Galbraith v. Vallely

• Decision Date: 15 November 1919
• Docket Number: 200.
• Citation: 261 F. 670
• Parties: GALBRAITH v. VALLELY. [1]
• Court: U.S. Court of Appeals — Eighth Circuit

261 F. 670

GALBRAITH v. VALLELY. ^[1]

No. 200.

United States Court of Appeals, Eighth Circuit.

November 15, 1919

Fred B Dodge, of Minneapolis, Minn. (Todd, Fosnes, Sterling &amp Nelson, of St. Paul, Minn., on the brief), for petitioner.

Before HOOK and STONE, Circuit Judges.

STONE Circuit Judge.

This is a petition by a common-law assignee under a general deed of assignment for the benefit of creditors to revise an order of the District Court, as a court of bankruptcy, affirming the jurisdiction of a court of bankruptcy in a summary proceeding to require such assignee to pay over to the trustee moneys claimed as expenditures and compensation in connection with the administration under the assignment. The petitioner contends that as to such expenditures and compensation he claims adversely to the trustee, and that he can retain the amounts claimed by him as properly expended and as properly due him for compensation until his right thereto is tested in a plenary suit. The referee so found, and was reversed by the trial court.

We think this contention governed by the principles announced in Randolph v. Scruggs, 190 U.S. 533, 23 Sup.Ct. 710 47 L.Ed. 1165, to the effect that subsequent bankruptcy proceedings avoid the assignment as a whole, but that the assignee is entitled to reimbursement and compensation for expenditures and services only to the extent that such are beneficial to the estate. In the face of the facts that bankruptcy avoids the assignment as a whole, and that the assignee acts with full notice thereof, and of the possibility of bankruptcy, it is rather an anomaly to permit any rights to arise from the assignment. However, as the assignee is not a mere volunteer, as the assignment is lawful (Stellwagen v. Clum, 245 U.S. 605, 38 Sup.Ct. 215 62 L.Ed. 507), as it is effective unless bankruptcy occur within four months (Mayer v. Hellman, 91 U.S. 496, 23 L.Ed. 377), and as such bankruptcy may not happen, it is but just that benefits rendered the estate should, to the extent of such benefit, be returned to the assignee. All that is necessary to accomplish this result is to regard the assignee, to the above extent, as a preferred creditor who may prove his claim in the bankruptcy court.

This preference springs rather from the character of the claim than from any superior right against the property. We take it that the theory of this preference is that services lawfully rendered for the purpose of, and having the effect of preserving and assembling the assets for the creditors should have precedence over the claims of such creditors. But it is not necessary to the preservation of such preference that the assignee be placed in the further...