## Facts

- Surf Advertising Corporation (Surf) and Fiegel Advertising Company (Fiegel) entered long-term contracts with Calvert Distillers Corporation (Calvert) to furnish and maintain advertising signs in exchange for installment payments over several years.
- To finance performance, Surf assigned its Calvert contract to Joseph S. Abrams as security for advances used to erect signs; Fiegel similarly assigned its Calvert contract to Mathilde Lehman as security for advances.
- The arrangements contemplated that Calvert’s payments under the contracts would be applied to repay the advances.
- Fiegel later assigned its Calvert contract to Surf, while still owing Lehman $964.52.
- Surf entered Chapter X reorganization, and Calvert deposited $5,960 into court representing sums owed under the Surf and Fiegel Calvert contracts.
- The district court awarded $4,410 to Abrams, $964.52 to Lehman, and $585.32 to the trustee (Rockmore) for servicing/maintaining the signs.
- The trustee appealed, contending Abrams’s and Lehman’s interests were subordinate and avoidable in the reorganization.

## Issues

1. Whether the assignments of Calvert advertising contracts and payments “to become due” were present assignments/pledges of existing bilateral contracts, enforceable against the bankruptcy trustee.
2. Whether the assignments were instead mere promises to assign future payments, creating only equitable liens avoidable by the trustee.

## Decision

- The Second Circuit granted rehearing and rejected its prior majority view.
- The court held the transactions were present assignments by way of pledge of existing bilateral contracts, not merely agreements concerning future rights.
- Under New York law, such assignments were effective despite the executory nature of the contracts and the fact that payments were contingent on continued performance.
- Abrams and Lehman therefore had priority to the deposited Calvert funds, subject to the trustee’s servicing allowance.
- The district court’s distribution was sustained in substantial part.

## Legal Principles

- Under New York law, an assignment of an existing bilateral contract as security can operate as a present transfer, even if payment is described as money “to become due” and depends on the assignor’s future performance.
- Courts distinguish between (a) assignments of existing contract rights (effective present transfers) and (b) agreements purporting to assign mere expectancies or rights not yet in existence (often treated as equitable liens).
- When a secured party receives a valid present assignment of contract rights before bankruptcy, the bankruptcy trustee generally takes subject to that property interest, rather than avoiding it as an unperfected claim to after-acquired funds.

## Conclusion

The court held that assignments of existing executory advertising contracts to lenders as security were valid present pledges under New York law, giving the assignees priority to contract payments over the Chapter X trustee, aside from an allowance for the trustee’s servicing of the signs.


Rockmore v. Lehman, 129 F.2d 892 (2d Cir. 1942)