Appeal from the District Court of the United States for the Southern District of New York.
Before AUGUSTUS N. HAND, CLARK, and FRANK, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
On December 7, 1939, certain creditors of Surf Advertising Corporation filed a petition for a reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. On December 26, Max Rockmore was appointed trustee. Surf had previously entered into three contracts with Calvert Distillers Corporation, whereby Surf was to furnish and maintain advertising signs for Calvert and the latter was to make instalment payments therefor. These contracts were dated May 28, 1937, July 28, 1937, and September 30, 1937, respectively. The contracts were assigned by Surf to the respondent Abrams in consideration of advances by the latter to enable Surf to erect and maintain the signs. Surf performed the contracts with Calvert from the time they were made until October 3, 1939, when Schub, the president of Surf, died. During the periods between the making of the contracts and the death of Schub, Abrams advanced to Surf $38,210.29. Subsequent to October 3, 1939, and prior to the appointment of the trustee, Abrams personally supervised the servicing of the signs under the contracts and expended $846.44 for that purpose. Checks aggregating $31,889.38, which Calvert issued as instalment payments under its contracts with Surf, were delivered by schub to Abrams, leaving a difference between his total advances of $39,056.73 and his receipts from Surf of $31,889.38 amounting to $7,167.35.
On May 18, 1938, Calvert made a contract for the installation and servicing of an advertising sign with Fiegel Advertising Company Inc. whereby Calvert agreed to pay Fiegel $165 per month for three years, making a total for the period of $5,940. The latter performed all the obligations under the contract prior to the appointment of the trustee. On June 8, 1938, Fiegel made a contract with Mathilde lehman reciting that it had made the agreement for installing and servicing the sign with Calvert and had acquired a lease of property on which the sign was to be erected. Fiegel promised to erect the sign at a cost of $1,000 and to service the same for three years. Lehman was to advance $1,000 to Fiegel and the latter was to repay the $1,000 in six instalments during the months of July, August, September, October, November and December, 1938, and also to pay $23 per month beginning with July 15, 1938, for the three succeeding years. The agreement between Fiegel and Lehman also provided that, "as security for the payment of the sums" provided to be paid to Lehman, Fiegel assigned all its rights and title both to the lease and to its contract with Calvert. The agreement also provided that Fiegel on receipt of paymentls from Calvert should forward them, or its own checks for like amounts, to Lehman, or, in the event of failure to do this, Lehman should have the right to receive the payments from Calvert direct.It was further provided that no written notice of the assignment should be given to Calvert, unless a default in the payments had taken place, and that after the repayment of the $1,000 to Lehman had been made Fiegel should be entitled to a re-assignment from Lehman of the lease and the contract upon Lehman's receiving from Fiegel satisfactory security covering the payments to be made for the balance of the term. After Fiegel had made the above assignment to Lehman it assigned its contract with Calvert to Surf. The payments received from Calvert by Fiegel were paid over to Lehman, but $964.52 still remained due under the terms of her agreement with Fiegel.
Calvert deposited $5,960 in the registry of the District Court which represented sums due after October 1, 1939, from Calvert undler the various contracts of which Abrams and Lehman held assignments.
Out of the fund of $5,960 the District Court awarded $4,410.16 to Abrams and $964.52 to Lehman. The court awarded the balance amounting to $585.32 to the trustee as reimbursement to him for servicing the various signs. The trustee appealed from the order of distribution in so far as it directed the payments of $4,410.16 to Abrams and $964.52 to Lehman. In his petition he alleged that the assignments to Abrams were fraudulent because the debtor Surf was at the time insolvent and the consideration for the assignments was inadequate and contrary to the Bankruptcy Act and the laws of the State of New York applicable thereto. In respect to the assignment to Lehman of the indebtedness of Calvert to Fiegel it is claimed by the trustee that Fiegel agreed to repay its indebtedness out of a fund to be created in the future through services to be rendered by Fiegel under its contract. The trustee's contention seems to us sound in respect to both the Abrams and the lehman assignments.
The court below did not determine whether the assignments to Abrams and Lehman were absolute or were only given as security for the advances and evidently thought it unimportant which view was adopted. The special master was of much the same mind as to lack of importance, though he seemed to regard the assignments given to Abrams as absolute rather than as security for the latter's advances. We think they were given both to Abrams and Lehman as security. Abrams filed his proof as one for a "Secured Claim" and therein reserved the right to collect moneys due and to become due under the contracts assigned. Moreover, he testified that the transactions with Surf consisted of "lending * * * money * * * " under assignments. A so-called master contract (Trustee's Exhibit 14) made in 1934 between Surf and Abrams provided in terms for securing advances out of all contracts assigned "and to be assigned."
The following assignment to Abrams of the rights of Surf in the contract between Surf and Calvert dated May 28, 1937, is typical of the other assignments covering the contracts of July 28 and September 30, 1937:
"Abrams & Company, "1140 Broadway, "New York, N.Y.
"The undersigned, Surf Adv. Corp. by its President, Samuel Schub, does hereby acknowledge the receipt of the sum of One Thousand Dollars ($1000.00) as evidenced by your check of even date #12664 and in consideration therefore, does hereby sell, assign, transfer and convey unto you Abrams & Co., all right, title and interest in the account of Calvert Distillers Corp., 405 Lexington Ave., N.Y.C., in the total sum of Seventeen Thousand Four Hundred Dollars ($17400.00) covering the service and maintenance of one sign board at W. 8th St., & Boardwalk, Coney Island, Bklyn., N.Y., for a period of three years.
"This said One Thousand Dollars ($1000.00) will be used for immediate requirements to bring this sign into working ...