Court Opinion

ID: 6424982
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:03:09.464764+00
Date Added: 2024-06-11T15:51:56.697199
License: Public Domain

Knowlton, J.
The only question in this case is whether, under St. 1884, c. 236, as amended by St. T885, c. 353, § 2, in determining the number and value of the creditors of an insolvent debtor who have proved their claims in proceedings for a composition, those only who proved on the first day of the hearing shall be counted, or those also who proved afterward on the day to which the hearing was adjourned. The section referred to is in part as follows: “ The hearing shall then be adjourned not less than seven days, and notice thereof sent to all creditors as before provided; and if at or before the day to which such or any subsequent adjournment is made the debtor shall file in court the written assent to the proposal of the majority in number and value of the creditors who have proved their claims . . . the court shall proceed at the hearing, or at a further adjournment thereof, to determine whether the composition shall be confirmed, and anjr creditor may be heard thereon,” etc.
The proposal for composition may be filed at any time after the filing of the petition by or against the debtor, and often it is filed, as it was in this case, on the same day as the petition. Only seven days’ notice of the hearing on the proposal is required by the statute, and if the debtor’s view of the law were correct only such creditors as proved their claims on the first *556day could be considered in determining whether he had obtained the assent of a sufficient number. In many cases the receipt of the notice of the proposal gives the creditor his first information of the debtor’s insolvency, and it would be a hard rule that would deprive him of his right to be considered upon the question of composition if he failed to prove his claim at the first meeting. The debtor would be likely to be active in inducing his friends to prove their claims, and it would often happen that those appearing at the first meeting would not fairly represent the whole body of creditors.
Under the original statute before the amendment above quoted •the debtor in order to make a composition was obliged to pro cure the assent of the prescribed proportion of all his creditors, and only those who had proved their claims could be counted in favor of the composition. This provision was thought to put too great a burden on the debtor, and the law was amended so that the proportion required should be of those creditors who proved their claims, instead of the whole number. The debtor may file the assent “ at or before the day to which such or any subsequent adjournment is made.” He may from time to time file the assent of additional creditors, up to the very moment when the court is about to determine whether he has the assent of a sufficient number. Under § 26 of Pub. Sts. c. 157, which is made applicable to the Composition Act, creditors may prove their claims at any meeting. The condition in regard to assent of creditors to which the statute refers is the condition at the time of the hearing. Until then the rights of the parties are not fixed. Additional claims may be proved, and the debtor may file the assent of additional creditors. If he chooses to file the assent of some of them before the day of the final hearing, he gets the benefit of an agreement from each, which is irrevocable unless the court upon hearing gives the creditor leave to withdraw it. Beverly Bank v. Wilkinson, 2 Gray, 519, 520. In re Borst, 11 Nat. Bankr. Reg. 96. If the debtor is embarrassed by the proof of an unexpected number of new claims at the adjourned meeting, it is in the power of the court to give him time to try to procure the assent of those who prove them. In this way there is no difficulty in protecting the rights of all parties.
This interpretation of the- statute is in accordance with the *557practice and the decisions under other similar statutes. Under Pub. Sts. c. 157, § 86, a certificate of discharge cannot be granted “ unless the assent in writing of . . . creditors who have proved their claims is filed in the case within six months.” That is, the assent may be filed “at or before” the expiration of six months. But if the filing is before the expiration of the time the “ creditors who have proved their claims ” within the meaning of the law are not merely those Avho have proved at the time of the filing, but those avIio have proved at the end of the six months when the rights of the parties become fixed. Gates v. Campbell, 8 Cush. 104, 108. Journeay v. Gardner, 11 Cush. 355, 356.
The provisions of the bankruptcy act in relation to the discharge are in similar language, and have received the same construction. U. S. Rev. Sts. §§ 5108, 5112, 5116. In re Borst, 11 Nat. Bankr. Reg. 96.
Insolvency Rule XVII. could not change the statute, and was not intended to change it, or to put upon it any other construction than the one above stated. It is as follows : “ In composition cases claims may be proved at any meeting; but creditors who have not proved their claims prior to the hearing on confirmation of the composition shall not be counted in ascertaining the sufficiency of assent to such composition.” The words “ hearing on confirmation of the composition ” refer to the point of time when the court takes into consideration the question of the sufficiency of the assent, and the other questions involved in deciding whether the composition should be confirmed. They do not refer to the general hearing on the proposal, of which notice is to be given when the proposal is filed, and which is begun on the first day before the adjournment required by the statute. They specify a particular hearing in distinction from the general hearing. The particular hearing referred to may not begin until after claims have been proved and other business has been done on the day to which the adjournment was made, or on any subsequent day to which there is an adjournment.
We are of opinion that the Court of Insolvency should be directed to enter a decree that the proposal of composition shall not be confirmed unless before the final hearing the debtor files *558the assent of additional creditors enough to make three fourths in number and value of the creditors who at the final hearing shall have proved their claims. Decree accordingly.