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Gleason v. Bush

166 A.D. 865 Court Fourth Department, Decision date 1915-03-03 English

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p. 865
James F. Gleason, Respondent, v. Seth J. T. Bush, as Trustee in Bankruptcy of Growers and Shippers’ Exchange, a Bankrupt, Impleaded as Defendant in Place of Growers and Shippers’ Exchange, Appellant.
Fourth Department,
March 3, 1915.

Headnote

Pleading — action in replevin by transferee against bailee — inter, pleader of bailor —right of trustee in bankruptcy of bailor to set up preferential transfer as counterclaim.
Where, after the commencement of an action for replevin by a transferee of certain property against the bailee thereof, the original bailor was substituted as a defendant, pursuant to section 830 of the Code of Civil Procedure, and thereafter was adjudicated a bankrupt, and, although the order of interpleader changes the action from one at law to one in equity, the parties consented to try it as one at law, the right of the trustee in bankruptcy to avoid the transfer to the plaintiff as a voidable preference is “connected with the subject of the action” within the meaning of subdivision 1 of section 501 of the Code of Civil Procedure, and may be interposed as a counterclaim.
Appeal by the defendant, Seth J. T. Bush, as trustee, etc., from a judgment, as resettled, of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Monroe on the 12th day of June, 1914, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 13th day of June, 1914, denying defendant’s motion for a new trial made upon the minutes.
The action was in replevin, brought by plaintiff Gleason against a bailee of certain apples to recover possession thereof. Thereafter, by an order of the court, the original bailor of the apples, Growers and Shippers’ Exchange, was substituted as defendant in the action in the place of the original defendant pursuant to the provisions of section 820 of the Code of Civil Procedure. The substituted defendant, Growers and Shippers Exchange, was, after its substitution as defendant, adjudicated a bankrupt, and the defendant Bush, after his appointment as trustee in bankruptcy of the bankrupt’s estate, was substituted as defendant in place of the bankrupt corporation.
p. 866
The answer interposed by the defendant trustee among other things alleged as a counterclaim his right as trustee to recover the apples, or the value thereof, as property of the bankrupt transferred by it to the plaintiff within four months next preceding the date of the adjudication of its bankruptcy without receiving from plaintiff any consideration therefor, he then knowing the company was insolvent and that the transfer was so made to enable him to secure a larger percentage upon his claim against it than other creditors in like situation with himself.
Cogswell Bentley [Bentley & MacFarlane, attorneys], for the appellant.
Irving L'Hommedieu [L'Hommedieu & Whedon, attorneys], for the respondent.

When the order was made substituting the bailor of the apples in controversy for the bailee thereof as the defendant in the action, the action thereupon became an equitable one triable by the court and neither party had the right to a trial by jury. (Clark v. Mosher, 107 N. Y. 118 .) Had the action been tried as one in equity there could be little doubt that defendant should have been permitted to prove his alleged counterclaim that the transfer to plaintiff of the apples in question constituted a preferential transfer of the property of the bankrupt voidable at his election. “When a court of equity obtains jurisdiction and all the facts are before it by supplemental pleading, as they are here, it may and generally does adapt the relief to the situation existing at the close of the litigation.” (Dammert v. Osborn, 140 N. Y. 30 , 43; citing Peck v. Goodherlett, 109 id. 181, and Madison Ave. Bap. Church v. Oliver St. Bap. Church, 73 id. 83. See, also, Sherman v. Foster, 158 N. Y. 587 ; Hunt v. Provident Savings Life Assur. Soc., 77 App. Div. 338 , 343.) Though, because of the order of interpleader, the action was changed from one at law to one in equity, yet the parties to the litigation could still treat it as . a common-law action in which all the issues were triable by a jury. (Voss v. Smith, 87 App. Div. 395 .)

p. 867
In the present case the parties seem hy consent to have chosen to try the action as one at law. The case under these circumstances should then he tried precisely in the same way as any other common-law action. (Voss v. Smith, supra.) We shall, therefore, consider the case as one at common law. The counterclaim above referred to, which defendant sought to interpose, i. e., the right of the trustee to attack plaintiffs title to the apples as obtained because of a preferential transfer thereof voidable at the trustee’s option, did not exist at the time the action was begun. A cause of action may be interposed as a counterclaim, though it arose after the commencement of the action, if, as provided by subdivision 1 of section 501 of the Code of Civil Procedure, it is one “ arising out of the contract or transaction, set forth in the complaint as the foundation of the plaintiff’s claim, or connected with the subject of the action.” (Caspary v. Hatch, 157 App. Div. 679 .)

Plaintiff’s cause of action was based upon his alleged title to the apples in question. His title depended upon the fact that the Growers and Shippers’ Exchange had transferred its title to the goods to him. But the title thereby acquired was subject to the possibility that the transfer might be avoided as preferential, at the instance of a trustee in bankruptcy of the seller, provided the petition in the bankruptcy proceedings, in which such trustee was thereafter appointed, was filed within four months after the transfer. Such right of action given by the Bankruptcy Act to the trustee as between the trustee and the transferee is quasi contractual in substance and effect. (30 U. S. Stat. at Large, 562, § 60, as amd. by 32 id. 799, 800 , § 13, and 36 id. 812 , § 11; Cohen v. Small, 120 App. Div. 211 ; affd., 190 N. Y. 568 .) As was said in that case: “ The Bankruptcy Law enters into the contract between a debtor and a creditor and gives a right to the trustee in bankruptcy to recover from the creditor any payment made in violation of the Bankruptcy Law.” The right of the trustee in such case to avoid the transfer would thus seem to he, as the section of the Code above referred to phrases it, “connected with the. subject of the action,” which plaintiff seeks to maintain. It follows that, even if the action is to be treated as one at common law, the counterclaim was properly interposed and the

p. 868
defendant was entitled on the trial to have the issues raised thereby submitted to the jury.

The judgment and order should be reversed and a new trial granted, with costs to appellant to abide event.

All concurred.

Judgment and order reversed and new trial granted, with costs to appellant' to abide event.

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