Case Name: MATTER OF BACKER
Court: New York Court of Common Pleas
Jurisdiction: New York
Decision Date: 1877-07
Citations: 2 Abb. N. Cas. 379
Docket Number: 
Parties: MATTER OF BACKER.
Judges: 
Reporter: Abbott's New Cases
Volume: 2
Pages: 379–385

Head Matter:
MATTER OF BACKER.
N. Y. Common Pleas; Special Term,
July, 1877.
General Assignment.—Bankruptcy.—Composition with Creditors.—Discharge of Assignee and his Sureties.— Accounting.—Preferences.
A general assignment, which has not been impeached by any creditor for fraud, nor set aside at the suit of the assignee, is valid, although the assignor, assignee and creditors may have chosen to regard it as null and void.
Where, after a valid assignment for the benefit of creditors, bankruptcy proceedings had been commenced, which resulted in a composition, from which one of the creditors, whose claim was disputed by the assignee, was omitted; application was made by the assignee, before the composition agreement had been fully performed, for leave to reconvey to his assignor the property conveyed by the assignment, and for the discharge of himself as assignee and of his sureties, as well as for the cancellation of his bond;—Held, that the assignee became by force of the assignment a trustee for the benefit of the Assignor’s creditors, and the trust not having been executed, he could not be discharged, nor his bond canceled, nor could he release the assigned property to the assignor.
Where all the creditors of a bankrupt are secured to the same extent and in the same manner, so that no one has a preference over the others—as by a general assignment for the benefit of creditors—the provisions of the Bankrupt act discriminating between secured and unsecured creditors have no application.
Hence, where bankruptcy proceedings had been commenced after a valid general assignment, and a composition was proposed by the debtor’s giving notes payable at different dates, and the meetings of the creditors called to decide on the acceptance were attended by one of them who opposed the acceptance thereof, but his name and address and the amount of the debt due him were shown in the statement of the debtor which was produced at the meeting at which the resolutions for a composition were passed:—Held, that the composition was binding upon the opposing creditor as well as. upon all others included in the statement produced by the debtor at the composition meeting, and that the opposing creditor could not call upon the assignee of the general assignment for an accounting, before the termination of the latter’s trust thereunder.
Petition of assignee for benefit of creditors for Ms discharge. Also, petition of a creditor for an accounting by such assignee.
Abraham Backer, assignee of Ezekiel Waiztfelder and. Michael Waitzf elder, composing the firm of E. & M. Waitzf elder, and also' assignee of E. Waitzf elder & Co., petitioned this court for leave to reconvey to his assignors, or to the survivors of them, the property conveyed to him by assignments for the benefit of creditors, and for his discharge as assignee, as well as for the discharge of his sureties, and the cancellation of the bond given by him as such assignee.
At about the same time Henry Nathan & Co. petitioned that Backer account as assignee of the two firms.
The facts of the case appeared substantially as follows :
The firm of E. & M. Waitzf elder and the firm of E. Waitzf elder & Co., proceeding under the laws of the State of New York, severally executed to Abraham Backer assignments for the benefit of their respective creditors. Backer subsequently executed one bond conditioned for the faithful performance of his duties under both assignments. The assignee then took possession of the property.
Within one month after all this had been done, a petition in involuntary bankruptcy was filed against both firms : the firm of E. & M. Waitzf elder, and that of E. Waitzf elder & Co. Before any order of adjudication was made by the court of bankruptcy, a meeting of creditors was called under the terms of section 17 of the amendment to the bankrupt act, approved June 23, 1874.
Whether the proceedings in the United States court for the adjudication of the Waitzfelders as involuntary bankrupts were instituted at the suggestion of, and in collusion with, the Waitzfelders, or whether they were taken in good faith by creditors who really, with a view to their own advantage, wished to proceed in the court of bankruptcy, did not appear. From the fact that in about one month after they made their assignments, the Waitzfelders, in the course of their negotiations for a composition with their creditors in the bankruptcy court, assumed that the assignments were nullities, and represented the property which they had assigned to be still their own, the learned judge who delivered the following opinion held it not unfair to conclude that the only object they had in view in making the assignments was to gain time, and to keep their creditors at bay until they had perfected their arrangements for rapid transit through the court of bankruptcy. The proceedings in the bankruptcy court resulted in an arrangement, which the court approved, for a composition, under which the Waitzfelders were to pay their creditors twenty-five cents on the dollar in three payments, the first payment in six, the second in twelve, and third in eighteen months after date, giving notes for such payments with Abraham Backer as the indorser. The court approved the composition on September 20, 1876.
Henry Nathan & Co. at all times opposed the composition, and refused to accept the notes which were tendered to him in performance of it. They participated, however, in the meetings of the creditors called to decide upon the acceptance of the composition; and their names, and addresses, and the amount of the debt due to them, were shown in the statement of the Waitzfelders which was produced at the meeting at which the resolutions for a composition were passed. The name of Abraham Hoffnung did not appear in that statement, and the assignee Backer denied that Hoffnung was a creditor of the Waitzfelders.
