Livingston v. Bruce

15 F. Cas. 658, 1 Blatchf. 318

• Court: U.S. Circuit Court for the District of Northern New York
• Decided: June 15, 1848
• Status: Published

Opinion

NELSON, Circuit Justice.

It was proved •on the trial that the real estate on which Livingston & Butler’s judgment was a lien, was of sufficient value to satisfy it. The demand in question was therefore amply secured on the property of the debtor before he was declared a bankrupt. Such security was saved from the bankrupt act and from the proceedings under it, by the proviso in the second section of that act. The voluntary assignee took the estate under, the assignment to him, subject to this charge. Moreover, aside from the bankrupt act, the preference given to the judgment and the payments made in pursuance thereof .were legal and valid. The judgment had secured the priority. And, if we assume the voluntary assignment to be void and inoperative under the act, as having been made in contemplation of bankruptcy, the result is the same and for precisely the same reason. There can be no fraudulent preference predicated on the several payments made upon the judgment, because the payment of it had become matter of legal right according to the bankrupt act itself, the property charged being greater in value than the demand. It would be strange to hold the payment of a debt by a bankrupt to be a fraudulent preference within the meaning of the act, when it operated to discharge, for the benefit of his genera] creditors, an amount of property equal in value to the sum paid. It is true that in this case the voluntary as-signee, after making payments on the judgment to the amount of between five and six hundred dollars, stopped, and the judgment creditors caused the balance to be satisfied by a sale of the real estate. But they were not bound to await the proceedings under the bankrupt act. These in no way affected their security. The previous payments diminished, by a corresponding amount, the charge on the real estate of the bankrupt, and .if the petitioning creditors, (the sale having taken place before the appointment of the assignee,) had chosen to bid in the property for the benefit of the general creditors, the amount they would have been obliged to pay would have been calculated on a deduction of those previous payments.

The principle which must govern this case is well settled in England. In Thompson v. Beatson, 1 Bing. 145, payment by a bank-nipt of a debt to a creditor, on his giving up a lien on a ship and her cargo, was upheld, and in Mavor v. Croome, Id. 261, payment by a bankrupt of rent due was sustained, as the landlord had a right of dis-‘ tress and of re-entry which were waived by the receipt of the rent. In Marshall v. Lamb, 5 Adol. & El. (N. S.) 115, Lord Denman, referring to this principle, observed, that if the property covered by the mortgage in that case had belonged to the bankrupt, the payment by him would not have been a fraudulent preference, because the assignees would have had the mortgaged property, and it was indifferent to them whether they had the property free from the mortgage, (supposing it to exceed in value the amount of the mortgage.! or the property subject to the mortgage and the amount of the mortgage money in cash. But, the mortgaged property was not tlie bankrupt’s, and, for that reason, the payment was held to be a fraudulent preference within the act. Mr. Justice Patteson observed, in the same case, that where the creditor had a lien on property of the debtor, there was no fraudulent preference in paying money to discharge it. because the assignees, to recover the property, must do the same. Eden, Bankr. Law, 263, 266, 290.

It was said on the argument that the judgment creditors could look only to the property charged, and that the payments out of the personalty amounted to a fraudulent preference. But, it was a matter of indifference to the other creditors which fund was applied, provided the property charged exceeded in value the demand. And, besides, according to the case of Mavor v. Croome, the payments out of the personal property did not amount to a fraudulent preference, inasmuch as the judgment creditors could issue execution and levy on it at any time. The cases before referred to and the principle upon which they are founded assume that the payments have been made out of property of the bankrupt other than that specifically charged with the debt.

It can make no difference whether the payments be made by the bankrupt himself or by his voluntary assignee. The effect is the same, both as regards the estate of the bankrupt and the general creditors. The assignment neither prejudiced the rights of Livingston & Butler in respect to the former, nor did it give any new rights to the latter. Both are to be regarded in the same light as if no assignment had been made, and every thing done by the voluntary assignee had been done by the bankrupt himself. Judgment reversed.