Duffield et al., Assignees, etc., v. Horton et al.

by awarding to the mortgagee's claim the aforesaid additional

amount.

The second exception is overruled and the report confirmed as to that.

NEW YORK SUPREME COURT-FIRST DEPARTMENT.

MARCH, 1877.

An assignment to an assignee duly appointed in the bankruptcy proceedings dissolves the lien of an attachment levied within four months prior to the filing of the petition.

A debtor of the bankrupt who has, in ignorance of the appointment of an assignee, paid the amount of his indebtedness to the sheriff under an execution in the attachment suit, is not thereby relieved from his liability to the assignee.

J. DAVIS DUFFIELD et al., Assignees of CHARLES T. YERKES & CO., Appellants, v. HARRY L. HORTON and DAVIS JOHNSON, Respondents.

APPEAL from a judgment in favor of the defendants, entered upon the trial of this action by the court, without a jury.

Sidney S. Harris, for the appellants.

The filing of the petition in bankruptcy, followed by the adjudication of Yerkes as a bankrupt, dissolved the attachment issued in the suit of Bouvier v. Yerkes. (Bankrupt Act, 1867, Sec. 14; Miller v. Bowles, 10 N. B. R., 515; 58 N. Y., 263; In re Preston, 6 N. B. R., 545.) Bouvier had no lien at the time he recovered judgment, and acquired none by the recovery of the judgment or the issuing of the execution. (In re Hinds, 3 N. B. R., 351; Edmeston v. Lyde, 1 Paige, 637; Corning v. White, 2 id., 567; Carroll v. Cone, 40 Barb., 220, affirmed by Court of Appeals, 41 N. Y., 216 a. Only liens are preserved. (Bump on Bank., 586 [8th ed.].) When a judgment is not a lien by State law, it is not so treated by Bankrupt Act. (In re McIntosh, 2 N. B. R., 506; In re Cozart, 3 id., 508.) And this lien must attach

Duffield et al., Assignees, etc., v. Horton et al.

before proceeding in bankruptcy. (1 N. B. R., 199–599; 2 id., 388; 1 id., 165; 1 id., 190.) The defendants had constructive notice of the bankrupt proceeding. (Perley v. Dole, 38 Me., 558; Oakey v. Corry, 10 La. An., 502; In re Lake, 6 N. B. R., 542; In re Gregg, 3 id., 529; Ex parte Vogel, 2 id., 428; In re Wynne, 4 id., 23.) The plaintiffs can recover of defendants the amount due by them to Yerkes, disregarding the proceedings in Bouvier suit. (Stevens v. Mechanics' Savings Bank, 101 Mass., 109; Mays v. Man. Nat. Bank, 64 Penn. St., 74, 4 N. B. R., 446; Bankrupt Act of 1867, Secs. 14, 15, and 16; Miller v. O'Brien, 9 N. B. R., 26; In re Grinnell, 9 id., 29; In re Hall, 2 id., 192.) The plaintiffs, as assignees, succeed to the rights of creditors, as well as the rights of the bankrupt, and may contest the validity of a payment, although the bankrupt could not. (In re Metzger, 2 N. B. R., 355; Foster v. Hackley, 2 id., 406; Bradshaw v. Klein, 1 id., 542.) Congress has the power to divest the lien by attachment. (Bump on Bank. [8th ed.], 495, and cases cited; In re Brand, 3 N. B. R., 324; In re Williams, 2 id., 83; In re Ellis, 1 id., 555; Corner v. Miller, id., 403.)

R. A. Wight, for the respondents.

DAVIS, P. J.-On the trial the court below found the following facts and conclusion of law:

"1. I find that on the 18th day of October, 1871, one John V. Bouvier commenced an action against Charles T. Yerkes, and on that day attachment was issued in said action, which was served on the defendants, who were then owing Yerkes the sum of five hundred and sixty-six dollars and ninety-six cents.

66

"2. I find that on the 10th day of November, 1871, a petition in bankruptcy was filed by a creditor of Yerkes in the United States Court for the Eastern District of Pennsylvania against Yerkes, and such proceedings were had that, on the 13th day of December, 1871, Yerkes was duly adjudicated a bankrupt.

Duffield et al., Assignees, etc., v. Horton et al,

"3. That on the 30th day of December, 1871, Bouvier recovered a judgment in his action against Yerkes.

"4. That on the 5th day of January, 1872, a warrant in bankruptcy was issued out of said court to the marshal of that court, to which the marshal made his return, which appears in evidence.

