This action was brought by a trustee in bankruptcy to set aside certain transfers of property alleged to have been: made by the bankrupt in fraud' of creditors.
The complaint alleges, in substance, the bankruptcy proceedings commenced in October, 1904; the discharge of the bankrupt, John S. Boddy, now deceased, in- December of the same year; the appointment of the plaintiff as trustee in October, 1906 deficiency judgments recovered against Boddy in March, 1901,- in two actions in favor of two of the present defendants, which judgments remain unsatisfied with the exception of a small sum paid on one of them ; Boddy’s conveyance in December, .1900—-during the pendency of these two actions and while he was insolvent — of certain property, which is described,, for the purpose and with the intent of defrauding his - creditors, which fact was known to the grantees; the recovery of another judgment against Boddy in favor of Sulli*853van — another defendant in this action—in August, 1903, which remains wholly unpaid; that Sullivan did not file proof of claim or appear in the bankruptcy proceeding and had no notice or knowledge thereof; that there are debts of said bankrupt proved and unpaid amounting to upwards of $3,000 above all assets which have come into the hands of the trustee and that the debts of-the bankrupt, as stated in the schedules, amount to $4,000 above his assets, all or most of which indebtedness was incurred prior to December 17, 1900, the date of the alleged fraudulent conveyances. The judgment demanded is that, the conveyances in question be declared void; the plaintiff be authorized to sell the real estate conveyed, and that an accounting be had of the rents, issues and profits derived therefrom.
At the opening of the trial, and before any testimony had been offered, the attorney for the representatives of the bankrupt, and certain other defendants, moved to dismiss the complaint upon the ground that it did not state facts sufficient to constitute a cause of action. The motion was granted and the plaintiff appeals from the judgment and order denying a motion to set aside the dismissal.
The dismissal of the complaint, as appears from the opinion of the learned justice who presided at -the trial, was put upon the ground that the lien of the judgments set forth in the complaint survived the discharge in bankruptcy by virtue of the provisions of section 1268 of the Code of Civil Procedure, and that such judgment creditors are now in a position to enforce their judgments, either by a sale of the land or by bringing an action in equity to have the transfers in question declared void; but that this right does not vest in the plaintiff — the trustee in bankruptcy — citing Hillyer v. Le Roy (179 N. Y. 369).
I am of the opinion that the court erred in dismissing the complaint, and that the reasons assigned are wholly inapplicable to the facts pleaded. Whether the complaint states a cause o.f action of' course depends upon the construction to be put upon certain provisions of the Bankruptcy Act of July 1,1898 (30 U. S. Stat. at Large, 544 et seq.). Under the act an assignment or transfer of property, if made within four months prior to the filing of the petition, is a constructive fraud upon the Bankruptcy Act, in that it interferes with the control of the debtor’s estate by the court in bankruptcy *854and prevents the due operation of the act itself. (Matter of Gutwillig, 90 Fed. Rep. 475; West Co. v. Lea, 174 U. S. 590.) It is provided in subdivision e of section 67 of the act (30 U. S. Stat. at Large, 564, as amd. by 32 id. 800, § 16) that all conveyances, transfers and assignments made within four months by a person so adjudged a bankrupt with. intent to hinder, delay and defraud creditors shall be null and void as against such creditors, except as to purchasers in good faith for a present fair consideration, and that the property so conveyed, transferred or assigned shall be and remain a part of the assets and estate of the bankrupt, and shall pass to his trustee, whose duty it shall be to recover the same by legal proceedings of otherwise for the benefit of all the creditors. It matters not under this section, if the transfers were made within" four months, what the purpose or intent of the assignor was; the transfer’s are presumed to be fraudulent and can-be set aside.
It is quite apparent, therefore, that the complaint does not state a cause of- action under subdivision e of section 67, because none of the transfers sought to be attacked were, made within' four months of the timé the petition in bankruptcy was filed.— the allegation of the complaint being.: “ That the debts of said bankrupt as stated' in the schedules amount to $4,000 over and above his assets, all of which indebtedness or the greater part of which, .was incurred prior to the 17th day of December, 1900.”
If the plaintiff, therefore, can set aside these transfers, it must be under some other section, and this I think he can do under section 70 (30 U. S. Stat. at Large, 565, 566, as amd. by 32 id. 800, § 16), which provides: “ a The trustee of the estate of a bankrupt, upon his appointment "and qualification, and his successor or successors * * * shall in turn be vested by operation of law with the" title of the bankrupt as of the date he was adjudged a bankrupt * * * to all * * * (4) property transferred by him in fraud of his creditors. * * * e The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona, ficle holder for value prior to the date of the adjudication. * *
The trustee, by this provision of the act, is. invested with the title *855of all property of the bankrupt transferred by him in fraud .of creditors, unless his right in this respect is restricted — which I do not believe it is — by subdivision e. The policy of the act is to secure an equal distribution of all property of the bankrupt among all his creditors.' For that purpose the trustee represents all the creditors and may maintain an action to set aside any transfer which any creditor could or which any. creditor might acquire by any process taken by him. (Matter of McNamara, 2 Am. Bank. Rep. 566; Mueller v. Bruss, 8 id. 442 ; Sheldon v. Parker, 11 id. 152 ; Beasley v. Coggins, 12 id. 355.)
