In re McCrum

• Decision Date: 18 April 1914
• Docket Number: 143.
• Citation: 214 F. 207
• Parties: In re McCRUM.
• Court: U.S. Court of Appeals — Second Circuit

214 F. 207

In re McCRUM.

No. 143.

United States Court of Appeals, Second Circuit.

April 18, 1914

[Copyrighted Material Omitted]

Rosenberg & Levis, of New York City (Robert P. Levis and James N Rosenberg, both of New York City, of counsel), for Alfred C Coxe, Jr., trustee.

Curtis, Mallet-Prevost & Colt, of New York City (Wm. Edmond Curtis and Henry A. Stickney, both of New York City, and Cornelius C. Webster, of counsel), for respondent.

Before LACOMBE, WARD, and ROGERS, Circuit Judges.

ROGERS Circuit Judge (after stating the facts as above).

The question which this court has to decide is whether the bankruptcy court has summary jurisdiction to compel property to be transferred to a trustee in bankruptcy when the property has been transferred by the bankrupt in conjunction with another person, for the benefit of creditors of the two persons; the transfer having been made within four months of the bankruptcy and for the benefit of creditors, there not being included in such transfer either the whole or substantially the whole of the bankrupt's estate.

A trustee in bankruptcy who has been appointed within four months of a general assignment made by a debtor for the benefit of his creditors has a right to obtain an order from the bankruptcy court, and in a summary proceeding, compelling the assignee to submit his accounts and to turn over to him all money and property in his hands which belonged to his assignor. No plenary suit is necessary in a case of that sort. The assignee under such conditions is not an adverse claimant, but merely the agent of the assignor for the distribution of the proceeds of the property, and as such agent his possession is that of the principal. He is a mere naked bailee for the creditors and has no right to retain the possession as against the trustee in bankruptcy. In re Stewart, 179 F. 222, 102 C.C.A. 348; In re Smith (D.C.) 92 F. 135; In re Stokes (D.C.) 106 F. 312; In re Thompson (D.C.) 122 F. 174, affirmed in 128 F. 575, 63 C.C.A. 217; Black on Bankruptcy, Sec. 439; Remington on Bankruptcy, Sec. 1611.

The present proceeding was instituted by the petitioner upon the theory that the trustee Telling was a general assignee of the bankrupt McCrum for the payment of McCrum's creditors, and therefore was holding merely as a naked bailee or agent of McCrum, and as such might be compelled to turn over in a summary proceeding all the property which he had received and was holding in trust.

It appears that the transfer made by McCrum to Telling was not a transfer of all the property which the former possessed on March 13, 1912; that being the date on which the assignment was made. The instrument of transfer does not upon its face purport to transfer all the property of McCrum, and the latter's own testimony shows various items of property which were not included and which it is claimed had a value of $53,410, although McCrum's counsel insists that the real value is about $15,000. This property included shares of stock and certain pieces of real estate. Some of the stock not included in the assignment was at the time of the transfer in possession of third parties as collateral for loans. We are satisfied that while the property withheld may not total $53,410 as claimed it is considerably in excess of the value of $15,000. It is not important to determine the exact value of the property withheld. It is enough to know that a substantial amount of his property was not transferred, and we are satisfied that such was the fact. In arriving at a conclusion as to the value of the property transferred and the value of the property withheld, petitioner's counsel adopted the maximum value when the stocks appeared in the class of property transferred and the minimum value when the identical stocks appeared in the class of property not transferred. Thus 250 shares of stock of the Tower Hill Coke Company and 300 shares of stock of the Isabella Coke Company, which were not included in the transfer are valued at $5 and $10 per share, respectively. But in determining the value of property transferred 2,233 shares and 4,200 shares respectively of these identical stocks are valued at $50 and $14 a share respectively.

The question then arises whether the transfer by McCrum to Telling can be regarded as a general assignment. A 'general assignment for the benefit of creditors' is one which passes all the property or substantially all the property, real and personal, which the assignor owned at the time of the assignment. And an assignment which conveys only a portion of the property is a partial assignment. United States v. Hooe, 3 Cranch, 73, 90, 2 L.Ed. 370 (1805); United States v. Howland, 4 Wheat. 108, 114, 4 L.Ed. 526; Bock v. Perkins, 139 U.S. 628, 641, 11 Sup.Ct. 677, 35 L.Ed. 314; Missouri-American Electric Co. v. Hamilton-Brown Shoe Co., 165 F. 283, 287, 91 C.C.A. 251 (1908). A general assignment for the benefit of creditors is not only an assignment of all or substantially all of one's property, but it must be made to another party in trust to collect the amounts owing to the assignor, with power to sell and convey the property, to distribute the proceeds of all the property among the creditors of the assignor, and to return the surplus, if any, to the debtor. And it has been held that a conveyance of his property by a debtor directly to his creditor, or to his creditors, for their benefit, is not a general assignment for the benefit of creditors because it raises no trust. Anniston Iron & Supply Co. v. Anniston Rolling Mill Co. (D.C.) 125 F. 974 (1903); Missouri-American Electric Co. v. Hamilton-Brown Shoe Co., supra.

In the case at bar, however, the transfer was in trust with power to sell and to distribute the proceeds to pay 'the debts of said Howell and McCrum' and 'the personal debts of either of them' and then return 'to said Howell and McCrum' all of said property not disposed of under the terms of the trust deed. It has also been urged upon us that the transfer made by McCrum cannot be regarded as a general assignment for the benefit of creditors because it was not made solely for the benefit of McCrum's creditors, but was made to benefit as well persons who were not his creditors. It is not, however, necessary to determine, and it would be improper for us to determine in this proceeding, whether the trust instrument properly construed confers or does not confer upon the individual creditors of Howell any interest in the property turned over to Telling by McCrum. It is quite enough to know that the transfer by McCrum cannot be regarded as a general assignment because it did not transfer the whole or substantially the whole, of McCrum's property.

But even if the trustee Telling was a general assignee taking the whole of McCrum's property, he would, notwithstanding upon the facts of this case, have to be regarded as an adverse claimant, and therefore not subject in this summary proceeding to be compelled to transfer the property to the trustee in bankruptcy. He admits that he claims no beneficial interest for himself, but contends...