In re Leterman, Becher & Co., Inc.

• Decision Date: 28 May 1919
• Docket Number: 187.
• Citation: 260 F. 543
• Parties: In re LETERMAN, BECHER & CO., Inc.
• Court: U.S. Court of Appeals — Second Circuit

260 F. 543

In re LETERMAN, BECHER & CO., Inc.

No. 187.

United States Court of Appeals, Second Circuit.

May 28, 1919

Gettner Simon, & Asher, of New York City (Herman Asher, of New York City, of counsel), for appellant.

J. S Rosenthal and Jacob J. Lesser, both of New York City, for appellees.

Before WARD, ROGERS, and MANTON, Circuit Judges.

ROGERS Circuit Judge.

The order which is brought here for our consideration is not an order in a bankruptcy proceeding proper, as the claims of the two petitioners against the bankrupt have been allowed. But this is a controversy between two claimants as to the priority of their respective claims, which is the only question involved. It is therefore a controversy in a bankruptcy proceeding, and as such is subject to the appellate jurisdiction of this court under section 24a of the Bankruptcy Law (Act July 1, 1898, c. 541, 30 Stat. 553 (Comp St. Sec. 9608)). The petition to revise which under section 24b gives a right to review as to matters of law where facts are not in controversy will be disregarded. In re Doran, 154 F. 467, 83 C.C.A. 265.

This controversy arises out of the failure of an assignee of choses in action to give notice to the debtors at the time of the assignment. The result is that a subsequent assignee who claims to have first given notice is seeking priority of payment out of the proceeds of assigned choses in action now in the hands of the trustee of the bankrupt assignor.

It appears that Coleman & Co. were engaged in business as commercial bankers and factors, and that on October 15, 1915 they entered into an agreement with the bankrupt, which it is alleged has ever since continued in force, whereby Coleman & Co. were to acquire certain accounts receivable of the said bankrupt by advancing thereon 80 per cent. of the net face value subject to a commission charge of 1 1/4 per cent., plus 6 per cent. interest on sums advanced until paid. At the time of the hearing there was owing to Coleman & Co. the sum of $9,314.48, for which they had held accounts receivable having a face value of $11,720.74.

The contract between Coleman & Co. and the bankrupt contained the following clauses among others:

'The company (Coleman & Co.) shall have a general banker's lien on all moneys, property, or other collateral in its possession or under its control for any and all indebtedness from the customer (Leterman, Becher & Co.) to the company. The word 'debtor' in this agreement refers to the customers of the customer mentioned in the assigned accounts.

'The title to all merchandise which any debtor may not receive or return or refuse to accept is in the company. Should the customer have any merchandise returned to it, or not accepted on any account assigned to the company, or should information be received by the customer of such return or nonacceptance, the customer shall immediately give notice to the company, and the company shall thereupon have the option either to retain its title to the merchandise so returned or not accepted, or to surrender the same to the customer upon receiving payment therefor in cash or receive possession of such merchandise.

'This agreement shall be construed according to the law of the state of New York.'

In November and December, 1917, the Tawas Company advanced to the bankrupt $2,750 in three installments, for which they received the promissory notes of the bankrupt. At the time the Tawas Company made these advances the bankrupt assigned to it various accounts receivable, all of which accounts had been previously assigned to Coleman & Co. But at the time of the assignment of these accounts the Tawas Company had no information or knowledge of the previous assignment of the accounts to Coleman & Co., and it at that time was given an affidavit by the bankrupt, for the purpose of inducing the loans, in which it was recited that the bankrupt was then in a solvent condition and was the sole owner of the accounts, and that the same had not been assigned or transferred.

No notice of the assignment of the accounts was given to the debtors of the bankrupt at the time of the respective assignments by either Coleman & Co. or the Tawas Company. But a few days before the bankruptcy and on January 11, 1918, Coleman & Co. sent letters of notification to all the debtors, informing them that the accounts had been assigned to Coleman & Co. and were payable only to them. The Tawas Company on the same day also sent notices of the assignment and that payment should be made to them.

The finding of the referee as to the facts concerning these notices was as follows:

'The evidence showed that Coleman & Co.'s (notices) went by registered letters calling for receipts of the addressees. These letters were mailed at the Madison Square branch post office on January 11, 1918, 'not later than 8 p.m.' The exact hour when they were mailed was not shown. After the letters were delivered to the post office, they were entered on 'descriptive sheets.' Receipts were made out for each letter; that each letter was numbered and postmarked, and then entered on bills to dispatch them to the terminal.

'The Coleman registered letters were dispatched at 1:10 a.m. January 12, 1918; that is, at that hour they were sent to the Pennsylvania Railroad terminal to be sent forward by trains carrying registered mail. All mail trains do not carry registered mail. Mail not registered goes by any mail train, and there are more mail trains carrying mail not registered than there are trains carrying registered mail. Registered mail calling for receipts must be delivered to the addressee, or to some one usually receiving the mail for the addressee, and the person to whom the registered mail is delivered must sign a receipt therefor. Mail not registered may be left in a letter box, or at the address of the addressee, and no receipt is taken therefor. In the ordinary course of business a registered letter is not delivered as promptly as an unregistered letter.

'The Tawas notices were put in envelopes, duly addressed, postage prepaid, and deposited in the 116th Street branch post office, Manhattan borough, at 6 p.m. on January 11, 1918. The envelopes had printed on the outside 'Gettner, Simon & Asher, 299 Broadway.' None of these letters came back. The Tawas letters were not registered. Unregistered letters for the South and extreme West dropped into the post office in the afternoon go earlier than midnight of that day. There is a mail from New York to the south at about 10:30 p.m. * * *

'The fair inference from the testimony of McEachron, an employe of the New York post office for 24 years, is that the unregistered letters containing notices to debtors mailed by the Tawas Company at the 116th Street branch post office on January 11, 1918, at 6 p.m., were received by the debtors in due course of the mails before the notice mailed by Coleman & Co. at the Madison Square branch post office on January 11, 1918, at an unascertained hour, but not dispatched from that office until 1:10 a.m. January 12, 1918.'

His conclusion of law was that the proceeds of the accounts assigned to the Tawas Company should be first applied to the satisfaction of the claim of the Tawas Company, and that the balance so far as required should be applied to the payment of the claim of Coleman & Co.

The District Judge reversed the referee. In his opinion he said:

'Nothing more can be called proven than that both these claimants gave notice on the same day, and the day is not split up or divided into fragments by any persuasive evidence. It follows that both stand on exactly the same bottom, except as to priority in time of assignment, and there Coleman has the advantage, and the fund is awarded to him, reversing the finding of the referee.'

The accounts assigned apparently were not delivered by the bankrupt either to Coleman & Co. or to the Tawas Company. The intention evidently was that the bankrupt should collect the assigned accounts as agent for the assignee, and as collected from time to time pay over to the assignee the amounts collected, either at the time of collection or when demanded. As between assignor and assignee and the creditors of the assignor, the validity of the assignment is not affected by the fact that the accounts to be collected were allowed to remain in the assignor's possession. It has been held that the Personal Property Law of New York (Consol. Laws, c 41), declaring sales or mortgages of goods and chattels...