All parties, having gone to the end of their proceedings in the court of bankruptcy, returned to the court of common pleas, and asked that the assignments be resuscitated. Backer, the assignee, asked leave to reconvey the assigned property to the Waitzfelders, and Henry Nathan & Co. petitioned that Backer be ordered to account as assignee. Henry Nathan & Co. opposed Backer’s application, and Backer objected that his opponents had no standing in court, because, as hs contended, Nathan & Co. were no longer creditors of the Waitzfelders ; the composition proceedings in the court of bankruptcy having extinguished their claim. To the application of Nathan & Co. for a citation requiring Backer to account, the latter answered that Nathan & Co. were bound by the composition, and were therefore not entitled to an account. Nathan & Co. replied that they were not bound by the composition, because the court of bankrupcty had no jurisdiction over them with respect to their claim against the Waitzfelders, inasmuch as that claim was a secured debt; it having been made so by the assignment, which set over the property of the Waitzfelders as the fund out of which the debt should be paid.
Louis V. Putney, with whom was Abraham, J. Dittenhoefer, for Abraham Backer.
Gershon A. Seixas, for Henry Nathan & Co.

Opinion:
Yaw Hoesew, J.
These applications forcibly illustrate the inconvenience of permitting two conflicting systems of procedure to exist in one State at one and the same time. [The learned judge, after stating the facts, proceeded as follows:]
It cannot now be denied that the assignments were valid. The Waitzfelders, their assignee, and their creditors, may have chosen to regard them as null and void, but it is my duty to hold that, not having been impeached by any creditor for fraud nor set aside at the suit of the assignee, they were and are good and sufficient deeds which transferred to Backer all the property which they purported to convey. Backer became, by force of the assignments, a trustee for the benefit of Waitzf elder's creditors, and he must execute that trust before he has any right to a discharge. I am bound to look into the papers presented before I order the discharge of Backer's sureties, and I find that Abraham Hoffnung insists that he has a claim against the Waitzfelders. It is conceded that Hoffnung, if he be a creditor at all, is not bound by the composition, as his claim was not in the statement which the Waitzfelders produced at the meeting at which the composition resolution was passed. Until Hoffnung's claim has been disposed of, it would be improper to permit the assignees' bond to be can-celled.
In addition to that, it does not appear that the composition agreement has been fully performed. Indeed, the time for the payment of the notes at twelve and at eighteen months has not arrived. Until those notes shall have been paid, neither the Waitzfelders nor Backer can say that the claims of creditors are ex- languished or discharged. At the most, those claims are suspended. If the notes be not paid the creditors may cast them aside, and sue upon the original indebtedness. Such is the law in England, and such must be the law in this country also (Edwards v. Hancher, 2 Weekly Digest, 233).
As the assignments stand in full force and effect the creditors must look to the assignee and the assigned estate for the payment of their claims, if the composition agreement be not carried out. It may be said that the composition resolutions provided for the restoration to the Waitzfelders of the assigned estate. To that suggestion there is a complete answer in the fact that neither the court of bankruptcy, nor the creditors, nor the Waitzfelders, were in a position to control or dispose of that estate.
The bond cannot be canceled, nor can the assignee release the assigned estate to the Waitzfelders. The trust must be performed. It will be observed that I have not put my denial of the assignee's petition, on the ground that Henry Nathan & Co. are creditors of the Waitzfelders, with a claim to-day valid and undischarged. My opinion is that the claim of Henry Nathan & Co. is—like all other claims embraced in the statement produced by the Waitzfelders at the composition meeting—suspended.
The view I have taken renders it unnecessary for me to consider what the rights of Henry Nathan & Co. may be under subdivision 6 of section 20 of the general assignment act of 1877. I purposely refrain from passing upon the question. It will doubtless arise hereafter when the assignee renews his application under that section.
With respect to the petition of Henry Nathan & Co. for a citation to the assignee to account, it will not be necessary for me to say much. It is true that the creditors for whose benefit an assignment is made are in a certain sense secured. They have a right to enforce the trust created for their benefit, and they have an equitable lien on the assigned estate (Story's Equity Juris. § 1244 [10th Ed.]). But where all the creditors without exception are secured to the same extent and in the same manner, so that no one of them has a preference over the others, I think that those provisions of the bankruptcy act discriminating between secured creditors and creditors unsecured have no sort of application. The object of those provisions is to secure equality, and so to marshal the effects of the debtor that a creditor, having the security of a, special fund, shall look to that fund first, and exhaust it before he shall be permitted to join in the scramble for the general assets. All creditors of the Waitzf elders standing on a level, I think the composition was binding upon Nathan & Co. as well as on all others included in the statement produced by the Waitzf elders at the composition meeting, notwithstanding the fact that an assignment had been executed for their security. Henry Nathan & Co. have not, therefore, at the present time, the right to call upon the assignee for an accounting.
As I have denied the application of the assignee for the cancellation of his bond, and for the privilege of releasing the assigned estate to the survivors among the assignors, it is unnecessary to pass upon the duty of the assignee respecting the assets of Michael Waitzf elder, deceased.