ZARTMAN, TRUSTEE IN BANKRUPTCY,
v.
FIRST NATIONAL BANK OF WATERLOO

U.S. | 1910-02-21
No. 74
216 U.S. 134 Supreme Court of the United States (1910) Caution
Also reported at: 54 L. Ed. 418 · 30 S. Ct. 368 · SCDB 1909-067 · 1910 U.S. LEXIS 1879
Cited by 96 cases

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Synopsis

A bankruptcy trustee sought to avoid correction of a written contract containing a mutual mistake between the bankrupt and a bank, claiming the mistake constituted an asset of the estate. The Supreme Court affirmed that a trustee in bankruptcy takes property subject to the same equities and claims that bound the bankrupt, not as a bona fide purchaser for value, and therefore does not inherit protection from the debtor's contractual mistakes that a court of equity may correct.

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Opinion of the Court
Me. Chief Justice Fuller,

Mr. Chief Justice Fuller,

after making the foregoing statement, delivered the opinion of the court..

The jurisdiction in equity to decree the correction of errors in written contracts which have been caused by mutual mistake is firmly established and needs no citation of authority to sustain it. In the present case the evidence of the mistakes in question was undisputed. We are not aware that the bankruptcy law has suspended that jurisdiction.

The position of the trustee in bankruptcy seems to be that the mistake made by Bacon in dictating or writing out the contract between himself and the Waterloo Bank “is an asset in his hands as part of the estate of the' bankrupt,” but we cannot agree to that. The trustee claims that he takes the' same kind of title as a bona fide purchaser for value, but the rule applicable to this and all similar cases is that the trustee takes the property of the bankrupt, not as an innocent purchaser, but as the debtor had it at the time of the petition, subject to all valid claims,' liens and equities. Thompson v. Fairbanks, 196 U. S. 516, and cases cited. And this is so well settled that our jurisdiction of the writ of error is exceedingly doubtful. Judge Williams, speaking for Appellate. Division, Fourth Department, treated of this point thus (113 App. Div. 612, 615):

“ It is said that the bankruptcy of Bacon constituted a bar to the relief granted in this action. This cannot be true. The trustee took the bankrupt’s.property in the same condition and subject to the same liens as the bankrupt himself held it. The trustee is in no sense a bona fide purchaser for value, and entitled to protection as such. No new lien was created by the decision and judgment appealed from.' The original lien was adjudicated and determined.”

We concur in this view, and the judgment is' Affirmed.

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Cited By (26 total)

  • Bank of Marin v. England in Bankruptcy, 385 U.S. 99 (U.S. 1966)
    …e. The trustee succeeds only to such rights as the bankrupt possessed; and the trustee is subject to all claims and defenses which might have been asserted against the bankrupt but for the fifing of the petition. See Zartman v. First National Bank, 216 U. S. 134, 138. The relationship of bank and depositor is that of debtor and creditor, founded upon contract. The bank has the right and duty under that contract to honor checks of its depositor properly drawn and presented (Allen v. Bank of America, 58 Cal.…
  • Sexton in Bankr. of Kessler & Co. v. Kessler & Co., 225 U.S. 90 (U.S. 1912)
    …hrey v. Tatman, 198 U. S. 91, 95. A trustee in bankruptcy does not stand like an attaching creditor; he gets no lien by the mere fact of his appointment. York Manufacturing Co. v. Cassell, 201 U. S. 344. Zartman v. First National Bank of Waterloo, 216 U. S. 134, 138. The most obvious objection is that the continued physical power of the New York firm over the securities and its right to withdraw and substitute admittedly reserved are inconsistent with a title or lien of the English house in any form. But t…
  • Bankruptcy v. Mfrs. Nat'l Bank of Detroit, 364 U.S. 603 (U.S. 1961)
    …a lien . . . whether or not such a creditor actually exists,” contained in § 70c. Prior to 1910 the trustee had no better title to the property than the bankrupt had. See York Mfg. Co. v. Cassell, 201 U. S. 344, 352; Zartman v. First National Bank, 216 U. S. 134, 138. The provision with which we are here concerned was written into the law in 1910 to give the trustee all the rights of an ideal judicial lien creditor.2 The predecessor of the present § 70c was § 47a (2) of the Bankruptcy Act, as amended by th…

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