Case Name: Charles A. Bryan, Plaintiff, v. Matilda L. Madden and The Equitable Life Assurance Society of the United States, Defendants
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1902-09
Citations: 38 Misc. 638
Docket Number: 
Parties: Charles A. Bryan, Plaintiff, v. Matilda L. Madden and The Equitable Life Assurance Society of the United States, Defendants.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 38
Pages: 638–641

Head Matter:
Charles A. Bryan, Plaintiff, v. Matilda L. Madden and The Equitable Life Assurance Society of the United States, Defendants.
(Supreme Court, Kings Special Term,
September, 1902.)
Bankruptcy — Complaint by the trustee’s mesne assignee to set aside a transfer made by the bankrupt to his wife as in fraud of creditors and also as an illegal preference.
A complaint, by a mesne' assignee of a trustee in bankruptcy who sold under an order of the federal court the interest of the bankrupt in certain contracts securing to him commissions as an- insurance agent and which contracts he had before voluntary bankruptcy assigned to bis wife, seeking, in the same cause of action, to set aside this latter assignment, first, as in fraud of creditors and, second, as an illegal preference under the Bankruptcy Act of 1898, was deemed not to allege inconsistent claims, and the court, after holding that the assignment was shown not to have been made in fraud of creditors, granted the plaintiff relief against the wife and the insurance company upon the second ground.
This is an action brought by the plaintiff as assignee by mesne conveyance from the trustee in bankruptcy of William J. Madden, to declare void, as made in fraud of creditors, and to set aside, as made by way of preference, an assignment by William J. Madden to Matilda L. Madden, his wife, within four months prior to his adjudication as a bankrupt, of three contracts entered into by him (Madden) with the Equitable Life Assurance Society of the United States.
On or about the 3d day of February, 1893, 15th day of May, 1899, and the 18th day of December, 1899, William J. Madden entered into three certain contracts with the defendant The Equitable Life Assurance Society of -the United States, under the terms of which he became entitled to renewal commissions accruing in each year during the life of the many policies of life insurance, written by him thereunder. On the 19 th day of July, 1900, said William J. Madden, who was indebted to his wife, the defendant Matilda L. Madden, in the sum of $2,585, assigned to her his right and interest in the aforesaid contracts and to the renewal commissions accrued and thereafter to accrue thereunder.
On the 3d day of August, 1900, said William J. Madden was on his own' petition to the United States District Court, Eastern District of New York, adjudged a bankrupt and Edward Butcher, Jr., was on the 23d day of August, 1900, appointed trustee of his estate. William J. Madden assigned said contracts to his trustee in pursuance of an order of the said District Court, dated December 29, 1900, which directed him so to do, and made the following reservation: “And the court not passing upon or de-
termining the alleged right or interest, if any, of the said Matilda L. Madden in the said three contracts.” On appeal this order was affirmed (49 O. O. A. 83). On the 14th day of October, 1901, the trustee in bankruptcy sold at public auction the interest of the defendant William J. Madden in said contracts to one James S. Clem who in turn assigned to the plaintiff.
The complaint in the action set out that the assignment by William J. Madden to the defendant Matilda L. Madden was made “ with the intent and purpose on his part to hinder delay or defraud his creditors,” and was therefore void; and in the same count the complaint further set forth that the assignment was made within four months of the adjudication in bankruptcy of said William J. Madden “ to the defendant Matilda L. Madden, his wife, who was then one of his creditors,” and was therefore voidable as a preference.
Before any proof was put in, the defendant Matilda L. Madden moved to dismiss the complaint on the ground that the inconsistency between the two or more material allegations contained in the alleged single cause of action in the complaint was fatal, since both could, not be true as matter of fact and either was essential to make out a sufficient case. On the trial the court ruled that the plaintiff had shown that the assignment was not made in fraud of creditors.
Charles N. Morgan & Son, for plaintiff.
Alexander & Green (W. L. Kitchel, of counsel), for defendant, Equitable Life Assurance Society of the United States.
Henry B. Heylman, for defendant Matilda L. Madden.

Opinion:
Russell, J.
The objection that the trustee in bankruptcy would not have a right to follow the moneys, due from the Equitable Life Assurance Company to the bankrupt, upon the charge that the assignment of the contracts to the' bankrupt's wife was a preference made within four months of bankruptcy, and also upon the charge that the assignment was fraudulent as against creditors because the two claims are inconsistent, is not well founded. The bankrupt may well seek to prefer an alleged creditor who is friendly to him, and also retain such a right by secret connivance with that creditor which will enable him to hold the benefits in whole or in part for future use, and so the transfer be unlawful within the provisions of the Bankrupt Act.
Whatever interest the bankrupt had in the contracts was assignable, and the defendant wife claims her right and such power of assignment by the bankrupt. If she had a right to take an assignment from him, the trustee gained by the proceedings whatever interest the bankrupt had in the contracts, and that interest is to be determined by the status of the contracts and the ownership thereof under the provisions' of the Bankrupt Act. If the assignment to the wife was valid, the bankrupt had no longer any interest, and the transfer to the trustee in bankruptcy carried no interest whatever. But, if that transfer to the wife was subject to the provisions of the National Law to further its object in-giving to thv trustee all -the bankrupt's property, including that fraudulently transferred and that given to creditors for preference within four months of bankruptcy, then the trustee took the rights the bankrupt had in the contracts before the assignment to the wife if he chose to follow his privilege. If this action had been brought by the trustee his right to recover would have appeared to be clear. Instead of bringing an action however, by order of the District Court he was directed to transfer the interest of the bankrupt to a purchaser upon a sale made by him, which he did. It will not be assumed that these orders and sale attempted to assign an interest which was nothing if the assignment to the wife were absolute. The intention and effect was to assign whatever right the trustee in bankruptcy had, and that right was the same as the one which the trustee himself could reach, for by the orders for the sale and the. sale the trustee parted with every interest he had in the bankrupt's contracts. Otherwise the proceeding would have been a confessedly futile one by the United States Court.
¡Nor is the right of action by the trustees a purely personal one. So far as he acts within the obligations of official duty his power to perform is personal, but so far as he undertakes to pass property rights he assigns all that he can assign, and it is a wholesome rule that he can dispose of property interests which may be the subject of litigation, allowing others interested to carry on the burden, while he himself promptly distributes all the proceeds realized to the creditors, and within a reasonable time terminates his trust.
Let judgment go in favor of the plaintiff for the relief asked for in the complaint, with costs against the defendant Matilda L. Madden.
Judgment in favor of plaintiff, with costs against defendant Matilda L. Madden.