Court Opinion

ID: 8801369
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:33:42.221914+00
Date Added: 2024-06-11T17:03:54.880284
License: Public Domain

Mr. Justice Ball delivered the opinion of the court. The rights and liabilities of Holmes are to be determined as of the time of the filing of the bill and the appointment of the receiver. At that date Holmes was a creditor of the company. Appellant was not then its creditor. If Holmes had retained the ownership of these thirty bonds and had proved them as a claim against the company, the court would have compelled him to pay the amount of the decretal judgment against him before it would have allowed him to participate in the distribution of the assets of the insolvent company. Had the claim upon the bonds been proved by Holmes before his stock liability was determined, the court would have withheld payment upon the one until the other had been passed , upon. The receiver was appointed to enable the court to collect in all the assets of the insolvent company for the benefit of its creditors. The moment the insolvency of the company was ascertained its assets became trust funds for the payment of its creditors; and the court would proceed in administering the estate upon the maxim that equality is equity. Blair v. Illinois Steel Co., 159 Ill. 361; Roseboom v. Whittaker, 132 Ill. 81; Colt v. Brown, 78 Mass. 233; Balch v. Wilson, 25 Minn. 299; King v. Armstrong, 50 Ohio St. 222; Scott v. Armstrong, 146 U. S. 499. But it is said that because these bonds were negotiable and not due, and appellant purchased them for value, they are excepted out of the general rule, and that therefore the claim of appellant should be paid without reference to the stoclcholders’ liability to which it was subject while in the hands of Holmes, and without reference to the established insolvency of Holmes. We do not so understand the law. Appellant, for more than three years before he purchased • these bonds, had represented Holmes in this cause, had filed his answer to the bill herein, and had performed these and other services to the value of $5,000 in endeavoring to shield Holmes from liability as a stockholder in this insolvent company. Therefore appellant must be held to have known all that has been pleaded, proved or decided in this cause, and to have taken these bonds cum onere. The learned chancellor who decided this case stated the law governing it so clearly that we quote and adopt it: “ By a long established rule both in bankruptcy and in the administration by chancery of insolvent estates either of deceased persons, or, by statute, of insolvent corporations, or by courts with equitable powers, under voluntary assignments for the benefit of creditors, all claims, whether on negotiable or non-negotiable instruments, are proven as of the date at the latest that the court acquires jurisdiction of the fund—in this case at the latest, the date of the appointment of the receiver. Ho claim then existing can be in any manner thereafter enlarged. Ho right of set-off, legal or equitable—and in the administration of insolvent estates courts of chancery adopt very broad rules in permitting set-offs for the promotion of justice as against insolvents, even though they could not be pleaded in a suit at law—can be destroyed by any subsequent transfers. Some courts are so insistent on the date of the appointment of the receiver in determining the amount of the claim, that, contrary to the bankruptcy rule, they do not even compel creditors to file their security, or contrary to the Illinois law (Levy v. The Chicago National Bank, 158 Ill. 88) to deduct collections made on the securities after the appointment of the receiver and before filing the claim. (Merrill v. Bank, 173 U. S. 131.) That the negotiability of the obligations of the company should not change the rule so as to enable claims to which defenses exist in the hands of the holders at the time of the appointment of a receiver to share'in the fund which equity has taken in hand for the purpose of distributing it equally and equitably among the creditors of the insolvent corporation, would seem to be clear, and doubtless for this reason the authorities are few on the exact point. Ex parte Deey, 2 Cox, 423, and Ex parte Rogers, Buck 490, early English bankruptcy cases, are, however, expressly in point, to the effect that a bona fide purchaser without notice before maturity of a negotiable instrument, who has bought after bankruptcy, is subject to all defenses that could have been ' made against the holder at thé time of the bankruptcy.” Appellant insists that the court erred in not finding a balance due him, after allowing the set-off, or in not sending the claim back to the master to ascertain the balance due appellant after allowing the set-off. The court found that all the collectible assets had been converted into cash, and that -they would pay but 44J per cent, of the amount of the proved claims. As the amount due upon the Holmes stock liability is several thousand dollars greater than is the amount payable out of the estate upon these thirty bonds, nothing could be accomplished by ascertaining such alleged balance, which in fact did not exist. A court will not knowingly order the doing of an unnecessary thing. The judgment of the Circuit Court is affirmed. Affirmed.