Under the Bankruptcy Act of 1867, which contained a provision to the effect that title to property fraudulently transferred vested in the assignee, now the trustee, it was held that the assignee could maintain an action to set aside such transfers whether any individual creditor could have done so or not. (Platt v. Matthews, 10 Fed. Rep. 280 ; Matter of Leland, 10 Blatchf. 503.) Judge Wallace, who delivered the opinion in the Matthews case, concluded by saying: “Bumerous other authorities might be cited to sustain the position that an assignee may proceed to recover property transferred in fraud of creditors whether any creditor was in a position to attack the transfer or not, and that his title accrues by force of the act, and not through the rights of the creditor to- assert the fraud.”
The same view was entertained by the Court of Appeals in Southard v. Benner (72 N. Y. 424). There the court had under consideration the construction to be put upon chapter 314 of the Laws of 1858 in connection with the Bankruptcy Act of 1867. The provisions of that act are somewhat similar to the one under consideration in so far as relates to the maintenance of an action by an assignee or a trustee, irrespective of the rights of individual creditors. The court, speaking through Judge Allen, said: “ Upon sound reason and the policy of the law, as well as the authorities quoted and others that might be referred to, there can be no doubt, we think, that the plaintiff as assignee has a right of action for property Conveyed by the bankrupt in fraud of his creditors, although none of the creditors have acquired a specific lien. It is not such liens, or any particular interest in the property, or an' interest for the benefit of any one ' creditor or class of creditors, that is vested in the assignee, but the *856entire' property fraudulently transferred and for the benefit of all the creditors. The assignee takes title'not under any claim of right existing in the creditors, but under the statute,'and that right.he may assert by action,- although no individual ■ creditor, Or all the creditors combined, could have a standing in court to challenge -the conveyance.” -
Therefore, it seems, tó me, even though it-be held, as contended,, that the complaint does not show that any of the creditors whose claims were filed in the bankruptcy proceeding were'in a position to attack the transfers, nevertheless, 'the trustee may do so. This, must be so if the reasoning in the authorities cited be sound'. To hold that a trustee cannot attack a fraudulent conveyance - made by the bankrupt more than four months before the filing of the petition, without showing, that some creditor had obtained a judgment and issued execution thereon, so that he could maintain a similar action, would be simply to provide an easy and convenient-' method for a dishonest debtor to dispose of -his property. In that case the debtor could frapdu-lently dispose of all his property more than four months before bankruptcy proceedings' were ■ instituted, and unless some creditor —- intermediate the disposition of the property and the filing of the petition in bankruptcy — had put himself in posi-. tion to attack the fraudulent transfers by obtaining a judgment, issuing an execution and having the same "returned unsatisfied, the trustee would be powerless to reach the property fraudulently disposed of.. .
But I think the complaint under consideration shows, or facts are stated from which an inference may be -fairly drawn, that at least two of the "creditors of the bankrupt, who were in a position, to attack the transfers at the time the petition was filed, did ..file their claims in the bankruptcy court. Indeed, it is not claimed by . counsel for the respondent but xyhat such fact is to bé inferred from the complaint; because he states in his brief- .used upon the argument of. the appeal that two of.'the judgments were proved in the bankruptcy proceedings. Whát he claims, under the authority of Hillyer v. Le Roy (supra), is that because these two judgment creditors had a fight to attack the transfers, that deprived the trustee in bankruptcy óf such right. In Hillyer v. Le Roy (supra) the plaintiffs, as judgment creditors, brought an action to set aside *857certain transfers alleged to have been made in fraud of creditors. After the commencement of the action the firm was adjudged bankrupt and discharged in bankruptcy proceedings. In a supplemental answer this discharge was alleged as a bar to the action. All that the court held' in affirming the jndgmeti't in favor of the plaintiffs, as I understand the opinion, was that they had acquired a lien by virtue of their judgment and the. commencement of the action,» which was not within the operation of the Bankruptcy Act and they were at liberty to pursue any remedy they had for the enforcement of the lien, unfettered by the bankruptcy adjudication, and that the right to maintain an action to enforce the lien did not vest in the trustee in bankruptcy. Obviously, this must be so, but it falls far short of holding that the trustee, even though certain creditors might have maintained the action, is deprived of doing so himself and especially when such creditors have not commenced an action to enforce their lien, are made parties defendant to the one commenced by the trustee, and do not object to his proceeding. (Patten v. Carley, 69 App. Div. 423.) The fact that a creditor has reduced his claim to judgment, which gives him a lien upon the bankrupt’s property, does, not prevent, if he_sees fit to do so, his filing his claim in the bankruptcy proceeding. He is not obliged to embark in litigation for the purpose of enforcing his lien. He may waive that right and take his chances with all the other creditors, and if he does so, then the trustee is just as much obligated to bring an action to set aside a fraudulent transfer so far as he is concerned as he is as to the other creditors. The trustee represents all the creditors. His action is for the benefit of them all, but it is not necessary that all or any of them should be in a position to attack the transfers, or that the transfers should be fraudulent as to all; if fraudulent as to any, that is sufficient..
The. judgment and order appealed from, therefore, must be reversed and a new trial ordered, with costs to appellant to abide event.
Patteeson, P. J., Ingbaham and Houghton, JJ., concurred'; Soott, J., dissented.
Judgment and order reversed, new trial ordered, costs to appellant to abide event.