Case Name: G. Edgar Allen, as Trustee in Bankruptcy of the Estate of William H. Gray, Bankrupt, Appellant, v. William H. Gray, Individually and as Sole Surviving Executor of and Testamentary Trustee under the Last Will and Testament of William Gray, Deceased, and John Boyd Gray, Administrator, etc., of Mary J. Gray, Deceased, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1910-07-07
Citations: 139 A.D. 428
Docket Number: 
Parties: G. Edgar Allen, as Trustee in Bankruptcy of the Estate of William H. Gray, Bankrupt, Appellant, v. William H. Gray, Individually and as Sole Surviving Executor of and Testamentary Trustee under the Last Will and Testament of William Gray, Deceased, and John Boyd Gray, Administrator, etc., of Mary J. Gray, Deceased, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 139
Pages: 428–433

Head Matter:
G. Edgar Allen, as Trustee in Bankruptcy of the Estate of William H. Gray, Bankrupt, Appellant, v. William H. Gray, Individually and as Sole Surviving Executor of and Testamentary Trustee under the Last Will and Testament of William Gray, Deceased, and John Boyd Gray, Administrator, etc., of Mary J. Gray, Deceased, Respondents.
First Department,
July 7, 1910.
Bankruptcy — transfer prior to four months — action by trustee-—equity — no right to jury trial.'
A trustee in bankruptcy is given power by virtue of subdivision a, section 70, of the Bankruptcy Act to enforce all rights against the-bankrupt’s property that the bankrupt’s creditors had before the adjudication.
A trustee in bankruptcy suing to enforce the rights of creditors to have property fraudulently transferred applied to the payment of the bankrupt’s debts must adopt the remedies by which the creditors could have obtained such relief.
' A suit brought by a judgment creditor to avoid as fraudulent transfers made by his debtor, and to satisfy his claim out of the assigned property, is in equity.
Where the complaint in a suit by a trustee in bankruptcy to set aside a transfer of personalty, and a general assignment made by the bankrupt more than four months prior to the filing of his petition, alleges that the pretended transfer was a fraudulent transaction intended to hinder, delay and defraud the bankrupt’s creditors, and demands judgment for the value of the property against those to whom it was transferred, the suit is in equity and there is no right to a jury trial.
Evidence in an action to set aside a bill of sale made by one afterwards adjudged a bankrupt which was given to pay an indebtedness to an estate of which he was trustee, examined,' and held, to sustain a finding that the transfer was intended to satisfy an actual existing indebtedness and was made in good faith.
McLaughlin and Laughlin, JJ., dissented.
Appeal by the plaintiff, G. Edgar Allen, as trustee, etc., from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Hew York on the 18th day of February, 1909, upon the decision of the court, rendered after a trial at the Hew York Special Term, dismissing the complaint upon the merits.
Albert O. Briggs, for the appellant.
Abraham Benedict, for the respondents.

Opinion:
Ingraham, P. J.:
William H. Gray, the bankrupt, was in business-as a dealer in-wagons and carriages at Hos. 20 and 22 Wooster street in the city of Hew York; he was also with his mother an executor of the estate of his father, William Gray, and a trustee under certain trusts in his father's will. He had become indebted to the trust estate, and on September 1, 1898, the. bankrupt executed a bill of sale to William IT. Gray and Mary J. Gray, as executors and trustees of the estate of William Gray, deceased, by which he transferred to said estate certain carriages and harnesses which had constituted part of the bankrupt's stock in trade. This merchandise was contained in a store which belonged to his father's estate and which the bankrupt had occupied under a lease from the estate and for which he had agreed to pay rent. Subsequently, on October 3, 1898, the bankrupt made a general assignment for the benefit of creditors and the assignee took possession of the assigned estate, not, however, including the merchandise transferred to the estate by the bill of sale executed on September. 1, 1898. On the 19th of January, 1899, a petition in bankruptcy was filed and on the 18th of'February, 1899, William- H. Gray was duly adjudicated a bankrupt and subsequently, plaintiff was appointed his trustee in bankruptcy. In March, 1904, this action was commenced, the complaint alleging that the general assignment for the benefit of creditors and the transfer of the merchandise to the estate of William Gray was made and intended to hinder and delay and defraud the creditors ' of William JEL. Gray and that the pretended transfer -to defendants as representing the estate of William Gray was a "fraudulent scheme and covinous transaction arranged and carried out by the detendrán ts to hinder, delay and defraud the creditors of said William H. Gray, was fraudulent and void as against his said creditors, and made in contemplation of his bankruptcy ; " that the property so transferred was of the value of $14,000 and the complaint demands judgment for $14,000.
