The opinion of the court was delivered by: BYERS
This is a trustee's petition to review a referee's order directing payment to the claimant of all the assets coming into the trustee's hands, under the following circumstances:
An involuntary petition was filed on June 25, 1932; twenty-three days before that the bankrupt had executed an assignment to his father-in-law, the said claimant, of a judgment recovered by the bankrupt on that day and any money "that may be had or obtained by means thereof or on any proceeding to be had thereon".
It is therein recited that on that day the bankrupt did recover a judgment in the Supreme Court, Kings County, against the Radio Corporation of America, for $10,174.57, which was duly filed, and that, in consideration of the sum of One Dollar and other good and valuable considerations, the bankrupt sold, assigned, etc., the said judgment; and constituted the assignee his attorney in fact to recover the money due on the said judgment, and to satisfy the same. Also that the said agreement was subject to the lien of the attorneys for the plaintiff for their services and disbursements incurred in connection with the said action.
The foregoing, having been executed within the period of four months prior to the filing of the petition, clearly constituted a preference, and, as such, would be set aside at the instance of the trustee for creditors; it is claimed, however, that the transaction evidenced by the assignment was merely the consummation of an antecedent transfer made by the bankrupt to his father-in-law on August 3, 1930. The latter is in writing and recites that --
"In consideration of the sum of One ($1.) Dollar and other good and lawful consideration, receipt whereof is hereby acknowledged, I (the bankrupt) do hereby transfer and assign to Samuel Klar, residing at 2407 Avenue J, Brooklyn, New York, all my right, title and interest in and to any verdict, decision, judgment, recovery or proceeds thereof, which I may recover or become entitled to arising from an action commenced by me in the Supreme Court of the State of New York, Kings County, entitled Julius Modell against Radio Corporation of America and John Harley.
"I hereby authorize the defendants in said action or my attorneys to pay to said Samuel Klar the share that may become payable to him from said verdict, decision, judgment or recovery and I hereby give to said Samuel Klar the full power and authority to ask, demand, collect or receive my share, and who in my name or in his name, to satisfy or discharge any judgment I may obtain in said action."
The claimant urges that the foregoing created an equitable lien upon the proceeds of the judgment (which was for a personal tort), which should be given effect even though other creditors of the bankrupt are thereby deprived of any share of his estate.
The conditions under which the last mentioned instrument was signed are deemed to have been established substantially as follows:
In September, 1930, the bankrupt was indebted to his father-in-law in the sum of about $35,000.00, which was reduced in that month to about $16,000.00 through sources not presently involved. The latter balance was owing on October 3, 1930, and at that time the bankrupt and his family were living in the home of his father-in-law.
The extent of the bankrupt's indebtedness to other creditors at that time was not less than $70,000.00.
There was no present consideration for the instrument of October 3, 1930, and the following statement in the referee's memorandum to the contrary must have been inadvertent:
"As security for loans previously made to the bankrupt and for future loans the bankrupt executed, on October 3rd, 1930, an assignment to his father in law, Samuel Klar, of any judgment which he might obtain against the Radio Corporation.
"The record shows that Samuel Klar thereafter advanced substantial sums for the living expenses of the bankrupt's family and also for the expense of the litigation. The total loans made by him ...