"5. That on the 23d of January, 1872, the plaintiffs were appointed assignees in bankruptcy of all the estate and effects of Yerkes by the same court, and on the 24th of January, 1872, the register in bankruptcy executed to the plaintiffs an assignment to them of all the property, effects, etc., of said Yerkes, which he had on the 10th day of November, 1871.

"6. That the marshal published the warrant and notices relating to same, as appears by his return.

"7. That the plaintiffs published, as required by law, the usual notices of their appointment in four newspapers, three of which were published in Philadelphia and one in New York City, once a week for five weeks.

"8. That all the proceedings in bankruptcy were regular, and the usual notice in such proceedings were served and published as required by that act.

"9. That on the 3d of January, 1872, the defendants paid to the sheriff of the city of New York the sum owing by them to Yerkes, to wit five hundred and sixty-six dollars and ninetysix cents, who then held an execution on said judgment in favor of Bouvier, issued to him on the said 30th day of December, 1871.

"10. That the defendants had no knowledge of the bankruptcy proceedings against Yerkes until after the payment to the sheriff of the balance in their hands.

"As conclusion of law, I find that the defendants are entitled to judgment, with costs."

The only question in this case is as to the correctness of the conclusion of law that follows upon the findings. We think the case is controlled by Miller v. Bowles (10 N. B. R., 515; 58 N. Y., 263), where it was held that an assignment to an assignee, duly appointed in proceedings under the Bankrupt Act, dissolves the

City Bank of Harrisburg v. Sherlock.

lien of an attachment sued out of a State Court, levied upon the property of the bankrupt within four months of the commencement of such proceedings. In accordance with that case, judgment should have been ordered, upon the facts found by the court in this case, in favor of the plaintiff. There is no controversy as to the facts in the case, and no necessity for a new trial. The judgment must, therefore, be reversed, and judgment directed for the plaintiff for the sum of five hundred and fifty-six dollars and ninety-six cents, with costs of the court below and of this appeal, to be adjusted. BRADY and DANIELS, JJ., concurred.

SUPREME COURT-PENNSYLVANIA.

JUNE 11, 1877.

A voluntary assignee is a mere representative of his assignor, and takes his choses in action subject to any existing right of set-off.

Where a bank has made a voluntary assignment for the benefit of creditors, a depositor may set off a balance of deposits due him against his note held by the bank at the time of the assignment.

CITY BANK OF HARRISBURG v. SHERLOCK.

ERROR to the Court of Common Pleas of Dauphin County. AGNEW, C. J.-In re Fulton's Estate, 1 P. F. Smith, 204, it is said: "Perhaps nothing is better settled in this State, by uniform and numerous decisions, than this, that a voluntary assignee is a mere representative of the debtor, enjoying his rights only, and no other, and is bound where he would be bound; that he is not the representative of the creditors, and is not clothed with their powers; that he is but a volunteer, and not a bona fide purchaser for value." Many cases are cited for these propositions. Martin Sherlock made his note for three hundred and fifty dollars, June 13, 1876, at ninety days, which the City Bank discounted, and held on and before

City Bank of Harrisburg v. Sherlock.

the maturity of the note. He had a running account of deposits in the bank before and during the running of the note, on which there was a balance due him, September 6, 1876, of three hundred and ninety-five dollars and fifty cents, the bank then being the holder of the note. The bank made a voluntary assignment for the benefit of creditors, on the 7th of September, 1876. When the note passed by this assignment to the assignees, Sherlock was the creditor of the bank, and had an immediate right of action against it. The assignees being the mere representatives of the bank, and not purchasers for value, took the note subject to his right of set-off.

It is clear, according to authorities, that the bank conferred upon the voluntary assignees no right greater than their own, which was a right of action when the note fell due, subject to the existing set-off. Bosler v. The Exchange Bank (4 Barr., 32) was decided on a widely different principle. When Bosler died, the bank had no debt due for which it could sue; while Bosler's right of action was perfect before his death. But at the moment of his death the law took possession of his estate for the benefit of his creditors, he being insolvent. It was not the case of a mere voluntary transfer, but new rights sprang into being on the instant of his death. At his death the debts did not ipso facto cancel each other, for the reason that the bank had no immediate right of action. Consequently, when the estate, by operation, passed into legal administration, and was in gremio legis, the rights of creditors immediately attached, and, the estate being insolvent, equity demanded equality among the creditors of the same class. Ilence the right of the bank as a creditor was to pro rata only. But a voluntary assignment has no such effect. It does not alter the status of the rights of the creditors as death does of the decedent's estate. It is true the duties and obligations of the assignees are regulated by law, but the transmission of the estate to them is the merely voluntary act of the debtor, who cannot impair the rights of creditors which had attached before his act. We discover no error in the record, and the judgment is affirmed.