An answer was interposed and plaintiff noticed the case for trial at a Trial Term of the court. Subsequently at Trial Term the defendants moved to transfer the cause to the Special T erm for trial which motion was granted, and on November 29, 1907, an order was entered transferring the cause to the Special Term for trial Plaintiff did not appeal from that order, but brought on the case for trial at Special Term. When the case was called the plaintiff moved that-the case be sent to a jury for trial on the ground that the plaintiff had a right under the Constitution (Art. 1, § 2) to a jury trial. The order transferring the case to Special Term was put in evidence, the motion denied and plaintiff excepted. On this appeal plaintiff insists (hat the judgment should be reversed because he was denied the right to a trial by jury. Assuming that the question is presented, I think the action was in equity. The complaint alleges an assignment of certain personal property by the bankrupt and a general assignment. for-the benefit of creditors; .that these assignments and transfers were made with intent to hinder, delay and defraud creditors of the assignor and were fraudulent and void as against his creditors. These assignments and transfers were good as between the assignor and the assignee, but could be attacked by creditors,' and the trustee in-bankruptcy brings this action to enforce the rights of the creditors. "Until the creditors or the plaintiff, acting in their right, elected to avoid the transfer, it was good as to every one. It might be that it would have been for the benefit of the estate to have confirmed the transfer to the defendant and thus satisfy the defendant's claim against the assigned estate. If a creditor wished to avoid the assignment or transfer he could have commenced an action at law against the assignor and on recovery of judgment issued an execution under which the sheriff could have levied on the property transferred and, in an action brought against the sheriff, could set up the invalidity of the transfer, or he could by a creditor's bill set up the transfer, allege that it was void as against creditors, and ask to have the property fraudulently transferred applied to the payment of his judgment. There can be no doubt but that this action would have been in equity. If this action was brought by a judgment creditor it could only be sustained as a creditor's action to avoid the transfers as fraudulent and to satisfy.the claim out of the assigned property. The action is, however, by the trustee in bankruptcy, but,-as I understand the Bankruptcy Act, the trustee when not seeking to enforce the rights of the bankrupt, but when acting in the right of the creditors and to enforce their right, individually or collectively, to have property transferred in fraud of such right applied to the payment of the debts of the bankrupt, must adopt the remedies by which the creditors could obtain such relief. The transfer having been made more than four months prior to the date of the filing "of the petition in bankruptcy, it could not be attacked as a preference, under section 60 of the Bankruptcy Act, and the action could only be maintained under section 70 of the act. (See 30 U. S. Stat. at Large, 562, § 60; Id. 565, 566, § 70. See, also, subsequent amendments, 32 U. S. Stat. at Large, 799, 800, § 13; Id. 800, § 16; 36 id. 842, § 11.) By subdivision a of the latter section, the trustee is vested by operation of law with the title of the bankrupt to all property transferred by him in fraud of. creditors. This would not vest in the trustee the title of property which the bankrupt had transferred and which had vested in the .transferee prior to the adjudication in bankruptcy ; but subdivision e provides that the trustee may avoid any transfer by the bankrupt which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred or from whoever may have received it, except a bona fide" holder for value. This provision seems to give to a trustee a cause of action to enforce the rights against the bankrupt's property that the bankrupt's creditors had before the adjudication. It is only a transfer which a creditor might have avoided that a trustee may avoid. There is no provision as to the form of action by which the trustee is to enforce the right given to him, and when he comes into the courts of a State to enforce the creditor's rights it would seem as if he were limited to the forms of action by which creditors are entitled to enforce the rights that are by this section of the Bankruptcy Act given to the trustee. While the complaint demands judgment for a sum of m'oney, that is not material, as before plaintiff could have such a judgment he must have a judgment avoiding the transfer, and the necessity of that relief makes the action' one in equity. I think, therefore, the court correctly held that the action was triable at Special Term.
The court on the trial found that at the time of the transfer said William H. Gray individually was justly and honestly indebted to the estate of William Gray) deceased, to an amount'of at least $10,834.27; that the transfer of this property was made by the bankrupt in payment of such indebtedness, and was accepted by the executors and trustees of said estate as and for such payment; that there was an immediate delivery and actual and continued change of possession of said merchandise, the fair market value of which was $8,400 ; that- the transfer was not made, by the bankrupt with the intent to hinder, delay or defraud his creditors, but was made by him and accepted by the transferees in good faith for the sole purpose of paying the indebtedness owing by the said bankrupt to the estate of William Gray,, and that the transfer was not made within four months preceding the filing of the petition in bankruptcy. An examination of the evidence has satisfied me that these findings áre sustained. There is no reasonable doubt that the bankrupt was actually indebted to the estate of which he was a trustee in an amount exceeding the valué of this property, and that this transfer was intended to satisfy his indebtedness to the estate. A representative of the estate took actual possession of the property transferred. The proceeds of its sale .have actually been received by the estate, and the court having "been satisfied of the good faith of the transaction, I see no reason why we should disturb the determination.
It follows, .therefore, that the judgment should be affirmed, with costs.
Soott and Dowling, JJ., concurred; McLaughlin and Laughlin, JJ., dissented on the ground that plaintiff is entitled to a jury trial.
Judgment affirmed, with costs.