IN ItE JACKSON.
(DisericteCou.rt, 8. D. New Y urk. November 16, 1881.)
1. INJuKcnoN DISSOLVED-SECTION 5057-LulITATIONS-FRAUDULENT JUDGMENT. An injunction should be dissolved when it can no longer subserve any useful purpose. Where, prior to proceedings in bankruptcy, several executions had been levied on the bankrupt's property, and the sheriff had advertised it for sale thereunder, when he was stayed by injunction issued in the bankruptcy proceedings, but was afterwards allowed to sell and hold the proceeds, subject to the order ofthe court: and after paying certain prior executions, about which there was no controversy, there remained in the sheriff's hands $611, applicable next in order upon a judgment and execution of M.; but it was claimed by the assignee in bankruptcy, and also by certain subsequent execution creditors, that M. 's judgment was fraudulent and fictitious,. and M.'s proceedings under it had been stayed since 1874, and the assignee, though knowing the facts since 1875, had taken no steps to assail M.'s judgment,-held, that the assignee's right to attack M. 's judgment had, under section 5057, long since expired, and that 1he injunction should now be dissolved.
In Bankruptcy. Jas. Armstrong, for the motion. Jas. G. Graham, for the assignee. Darwin W. Esmond, for creditors. BROWN, D. J. Markowitz, the moving creditor, by virtue of a judg. ment, execution, and levy prior to the commeneement of proceedings in bankruptcy, obtained a legal lien upon the goods and chattels of the bankrupt. The goods were under advertisement for sale under this execution, and others, at the time of the filing of the petition in bankruptcy, on December 8, 1874. On that day an injunction was issued out of this court in those proceedings, restraining further proceedings by the sheriff. Afterwards it was so modified as to permit the sheriff to sell all the goods and chattels of the bankrupt levied on, and to retain the proceeds to abide the further order of the court. He was also permitted to pay two judgments prior to that of Markowitz, there being no controversy about them. After paying those judgments and the expenses of sale, a net balance of $611.39 remained in his hands, which was then, and has ever since been, claimed by Markowitz under his judgment of $2,040, which was next in order of lien. Payment to him has been prevented by the original injunction, which, as respects this judgment, has never been vacated, it 1;,leing claimed, not only on behalf of the assignee in bankruptcy, but also in behalf of two subsequent judgment creditors, that that judgment was fraudu· lent and collusive, and designed to give an unlawful preference to Markowitz, who is a brother-in-law of the bankrupt.
The assignee in bankruptcy was chosen on March 25, ]875. On the nineteenth day of April, 1875, he applied to this court for an order upon the sheriff to show cause why the of $611.39 should not be paid to him as assignee. The order was refused by Judge Blatchford, who indorsed upon the papers that the relief must be obtained by plenary suit. The money in the sheriff's hands stands in the place of goods which were already subject to the lien of the judgment at the time of the commencement of the proceedings in bankruptcy. If the judgment was collusive, and designed to give a fraudulent preference, as alleged, it was voidable at the suit of the assignee. Such a suit by him to displace the apparent legal lien of the judgment, and to recover the property for the use of the general creditors, would be within section 5057 of the Revised Statutes, because against a person claiming an adverse interest touching rights of. property transferable to or vested in the assignee. Had the assignee possessed himself of the goods or the proceeds, notwithstanding this lien, the judgment creditor must been limitea' to two years in which to assert his right to the goods; and the assignee must be held limited to a like period from the time of his discovery of the fraud or illegality. Bailey v. 21 Wall. 842. The papers on file, referred to on this motion, show that in April, 1875, the assignee, in his original application for the ,balance of the money, was apprised of the alleged collusion and fraudulent character of the judgment. The affidavit of Clark, the attorney of the petitioning creditors, not only stated the fact, but 'gave ,some evidence of it. No suit, however, has ever been commenced to assail the legal lien of this judgment. ,More than six years have elapsed since the charge of its fraudulent character was made by the assignee, and since he was apprised by the court that it could be assailed only by plenary suit. The assignee has appeared in opposition to this motion, but there is no evidence that he is any better prepared to commence such a suit now than he was six years ago, or is even proposing to recover this money. No reaSon appears why such suit should not have been commenced long ago, if it was desired or intended to contest the lien of this judgment, except, pJssibly, the assignee's want of the necessary funds to do so, which it must be assumed the creditors were not willing to advance. This cannot extend the statute of limitations. The object of the statute was to secure the speedy liquidation of bankrupts' estates; The injunction of December 8, 1874, was not an injunction upon the assignee's proceedings, but was for the benefit of the assignee to be thereafter chosen. He has not availed himself of
IN BE SHAW.
it in the only way it could become beneficial to the estate,"'-by a suit to Bet aside the judgment and obtain the maney,-and the time for doing BO has lang since passed. I cannot perceive anything possibly useful to the bankrupt's estate in continuing the injunction longer, and it ought, therefore, to be solved. By the operation of the statute of limitations the questiqn of the validity of the judgment has long since passed beyond the scope of proceedings in bankruptcy; and the special interest of the' two subsequent judgment creditors, in contesting the judgment, cannot be here oonsidered, as it does not concern the general The motion should be granted·.
(District Oourt, S. D. New York.
ExECUTED CoMPOSITION-ATTEMPT TO SET ASIDE-SALE BY TlIlll. BANKRUl'T OF HIs STOCK-INADEQUACY OF CONSIDERATION.
In a proceeding to setaside a composition in bankruptcy after it has been fully executed, a sale of the bankrupt's stock and fixtures, made prior to the adjudication in bankruptcy, will not be disturbed on the ground of inadequacy of price in a doubtful case, nor upon other grounds known to. the. creditors. accepting the composition, although it might probably have been avoided by an assignee in bankruptcy. .
A creditor, who, with full knowledge of tbe schedule estimates, voted for the composition and received payment. under it, is precluded from seeking to set aside the composition for mere inadequacy, or because it ultimately turns out that a larger amount might have been offered and paid, where the schedules show with substantial correctness the situation of the estate.
BAME-AssltTS-BANKRUPT'S RIGHTS WITH RESPECT THERETO.
A bankrupt from whom a composition is received is necessarily at liberty to deal with his assets as he chooses. The creditors have no concern in the matter if their composition be paid and no fraud Placticed. He may pledge or sell his stock to op.e or more of his creditors to raise money to pay the composition, where there is no concealment practiced, or unfairness to others.
This was a petition filed in this court on the twenty-sixth day of June, 1877, by Frederick M. Peyser, to vacate and set aside a composition made by the above-named bankrupts with their creditors, confirmed by an order of this court on the first day of December, 1875, and to .aeate and set asIde the discharge of said from their debts. The bankrupts were a firm engaged in the manufacture of blank books in the city of New York. On or about the seventh day of Aug-nst, 1875, being unable to meet the payment of all their debts. they sold all their stock ana fixtures to their clerk, Uandolph