Thomas E. Hogan, Inc. v. Berman

• Decision Date: 21 November 1941
• Citation: 37 N.E.2d 742,310 Mass. 259
• Parties: THOMAS E. HOGAN, Inc., v. BERMAN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

310 Mass. 259

37 N.E.2d 742

THOMAS E. HOGAN, Inc.,

v.BERMAN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Nov. 21, 1941.

Suit in equity to set aside sale of tires by Thomas E. Hogan, Incorporated, against Doris Berman, Irving Berman and another. From the decree, Irving Berman and the plaintiff both appeal.

Reversed, and decree entered dismissing the bill.Appeal from Superior Court, Suffolk County; Sheehan, Judge.

Argued before FIELD, C. J., and DONAHUE, QUA, and RONAN, JJ.

S. L. Kaplan, of Boston, for plaintiff.

A. Hurwitz, of Boston, for defendants.

RONAN, Justice.

The plaintiff, a wholesale distributor and retail dealer in automobile tires, sold one hundred tires to the defendant Sherman on September 11, 1939, for $854.10. Upon receipt of these tires, on September 11 and 12, by Sherman, they were immediately transferred and sold to the defendant Irving Berman, hereinafter called Berman, for $700. Berman maintained two stores under different names, and his wife, the defendant Doris Berman, filed a married woman's certificate purporting to show that one of these stores was conducted by her. Sherman was adjudged a bankrupt upon a voluntary petition filed on September 18, 1939, and the defendant Rubin, trustee of the bankrupt estate, appeared and claimed the tires or their value. The plaintiff on October 6, 1939, brought this bill in equity to set aside the sale of the tires. From a final decree adjudging that the trustee had no interest in the tires, ordering Berman to deliver the tires to the plaintiff, and dismissing the bill as against the defendant Doris Berman, Irving Berman appealed, and the plaintiff appealed on the ground that it was entitled to recover from both Irving Berman and Doris Berman the value of the tires at the time when they were sold to Sherman.

The bill is based upon two grounds: First, that the sale from Sherman to Berman was in violation of G.L. (Ter.Ed.) c. 106, § 1, the sales in bulk act; and second, that the sale to Sherman was procured by fraud, that the subsequent sale to Berman was made by Sherman without fair consideration and with intent to hinder, delay and defraud, and that Berman should reasonably have known of such intent.

The plaintiff, however, had no right, when it filed its bill, to have the transfer to Berman set aside as fraudulent because it was not made in compliance with the sales in bulk act, G.L. (Ter.Ed.) c. 106, § 1, even if we assume in its favor that there was a violation of this statute. The right to set aside a transfer made by the bankrupt with intent to defraud his creditors and a statutory right given to a creditor to avoid a fraudulent conveyance made by his debtor passed to the trustee in bankruptcy as of September 18, 1939, when Sherman filed his petition in bankruptcy, U.S.C.Sup.V. Title 11, § 110a(4), e, 11 U.S.C.A. § 110, subs. a(4), e, and this included the right of the creditor to set aside a transfer made in contravention of the Bulk Sales Act. Dodd v. Raines, D.C., 1 F.2d 658;Gross v. Grossman, 5 Cir., 2 F.2d 458;Pratt Paper Co. v. Eiffler, 196 Iowa 199, 194 N.W. 370;Union Guardian Trust Co. v. Detroit Creamery Co., 265 Mich. 636, 251 N.W. 797;Mott v. Reeves, 125 Misc. 511, 211 N.Y.S. 375; Id., 246 N.Y. 567, 159 N.E. 654;Goodwin v. Tuttle, 70 Or. 424, 141 P. 1120. Compare McLaughlin v. Fisk Rubber Co., D.C., 288 F. 72.

The present suit having been commenced subsequently to the filing of the petition in bankruptcy by Sherman, the plaintiff then had no right to bring a suit to set aside the transfer to Berman on the ground that it did not comply with the Bulk Sales Act, and to apply the tires to the satisfaction of its claim to the exclusion of the other general creditors of Sherman. Glenny v. Langdon, 98 U.S. 20, 25 L.Ed. 43;Trimble v. Woodhead, 102 U.S. 647, 26 L.Ed. 290;Moyer v. Dewey, 103 U.S. 301, 303, 26 L.Ed. 394;Acme Harvester Co. v. Beekman Lumber Co., 222 U.S. 300, 308, 32 S.Ct. 96, 56 L.Ed. 208;Bingaman v. Commonwealth Trust Co., D.C., 15 F.2d 119;Gochenour v. George & Francis Ball Foundation, D.C., 35 F.Supp. 508, affirmed, 7 Cir., 117 F.2d 259. Where suits by creditors were pending before the filing of a petition in bankruptcy, see Straton v. New, 283 U.S. 318, 51 S.Ct. 465, 75 L.Ed. 1060;Taylor v. Sternberg, 293 U.S. 470, 55 S.Ct. 260, 79 L.Ed. 599.

The plaintiff, apparently attempting to avoid the difficulty that must be encountered if it proceeds on the theory that the tires were a part of the assets of the bankrupt, framed its bill on the further ground that it was entitled, on account of the fraud of both vendees, to a reconveyance of its property from Sherman and also from Berman. But even aside from the question of bankruptcy, the plaintiff does not show a case where it was entitled to set aside the transfer to Berman. As between the plaintiff and Sherman, the plaintiff upon the findings of the master would be entitled to rescind the sale on the ground of fraud if the tires were still in the possession of Sherman or the rights of an innocent third person had not intervened, Watson v. Silsby, 166 Mass. 57, 43 N.E. 1117;Phinney v. Friedman, 224 Mass. 531, 113 N.E. 285;Donovan v. Clifford, 225 Mass. 435, 114 N.E. 681, or, if Sherman had been adjudged a bankrupt, to recover the goods upon a petition for reclamation filed in the bankruptcy proceedings. Kamberg v. Springfield National Bank, 293 Mass. 24, 26, 199 N.E. 339, 103 A.L.R. 306, and cases cited. See collection of cases in Manly v....