Court Opinion

ID: 6236323
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:33:22.035348+00
Date Added: 2024-06-11T08:57:47.970196
License: Public Domain

Mr. Justice Trunkey
delivered the opinion of the court, January 5th 1880.
Section 17, of the Act of Congress of June 22d 1874, is an *64addendum to the 43d section of the Act of 1867, and provides a second mode for the discharge of bankrupts. It enacts that in all cases of bankruptcy, the creditors of the alleged bankrupt may, at a meeting called under the direction of the court, resolve that a composition proposed by the debtor shall be accepted in satisfaction of the debts due them ; that such resolution, to be operative, shall be passed by a majority in number and three-fourths in value of the creditors assembled, and confirmed by the signatures of the debtor and two-thirds in number and one-half in value of all his creditors ; that the debtor shall produce to the meeting a statement of his assets and debts, and the names and addresses of the creditors to whom such debts are due; that such resolution, together with said statement, shall be presented to the court, and the court, after a prescribed notice, upon hearing, if satisfied of certain facts, shall cause the resolution to be recorded and statement to be filed, and until such record and filing the resolution shall have no validity ; and thereafter the provisions of the composition “shall be binding on all the creditors whose names and addresses and the amounts of the debts due to whom are shown in the statement of the debtor produced at the meeting at which the resolution shall have been passed, and shall not affect or prejudice the rights of any other creditors.” “ The provisions of any composition, made in pursuance of this section, may be enforced by the court, on motion made in a summary manner by any person interested, and on reasonable notice.” “If at any time it shall appear to the court, on notice, satisfactory evidence and hearing, that a composition under this section cannot, in consequence of legal difficulties, or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the debtor, the court may refuse to accept and confirm such composition, or may set the same aside; and, in either case, the debtor shall be proceeded with as a bankrupt, in conformity with the provisions of law, and proceedings may be had accordingly.” The statute is thus referred to at length because it plainly shows what a composition is, its effect, how it may be set aside, and what shall follow its annulling. It is authorized to be made only in cases pending in court, is of no validity until confirmed by the court, and then is binding on all creditors who were named and made parties. No procedure under the bankrupt law is more under the control and supervision of the bankrupt court than this. The jurisdiction vested in the courts of the United States, of all matters and proceedings in bankruptcy, is exclusive. If the composition be not confirmed, or if the same be set aside, in either case the debtor shall be proceeded with as a bankrupt. Pending the petition in bankruptcy, and before the court shall have confirmed the composition, the courts of the state cannot interfere; nor can they afterward. While the composition stands the creditor, who is bound by it, cannot maintain an action for the original debt; he is *65barred everywhere, except in an application to the court where the confirmation was made to annul it for cause.
It has been decided by the Court of Appeals of Maryland, that “ the creditors have no right to resort to the courts of the state for the recovery of their claims, nor to invoke their authority for the redress of their alleged grievances:" Deford v. Hewlett, 18 N. B. R. 518. In that case, the distinction between the English statute and the Act of Congress is pointed out, and the able opinion concludes with the remark: “ Until the bankrupt performs the terms of the composition by payment in money, or his promissory notes to be treated as money, the composition is incomplete and ineffectual; but that would not invest the state court with jurisdiction, the remedy must be sought in the bankruptcy court, and the provisions of the statute point out the mode of redress, and that must be exclusive; but when performed the result provided for in the act necessarily follows.” Like principle was declared in Leggett v. Barton, 11 Vroom (N. J.) 83, where it was said: “The payment’, is within the court’s control; enforceable by its order and by attachment for disobedience. And the proceeding is, when concluded, made binding upon all creditors of the bankrupt, whether participants or not. It operates to discharge the debtor from his debts.”
In argument, Hamlin’s Case, 16 N. B. R. 324, was cited, wherein it.was said by the learned judge of the District Court of the United States, that creditors whose dividends have not been paid, may bring actions at law. It may be inferred from the context that he meant by this dictum an action for recovery of the sum the debtor agreed to pay in the composition, and not the original debt. If such be not his meaning, we think it in conflict with the Bankrupt Act. Reference was also made to the case of Pierce v. Gilkey, 6 The Reporter 242, which is based solely on English decisions. Of the effect of the latter, when applied to a composition under the the Act of Congress, enough has been said in Deford v. Hewlett, supra, and in Bayley v. Pond, 19 N. B. R. 73.
The wisdom of creditors agreeing to a composition without payment of, or security for, the sums agreed to be paid by the debtor, concerns not in the decision of this case. That was for their consideration and the court’s, where the petition in bankruptcy was pending. That court, by the terms of the statute, had jurisdiction to enforce the composition, or to set it aside; and, if the composition, by its order, becomes invalid, then “ the debtor shall be proceeded with as a bankrupt.”
The court below was clearly right in setting aside the execution.
Judgment affirmed.