Case Name: Williams v. Vermeule and others
Court: New York Court of Chancery
Jurisdiction: New York
Decision Date: 1846-12-04
Citations: 4 Sarat. Ch. Sent. 388
Docket Number: 
Parties: Williams v. Vermeule and others.
Judges: 
Reporter: Sandford's Chancery Reports
Volume: 4
Pages: 388–390

Head Matter:
Williams v. Vermeule and others.
Oct. 16 ;
Dec. 4, 1846.
Under the bankrupt act of congress passed in 1841, the general assignee in bankruptcy became vested with the rights of property of one declared a bankrupt, including the right for the benefit of creditors, to set aside all transactions made by the bankrupt to defraud his creditors, or in fraud of the bankrupt law.
A sale of the bankrupt’s rights of property, made by the assignee under the order of the court, carried to the purchaser all the rights of action which the assignee himself could exercise in respect of such property.
An averment that certain acts in the court of chancery, were a fraud upon the court, is not equivalent to a charge that they were in fraud of the bankrupt law, or of creditors.
Demurrer. The bill set forth that on the 18th of December, 1840, Vermeule being in possession of certain lands, mortgaged them to Henry B. Knapp, ostensibly to secure the payment of $500. On the 30th of March, 1843, Knapp filed a bill in this court against V. and wife, to foreclose the mortgage.
A decree of sale was made, on the 23d of May, and on the 15th of June, 1843, the premises were sold by a master, and were bid off by Van Arsdale, one of the defendants in this suit, for $100. A master’s deed was executed to him in October following.
On the 17th of June 1843, Vermeule was declared a bankrupt, pursuant to his own petition, in the United States District Court.
‘ On the 28th of November 1845, the general assignee in bankruptcy, under an order of the district court, sold at auction all Vermeule’s rights and interest in the premises, and the same were purchased by the complainant, and a deed was executed to him by the assignee, a few days afterwards.
The bill alleged that the mortgage was executed to Knapp, to secure him against certain indorsements which he had made for Vermeule. That when the bill for its foreclosure was filed, nothing had been paid by Knapp in respect of such indorsements 5 all of the same have been paid off or otherwise secured without any resort to him, and there was nothing due on the mortgage at the time of the master’s sale. That the foreclosure was conducted by the same solicitors who prosecuted Vermeule’s bankrupt discharge, and he furnished the money for conducting the foreclosure, and the whole proceeding was a fraud on the’ court of chancery. That Yan Arsdale is an intimate and confidential friend of Vermeule; he purchased, and was to, and does hold the premises for the latter’s benefit; and he never paid any: thing upon or towards the purchase. That the whole affair was a contrivance between Knapp and the other parties, and a mere cover for Vermeule’s benefit, who is in the actual enjoyment of the rents and profits of the premises. The bill offered to pay the bid at the master’s sale. It prayed for an avoidance of the sale, or a redemption on those terms, and for general relief.
Vermeule and Van Arsdale demurred to the bill for want of equity; and they claimed that no one but the general assignee could proceed to avoid the sale. That he could not transfer that right to a purchaser.
J. Anthon, for the defendants.
J. B. Scoles, for the complainant.

Opinion:
The Vice-Chancellor.
There is no doubt that under the late bankrupt act of congress, the general assignee of a banktrupt became vested with his rights of property, including the right for the benefit of creditors, to set aside all transactions made by the bankrupt to defraud his creditors, or in fraud of the bankrupt law. Nor have I any doubt as to the point, that a sale of the bankrupt's "rights of property," when made under the order of the district court, carries to the purchaser all the rights of action which the assignee himself could exercise in respect of such property. (Bankrupt Act of 1841, § 2, 3, 9 ; Sands v. Codwise, 4 Johns. 536.)
The only difficulty in this cáse, is that the complainant has omitted to aver in his bill, that the mortgage and its foreclosure and the sale, were in fraud of the bankrupt law, or contrived, &c. .in contemplation of Vermeule's bankruptcy, or that he was largely indebted or insolvent at the time and those proceedings were for the purpose of defrauding his creditors.
The charge is limited to a fraud upon this court, which is not equivalent to any of those I have enumerated, and does not supply their place.
The demurrer must be allowed, with leave to the complainant to amend his bill on payment of costs of the demurrer and the hearing.