Keck v. Werder

This was an application, on petition, by the assignee in bankruptcy of John "Werder, the defendant, to vacate a judgment entered in the above entitled action against Werder on the 31st of May, 1877, and let the petitioner in to defend, and to compel the plaintiffs, their attorney, and the referee in the action, to pay into court certain moneys which had, under said judgment and orders of the court, been paid to them by the receiver in said action. Also, to revive the action against the representatives of one of the original plaintiffs, who had died since the entry of the judgment. The motion was denied at Special Term and the order was affirmed at General Term.

The action was brought for an accounting and winding up of a partnership between the plaintiffs and defendant and for damages sustained by the plaintiffs by reason of false representations of the defendant respecting certain choses in action, a half interest in which he sold to the plaintiffs in and by the partnership agreement, and for which interest and an interest in certain chattels, the plaintiffs paid him the sum of fourteen thousand dollars.

Issues respecting the alleged frauds were, by order of the court, framed, and tried by a jury, and the trial resulted in a verdict for the plainti^s of $6,255.41 in May, 1873. A receiver of the partnership assets was appointed, and the net amount which came to his hands was about $15,000, of which each partner was found upon an accounting before a referee to be entitled to one-half. ■ Out of this fund the referee’s fees, amounting to $2,500, were paid. A judgment was entered in the action on the 31st of May, 1877, awarding to the pláintiffs, out of the defendant’s half of the fund, the amount then due plaintiffs on the verdict, together with certain costs, the final

The fund in the receiver’s hands was paid out pursuant to this judgment, in June, 1877, and in June, 1879, the present application was made. The petition contains allegations for the purpose of excusing the delay, and charges that the judgment was entered by collusion. The charges of collusion are denied in the opposing papers, but the principal ground upon which the assignee in bankruptcy claims to be entitled to the relief asked for is, that Werder, the defendant, was, on his own application, adjudged a bankrupt on the 2d of February, 1877, on a petition filed in December, 1876; and assignees were appointed in March, 1877, all of which was prior to the entry of the judgment in question, and the surviving assignee now contends that the judgment, and all the orders, in pursuance of which the fund was paid out by the receiver, were irregular and void; that, hy the adjudication of bankruptcy, the defendant Werder was civilly dead, and the action against him abated, and none of the subsequent proceedings against him in the action were regular or of any validity; that, although all the parties proceeded against on this application swear that at the time they drew the money they had no knowledge of the proceedings in bankruptcy, yet they must be deemed to have had constructive notice of them; that the presumption of notice is conclusive, and it was consequently a fraud upon the court, and a contempt, to draw the money, and they should be compelled to refund, and the assignee in bankruptcy- should be allowed to come in and defend the action; that the proportion of the fund which was applied to the payment of the verdict, was the sole property of the bankrupt, and the plaintiffs had no lien thereon, the sum recovered not being a partnership liability, but an individual claim against Werder for money which he had fraudulently obtained from the plaintiffs, and which formed no part of the partnership assets, and that plaintiffs had obtained an unlawful preference for the amount of their verdict, by means of the void judgment.

Assuming that the claims of the assignee in bankruptcy are

Section 5047 of the United States Bankrupt Law is cited by the appellant as entitling him to the order, as matter of right. It .provides that if any suit at law, or in equity, in which the bankrupt is a party, is pending at the time of the adjudication of the bankruptcy, the assignee may defend the same in the same manner as it might have been defended by the bankrupt. Even if this section should be held to confer upon the assignee an absolute right to come in and defend while the action is pending, it does not follow that where he does not seek to come in at that stage, but through laches or even excusable neglect, he omits to apply until after judgment has been rendered and executed, it is not discretionary with the court, on a

The application being made by petition, instead of notice of motion, does not affect the question.

The appeal should be dismissed, with one bill of costs to respondents.

All concur.

Appeal dismissed.