Gilbert v. Mechanics & Metals Nat. Bank — 160 N.Y.S. 710

Majority

p. 710

(95 Misc. Rep. 364)

GILBERT v. MECHANICS & METALS NAT. BANK OF CITY OF NEW YORK.

(Supreme Court, Special Term, New York County.

May, 1916.)

Headnote

Bankruptcy <@=3157, 299—Action Against Creditor—Parties.

Code Civ. Proc. § 756, providing that, in case of transfer of interest, an action may be continued by the original party, does not, on an adjudication in bankruptcy, apply to an action against a debtor of a bankrupt by the bankrupt’s assignee for the benefit of creditors, since the trustee in bankruptcy does not take title through the assignee, but by a superior title, and such an action cannot be maintained either by the assignee or by the trustee in the name of the assignee; Bankr. Act July 1, 1898, c. 541, § 67, 30 Stat. 564 (ü. S. Comp. St. 1913, § 9651), relating to liens against the property of a bankrupt, not being applicable.

[Ed. Note.—For other cases, see Bankruptcy, Cent. Dig. §§ 237, 238, 448; Dec. Dig. <@=>157, 299.]

<&=>For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

Action by Francis Gilbert, as assignee for the benefit of creditors of Alessandro Bolognesi and another, formerly doing business as A.

p. 711

Bolognesi & Co., against the Mechanics & Metals National Bank of the City of New York. On motion by defendant for judgment on the pleadings. Granted.

Sec, also, 172 App. Div. 25 , 157 N. Y. Supp. 953 .

Olcott, Gruber, Bonynge & McManus, of New York City, for plaintiff.

Frank M. Patterson, of New York City, for defendant.

The trustees in bankruptcy did not take title through the plaintiff, as assignee for the benefit of creditors of A. Bolognesi & Co., but took by a superior title (Black, Law & Prac. of Bankruptcy, § 440; Whittlesey v. Becker & Co., 142 App. Div. 313 , 126 N. Y. Supp. 1046 ); hence section 756 of the Code of Civil Procedure has no application, and the action cannot be maintained, either by the plaintiff, who no longer has title, or by the trustees in his name, for no title has been transferred from him to them. I cannot see that section 67 of the Bankruptcy Act has any application to the case. The plaintiff did not procure any lien upon the fund in question, either by the assignment or by the institution of this action. If he had procured any lien, perhaps the trustees could have been subrogated to it; but it would not follow that they were authorized to continued the present action for the purpose of enforcing their rights.

Counsel for plaintiff frankly states that the present action is sought to be continued by the trustees of the bankrupt estate in the name of the plaintiff on the theory that the defendant would then have no right to offset a debt due it from the plaintiff’s assignors and exceeding the amount of the plaintiff’s claim; whereas, if an action were brought by the trustees in bankruptcy, the defendant would, under the Bankruptcy Act, have the right to make this offset. It would be regrettable if by such a device a debtor’s estate, thrown into bankruptcy by virtue of the act enacted for that very purpose, could be administered in defiance of the equitable, provisions of the act relating to offsets. In other words, it would be strange, not to say unconscionable, if the creditors of the bankrupt could avail themselves of the benefits of the act, while refusing to recognize the right of offset given by the act itself to one of their number, and insist that he must pay his debt to the bankrupt in full and claim against the estate, not for the balance due him, but for the full amount of his independent claim. Motion for judgment on the pleadings dismissing the complaint granted, with $10 costs.

Motion granted, with $10 costs.