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In Walradt v. Miller, 2 Cir., 45 F.2d 686, the facts were well within the Ratner holding in that the real agreement between the parties as found by the court contained no definite condition to the assignment but contemplated only that the assignor might collect from the obligors for an indefinite period.
Summary of this case from In re New York, N.H. H.R. Co.Opinion
No. 64.
December 1, 1930.
Appeal from the District Court of the United States for the Eastern District of New York.
Appeal from a decree of the District Court for the Southern District of New York.
Action by Arthur E. Walradt, as trustee in bankruptcy of Jacob B. Cohen, against Edward Miller and another. Decree for plaintiff, and defendants appeal.
Modified and affirmed.
The plaintiff-appellee is the trustee in bankruptcy of Jacob B. Cohen, who was adjudicated a bankrupt on February 25, 1927, on an involuntary petition filed against him January 11, 1927. Cohen, who was then in business under the name of Auto Trade Supply Company, in December, 1926, applied to the defendant Braunstein, who was his father-in-law, for a loan of $5,000. Braunstein was willing to give him financial assistance, but was fearful that, if he himself let his son-in-law have the money, it would not be repaid. Consequently he arranged with the defendant Miller, an old friend, to let Miller have the money and for Miller to deal with Cohen without letting him know that the money belonged to Braunstein. Afterwards Braunstein sent Cohen to Miller, and Miller gave to Cohen his check for $3,000 dated December 11, 1926. It is not certain that Cohen got this check on that day, but he did receive it before December 15th, when it went through the New York Clearing House. On December 11, 1926, Cohen assigned to Miller certain accounts by means of the following written assignment:
"For valuable consideration I hereby sell, assign and transfer to Edward Miller, of New York the following accounts
"Auto Trade Supply Co. "J.B. Cohen."
Cohen did not then deliver the accounts to Miller, but, so Miller claimed, agreed to collect them as he could and to keep the proceeds separate from his own money in a trust account for Miller. Later Cohen needed $2,000 more, and got it from Miller after Braunstein had let Miller have that additional sum. On January 11, 1927, Cohen, by written assignment in terms like that of December 11th, assigned additional accounts to Miller. The accounts assigned in all had a face value of $8,000. The District Court found on sufficient evidence that the assignments were not the result of outright sales of the accounts to Miller, but were given as security only for loans.
During December, Cohen sent Miller three checks to cover collections he had made on the assigned accounts. These checks were drawn on the checking account of the Auto Trade Supply Company, were not numbered consecutively, and were, as the court found, notice to Miller that Cohen was not putting the collections in any trust account for him. Miller made no protest, however. At one time in December, but just when does not appear, Miller went to see Cohen about the payments he was making and discovered that Cohen was not turning over all of the money he was collecting on the assigned accounts. There is no indication even then that Miller thought that Cohen was violating any agreement, but that he did insist upon Cohen's paying to him the balance of the collections at that time. Cohen did this with a check that was not honored at the bank. It was only after that, and early in January, that Miller took control of the accounts himself and undertook their collection. The District Court did not believe the evidence of any agreement to let Cohen collect the assigned accounts to hold the proceeds in trust for Miller, and found, as the circumstances strongly indicated, that the agreement was for Cohen to, as he did, control and have dominion over the assigned accounts as his own until Miller saw fit to and did take over their collection himself.
David Haar, of New York City, for appellants.
Arthur Leonard Ross, of New York City, for appellee.
Before L. HAND, SWAN, and CHASE, Circuit Judges.
As there was evidence to support the findings of the District Court that the assignments were given as security only and that Cohen was allowed to and did exercise dominion over all the accounts first assigned as though they were his own up to the time Miller took them over in January, we should and do treat both those findings as establishing the facts. Coder v. Arts (C.C.A.) 152 F. 943, 946. From the fact that Cohen not only kept the accounts, but was to, under his arrangement with Miller, and did, reserve and exercise complete dominion over them, there arises a conclusive presumption that the first assignment was fraudulent as to creditors. Benedict v. Ratner, 268 U.S. 353, 45 S. Ct. 566, 69 L. Ed. 991. The trustee is now entitled to have assigned to him any uncollected accounts covered by the assignment of December 11 which were outstanding and unpaid when the petition in bankruptcy was filed January 11, 1927, and to have any money collected by Miller after January 11, 1927, on the accounts assigned in December also turned over. But it is not enough that the assignment was invalid to entitle him to recover any money received by Miller before bankruptcy either from Cohen or directly from the collections made by Miller himself on the accounts assigned. At the worst, such payments to Miller were only preferential. Lee v. Bank Trust Co. (C.C.A.) 38 F.2d 45, 48. The evidence tending to show that they were preferential was not found sufficient by the District Court to make out that cause of action, and as to that the complaint was dismissed. By failing to appeal, the trustee has acquiesced in such dismissal.
Accordingly, the decree is modified to permit the defendants to retain all moneys received by them, or either of them, as payments on the loans, before the petition in bankruptcy was filed, either from the bankrupt or from the collection by Miller of accounts covered by the assignment of December 11, 1926, and, as so modified, is affirmed.