Brooks v. D'Orville

4 F. Cas. 272, 7 Ben. 485

Opinion

BLATCHFORD, District Judge.

There can be no doubt that the pretended sale by the company to D’Orville was voidable as against the assignee in bankruptcy. It was made when the company was insolvent, and was known to be so by D’Orville. It was a sale of all the furniture and fixtures in the office of the company and of its interests under the lease it held of the premises where its business was carried on. The sale deprived the company of its means of continuing its business, and was a sale out of the usual and ordinary course of business of the company. Neither D’Orville nor any officer of the company is examined to show the consideration paid or received for the sale, or to sustain the bona fides of the transaction.

As to the mortgage by D’Orville to Martha-ler, although the conveyance to D’Orville was one which the assignee in bankruptcy could impeach, yet the furniture was in the possession of D’Orville, and he dealt with it as his own, and the officers of the company informed Marthaler that the furniture belonged to D’Orville and that he had a right to mortgage it, and Marthaler advanced $400 in cash to D’Orville on the security of the mortgage, and it was given and filed before the bankruptcy proceedings were commenced. The conveyance to D’Orville was good between the parties to it, so as to support a mortgage given by D’Orville on the furniture, under the circumstances above stated, although, as against D’Orville, the as-signee in bankruptcy can Fold him to respond for the value of the furniture and fixtures and other property of which, by his act, the assignee has been deprived. The mortgage being valid as respects Marthaler, he had a right to hold it as security for the money he advanced on the faith of it. But he had no right, after he had been notified of the bankruptcy proceedings and of the cla>m made on behalf of the assignee, to assign the mortgage to Kellinger. Nor did Kellinger acquire, by such assignment, or by a sale under the mortgage, any greater rights than Marthaler had, for Kellinger had full notice of the claim made by the assignee.

The plaintiff does not, in the bill, offer to' pay the amount advanced by Marthaler on the mortgage. He claims to recover against Marthaler and Kellinger the entire value of the property. There must be a decree declaring the rights of the parties to be as above stated, and referring it to the clerk, as a master, to ascertain and report the value of the property at the time of the commencement of this suit, to the end that a decree may be made, as against D’Orville, setting aside the sale to him, and decreeing a recovery against him, and to the end that a decree may be made, as against Marthaler and Kellinger, for a recovery from them. The recovery against Marthaler and Kellinger will be the amount of such value, with interest from the commencement of this suif, less the ¿mount advanced by Mar-thaler on the mortgage, with interest from the date of such advance. The recovery against D’Orville will be the amount of such value, with interest from the commencement of this suit The master will report the amounts which the plaintiff is entitled to recover, on these principles. The plaintiff will be entitled to costs as against D'Orville, and must pay costs to Marthaler and Kel-linger. All further questions and directions are reserved until the coming in of the report of the master.