Bourke v. Krick (304 F.2d 501, 1962)

SOBELOFF, Chief Judge.

This appeal concerns a controversy between Clyde Bourke, trustee in bankruptcy of Roger Craig, Inc., and Benjamin Krick over the proceeds from the sale of certain real property located in Montgomery County, Maryland. Determination of the issue is wholly dependent on Maryland law.

Roger Craig, Inc., the bankrupt, is a solely owned corporation of Daniel M. Ostrow, which engaged in the development of real estate in Maryland. Fee simple title to the land underlying this litigation was acquired by Ostrow, individually, in 1955. On June 28, 1957, he and his wife contracted to sell the property to the Bethel Baptist Church for $48,213.00. The contract was recorded shortly thereafter. Subsequently, marital difficulties having arisen between Os-trow and his wife, Roger Craig, Inc., was organized, and on August 1, 1958, they conveyed a large tract of land to the corporation. The purpose of the conveyance was to enable Ostrow to deal with the property without the necessity of procuring his wife's separate signatures on deeds, contracts and the like. Included in the conveyance to the now bankrupt corporation was the property under contract of sale to the church, and this transfer is the source of the trustee’s claim. On August 11, 1958, this deed was properly recorded in the land records of Montgomery County.

Later, on July 17,1959, Ostrow (joined by his wife) assigned, in his individual capacity, all right, title and interest in and to the proceeds of the contract with the church to Benjamin Krick. This is the instrument upon which Krick rests his claim. Both parties to the assignment assert that they were unaware that the church property had been included in the previous conveyance to Roger Craig, Inc. At the time of the assignment Os-trow was in debt to Krick for plumbing and heating supplies, and Krick credited Ostrow’s account with an amount equal to the purchase price due from the church under the recorded contract of sale. By letter dated February 16, 1960, Krick notified the church of the assignment. It is undisputed that Roger Craig, Inc., never notified the church of the deed to it.

Two months later, bankruptcy proceedings were begun against Roger Craig, Inc. Meanwhile, the church discovered among the land records the 1958 deed from Ostrow to Roger Craig, Inc., and when the church made settlement for the property, deeds were executed by both Ostrow (in which his wife joined) and Roger Craig, Inc., and by agreement of the parties the church paid the proceeds to attorneys to hold in escrow for the future determination of the rightful claimant. By turnover petition, the jurisdiction of the District Court was invoked to determine the rights of the respective parties in the fund. As above noted, the trustee relied upon the 1958 deed from Ostrow to the bankrupt, while Krick asserted his later assignment.

In the District Court, the parties assumed that the interest retained by Os-trow in the land he contracted to sell to the church was merely a chose in action. Predicated upon this assumption, the parties viewed the controversy between the trustee and Krick as governed by the Maryland law of assignments. On the one hand, the trustee contended that Article 8, section 1 of the Annotated Code of Maryland (1957), enacted in 1943, established in Maryland the rule that, as between assignees of the same interest, the first in time prevails. On the other hand, Krick, relying on the case of Maryland Cooperative Milk Producers, Inc. v. Bell, 206 Md. 168, 110 A.2d 661, 665 (1955), insisted that the 1943 statute