Case Name: Thomas Murphy et al., App'lts, v. Ruel Philbrook, Resp't
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1889-06-28
Citations: 26 N.Y. St. Rep. 167
Docket Number: 
Parties: Thomas Murphy et al., App’lts, v. Ruel Philbrook, Resp’t.
Judges: 
Reporter: New York State Reporter
Volume: 26
Pages: 167–170

Head Matter:
Thomas Murphy et al., App’lts, v. Ruel Philbrook, Resp’t.
(New York Superior Court, General Term,
Filed June 28, 1889.)
1. Insolvency — Discharge—Effect of.
A decree of an insolvency court of Massachusetts which is fairly obtained, discharging a debtor residing in that state, will bar an action on a claim of a creditor, who is also a resident of Massachusetts, brought in this state by the assignee of me creditor who filed his claim in the insolvency court of Massachusetts.
2. Same — Assets—What cannot be sold as.
The interest of an insolvent debtor in a patent right, under an assignment by which he obligated himself to prosecute all claims for infringement at his expense, receiving one-fourth of all sums recovered, less the costs of prosecuting the suits, is only that of a trustee, and cannot be sold ai an asset of his estate.
3. Same — When sale cannot be collaterally attacked.
A sale by the assignee in insolvency cannot be collaterally attacked for irregularity, but should be vacated by proceedings in the insolvency court itself.
Appeal from an order of special term overruling a demurrer to defendant’s answer.
The facts are sufficiently stated in the opinion.
Roger M. Sherman, for app’lts; Harvey D. Hadlock, for respondent, Philbrook.

Opinion:
Freedman, J.
All the allegations of conspiracy, fraud, collusion and concealment stated in the complaint having been denied in the answer, to which the plaintiff has demurred, the facts still available to the plaintiff may be summed up as follows: The plaintiff sues as assignee of the claims of certain creditors who are residents of the state of Massachusetts, and who, in the year 1885, proved their demands in an insolvency court of that state against the defendant, Ruel Philbrook. The insolvency court was a court of record, and had full jurisdiction over the matters contained in Philbrook's petition for a discharge. The assignment of the said creditors to the plaintiff was not made until 1887. Philbrook was a voluntary insolvent petitioner in the Massachusetts proceedings, and, in the course of such proceedings, the defendant". Ruel W. Thompson was duly appointed assignee for the benefit of creditors. By the law of Massachusetts, the assignment vested in Thompson all the property of Philbrook which he could have lawfully sold, assigned, or conveyed, or which might have been taken on execution against him, and also his rights of action. Philbrook included in his schedule of assets "one-fourth contingent interest in patent No. 42,920," which patent was for an improvement in fire engines. This item was stated as " of no value." It-was duly appraised as of no value by appraisers duly appointed, end subsequently, upon due notice, duly sold at public auction in the course of the proceedings by Thompson, as assignee, to the defendant Albert H. Smith, as the highest bidder therefor, for the sum of two dollars. Smith then was, and now is, the son-in-law of Philbrook. In May, 1885, Philbrook obtained from said court of insolvency a full discharge from all debts proved against his estate, and from all debts held, by residents of the commonwealth of Massachusetts, which said discharge he pleads as a bar to the present action, on the ground that the creditors represented by the plaintiffs were residents of Massachusetts, and parties to the insolvency proceeding, and as such proved their claims against him and shared in the proceeds. To overcome this plea, the plaintiff relies upon the fact that since the said sale to Smith, the latter has not attempted to exercise any right or control over, or to assert any interest in or to, said one-fourth contingent interest in the said letters patent, but that he has allowed Philbrook to litigate claims for infringement of said letters patent during the life of the patent.
Concerning this claim, Philbrook says, in his answer, " that, at the time when he filed his petition in insolvency as aforesaid, he was an assignee in trust of certain rights, recoveries and choses in action, created by an instrument dated the 20th day of May, 1884, for infringement of said letters patent during the term of their existence, a period of seventeen years, said patent having expired on the 24th day of May, 1881; that the condition of said trust was to prosecute all claims that had arisen by reason of the infringements of said letters patent, during their said term of existence, and pay all the expenses of such prosecution, and when all the expenses of such prosecution had been paid from such sums as he held in excess of the necessary expenses aforesaid, he was to have, and enjoy as his own separate property, one-fourth interest in all recoveries; * . that at no time since he was trustee as aforesaid has there been any fund in his hands for distribution; that at the time when he filed his proceedings in insolvency as aforesaid he had never received as much as one dollar by reason of the assignment of May 20, 1884, and that on the 13th day of October, 1884, the only interest that he had in and to the rights and recoveries specified in his said assignment was that of trustee, and that interest he has continued to hold until the present time, and is now, so far as within his power, prosecuting said suits to final decree to obtain the rights and recoveries arising by reason of the infringements aforesaid."
