Stern v. Mayer

. The plaintiff, as the duly appointed trustee of Hyman Gattle, a bankrupt, brings this action to recover the value of certain jewelry alleged to have been transferred by the bankrupt to the defendant as security for a claimed indebtedness. . , .

The gist of the action is to recover the value of the security so unlawfully transferred by the bankrupt. to the defendant,, liis ■creditor, on the ground that such transfer was in fraud of other creditors. • n ' "

The complaint alleges that on the 16th of June, 1903, a petition in involuntary bankruptcy was filed by certain creditors against Gattle, which resulted on 'the'twentieth of July following ‘in adjudging, him to be a bankrupt, and that- in May preceding the defendant, •claiming to be a creditor of Gattle in the sum of' $1,600, received from him while lie was insolvent within the meaning and.-purview of the Bankruptcy Apt, and with knowledge thereof, the jewelry in question as security for such alleged indebtedness ; that such security was given intending to give.the defendant a preference.over-the other creditors of Gattle, in order that he-might receive a greater percentage of his alleged debt than the other creditors would obtain. Then follows an allegation of demand oil the part of the plaintiff for the 'return of the security so delivered by the bankrupt or its value, and refusal on the part of the defendant to deliver and demand for a money judgment. - .

The action on appeal from an intermediate order was held by this court to be one at law, and was directed to be tried as such' -(99 App. Div, 427). The complaint .is. manifestly framed under section 6Ó'óf the Bankruptcy Act..* That section provides that if within four months before the filing of the petition in bankruptcy, *183the bankrupt shall.have given a preference by transfer of property to a creditor who has reasonable cause to believe that the transaction was intended to give such preference, the transaction may be treated as voidable by the subsequently appointed trustee of the bankrupt, who may recover the property so transferred or its,value. Collusion between the bankrupt and the creditor, and conspiring to give a favorite creditor greater advantage than the other creditors ,shall receive, is the gravamen of an action under this section, and evidently was so regarded by the plaintiff in framing his complaint.

On the trial the plaintiff proved that the defendant came to the bankrupt’s place of business and pretended he wanted to buy the jewelry in question for his wife; that a price was fixed, and the same was delivered to him with leave to return if unsatisfactory; that upon obtaining possession of it he refused to pay therefor and to redeliver, saying that the bankrupt owed him and-he would keep the articles as security for his debt. The bankrupt himself says that he did not consent that the defendant take or keep, the jewelry as security, and that it was kept against his protest and demand for return, and that he threatened and actually brought replevin therefor.

At the close of the plaintiff’s testimony the defendant moved to. dismiss the complaint on the ground that the plaintiff had wholly failed to prove the cause of action set forth in the complaint, and at the close ?of the defendant’s evidence, which related to value only, the'motion was renewed, and in both instances denied, and we think, improperly.

It is very plain that the plaintiff failed to show that his bankrupt transferred any property to the defendant as security for his debt, intending thereby to create an unlawful preference in favor of the defendant as against his general creditors. On the contrary,- he proved that the bankrupt did no such thing, and that if anything was done, it was that the defendant by deceit obtained possession of the jewelry, and against the protest of the bankrupt insisted upon retaining it because of the debt owing to him. If what the plaintiff proved was true, title to the jewelry in question never passed from the bankrupt to the defendant, but it did pass to the trustee on his appointment and qualification as such, and if he had seen fit he could have brought an action either in replevin or for the value *184of the property, against the defendant by virtue of. section 70 of the 'Bankruptcy Act.* . Such an action, however, would be Upon the theory that the claim to the property, or its value, or the property itself, had never .been'out of the .bankrupt, and came to the trustee by virtue of his appointment, and would be quite a different one than that set forth in the complaint.' »

The plaintiff made no request on the trial to be permitted to amend his complaint.to conform to the .proofs, and the defendant made seasonable and proper objection by his motions to, dismiss.A party having chosen and plead the acts for Avhich he seeks to hold his adversary, must abide by his allegations unless relieved, by amendment. (Scheu v. Union Railway Co., 112 App. Div. 239.) He cannot plead one cause.of action and. recover upon another if seasonable objection is made and no amendment, of the'complaint is asked for or allovved. (Davis v. Broadalbin Knitting Co., 90 App. Div. 567.)

The judgment and order should be reversed, and a -new trial granted, Avith costs to the appellant to abide the.event.

. O’Brien, P. J., McLaughlin and Clarke, JJ.,.- concurred ; ,lNGRAHAMj J., dissented. .

The defendant obtained these goods from the bankrupt upon á statement that he Avished to sho-w them to his wife for the purpose' of making a' purchase. After he had obtained them lie refused to redeliver them to the bankrupt, or to purchase them, stating that-lie intended to hold them as security for a debt of the bankrupt.to ' him. It is clearly disclosed that the intent' of the defendant was to obtain possession, of the goods and then hold them as' .security for his indebtedness^ Avhich would give him an unlawful preference under section 60 of the Bankruptcy. Law (30. U. S. Stat. at Large, 562, as amd. by 32 id, 799, § 13). The evidence offered’ by the plaintiff was received without objection as evidence tending,to sustain the' plaintiff’s ' cause^ of action.. Iff the. defendant, after-obtaining- the goods and when asked for payment, had told the bankrupt that his Avife would purchase them and offset the amount *185that the bankrupt owed him. the purchase iiaving been made with the intent of thus securing an unlawful preference, I assume that the trustee in bankruptcy could maintain an action in .the form here pleaded. The defendant obtained the goods for his wife to purchase if she desired them, intending at the time to get them into his possession so as to hold them as security for the indebtedness, and, having thus- obtained the goods and held them to secure the indebtedness, I do not 'think he can defend against an action to recover, the value of the goods as having been obtainediiy him for the purpose of obtaining an unlawful preference, by claiming that ’ he was guilty of a fraud and that the bankrupt or his trastee could repudiate the transaction and recover the goods or their value upon that ground. But if he wished to take this objection, I think he was bound to take it when the evidence was introduced, and that he - could not lie by and allow the plaintiff to prq,ve his cause of action, and then, when a good cause of action was proved, object to the sufficiency of the evidence under the complaint. The nature of the defendant’s possession of these goods was entirely changed when the bankrupt requested him either to purchase or to return the goods. He refused to do either, but held them as security for the bankrupt’s indebtedness to him. His possession of the goods after that was as collateral security for the payment of the bankrupt’s indebtedness, and he was not then in a position to claim that he held the goods under any other right. While the bankrupt.attempted to repudiate this relation, .the trustee in bankruptcy recognized it, but claimed to be entitled to recover the goods as being in violation of section' 60 óf the Bankruptcy Laws (as amd. supra). That, I think,'lie had a right to do, and that the defendant would not then be allowed to say that he obtained the goods by fraud and not for the purpose that he announced when the bankrupt demanded their return. ■

There was no error in the submission of the case to the jury, and I think the judgment and order should be affirmed, with costs.

Judgment and order reversed, new trial ordered, costs to appellant to abide event. Order filed.