of Camden and Philadelphia Soap and Manufacturing Company, Bankrupt, Respondent, v. Electro Bleaching Gas Company, Appellant.
(Supreme Court, Appellate Term, First Department,
June, 1915.)
Bankruptcy — Municipal Court of city of New York has no jurisdiction in — filing petition in bankruptcy against corporation—rights of creditors.
The Municipal Court of the city of New York has no jurisdiction over an action to secure the repayment of moneys constituting an unlawful preference in bankruptcy.
Upon the filing of a petition in bankruptcy against a corporation, a creditor has the right to accept certified checks delivered to it some months previously by the alleged bankrupt.
Appeal by defendant from a judgment of the Municipal Court of the city of New York, borough of Manhattan, fifth district, rendered in favor of plaintiff,after a trial by the court without a jury.
Dutton & Kilsheimer (James B. Kilsheimer, of counsel), for appellant.
Harry Bowers Mingle, for respondent.

Opinion:
Lehman, J.
It appears that in July, 1912, the bankrupt owed to the defendant certain moneys. It sent to the defendant three checks which it had previously procured to be certified. These checks showed upon their face that they were intended to be in payment of certain items which the bankrupt concededly owed to the defendant. The defendant, however, claimed that the bankrupt owed it a larger sum, and notified the bankrupt that it could not accept these certified checks as payment for the specific items for which they were tendered, and would hold the checks subject to the bankrupt's orders. Considerable correspondence passed between the parties in regard to these matters, until October fifth, when the Camden and Philadelphia Soap Company was adjudicated a bankrupt. At that time the question of whether or not the defendant would accept the checks had not yet been satisfactorily settled and the defendant was still in possession of the checks with the consent of the bankrupt, which was still urging the defendant to accept them. When the defendant learned of the bankruptcy of the maker of the checks, it accepted them and- used the proceeds. The trustee in bankruptcy has now brought this action upon a complaint alleging that the transaction constituted an unlawful preference.
I think that there can be no doubt but that the Mu nicipal Court has no jurisdiction over an action to secure the repayment of moneys constituting an unlawful preference in bankruptcy, and the complaint should have been dismissed. The plaintiff, however, claims that the complaint really set forth a cause of action for conversion or for money had and received.. Even if the complaint were susceptible of such a construction, I do not think that the plaintiff has made out such a cause of action. The bankrupt had, months before the petition against it was filed, tendered to the defendant certified checks. By procuring the certification of the checks, the maker had in effect made an assignment of a part of its funds in the bank to the defendant. It is true that such assignment could not bind the defendant until the chcks were delivered to it and unless accepted by it. The checks were, however, delivered to the defendant and the acceptance of the checks had not yet been definitely refused and was still the subject of correspondence. Until the checks were refused or their return demanded back, the bankrupt had no control of the funds covered by the checks. As soon as the defendant accepted the checks, then the assignment of the funds covered by them became effective, as of the date of the tender of the checks, when the bankrupt had done everything on its part necessary to divest itself of title. It seems to me, therefore, that the defendant had a right even after bankruptcy to accept the delivery made some months previously.
Judgment should be reversed, with costs, and complaint dismissed, with costs.
Hendrick and Cohalen, JJ., concur.
Judgment reversed, with costs.