Upon this state of facts the plaintiff demands judgment First, that said discharge, granted by the court of insolvency within and for the county of Suffolk, in the commonwealth of Massachusetts, on or about the 29th day of May, 1885, to the defendant Phil-brook, be adjudged null, void and of no effect as against plaintiff, and as a bar to the debts proved against his estate aforesaid.
, Second. That it be adjudged and decreed that all right, title and interest of said defendant Philbrook, which he had on the 13th day of October, 1884, in or to one-fourth contingent or other interest in letters patent of the United States, No. 42,920, or any suits, demands, rights or causes of action for or because of in fringements thereof, are subject to a lien in favor of this plaintiff, to the extent of the claims assigned to him as aforesaid, and interest thereupon, and that the sale and conveyance to said Smith is null, void and of no effect.
Third. That a receiver be appointed herein to take possession and control of all said right, title and interest, and that he have power to interplead and be substituted in all the suits at law and in equity aforesaid as fully as said defendants, Philbrook, Thompson or Smith, are, or may lawfully be in his or their name, place and stead, and to hold and prosecute the same, subj'ect to the direction of this court.
Fourth. That the defendants, their, and each of their attorneys, counsel, agents, employees and all persons acting by their and each of their appointment or authority, be, during the pendency of this action and permanently, enj'oined and restrained from selling, assigning, transferring, receiving, collecting, discharging, incumbering, or in any manner disposing of or interfering with said" one-fourth interest in letters patent of the United States, No. 42,920, or in any of said suits at law, or in equity, or any cause of action therein, or in any manner intermeddling or proceeding in said actions or suits, or either of them, etc.
I fail to perceive how the plaintiff, upon the foregoing state of facts admitted by the demurrer, can have the relief claimed, or any part thereof. The court of insolvency of the state of Massachusetts having, as a court of record, obtained full jurisdiction over the matters embraced in Philbrook's petition, and over the persons of plaintiff's assignors, by reason of their appearance and submission to the jurisdiction of the court and the proof of their claims, and there having been no conspiracy, fraud, collusion or concealment in the proceedings, full faith and credit must be given to the judgment of said court, and the. said judgment, and the discharge granted thereby, must be-held to be conclusive between the parties, and a bar to any other action founded on a matter involved therein and determined by it. A controversy between citizens of the same state cannot, after its final determination by the courts of that state, be reopened or reviewed in another state m consequence of a mere assignment by a party to the controversy to a citizen of another state. No such assignor can convey a greater title than he himself possesses.
There are. still other reasons why the plaintiff must fail upon the case as it stands. If Philbrook's interest in the letters patent was assignable at all, it passed to his assignee, and was, by the latter, duly sold to Smith, as the highest bidder therefor. By that sale the title to such interest became vested in Smith. In the absence of conspiracy, fraud, collusion and concealment, the sale cannot be disturbed, and it was competent thereafter for Smith to relinquish the subject of his purchase to Philbrook. But, even if there had been some irregularity or inadequacy in the appraisement or sale, for which the sale could be set aside, in the exercise of the discretion of the court, and a resale ordered, it is too clear for argument that no other court than the insolvency court can make such an order.
In conclusion, it should be pointed out that whatever' interest Philbrook really had in the said letters patent depended upon a certain contract, a copy of which was set forth by him, in full, in his answer. By that it appeal's that his interest was purely speculative ; that it was in trust to him; that it depended upon the ultimate success of litigations then pending, and thereafter to be brought; and that such ultimate success was dependent upon his personal exertions, and upon his ability to raise and procure the necessary funds with which to pay the necessary expenses. Such an interest was a personal trust, based upon personal services to be thereafter rendered, and, as such, it could not be assigned. His duties as trustee could not be renounced by an assignment to his assignee in insolvency, without the consent of his cestui que trust, and consequently, notwithstanding the assignment, his assignee did not and could not become a trustee in his stead, with power to sell the trusteeship at public auction to the highest bidder. Thus it has been shown that, in whatever aspect the case, as left by plaintiff's demurrer, is considered, the plaintiff has no cause of action. In no aspect of it will the law, in the face of Philbrook's specific demands and explanations, raise an implied trust in favor of plaintiff's assignors, or sustain an implication of fraud for then-benefit.
The order and interlocutory judgment should be affirmed, with costs, with leave to plaintiff to withdraw his demurrer, on payment, of such costs and of the costs below.
Sedgwick, Ch. J., and Truax, J. concur.