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Rudnick v. Fishbeck.


: December 10, 1946.


Author: Frank

Before SWAN, CLARK, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

The record is largely unintelligible, and we shall therefore not attempt to go into the facts in detail. As neither the Referee nor the judge dealt with the merits of Natural's claim against the bankrupt, we shall not consider them.

The assignment needed no consideration; see New York Personal Property Law, § 33, subdivision 4.*fn3 The more troublesome question is whether there was compliance with G.O. 21(3). Rodman's affidavit of October 2, 1945 stated his reasons for refusing to execute the affidavit which had been requested by appellants in order to comply with the Order. Rodman's affidavit fulfills the requirements of the Order in so far as they relate to consideration; for, where an assignment requires no consideration, a statement that none existed is enough. Rodman's affidavit does not detail the amount of the claims, whether or not they are secured, and whether or not any payments have been made. However, it is apparent that the claimant-appellants could not, by the exercise of due diligence, have procured an affidavit which complied with G.O. 21(3) in these respects. The failure to ask Stettner for one was reasonable in the light of Rodman's testimony; Stettner was probably not an officer at the time of the assignment; and even if he had been, his affidavit would have served no useful purpose since he knew nothing of the assignment, and the reason for requiring such a sworn statement from the assignor is that presumably he is better acquainted with the pertinent facts than the assignee. The proof of claim filed November 10, 1943, contained all the information required under the General Order, and there is no suggestion that the debtor and its creditors have been prejudiced by the absence of any data in Rodman's affidavit.

Aware that, literally, the language of the Order is mandatory, we are not prepared to say what our decision would be if the claimants had been unable to obtain any affidavit whatever from the assignor. For here they did obtain one, and it contains the most important element, i.e., the necessary information about the consideration. In the circumstances, on familar equitable grounds, full literal compliance with the General Order must be excused.

As there was an absence of corporate action by Natural authorizing the assignment, appellee asserts that it was invalid. Rodman, however, testified before the judge that, when he executed it, he was Natural's sole stockholder. He had previously testified before the referee that (at some time which he did not indicate precisely) there had been another stockholder. The judge made no finding on that issue of fact. It is suggested that, even if he had found it in favor of appellants, they could not win because (1) their pleadings were not based on a disregard of the corporate fiction, and (2) in any event, they had the burden of proof. But a proof of claim is hardly a pleading, and in any event the formal proof of claim seems adequate as a statement of ultimate facts. And the testimony as to Rodman's sole ownership of all the stock when the assignment was made might well have justified a conclusion in favor of its validity. The course of the proceeding below was such, however, as to obscure this issue so that it was not only not adjudicated, but apparently not thoroughly canvassed. We think that in the interests of justice the case should be remanded for a complete trial of this issue, with the parties at liberty to present additional evidence if they see fit.*fn4 This will enable the referee below to make adequate findings of fact, as well as the appropriate final adjudication.

Appellee asserts that the assignment was invalid under New York Penal Law, § 274 because one of the assignees was a lawyer. While we incline to believe that, on the facts now before us, this statute is here inapplicable, this issue, which was not considered below, should also be considered, after a further hearing, on the remand.

Should the right to file the claim be decided in favor of appellants, of course all defenses, of every kind, on the merits will be open.

Reversed and remanded.

SWAN, Circuit Judge (dissenting).

I think the order expunging the claim should be affirmed on the ground that Rodman, who executed the purported assignment as president of Natural, had no authority to act on the corporation's behalf.It is true that consideration is unnecessary to validate an assignment "In writing and signed by the assignor." N.Y. Personal Property Law, § 33, subd. 4. But the assignment upon which the appellants based their claim was not signed by the assignor but by one who purported to act as an agent of the assignor. To establish their right as assignees the appellants had to prove that the agent possessed authority, either actual or apparent, to act on behalf of his principal. Rodman testified that he had no actual authority to execute the assignment and that the only consideration given by the assignees was the delivery by Rice to Rodman personally of shares of stock which Rodman wanted in order to enable him to put through a reorganization of Natural. Assuming that there was a valid debt owed by the bankrupt to Natural, Rodman as president of Natural had neither actual nor apparent authority to give away this corporate asset or to sell if for his own advantage.

Because the record leaves it uncertain whether Rodman was the sole stockholder of Natural at the date of the assignment, and whether at that date Natural had creditors who might be defrauded by the assignment of the claim to the appellants, my brothers think the cause should be remanded for findings on those subjects. The appellants never presented their case on the theory that the corporate entity should be disregarded, and the debt owed by the bankrupt treated as a debt owed to Rodman personally which he assigned as principal. Had they made allegations to that effect they would have lost the case for failure to carry the burden of proving them. When there is a ground (lack of authority in Rodman to assign Natural's claim) adequate to sustain the judgment on the issues presented by the pleadings and proof, I see no good reason for this court to make over the case and send it back for trial on a theory neither alleged nor proved by the appellants.

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