Rochester Ropes v. Scherl

Decision Date10 July 1941
Docket NumberNo. 324.,324.
Citation121 F.2d 852
PartiesROCHESTER ROPES, Inc., v. SCHERL et al.
CourtU.S. Court of Appeals — Second Circuit

Harry J. Macklis, of Jamaica, N. Y., for appellant.

Allan D. Emil, of New York City (George Kossoy and Sidney O. Raphael, both of New York City, of counsel), for Trustee in Bankruptcy.

Arthur J. Homans, of New York City, for Park Avenue Woodworking Co., Inc., appellee.

Before SWAN, AUGUSTUS N. HAND and CLARK, Circuit Judges.

SWAN, Circuit Judge.

Peerless Elevator Company was adjudicated bankrupt upon an involuntary petition filed on September 14, 1939. Its receiver in bankruptcy passed on to the trustee a fund of $2,045 paid into court by Beechwood Construction Company as the balance due under a contract with the bankrupt for the installation of two elevators. To this fund several claimants asserted rights under assignments from the bankrupt. Earliest in date of execution was an assignment to Rochester Ropes, Inc. As between successive assignees of the same chose in action priority in point of time establishes priority of right, under the New York law, without regard to the date of notification to the debtor. Fortunato v. Patten, 147 N.Y. 277, 41 N.E. 572; Salem Trust Co. v. Manufacturers' Finance Co., 264 U.S. 182, 197, 44 S.Ct. 266, 68 L.Ed. 628, 31 A.L.R. 867. But for reasons hereafter to be stated the referee in bankruptcy to whom the several claims had been referred, disallowed the claim of Rochester Ropes, Inc.; and the referee's order was confirmed by the district court. This is the order before us for review.

The appellant had had business dealings with the bankrupt for a number of years. On March 16, 1938 they made a written agreement pursuant to which the bankrupt was to assign accounts receivable to the appellant as security for past due indebtedness and for new indebtedness to be incurred by future dealings. The agreement provided that the assigned accounts were to remain at all times at a total of not less than $2,000, "and as old accounts are paid off they are to be replaced by new accounts receivable within two (2) days after the old ones are paid off." It was further provided that any money, check or commercial paper received by the assignor in payment of an assigned account should be accepted "as the property of" the assignee, and its receipt immediately reported; and the assignor agreed "to account therefor" to the assignee within two days after the receipt thereof. Pursuant to this agreement accounts were assigned to the appellant on March 16, 1938 and numerous substitutions of accounts were made thereafter, including the assignment, under date of February 20, 1939, of the Beechwood account in suit. The above quoted terms of the agreement of March 16, 1938 were disregarded by the bankrupt almost from the start. Checks received by it in payment of assigned accounts were deposited in its own bank account and used for its own purposes without notification to the assignee and without assigning other accounts in substitution for the accounts paid, unless and until the assignee should discover the dereliction and demand the substitution, as it did on numerous occasions. Between November 21, 1938, and February 21, 1939, no substitutions were made, although during this period the bankrupt collected more than $1,200 on the assigned accounts. This provoked a strong letter of protest from the appellant in which it was stated that in the future the assignor's customers would be notified of assignment of the accounts. Nevertheless notice to Beechwood was not given until three months after the account was assigned. The referee concluded that Rochester Ropes in spite of its protests...

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3 cases
  • Rose v. Amsouth Bank of Florida
    • United States
    • U.S. District Court — Eastern District of New York
    • December 13, 2003
    ...assignee has a priority over the second assignee irrespective of whether the second first notifies the debtor. Rochester Ropes, Inc. v. Scherl, 121 F.2d 852 (2d Cir.1941) (emphasis added) ("As between successive assignees of the same chose in action priority in point of time establishes pri......
  • Rose v. Amsouth Bank of Florida
    • United States
    • U.S. Court of Appeals — Second Circuit
    • December 1, 2004
    ...in point of time establishes priority of right ... without regard to the date of notification to the debtor." Rochester Ropes, Inc. v. Scherl, 121 F.2d 852, 852 (2d Cir.1941); see also Cent. Trust Co. of N.Y. v. W. India Improvement Co., 169 N.Y. 314, 323-24, 62 N.E. 387 (1901); Niles v. Ma......
  • Bloch v. Mill Factors Corporation
    • United States
    • U.S. Court of Appeals — Second Circuit
    • April 2, 1943
    ...will not suffice. Brown v. Leo, 2 Cir., 12 F.2d 350, 351; Lee v. State Bank & Trust Co., 2 Cir., 38 F.2d 45, 47; Rochester Ropes, Inc. v. Scherl, 2 Cir., 121 F.2d 852, 853; Glenn, Fraudulent Conveyances and Preferences, Vol. 2, p. 1007. The trial court found that the factor did not directly......

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