Case ID: ind_73/html/0029-01.html
Source: Caselaw Access Project
Author: {"author": "Niblack, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

No. 7695.
    Robinson v. Clement.
    Bankruptcy.— Composition. — Judgment. — Execution.— Payment. — Deposit. — Condition.—Sights of Creditor of Bankrupt on Failure to Comply with Compromise Agreement. — A. recovered a judgment in the circuit court against B. Two days thereafter B., upon his petition, was adjudged a bankrupt by the District Court of the United States.
    A. 's judgment was afterward allowed in full against the estate of B.
    B. compromised with his creditors, agreeing to pay a certain per cent, of their claims. A. and B.'s assignee, afterward, in pursuance of section 20 of the bankrupt act. fixed the value of the lien of A.’s judgment upon B.’s real estate, leaving a balance upon which B. should pay the percentage agreed upon, which he afterward failed and refused to do. hut deposited the same with the deputy clerk of the U. S. District Court, to be paid to A. upon the condition that the said judgment should be finally determined by the Supreme Court of the State, B. knowing that no appeal had ever been taken therefrom. The clerk refusing to pay said sum on demand on account of such condition, A. •brought suit to revive the balance of said judgment, and asked for an order for the issuance of an execution thereon against the property of B.
    
      Held, that A. was entitled to execution on his judgment for the unsecured balance due.
    Held, also, that an execution on said judgment should only he issued by order of the court rendering the same.
    
      Held, also, that the money left with the deputy clerk was not a payment either to him or to A., but a mere deposit upon a condition.
    
      Held', also, that a creditor of a bankrupt, in the event of the non-payment of the composition according to its terms, is remitted to all the rights which lie had at the time the proceedings in bankruptcy were instituted.
    From the Vanderburgh Circuit Court.
    
      A. L. Robinson and G. Bcihner, for appellant.
    
      O. Denby and JD. B. Kumler, for appellee.
   Niblack, C. J.

— In this case, Andrew L. Robinson, the plaintiff, complained of Converse Clement, the defendant,, and said that on the 24th day of December, 1874, be recovered a judgment, in the Vanderburgh Circuit Court, against the defendant for three thousand and five hundred dollars, with costs of suit; that afterward, on the 2(>th day of the same month, the defendant began certain proceedings in bankruptcy in the District Court of the United States for the District of Indiana, at Evansville, by means whereof he was, on the same day, adjudged to be a bankrupt; that on the 4th day of February, 1875, the-claim of the plaintiff was duly proven against tbe defendant, in such proceedings in bankruptcy, and the sum of $3,512.80 was allowed against the defendant’s estate in bankruptcy, with security — that is to say, on the supposition that the judgment rendered as above was a lien on the defendant’s real estate ; that on the 1st. day of May, 1875, the defendant made an offer of compromise with his creditors, which was not agreed to by the plaintiff, but was accepted by a sufficient number of such •creditors to make it binding upon all, by which he was to be released and discharged from his debts by the payment of five per cent, of the amounts respectively due thereon, within sixty days from that date; that on the 8th day of June, 1875, the plaintiff and James H. McNeely, the defendant’s assignee in bankruptcy, by an agreement made between them in pursuance of section 20 of the bankrupt act, ascertained and fixed the value of the lien of the plaintiff’s judgment upon the defendant’s real estate at the sum of $1,800, leaving the sum of $1,712.80, without security, upon which latter sum the defendant should have paid to the plaintiff the amount of five per cent., making the sum of $85.64; that the defendant had neither paid nor tendered to the plaintiff said sum of $85.64, or any part thereof, but had refused to either pay or tender any part of the same ; that on the 6th day of August, 1875, the defendant, instead of paying the same to the plaintiff, as it was his duty to have done, deposited said sum of $85.64 with the deputy clerk of the United States District Court, at Evansville, to be paid to the plaintiff upon the condition that his said judgment should be finally heard and settled by the Supreme Court of this State, when in truth and in fact no appeal to said Supreme Court had ever been taken from said judgment, nor had the cause in which it was rendered ever been in any way in that court, which the defendant well knew at the time said sum of' money was so deposited; that on the 10th day of August, 1875, the plaintiff applied to the said deputy clerk for said sum of $85.64, and requested that said sum of money should be paid to him, but that said deputy clerk refused to pay the same to the plaintiff, by reason of the condition upon which said money had been deposited with him, as above set forth; that the defendant claimed and pretended that, by reason of the proceedings in bankruptcy, heroin above referred to, he is wholly released and. discharged from the payment of the plaintiff’s said judgment, and every part thereof. Wherefore the plaintiff prayed that his said judgment, as to said sum of $1,712.80, with the interest which had accrued thereon, might be revived, against the defendant, and that execution be issued thereon for the amount found to be due, against the property of the-defendant.

The defendant demurred to the complaint, and his demurrer was sustained. The plaintiff refusing to plead, further, final judgment was rendered against him upon demurrer.

Only one question is therefore presented, and that is, did. the court err in sustaining a demurrer to the complaint?

The appellee urges two objections to the sufficiency of the-complaint:

First. That, if the appellant was entitled to an execution on his judgment, he could have procured the issuance of' such an execution by a proper application to the clerk, without the necessity of filing such a complaint, and that this, proceeding was both unnecessary and unauthorized.

Second. That the facts alleged showed the condition upon which the $85.64 was paid to the deputy clerk of the United States District Court to have been an utterly impracticable, and hence a void, condition, thereby rendering the-payment an absolute one, and conferring upon the appellant a right of action against the deputy clerk instead of the appellee.

In the first place, we think the facts averred in the complaint made a case upon which it was proper to take the opinion of the court before attempting to proceed "further, and in which an execution should only be issued, if at all, by order of the court rendering the judgment, inasmuch as. proceedings upon the judgment had been suspended by operation of law. In the next place, we can not agree that the facts averred showed an absolute payment to the deputy clerk for the use of the appellant. The question is a novel one and not free from difficulty, but we feel constrained to construe, and' accordingly do construe, the so called payment to have been a mere deposit with the deputj clerk upon a condition which he was not at liberty to disregard, and not in any proper sense a payment, either to the deputy clerk or the appellant.

As to the effect which results from the failure of a bankrupt debtor to pay the amount agreed to be paid on a compromise with his creditors, Blumenstiel on Bankruptcy, at page 451, sajes: “The creditor, in the event of non-pay-

ment of the composition according to its terms, is remitted to the rights which he possessed at the time the proceedings, were initiated, so that if he had taken legal steps for the recovery of his debt and the suit had been suspended by the' composition, he is to be placed in the same position as he occupied before the settlement was made, and can resume the proceedings, from the further prosecution of which he had been previously restrained.”

The rule thus stated by Blumenstiel is well supported by the Aveight of authority, and appears to us to be decisive of the ease in hearing in favor of the appellant. There are cases apparently conflicting Avith this rule, but, so far as our attention has been called to them, they are based upon a condition of facts different from those presented in this case.

Reason and justice concur in support of the doctrine, that a creditor ought not to be bound by an agreement of composition, Avhich the debtor has failed to perform on his part. In re Reiman and Friedlander, 12 Blatchf. 562 ; National, etc., Bank v. Porter, 122 Mass. 308 ; Deford v. Hewlett, 7 Central Law Journal, 149 ; Deford v. Hewlett, 9 Md. 51.

Upon the facts stated in the complaint, we think the appellant is entitled to execution on his judgment for the unsecured balance due upon it.

The judgment is reversed, with costs, and the cause remanded for further proceedings.