Fischer v. Liberty Nat. Bank & Trust Co.

• Decision Date: 07 November 1932
• Docket Number: No. 56.,56.
• Citation: 61 F.2d 757
• Parties: FISCHER v. LIBERTY NAT. BANK & TRUST CO. IN NEW YORK et al.
• Court: U.S. Court of Appeals — Second Circuit

61 F.2d 757 (1932)

FISCHER v. LIBERTY NAT. BANK & TRUST CO. IN NEW YORK et al.

No. 56.

Circuit Court of Appeals, Second Circuit.

November 7, 1932.

Hardy & Hardy, of New York City (David Haar and David Brady, both of New York City, of counsel), for Liberty Bank.

A. Prentiss Butler, of New York City (Robert J. Sykes, of New York City, of counsel), for Wendell P. Barker.

Baker & Obermeier, of New York City (Oscar S. Rosner and Clarence R. Treeger, both of New York City, for Lippe.

Krause, Hirsch & Levin, of New York City (George C. Levin, of New York City, on the brief), for appellee.

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

L. HAND, Circuit Judge.

This is a suit under section 60b of the Bankruptcy Act, 11 USCA § 96 (b) to recover moneys alleged to have been preferentially paid. Wilson, the bankrupt, was indebted to the three defendants, the bank, Lippe and Barker, under separate transactions, not necessary to describe, upon which they had unsuccessfully pressed him from time to time for payment. He had been appointed receiver along with Barker and one Richards, in a sequestration suit pending in the District Court for the Southern District of New York, and in September, 1930, the estate was ready to be closed. The suit was ancillary to one in Delaware, the New York assets had been liquidated, and the receivers were ready to turn over the assets to the Delaware receiver, Richards. All three had presented their claims for allowance to Judge Caffey, and their petitions were sub judice. Before he had decided the case, on September twenty-ninth, the bank and Lippe for their joint interest procured from Wilson a document addressed to Barker and Richards, reading as follows: "I hereby authorize and direct you to pay over to Liberty National Bank and Trust Company in New York out of the first moneys or allowances allowed by the Court to me the sum of $9,447.80." Judge Caffey filed his decision on October third, allowing Wilson $28,000, and entered a final decree of distribution on October fourteenth, by which he directed the receivers to pay the allowances as fixed to themselves, to turn over certain books and papers to a person named, to sell some furniture and the like, and "after compliance with the foregoing provisions of this order, to turn over to" Richards, as receiver in Delaware, all the rest of the property. On the fifteenth Wilson and Barker drew and delivered two cheques to Wilson's order for the total amount of $9,447.80; these he endorsed to the bank, which kept one, and turned over the other to Lippe in accordance with their agreement. Barker testified that between the third and the fourteenth Wilson gave him an oral assignment of five thousand dollars in payment of his debt to him; and on the fifteenth Wilson and Barker drew and delivered a third cheque, also to Wilson's order, which he endorsed and delivered to Barker. These were the three payments recovered; Barker's being reduced to thirty-five hundred dollars for reasons not pertinent here.

Wilson was hopelessly insolvent from September twenty-ninth onward and an involuntary petition was filed against him on February 14, 1931, just within the period of limitation under section 60b, if the payments were preferences, but not if Wilson's oral assignment and his order of September twenty-ninth were valid transfers. Barker admitted that he knew of Wilson's insolvency, but the bank and Lippe maintained that they neither had knowledge, nor sufficient notice to charge them. The judge found that they had, and that the assignments were invalid because they were of Wilson's allowance as receiver which he could not assign.

Upon the issue of notice we need say very little. As to the bank, over three years before, Barker had told it that Wilson had no tangible assets, that he had been unsuccessfully examined in proceedings supplementary to execution, and had a number of judgments against him. In June of 1930 its own attorneys had told it that he was worthless financially, and it knew that any assignments of his allowances as receiver were of doubtful validity. On October seventh Barker told it that there was absolutely no possibility of collecting a cent from him. As to Lippe, he had in 1927 taken notes from Wilson which he discounted with his bank, on which Wilson defaulted and the bank took judgment. Wilson was examined in supplementary proceedings in the spring of 1928, at which an assistant of Lippe's attorneys was present, and of which he made a memorandum, filed in their office. Wilson then swore that there were judgments against him for nearly $60,000 and suits pending for $25,000; he disclosed no assets. Lippe took over the notes, and pressed Wilson monthly for rent of an office Lippe had let him; at one time — August, 1928 — procuring an order in supplementary proceedings himself. He swore in November, 1928, that Wilson had been examined, and that judgments aggregating many thousands of dollars were outstanding against him. Two years later, he personally attended at Judge Caffey's chambers in an attempt to secure some of the allowance; he had had no reason to suppose that Wilson's financial condition had then improved. It needs no argument that on this showing both defendants had cause to believe that Wilson was insolvent. True, Lippe was insistent upon getting his claim in full, in which he succeeded, but a preferred creditor often does that. The only important issue is therefore whether the order of September twenty-ninth and the supposed oral assignment were valid, in deciding which we shall assume arguendo that Wilson's order created an equitable assignment of the fund (Spofford v. Kirk, 97 U. S. 484, 24 L. Ed. 1032); and that the oral assignment was in fact made. They were both for Wilson's pay as receiver, and while all his services had been rendered except that of distributing the fund, we nevertheless think that both were invalid.

It is settled both in England and in this country, that the assignment of the future compensation of a public officer is not valid. Flarty v. Odlum, 3 Term Rep. 681; Lidderdale v. Montrose, 4 Term Rep. 248; Barwick v. Reade, 1 H. Black. 627; Wells v. Foster, 8 M. & W. 149; Arbuckle...